Gaming Realms Regulatory News (GMR)

Gaming Realms plc

(the "Company" or the "Group")

Interim results for the six months ended 30 June 2016

Growth Strategy Generates 109% Year on Year Revenue Growth

Gaming Realms plc, which creates, publishes and licenses next generation mobile games, today announces its interim results for the six months ended 30 June 2016.

Financial highlights:

* excluding disposals (see note 3)

· Significant revenue growth of 109% to £16.6m (H1/15: £8.0m) driven by continued success from the Group's proprietary mobile platform ("Grizzly") and the acquisition of the social gaming assets from Real Networks, which contributed £3.8m of social gaming and licensing revenues in H1/16 (H1/15: £nil)

· Real money gambling revenue on the Grizzly platform up 143% to £10.2m (H1/15: £4.2m)

· EBITDA loss of £3.0m (H1/15: £2.4m) which includes an H1/16 front loaded growth investment in marketing of £9.5m related to the Group's ongoing investment in slingo.com and launch of Britain's Got Talent games, as well as the continued scaling in our other real money gaming sites and mobile apps. This investment in marketing has been the key driver in the growth of our revenues and depositing players, and compares to £5.1m of marketing expenditures in H1/15

· The Board believes that the Group is trading in line with market expectations, which implies that the Group will be EBITDA positive for 2016

Operational highlights:

· Mobile usage predominates on Grizzly platform, with 84% of depositing players using mobile up from 80% in H1/15

· Player take-up increased 269% with 143,282 new depositing players during the period (H1/15: 38,869) excluding disposals in current and prior periods

· Disposal of non-core assets including third party platform bingo sites and marketing agency to focus on core strategy

· Licensing contracts with Zynga and Scientific Games into significant adjacent markets

· Launch of Britain's Got Talent games site in the UK

· Continued investment in product development, in line with the Group's strategy of highly focused investment in our games, platform and player acquisition

Post-period end:

The Group has signed and launched a number of key deals which will further help growth for H2 2016:

· Launch of thexfactorgames.com and creation of a new game based on the television show

· A B2B deal with Bauer Media for the co-promotion of SpinGenie.com across Bauer's radio, digital and magazine titles, including Heat and Closer magazines, and on Heat, Kiss, Magic and Absolute radio stations

· The Group has launched its Remote Game Server which allows the licensing of its games to selected partners, which will have a direct positive impact on the EBITDA contribution in 2017 and beyond

Patrick Southon, Chief Executive, said:

"The Group has delivered an excellent first half as a result of focusing on our proprietary technology and games publishing and licensing.

"We have seen strong growth on our proprietary Grizzly platform, which has been achieved through the development of unique content, investment in player acquisition and improved use of CRM on mobile. We continue to see lower player costs per acquisition than the industry average. Our revenue per active real money player in H1/16 has increased by 56% to £110 v H1/15. At the same time, we have streamlined the business through the disposal of our third party platform bingo sites and marketing agency.

"The integration of the Social Games teams in Seattle and Vancouver Island has been successful and the Group is now producing content through a combined road map for both real money and free to play apps. In addition, we continue to sign strategic partnerships and licensing deals for our content, IP and platform with blue chip partners, which underlines the long term growth prospects of the Group."

Outlook

The Group will continue to implement its business strategy, which has proven to be very successful in H1 2016. At the same time, the disposal of the third-party platform bingo sites and the re-organisation of our non-core digital marketing activities have helped to increase the focus on the highest growth areas of the business.

The Board believes that the Group is trading in line with market expectations, which implies that the Group will be EBITDA positive for 2016.

- Ends -

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About Gaming Realms

Gaming Realms creates and publishes innovative real money and social games for mobile, with operations in the UK, U.S and Canada. Through its market leading mobile platform and unique IP and brands, Gaming Realms is bringing together media, entertainment and gaming assets in new game formats. The Gaming Realms management team includes accomplished entrepreneurs and experienced executives from a wide range of leading gaming and media companies.

Business review

Overview

The Board is pleased to report that the Group has made great progress during the first half of the year during which it delivered revenues of £16.6m (H1/15: £8.0m), up 109% over the comparable period and 25% higher than the second half of 2015. At the same time the Group has continued to invest heavily in its marketing strategy. Total marketing spend for the first half was £9.5m (H1/15: £5.1m) which, combined with increased operating costs, resulted in a loss before taxation of £5.8m (H1/15: £3.5 million loss), in line with the Group's operational growth plan.

Operating costs, which correlated with revenue growth, increased in the period as a result of the continued success of the Group's proprietary platform, leading to higher third party royalties, transaction fees and UK point of consumption tax ("POC"). In line with the Group's plan, management has focused on growing real money gambling on the proprietary platform, which accounted for 61% of Group revenue in the period (H1/15: 53%).

143,282 new depositing players were acquired in the period (H1/15: 38,869) excluding disposed third party legacy site players from both periods, with a continued growth in our proprietary platform which accounted for 75,644 of the players (H1/15: 38,869). The number of daily active depositing players grew 101% to 6,116 (H1/15: 3,042) excluding disposed third party legacy site players.

Casino & Proprietary Platform

Our proprietary platform continues to be the focus of the Group's strategy with significant revenue growth of 143% to £10.2m (H1/15: £4.2m). The Group continues to invest heavily in platform and game development and player acquisition and engagement.

The increase in revenue is a direct result of the platform's scalability with the slingo.com and bgtgames.com (launched in Q4/15 and March 2016 respectively), together contributing 39% of the platform's revenue in the period. These sites have also contributed to the low CPA of £88 for the period.

Since the acquisition of the gaming assets from Real Networks, we have been distributing and developing Slingo games across all sites which have contributed to 21% of the overall real money gross gaming revenue.

Mobile content and delivery continues to drive game play on mobile devices with 84% of funded players using mobile devices (H1/15: 80%).

Social & Licensing

During the period the Group entered into two new licensing deals for our leading games format, Slingo.

The first deal is with social games developer Zynga to bring a new Slingo branded slot game to the social casino market. The deal includes a minimum guaranteed royalty stream to the Group with recoupable upfront royalty payments on net revenue over a three-year term.

The second licensing deal is with Scientific Games Corporation. The five-year agreement will provide Scientific Games with exclusive rights to produce and distribute Slingo branded land-based slot machines to casinos and related properties worldwide. Under the terms of the licence, Scientific Games will develop new land-based slot games for traditional gaming machines, video lottery terminals, and on-property handheld devices. The agreement includes a minimum guaranteed royalty stream to the Group payable in the first two years. The agreement also includes an extension of Scientific Games' licence to produce Slingo branded physical scratch lottery tickets in certain lottery markets. 

The Group experienced month on month revenue growth in its free to play mobile games publishing segment, led by Slingo Adventure and Slingo Shuffle. Growth for H1 2016 in social and licensing was 52% compared to H2 2015, reaching over US$1m for the month of June.

Following the success of its initial Slingo mobile apps, two new Slingo apps were developed during the period for H2 launch, including one leveraging the Group's Remote Game Server with a view to bringing successful RMG content into the social app environment on the Group's social publishing platform.

The Group also continued to invest in the Hidden Objects category following the success of Hidden Artifacts and, since the period has ended, entered into an agreement to acquire a majority stake in Hullabu Inc., its studio partner, with which the Group intends to further develop capacity and game content in this highly popular genre.

Consolidated statement of profit or loss and other comprehensive income

for the 6 months ended 30 June 2016

Consolidated statement of financial position

as at 30 June 2016

Consolidated statement of cash flows

for the 6 months ended 30 June 2016

Consolidated statement of changes in equity

for the 6 months ended 30 June 2016

Notes forming part of the consolidated financial statements

For the 6 months ended 30 June 2015

1. Accounting policies

General Information

Gaming Realms plc ("the Company") and its subsidiaries (together "the Group").

The Company is admitted to trading on AIM of the London Stock Exchange. It is incorporated and domiciled in the UK. The address of its registered office is One Valentine Place, London, SE18QH.

The results for the six months ended 30 June 2016 and 30 June 2015 are unaudited.

Basis of preparation

The financial information for the year ended 31 December 2015 does not constitute the full statutory accounts for that year. The Annual Report and Financial Statements for 2015 have been filed with the Registrar of Companies. The Independent Auditors' Report on the Annual Report and Financial Statement for 2015 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

This interim report, which has neither been audited nor reviewed by independent auditors, was approved by the board of directors on 12 September 2016. The financial information in this interim report has been prepared in accordance with the recognition and measurement requirements of International Financial Reporting Standards as adopted for use in the EU (IFRSs). The accounting policies applied by the Group in this financial information are the same as those applied by the Group in its financial statements for the period ended 31 December 2015 and which will form the basis of the 2016 financial statements. A number of new and amended standards have become effective for periods beginning on 1 January 2016, however none of these are expected to materially affect the Group.

The consolidated financial statements are presented in sterling.

2. Segment information

The Board is the Group's chief operating decision-maker. Management has determined the operating segments based on the information reviewed by the Board for the purposes of allocating resources and assessing performance. The Group has two reportable segments. The social gaming product provide freemium gaming services to the US and Europe. The real money gambling products and marketing services operates our brands and provides other digital marketing services to both gaming and non-gaming clients in the UK.

Revenue by product:

Geographical information

The Group considers that its primary geographic regions are the UK, including Channel Islands, USA and the rest of the world. No revenue is derived from real money gaming in the US. Revenues from customers outside the UK (including Channel Islands) and USA are not considered sufficiently significant to warrant separate reporting. All non-current assets are based in the UK.

3. Profit on disposal

Disposal of third-party platform driven website properties

On 4 March 2016, the Group disposed of its third-party platform driven website properties, for a total consideration

of £2.4m. Black Spark Media Limited paid the Group an upfront cash payment of £1.2m with the remaining £1.2m payable by Silverspin Media Limited, was settled by way of waiving the final earn out payment to the previous shareholders of Blueburra Holding Limited. An additional £500,000 is payable under a transitional services agreement over a 5-month period.

Disposal of digital marketing agency

On 6 June 2016, the Group entered into a strategic partnership with digital marketing company Ayima Limited. Under the terms of the partnership, the Group has agreed to contribute assets comprising its external digital marketing agency to Ayima Limited. As consideration for the disposal of the Assets, the Group were issued shares to 10% of the enlarged issued share capital of Ayima Limited. The 10% shares have been valued at approximately £540,000, based on a desktop valuation performed by an external advisor.

4. Movement in deferred and contingent consideration

5. Tax expense

There are unused tax losses carried forward as at the balance sheet date of £31,759,715 (30 Jun 15: £24,420,026, 31 Dec 15: £27,278,988) equating to an unrecognised deferred tax asset of £6,351,943 (30 Jun 15: £4,884,005, 31 Dec 15: £5,455,798). No deferred tax asset has been recognised in respect of these losses, as the recoverability of any asset is dependent upon sufficient profits being achieved in future years to utilise this asset. The timings of such profits are uncertain.

The deferred tax balance relates primarily to amounts recognised as part of the business combination. The credit in the period relates to the unwind of the provision recognised on acquisition.

6. Loss per share

7. Intangible assets

*On 4 March 2016, the Group disposed of the third-party platform driven website properties, for a total consideration

of £2.4m to Silverspin Media Limited and Black Spark Media Limited. On 6 June 2016, the Group entered into a strategic partnership with digital marketing company Ayima Limited to contribute assets comprising its external digital marketing agency to Ayima Limited (note 3).

#On 9 April 2015, Bingo Realms Limited entered into an Asset Sale and Purchase Agreement with European Domain Management Ltd, to sell all associated assets in its Bingo Godz and CastleJackpot brands which were operated by Intellectual Property & Software Limited. The total consideration for the sales was £500,000 in cash, with £200,000 payable on completion and the remainder payable over the next 17 months.

8. Available-for-sale investments

The Group's strategic investments is a 10% interest in Ayima Limited. This company is not accounted for on an equity basis as the Group does not have the power to participate in the company's operating and financial policies, evidenced by the lack of any direct or indirect involvement at board level and a contractual arrangement which enables the board to take all operational and strategic decisions without consultation with shareholders owning less than 30% of the share capital of Ayima Limited (note 3).

9. Other assets

Other assets represent the rental deposits on operating leases.

10. Trade and other receivables

All amounts shown fall due for payment within one year

11. Cash and cash equivalents