Livermore Regulatory News (LIV)

26 Sep 2006 07:03

Empire Online Limited26 September 2006 26 September 2006 EMPIRE ONLINE LIMITED INTERIM RESULTS FOR SIX MONTHS ENDED 30 JUNE 2006 Empire Online Limited (the "Company" or "Empire Online"), a provider ofmarketing services to the online gaming industry, today announces its interimresults for the six months ended 30 June 2006. OPERATING AND FINANCIAL HIGHLIGHTS: • Earnings before interest taxation depreciation and amortisation (EBITDA) and non-recurring exceptional items of $15.7m (H1 2005: $24.9m*). • Net cash position of over $260m. • Net profit before taxation, non-recurring items and amortisation of $20.0m (H1 2005: $25.5m*) including net finance income of $4.7m (H1 2005: $0.9m*). • Net gaming revenue for H1 2006 was $38.2m (H1 2005: $49.7m*). Net gaming revenue across all gaming platforms excluding Empire Poker for H1 2006 was $34.7m (H1 2005: $10.7m*). • Casino net gaming revenue for H1 2006 was $30.2m (H1 2005: $10.7m*). • Poker net gaming revenue for H1 2006 was $8.0m (H1 2005: $39.0m*). • Geographic diversification with 55% of new real money players driven from outside of the USA (H1 2005 39%). • Reported profit after amortisation and non-recurring charges before taxation of $253.1m (H1 2005 $21.2m). * Pro forma figure which is defined as the aggregation of the Company forsix months to 30 June 2005 and the results of Tradal Limited to 31 May 2005. There will be a presentation to analysts at 9.00am today at Hudson Sandler, 29Cloth Fair, London, EC1A 7NN. For further investor information please go tohttp://investors.ep.com/company_information.htm Enquiries: Empire Online Limited +357 25 847 700Noam Lanir, Chief Executive OfficerAndrew Burns, Chief Financial Officer Hudson Sandler +44(0) 20 7796 4133Jessica Rouleau (The information contained herein is not for publication or distribution topersons in the United States of America. The securities referred to herein havenot been and will not be registered under the US Securities Act 1933, asamended, and may not be offered or sold without registration thereunder orpursuant to an available exemption therefrom.) Chief Executive's Statement FINANCIAL REVIEW Net gaming revenues for the first six months of 2006 were $38.2m (2005: $49.7m*). The increase in casino revenues arising from the Playtech licencees acquiredin the second half of 2005 offset the reduction in Poker revenues due to thetermination of Empire Poker following the settlement agreement with Partygamingplc in February 2006. Total casino revenues for the first six months of 2006rose to $30.2m (2005: $10.7m*). By contrast, poker revenues for the first sixmonths of 2006 fell to $8.0m (2005: $39.0m*). Gross profit for the first six months of 2006 was $17.6m, 46.1% of revenue(2005: $21.1m, 50.3% of revenue). Gross profit margin has reduced due to thechange in product mix towards casino activities. Administration expenses have risen to $2.3m, 6.0% of revenues, for the first sixmonths of 2006 (2005: $1.0m, 2.5% of revenues). This increase is due toadditional expenditure due to listing and lag in re-organisation following thedisposal of Empire Poker. Administration costs, as a percentage of revenues, islow compared with the sector in general. Net finance income has increased substantially to $4.7m for the first six monthsof 2006 (2005: $0.7m). This reflects the financial resources available to thegroup following the Empire Poker settlement. In the second half of the currentfinancial year the Company expects to obtain a yield in excess of LIBOR on itscash resources. The profit from non-recurring items and amortisation of intangible assetsexcluding goodwill and employee share options was $233m for the period (2005:nil). The net profit from the settlement of Empire Poker was $237m afterdeducting related costs, which consisted of professional fees and terminationcosts for affiliates and agents of $13m. Amortisation of intangible assets of$2m was charged during the period mainly relating to Player Data and Domainnames associated with the Club Dice and Noble Poker acquisitions. Employee shareoption amortisation was $1.5m for the period. DIVIDEND The Board declares an interim dividend of $5m, which equates to 1.7 US cents pershare. The dividend will be paid on 30 November 2006 to those shareholders onthe register at 27 October 2006. TRADING OUTLOOK As was reported within the Q2 KPI announcement, the normal slow down in tradingactivity seen in Q2 has been more pronounced this year when compared to previousyears. Current daily sign up rates of new real money players are approximately250 players per day. Whilst the Board expects the outcome for the current yearto be broadly in line with market expectations, if there is no improvement inthis rate of sign ups, earnings growth for 2007 will be challenging. STRATEGIC UPDATE The regulatory uncertainty that the on line gaming industry has always faced hasincreased as a consequence of recent events. In light of this, the Board willreview carefully all uses for the Company's surplus capital in order to maximizeshareholder value. The Company will update shareholders in due course. * Pro forma figure which is defined as the aggregation of the Company forsix months to 30 June 2005 and the results of Tradal Limited to 31 May 2005. Independent Review Reportto Empire Online Limited Introduction We have been instructed by the company to review the financial information forthe six months ended 30 June 2006 which comprises the consolidated incomestatement, the consolidated balance sheet, the consolidated statement of changesin equity, the consolidated cash flow statement and the related notes 1 to 12.We have read the other information contained in the interim report, whichcomprises only of the operating and financial highlights and the ChiefExecutive's statement, and considered whether it contains any apparentmisstatements or material inconsistencies with the financial information. Ourresponsibilities do not extend to any other information. This report is made solely to the company in accordance with guidance containedin APB Bulletin 1999/4 "Review of Interim Financial Information". Our reviewwork has been undertaken so that we might state to the company those matters weare required to state to it in a review report and for no other purpose. To thefullest extent permitted by law, we do not accept or assume responsibility toanyone other than the company for our review work, for this report, or for theconclusion we have formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by the directors. The directorsare responsible for preparing the interim report and for ensuring that theaccounting policies and presentation applied to the interim figures should beconsistent with those applied in preparing the preceding annual accounts exceptwhere any changes, and the reasons for them, are disclosed. This Interim report has been prepared in accordance with InternationalAccounting Standard 34 "Interim Financial Reporting". Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4"Review of Interim Financial Information" issued by the Auditing Practices Boardfor use in the United Kingdom. A review consists principally of makingenquiries of management and applying analytical procedures to the financialinformation and underlying financial data and, based thereon, assessing whetherthe accounting policies and presentation have been consistently applied unlessotherwise disclosed. A review excludes audit procedures such as tests ofcontrols and verification of assets, liabilities and transactions. It issubstantially less in scope than an audit performed in accordance withInternational Standards on Auditing (UK and Ireland) and therefore provides alower level of assurance than an audit. Accordingly, we do not express an auditopinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2006. GRANT THORNTON UK LLPChartered AccountantsSlough26 September 2006 Notes: 1 The maintenance and integrity of the Empire Online website is the responsibility of the directors: the interim review does not involve consideration of these matters and, accordingly, the company's reporting accountants accept no responsibility for any changes that may have occurred to the interim report since it was initially presented on the website. 2 Legislation in the United Kingdom governing the preparation and dissemination of the interim report differs from legislation in other jurisdictions. Financial resultsEmpire OnlineLimitedConsolidated Income Statement for the six months ended 30 June 2006 Amortisation Pre- amortisation and and non-recurring non recurring items itemsSix months ended 30 June 2006 2006 2006 2005 Year ended 31 December 2005 Unaudited Unaudited Unaudited Unaudited Audited Note $000 $000 $000 $000 $000 Net gaming revenue 38,203 - 38,203 41,953 97,389 Cost of sales (20,560) - (20,560) (20,838) (49,644) ------ ------ ------ ------ ------Gross profit 17,643 - 17,643 21,115 47,745Other income - - - 415 -Amortisation and 9non-recurring items - 233,130 233,130 - (4,581)Administrative expenses (2,353) - (2,353) (1,028) (3,171) ------ ------ ------ ------ ------Operating profit 15,290 233,130 248,420 20,502 39,993 Net finance income 4,722 - 4,722 695 1,191 ------ ------ ------ ------ ------Profit before taxation 20,012 233,130 253,142 21,197 41,184 Taxation (4) - (4) (3) (10) ------ ------ ------ ------ ------Profit after taxation 20,008 233,130 253,138 21,194 41,174for the period ------ ------ ------ ------ ------ Earnings per share 8Basic $0.86 $0.86 $0.16 ------ ------ ------Diluted $0.83 $0.86 $0.16 ------ ------ ------ Empire Online Limited Consolidated Balance Sheet as at 30 June 2006 As at 30 June 31 December 2006 2005 2005 Unaudited Unaudited Audited Note $000 $000 $000 Assets Non-current assets Plant and Equipment 11 167 - 119Intangibles 221,778 175,750 224,628 ------ ------ ------ 221,945 175,750 224,747 ------ ------ ------Current assets Trade and other receivables 7,092 7,413 11,431 Cash and cash equivalents 262,114 43,958 16,297 ------ ------ ------ 269,206 51,371 27,728 ------ ------ ------Total assets 491,151 227,121 252,475 ------ ------ ------Equity Share capital - - -Share premium 209,807 210,251 209,807Share option reserve 1,728 - 277Retained earnings 275,435 12,317 22,297 ------ ------ ------Total equity 486,970 222,568 232,381 ------ ------ ------Liabilities Current liabilities Trade and other payables 4,171 4,550 20,088 Current tax payable 10 3 6 ------ ------ ------Total liabilities 4,181 4,553 20,094 ------ ------ ------Total equity and liabilities 491,151 227,121 252,475 ------ ------ ------ Consolidated Statement of Changes in Equity for the period ended 30 June 2006 Share Share Share Retained Capital Premium Option Earnings Total Reserve Reserve $000 $000 $000 $000 $000 Balance at 1 January 2005 1 604 - 30,166 30,771 Net profit for the period - - - 41,174 41,174Issue of Share Capital (1) 222,601 - - 222,600IPO expenses - (13,398) - - (13,398)Share option reserve - - 277 - 277Dividends paid - - - (49,043) (49,043) ------ ------ ------ ------ ------Balance at 31 December - 209,807 277 22,297 232,3812005 Net profit for the period - - - 253,138 253,138Share option reserve - - 1,451 - 1,451 ------ ------ ------ ------ ------Balance at 30 June 2006 - 209,807 1,728 275,435 486,970 ------ ------ ------ ------ ------ Comparative prior period Balance at 1 January 2005 1 604 - 30,166 30,771 Net profit for the period - - - 21,194 21,194Issue of Share Capital - 209,646 - - 209,646Adjustment * (1) 1 - - -Dividends paid - - - (39,043) (39,043) ------ ------ ------ ------ ------ Balance at 30 June 2005 - 210,251 - 12,317 222,568 ------ ------ ------ ------ ------ * Shares in issue at 1 January 2005, had a par value of US $0.01 each. On 15June 2005 each share was converted and reclassified to 2,066.222427 ordinaryshares of no par value. Empire Online Limited Consolidated Cash Flow statement for the six months ended 30 June 2006 Year endedSix months ended 30 June 2006 2005 31 December 2005 Unaudited Unaudited AuditedCash flows from operating activities Note $000 $000 $000 Profit before taxation 253,142 21,197 41,184 Adjustments for Depreciation and amortisation 2,508 242 2,898Change in accounting estimate 798 - -Interest income (4,682) (712) (1,159)Interest expense 68 17 55Equity settled share options 1,451 - 277Profit on EP disposal (236,657) - - ------ ------ ------ 16,628 20,744 43,255 ------ ------ ------Changes in working capital Decrease/(increase) in trade and other receivables 4,339 (1,450) 6,900(Decrease)/increase in trade and other payables (15,917) 1,230 16,904Taxation paid - - (4) ------ ------ ------ (11,578) (220) 23,800 ------ ------ ------Net cash generated from operating activities 5,050 20,524 67,055 ------ ------ ------Cash flows from investing activities Purchase of plant and equipment (83) - (131)Purchase of intangible assets (421) (175,198) (5,528)Acquisition of business - - (221,192)Disposal of assets 9 236,657 - -Interest income received 4,682 712 1,159 ------ ------ ------Net cash generated from/(used in) investing activities 240,835 (174,486) (225,692) ------ ------ ------Cash flows from financing activities Loans to shareholders - 12,504 -Dividends paid - (39,043) (49,043)Proceeds from issue of shares - 209,646 209,202Interest paid (68) (17) (55) ------ ------ ------Net cash (used in)/generated from financing activities (68) 183,090 160,104 ------ ------ ------Net increase in cash and cash equivalents 245,817 29,128 1,467 Cash and cash equivalents at the beginning of the 16,297 14,830 14,830period ------ ------ ------Cash and cash equivalents at the end of the period 262,114 43,958 16,297 Empire Online LimitedNotes to the financial informationSix months ended 30 June 2006 1. Accounting Policies The Interim financial statements of Empire Online Limited have been prepared onthe basis of the accounting policies stated in the Annual Report 2005, availableon www.ep.com. The financial information has been prepared in accordance withIAS 34 "Interim Financial Reporting". Basis of consolidation The consolidated financial statements include the accounts of the Company andits subsidiaries. The subsidiaries are companies controlled by Empire OnlineLimited. Control exists where the Company has the power to govern the financialand operating policies of an investee entity so as to obtain benefits from itsactivities. Subsidiaries are consolidated from the date the parent gainedcontrol until such time as control ceases. The financial statements of the subsidiaries are included in the consolidatedfinancial statements using the acquisition method of accounting. On the date ofthe acquisition the assets and liabilities of a subsidiary are measured at theirfair values and any excess of the cost of acquisition over the fair values ofthe identifiable net assets acquired is recognised as goodwill. Intercompanytransactions and balances are eliminated on consolidation. Basis of preparation These results have been prepared on the basis of the accounting policiesexpected to be adopted in the Company's full year financial statements, whichare expected to be prepared in accordance with International Financial ReportingStandards ("IFRS") as adopted by the European Union. Goodwill is initially measured at cost, being the excess of the considerationpaid over the net fair value of the assets acquired. Following initialrecognition, goodwill is measured at cost less any accumulated impairmentlosses. Goodwill is not amortized. Goodwill is reviewed annually or morefrequently if events or changes in circumstances indicate that the carryingvalue may be impaired. The financial information for the period ending 30 June 2005 is extracted fromthe Group's financial statements for the year ended 31 December 2005. 2. Unusual items During the period the company has disposed of certain assets as a result of alegal dispute with PartyGaming Plc. This disposal may be considered as unusualdue to its size and form. The impact of this is disclosed in notes 4 and 5. 3. Change of Estimates During the year ended 31 December 2005, a provisional amount was used in respectof goodwill $44,074,000 relating to the acquisition of Club Dice. This wasreduced by $798,000 during the period upon finalization of the total amount dueto the selling party. 4. Effect of changes in the composition of the entity In February 2006 certain trade assets were disposed to PartyGaming for $250m. The assets included in the disposal are certain domain names and the brand names"Empire Poker" and "Ace Club". These brands and domain names were used by EmpireOnline to direct online poker and casino players to Partygaming's websites,creating net gaming revenue for the Group. In the year ended 31 December 2005, the gross profit before administrativeexpenses attributable to the assets being sold was approximately $38.5 million.In the quarter ended 31 December 2005 the assets contributed gross profit beforeadministrative expenses of $5.0 million. The balance sheet value of the netassets pursuant to the disposal was less than $0.1 million as at 31 December2005. In the quarter ended 31 March 2006 the assets contributed gross profit beforeadministrative expenses of $2.5 million. 5. Segment Information in respect of assets disposed during period Business Segment Six months ended 30 June 2006 Unaudited $000Revenue by business segment Poker 3,553Casino 556 ------ 4,109 ------Segment result by business segment Poker 2,007Casino 540 ------Gross profit before central costs 2,547 ------ 6. Dividend The Board declares an interim dividend of $5m, which equates to 1.7 US cents pershare. The dividend will be paid on 30 November 2006 to those shareholders onthe register at 27 October 2006. 7. Segment Information for the period Business segments The Group's performance is analysed by its two business segments below: Year ended 2006 2005 31 December 2005Six months ended 30 June Unaudited Unaudited Audited $000 $000 $000Revenue and result by business segment Casino Net gaming revenue 30,209 2,943 23,635 ------ ------ ------Segmental result 15,754 2,089 12,719 ------ ------ ------ Poker Net gaming revenue 7,994 39,010 73,754 ------ ------ ------Segmental result 3,163 24,030 38,274 ------ ------ ------Consolidated Net gaming revenue 38,203 41,953 97,389 ------ ------ ------Segmental results 18,917 26,119 50,993Central costs (1,274) (5,004) (3,248) ------- ------- -------Gross Profit 17,643 21,115 47,745 ------ ------ ------ 8. Earnings per share Basic earnings per share have been calculated by dividing the net profitattributable to ordinary shareholders (profit for the period) by the weightedaverage number of shares in issue during the period. Six months ended 30 June 2006 2005 Year ended 31 December 2005 Unaudited Unaudited Audited $000 $000 $000Net profit attributable to ordinary shareholders 253,138 21,194 41,174($000) --------- --------- ---------Weighted average number of ordinary shares/ (number) 292,777,772 24,505,698 260,689,492 --------- --------- ---------Basic earnings per share ($) 0.86 $0.86 $0.16 --------- --------- ---------Weighted average number of ordinary shares/ (number) 305,767,612 24,564,494 260,862,570 --------- --------- ---------Diluted earnings per share ($) 0.83 $0.86 $0.16 --------- --------- --------- There are potentially dilutive shares in existence at the period end. Dilutedearnings per share have been calculated by dividing the net profit attributableto ordinary shareholders (profit for the period) by the weighted average numberof shares in issue during the period. 9. Amortization and non-recurring items These items are of a non-recurring nature and they include the net profit fromthe disposal to PartyGaming, the amortisation of the share options scheme andthe amortisation of the Player Data and Domains acquired during 2005. 2006 2006 Unaudited Unaudited $000 $000 Disposal proceeds received 250,000Legal and other expenses paid (11,800)Affiliate costs paid (1,543) -------Profit from disposal to PartyGaming 236,657 Less amortisation: Player Data and Domains (2,076) Share Options (1,451) (3,527) ------- -------Total amortisation and non-recurring items 233,130 ------- 10. Related parties transactions Six months ended 30 June 2006 2005 Unaudited Unaudited $000 $000 Administration services provided by Tradal Ltd 305 631 --- --- Tradal Limited is a related party by virtue of common ownership with EmpireOnline Limited. 11. Property, plant and equipment During the six months ended 30 June 2006, the group has acquired property, plantand equipment with a cost of $83,000. Depreciation of $35,000 has been chargedduring the period. 12. Preparation of Interim Statements The financial information does not constitute statutory accounts within themeaning of the BVI International Business Companies Act 1984 (as amended).Financial Statements for Empire Online Limited for the year ended 31 December2005, prepared in accordance with International Financial Reporting Standards asadopted by the European Union, on which the auditors gave an unqualified auditreport are available from the company's website, www.ep.com. Pro Forma Financial Information The pro-forma financial information has been prepared so as to providecomparable information for the transitional year of 2005 during which certainassets were acquired by the Group from Tradal Ltd, a related companyincorporated in St. Vincent and the Grenadines. Tradal Ltd will continue to play an important role for the Group as some of thekey members of staff are employed by this company. This company charges aservice fee for the services provided by its staff members. To provide comparable financial information with that included within the AIMadmission document, the aggregation of the income statements for both EmpireOnline Limited and Tradal Limited is shown below. This aggregation has been prepared from the audited financial statements for theyear ended 31 December 2005 and the unaudited results for the interim periodended on 30 June 2006. Empire Online Limited Pro Forma Income Statement for the six months ended 30 June 2006 Pre- amortisation and Amortisation non-recurring and non items recurring items Six months ended 2006 2006 2006 2005 Year ended 31 December 2005 $000 $000 $000 $000 $000 Unaudited Unaudited Unaudited Unaudited UnauditedNet gaming revenue 38,203 - 38,203 49,744 105,181 Cost of sales (20,560) - (20,560) (24,439) (53,244) ------ ------ ------ ------ ------Gross profit 17,643 - 17,643 25,305 51,937 Other income - - - 415 -Amortisation and non-recurring items - 233,130 233,130 - (4,581)Administrative (2,353) - (2,353) (1,134) (3,249)expenses ------ ------ ------ ------ ------Operating profit 15,290 233,130 248,420 24,586 44,107 Net finance income 4,722 - 4,722 925 1,392 ------ ------ ------ ------ ------Profit before 20,012 233,130 253,142 25,511 45,499taxation Taxation (4) - (4) (15) (22) ------ ------ ------ ------ ------Profit after taxation for the period 20,008 233,130 253,138 25,496 45,477 ------ ------ ------ ------ ------ Earnings per share Basic $0.86 $0.09 $0.17 ------ ------ ------Diluted $0.83 $0.09 $0.17 ------ ------ ------ Empire Online Limited Pro Forma Cash Flow statement for the six months ended 30 June 2006 Year endedSix months ended 30 June 2006 2005 31 December 2005 Unaudited Unaudited UnauditedCash flows from operating activities $000 $000 $000 Profit before taxation 253,142 25,511 45,499 Adjustments for Depreciation and amortisation 2,508 299 2,928Change in accounting estimate 798 - -Interest income (4,682) (951) (1,395)Interest expense 68 22 90Equity settled share options 1,451 - 277Exceptional profit of EP disposal (236,657) - - ------ ------ ------ 16,628 24,881 47,399 ------ ------ ------Changes in working capital Decrease/(increase) in trade and other 4,339 (6,715) 14,039receivables (Decrease)/increase in trade and other payables (15,917) 2,311 15,793Taxation paid - (26) (4)Change in related party balances - 1,377 - ------ ------ ------ (11,578) (3,053) 29,828 ------ ------ ------Net cash generated from operating activities 5,050 21,828 77,227 ------ ------ ------Cash flows from investing activities Purchase of plant and equipment (83) (48) (131)Purchase of intangible assets (421) (175,253) (5,558)Acquisition of business - - (221,192)Elimination of Tradal Ltd assets and liabilities - - 216Disposal of assets 236,657 - -Interest income received 4,682 951 1,395 ------ ------ ------Net cash generated from/(used in) investing 240,835 (174,350) (225,270)activities ------ ------ ------Cash flows from financing activities Loans to shareholders - 12,533 -Dividends paid - (39,043) (49,043)Proceeds from issue of shares - 209,646 209,203Decrease in Capital Account - - (18,010)Decrease in Treasury Shares - - 445Interest paid (68) (22) (90) ------ ------ ------Net cash (used in)/ generated from financing (68) 183,114 142,505activities ------ ------ ------Net increase/(decrease) in cash and cash 245,817 30,592 (5,538)equivalents Cash and cash equivalents at the beginning of the 16,297 21,835 21,835period ------ ------ ------Cash and cash equivalents at the end of the 262,114 52,427 16,297period ------ ------ ------ END This information is provided by RNS The company news service from the London Stock Exchange