Livermore Regulatory News (LIV)

1 Aug 2005 07:06

Empire Online Limited01 August 2005 1 August 2005 For Immediate Release EMPIRE ONLINE LIMITED MAIDEN INTERIM RESULTS FOR SIX MONTHS ENDED 30 JUNE 2005 Empire Online Limited (the "Company" or "Empire Online"), a leading provider ofmarketing services to the online gaming industry, today announces its interimresults for the six months ended 30 June 2005. OPERATING AND FINANCIAL HIGHLIGHTS: • Successful listing on AIM raising approximately $222m before expenses of $13.7m.• Interim dividend of US 3.4 cents per Ordinary Share. Pro forma: • Net gaming revenues up 97.2% to $49.7m (H1 2004: $25.2m).• Gross profit up 75.7% to $25.3m (H1 2004: $14.4m).• Profit before taxation up 87.5% to $25.5m (H1 2004: $13.6m).• Number of New Real Money Players acquired by the Company during H1 2005 (Poker and Casino) rose by 101% to 92,213 (H1 2004: 45,862).• Increase of 222% in Poker Active Player Days 2,846,549 (H1 2004: 885,339) Pro forma is defined as the aggregation of the results of the company for thesix months till 30 June 2005 and the results of Tradal Limited till May 31,2005. Commenting on the results, Noam Lanir, CEO of Empire Online Limited, said:'Empire Online has experienced a strong half-year and remains focused on rapidgrowth while containing costs. The resource for the half-year show that thesetwo core objectives have been achieved despite investing in operations tosupport continued growth and management's focus on successfully taking theCompany public. 2005 is shaping up to be a landmark year for the Company'. There will be a presentation to analysts at 9.00am today at Citigate DeweRogerson, 3 London Wall Buildings, London EC2M 5SY. For further investorinformation please go to http://investors.ep.com/company_information.htm Enquiries: Empire Online Limited +44(0) 20 7638 9571Noam Lanir, Chief Executive officerYossef Pereg, Chief Financial officerAndrew Burnett Numis Securities +44(0) 20 7776 1500James Black Citigate Dewe Rogerson +44(0) 20 7638 9571Simon RigbySarah GestetnerGed Brumby The information contained herein is not for publication or distribution topersons in the United States of America.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. FINANCIAL RESULTS The "pro forma" statements refer to the aggregated results of the company andTradal Limited as if they were one operating company for the entire period underreview. POKER: The Group's poker revenues have grown rapidly in H1 2005, with allelements meeting the Board's expectations. • Pro Forma Poker revenue up 180.6% to US$39.0m (H1 2004: US$13.9m). CASINO: Casino net revenues have dropped off a little from last year's levelsdue to an extraordinary series of Jackpots won by the Company's players inexcess of, US$1 million, in aggregate. • Pro Forma Casino revenue down 6.1% to US$10.7m (H1 2004: US$11.4m). Pro Forma Financial Results for the Group. See note (6)• Revenue up 97.2% to US$49.7m (H1 2004: US$25.2m).• Cost of sales for the six months ended 30 June 2005 up 125.9% to $24.4m (H1 2004: $10.8m).• Gross profit of US$25.3m, up 75.7% (H1 2004: US$14.4m).• Gross margin decreased to 50.9% (H1 2004: 57.0%). The increase in the cost of sales is due to the Company investing in further strong future growth and relates to, inter alia, an increase in offline activities.• Administrative expenses grew to $1.1m (H1 2004 US$1.0m). The percentage of administrative expenses to revenue decreased from 4% at H1 2004 to 2% at H1 2005.• Operating profit for 2005 H1 was up 83.6% to US$24.6m (2004: US$13.4m).• Net finance income increased 312.9% to $0.9m (H1 2004 $0.2m).• Profit before taxation increased by 87.6% to $25.5m (2004: US$13.6m).• Basic and diluted earnings per share were $0.09 (H1 2004: US$0.05).• During the six months ended 30 June 2005, the group generated cash from operating activities of $21.8 (2004 US$37.4). In H1 2004 the company granted the shareholders loans of US$16.4m. These loans where set against dividend in 2005. Q2 2005 SUMMARY FINANCIAL RESULTS During the second quarter of 2005 the Company has continued its planned offlinemarketing scheme, which has delivered positive results. The Company is planningto launch offline campaigns in four more countries during the next six months. Key highlights pro forma for Q2 2005 include: • Strong net gaming revenues at US$25.3m. • Poker revenue of US$20.3m and casino revenue of US$ 5.0m. The casino revenue decrease is explained by an extraordinary series of Jackpotswon by the Company's players in excess of US$1 million. • Net profit of US$13.1m. KEY PERFORMANCE INDICATORS (KPIS) • Number of New Real Money Players acquired by the Company during the second quarter was 42,772 (Poker 32,934 and Casino 9,838). The decrease is explained by seasonality in the business. • Number of Active Players (players who played for real money during the last 90 days) increased to 126,507 (Poker 102,698 and Casino 23,809). • Average Number of Active Players per day (Average real money players playing during a day for Poker and Casino) increased to 17,555 (Poker 16,229 and Casino 1,326). PUBLIC SHARE OFFERING On June 15, 2005 the company successfully floated its shares on AIM. The Placingcomprised a total of 70,555,556 shares, representing 24.1 per cent of theenlarged issued share capital of the company, at 175p per Ordinary Share.Following admission, the number of Ordinary shares in issue was 292,777,772.Based on the Placing Price, the market capitalisation of Empire Online oncommencement of dealings in the Ordinary Shares was £512m. Gross proceeds of thePlacing was approximately £123.47m (US$222.3m.) Flotation expenses wereapproximately US$13.7m. On 1 June 2005, the Group purchased certain trade andassets of Tradal Limited, a company involved in the provision of marketingservices for e-gaming activities over the Internet for £97.2m. Although EmpireOnline and Tradal Limited had essentially the same controlling shareholders andmanagement and have effectively operated as sister companies, they have not anddo not form part of the same corporate group. DIVIDEND As set out in the AIM Admission document issued by the Company dated 10 June2005, it is the Directors' intention that the Company should pay dividends toShareholders in respect of the year ending 31 December 2005 of approximatelyUS$30 million. The Directors have pleasure in declaring a dividend in respect ofthe six months ended 30 June 2005 of US$10 million, being 3.4 cents per OrdinaryShare. The dividend will be paid on September 12, 2005 to Shareholders on theregister at the close of business on August 10, 2005.REVIEW OF OPERATIONSEmpire Online Limited KEY PERFORMANCE INDICATORS (KPIs) In the six months ended 30 June 2005, Empire Online Limited has made strong progress across the business. The number of registered customers has increased by 92,213 to 496,213. Key performance indicators (KPIs) H1 2005 H1 2004 Change % (1) Number of New Real Money Players acquired Company 92,213 45,862 101 Poker 70,567 27,680 155 Casino 21,646 18,182 19 (2) Number of Active Players (players who played for real money Company 126,507 51,367 146 during the last 90 days) Poker 102,698 32,147 219 Casino 23,809 19,220 24 (3) Average number of Active Players per day (Average Real Money Company 17,120 6,037 184 players playing during a day) Poker 15,724 4,865 223 Casino 1,396 1,172 19 (4) Number of New Real Money Players acquired outside the USA Company 30,739 12,072 155 Poker 21,808 5,075 330 Casino 8,931 6,997 28 (5) Poker Active Player Days - (i.e the number of days each player 2,846,549 885,339 222 generates rake) TRADING OUTLOOK Trading has been strong during the first month following the World Series ofPoker. This level of activity is consistent with the Board's expectations. STRATEGIC UPDATE The Company aims to pay particular attention to expanding its player base intargeted European countries in the medium term, with the intention of raisingits profile and reducing the Group's reliance on the North American market.However, Empire Online will also continue to pursue its existing strategies inrelation to its primary markets of the United States and Canada to maintain itsstrong position in these markets. The Company intends to increase its offline activity and branding campaigns intargeted European countries. The Company intends to use a part of the proceedsof the Placing to fund the acceleration of its plans to penetrate theseidentified countries by the end of the year. The Group is reviewing its strategy going forward and may also seek agreementswith online gaming operators with which it is not already working to allowEmpire Online to direct players to those operators' gaming websites. The company is planning to launch, in the near future, an online multi playerbackgammon platform. The platform will allow players to play with other playersfor fun and real money. The company is planning to use the platform developedfor other multi player games. The company has appointed Mr. Andrew Burnett, a leading leisure and gaminganalyst and latterly corporate financier at Numis Securities as a consultant tolead its mergers and acquisitions drive. Andrew Burnett was a member of theteam at Numis Securities, which advised the company during its recent placing inLondon. He will also play an active role in Investor Relations advice andsupport. Financial resultsEmpire Online Limited consolidated Income Statements for six months 30 June 2005 Period ended Period ended Year Ended 30 June 30 June 31 December 2004 2005 2004 $000 $000 $000 Unaudited Unaudited Audited Net gaming revenue 41,953 17,344 48,319 Cost of sales (20,838) (7,993) (20,716) ------ ------ ------Gross profit 21,115 9,351 27,603Other income 415 - -Administrative expenses (1,028) (863) (1,643) ------ ------ ------Operating profit 20,502 8,488 25,960 Net finance income 695 112 266 ------ ------ ------Profit before taxation 21,197 8,600 26,226 Taxation (3) - - ------ ------ ------Profit after taxation for the period 21,194 8,600 26,226 Earnings per shareBasic $0.86 $79.96 $243.85 ------ ------ ------Diluted $0.86 $79.96 $243.85 ------ ------ ------ Empire Online LimitedConsolidated balance Sheet as at 30 June 2005 As at 30 June As at As at 2005 30 June 31 December 2004 2004 $000 $000 $000 Unaudited Unaudited AuditedAssetsNon-current assetsIntangibles 175,750 381 794 Current assetsTrade and other receivables 7,413 12,080 18,331Cash and cash equivalents 43,958 1,748 14,830 ------ ------ ------ 51,371 13,828 33,161 ------ ------ ------Total assets 227,121 14,209 33,955 EquityShare capital - 1 1Share premium 210,251 604 604Retained earnings 12,317 12,540 30,166 ------ ------ ------Total equity 222,568 13,145 30,771 ------ ------ ------LiabilitiesCurrent liabilitiesTrade and other payables 4,550 1,064 3,184Current tax payable 3 - - ------ ------ ------Total liabilities 4,553 1,064 3,184 ------ ------ ------Total equity and liabilities 227,121 14,209 33,955 Consolidated statement of changes in equity for the period ended 30 June 2005 Note Share Share Retain capital premium Earnings Total $000 $000 $000 $000 Balance at 1 January 2004 1 - 3,940 3,941 Net profit for the period - - 26,226 26,226Issue of Share Capital - 604 - 604 ------ ------ ------ ------Balance at 31 December 2004 1 604 30,166 30,771 Net profit for the period - - 21,194 21,194 Issue of Share Capital - 209,646 - 209,646Adjustment * (1) 1Dividends Paid - - (39,043) (39,043) Balance at 30 June 2005 - 210,251 12,317 222,568 * Shares in issued of 31 December 2004, had a par value of US $0.01 each. On 15June 2005 these shares where converted and reclassified to 2,066.222427 each toordinary shares of no par value. Empire Online Limited Consolidated Cash Flow statement of cash flows for the six months ended 30 June 2005 Period ended Period ended Year Ended 31 December 2004 30 June 30 June 2005 2004 $000 $000 $000 Unaudited Unaudited Audited Cash flows from operating activities Profit before taxation 21,197 8,600 26,226 Adjustments for Depreciation and amortisation 242 127 173 Interest income (712) (130) (309) Interest expense 17 18 - ------ ------ ------ 20,744 8,615 26,090 ------ ------ ------Changes in working capital (Increase)/Decrease in trade and other (6,795) 1,416 881receivables Increase in trade and other payables 1,230 510 2,630 Increase/(decrease) in related party balances 5,345 (383) (4,739) ------ ------ ------ (220) 1,543 (1,228) ------ ------ ------Net cash generated from operating activities 20,524 10,158 24,862 Cash flows from investing activities Purchase of intangible assets (175,198) (508) (967) Interest income received 712 130 309 ------ ------ ------Net cash used in investing activities (174,486) (378) (658) ------ ------ ------Cash flows from financing activities Repayments/(advance) of loans by/to shareholders 12,504 (9,779) (11,139) Dividends paid (39,043) - - Proceeds from issue of shares 209,646 - - Interest paid (17) (18) - ------ ------ ------Net cash generated from/(used in) financing 183,090 (9,797) (11,139)activities ------ ------ ------Net increase/(decrease) in cash and cash 29,128 (17) 13,065equivalents Cash and cash equivalents at the beginning of the 14,830 1,765 1,765period ------ ------ ------Cash and cash equivalents at the end of the period 43,958 1,748 14,830 Empire Online LimitedNotes to the financial informationSix months ended 30 June 2005 1. 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. 2. 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, and arenot expected to be significantly different from those set out in the Group'saudited financial statements for the quarter ended 31 March 2005, with theexception of goodwill which was not present at 31 March 2005. 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 results are in accordance with International Financial Reporting Standards("IFRS") including International Accounting Standards ("IAS") andinterpretations adapted by the International Accounting Standards Board("IASB"). The financial information for the period ending 30 June 2004 is extracted fromthe Group's financial statements for the year ended 31 December 2004. 3. Earnings per share Basic earnings per share Basic earnings per share have been calculated by dividing the net profitattributable to ordinary shareholders (profit for the year) by the weightedaverage number of shares in issue during the year. Period ended Period ended Year Ended 31 December 2004 30 June 30 June 2005 2004Net profit attributable to ordinary 21,194 8,600 26,226shareholders ($000) --------- --------- ---------Weighted average number of ordinary shares/ 24,505,698 107,550 107,550(number) --------- --------- ---------Basic earnings per share ($) $0.86 $79.96 $243.85 --------- --------- ---------Weighted average number of ordinary shares/ 24,564,494 107,550 107,550(number) --------- --------- ---------Diluted earnings per share ($) $0.86 $79.96 $243.85 --------- --------- --------- 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 year) by the weighted average number ofshares in issue during the period. 4. Acquisition of trade and certain assets from Tradal Limited. With effect from 1 June 2005 the Group purchased certain trade and assets ofTradal Limited, a company incorporated in St Vincent and the Grenadines, acompany involved in the provision of marketing services for e-gaming activitiesover the Internet. The cash consideration for the purchase of approximately£97.2 million being considered by both parties to be the fair value of theassets acquired at the acquisition date. The goodwill generated represents thedifference between the fair market value of the assets acquired as at the dateof acquisition and the consideration paid. Full consideration was paid on thedate of acquisition. The assets acquired are summarised in the following table: $'000 Intangible assets including software and website design cost 83 Net assets 83 Fair value of assets acquired 83 Consideration 175,000 Goodwill 174,917 5. Dividend On 9 June 2005, the Company declared dividends totaling $39m, representing$363.02 per share. Of the total amount declared, $7m was paid in cash and thebalance of $32m was applied to settle outstanding shareholder loan balances. 6. Pro Forma aggregation of the income statements and statements of cash flowsfor both Empire Online Limited and Tradal Limited To provide comparable financial information with that included within theprospectus, the aggregation of the income statements for both Empire OnlineLimited and Tradal Limited are shown below. This aggregation has been prepared from the audited financial statements for theyear ended 31 December 2004 and quarter ended 31 March 2005, and the unauditedresults for the quarter to 30 June 2005. The financial statements of the Company and Tradal Limited have been preparedfor the same reporting period, using consistent accounting policies. 3 months 3 months 6 months 6 months 12 Months ended ended ended ended ended 31 December 30 June 30 June 30 June 30 June 2005 2004 2005 2004 2004 $000 $000 $000 $000 $000 Unaudited Unaudited Unaudited Unaudited Audited Net gaming revenue 25,330 13,814 49,744 25,203 65,186 Cost of sales (12,516) (5,489) (24,439) (10,837) (26,192) ------ ------ ------ ------ ------ Gross profit 12,814 8,326 25,305 14,366 38,994 Other income 415 - 415 - - Administrative expenses (537) (685) (1,134) (992) (1,827) ------ ------ ------ ------ ------ Operating profit 12,692 7,640 24,586 13,374 37,167 Net finance income 436 107 925 224 531 ------ ------ ------ ------ ------ Profit before taxation 13,128 7,747 25,511 13,598 37,698 Taxation (8) (4) (15) (8) (16) ------ ------ ------ ------ ------ Profit after taxation 13,120 7,743 25,496 13,590 37,682 Earnings per share Basic $0.04 *$0.03 $0.09 * $0.05 * $0.13 ------ ------ ------ ------ ------ Diluted $0.04 *$0.03 $0.09 * $0.05 * $0.13 ------ ------ ------ ------ ------ * Calculated as for the number of shares after the June 2005 placing. 6 months ended 12 months ended 30 June 31 December 2005 2004 $000 $000Cash flows from operating activities Unaudited Audited Profit before taxation 25,511 37,698 Adjustments for Depreciation and amortisation 299 317 Interest income (951) (625) Interest expense 22 Non cash item: aggregation adjustments - (3,384) ------ ------ 24,881 34,006 ------ ------Changes in working capital Decrease/(increase) in trade and other receivables (6,715) 855 (Decrease)/increase in trade and other payables 2,311 2,386 Taxation (paid)/received (26) 1 (Increase)/decrease in trading investments - 104 Change in related party balances 1,377 - ------ ------ (3,053) 3,346 ------ ------Net cash (used in)/generated from operating activities 21,828 37,352 Cash flows from investing activities Purchase of property, plant and equipment (48) (152) Purchase of intangible assets (175,253) (1,037) Interest income received 951 627 ------ ------Net cash used in investing activities (174,350) (562) ------ ------Cash flows from financing activities Advance of loans to shareholders 12,533 (16,413) Dividends paid (39,043) (5,004) Proceeds from issue of shares 209,646 - Interest paid (22) - ------ ------Net cash used in financing activities 183,114 (21,417) ------ ------Net increase/(decrease) in cash and cash equivalents 30,592 15,373 Cash and cash equivalents at the beginning of the period 21,835 6,462 ------ ------Cash and cash equivalents at the end of the period 52,427 21,835 ------ ------ This information is provided by RNS The company news service from the London Stock Exchange