Livermore Regulatory News (LIV)

4 Apr 2006 07:02

Empire Online Limited04 April 2006 EMPIRE ONLINE LIMITED MAIDEN PRELIMINARY RESULTS FOR YEAR ENDED 31 DECEMBER 2005 Empire Online Limited (the "Company" or "Empire Online"), a leadingmulti-channel online gaming and marketing services company, today announces itsmaiden preliminary results for the year ended 31 December 2005. OPERATING HIGHLIGHTS: • Successful acquisitions of Club Dice casino and bingo platforms and Noble Poker, the largest poker operator on the iPoker network • Final dividend of US6.8cents (3.9pence) per Ordinary Share • Successful listing on AIM market raising $222m in gross proceeds • Assignment of Empire Online's PartyGaming related 'skin' operations to PartyGaming for $250 million cash FINANCIAL HIGHLIGHTS: • Reported net gaming revenues up 102% to $97.4m (2004: $48.3m.) Reported profit after amortisation and non recurring charges before taxation up 57% to $41.2m (2004: $26.2m) • Pro forma* net gaming revenues up 61% to $105.2m (2004: $65.2m) • Pro forma* gross profit up 33% to $51.9m (2004: $38.9m) • Pro forma* profit before amortisation and non recurring charges up 33% to $50.1m (2004: $37.7m) • Active Real Money Players at the end of 2005 rose by 59% to 165,310 (2004: 104,177) Commenting on the results, Noam Lanir, CEO of Empire Online Limited, said: "2005was an extremely busy year for Empire with our successful listing on the AIMmarket of the London Stock Exchange and our evolution from a marketing servicesprovider to a successful online gaming platform. We are extremely pleased withthe performance of the Company during the period, and are very encouraged withthe growth in both our poker and casino offerings globally and in particular ingeographical territories outside of the USA. The Company added around 450 new real money sign ups per day in the first 4weeks of March in the new financial year. The Board reiterates its confidencein achieving an EBITDA of $37m for the year to 31 December 2006." \* 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. Further details are disclosedwithin this statement. 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 OfficerAndrew Burns, Chief Financial OfficerAndrew Burnett, Head of Mergers & Acquisitions Citigate Dewe Rogerson +44(0) 20 7638 9571Sarah GestetnerGed Brumby Chairman's Statement I would like to welcome all shareholders and investors to Empire Online's maidenpreliminary results. This has been a big year of change for all at Empire Online and I would like toexpress my gratitude to Noam Lanir and the rest of the directors and staff forall of their efforts during this period. Noam has a great understanding of thissector and I believe that with his ongoing enthusiasm and experience the Companyis extremely well placed to meet the challenges ahead. Following the settlement from PartyGaming, Empire Online is in a very strongposition financially. The $250m received is currently on deposit and isavailable to finance the acquisition of complementary businesses that can beacquired at a sensible price. The sector is widely expected to go through aperiod of consolidation and the Company in uniquely placed to emerge as one ofthe key players in the industry. Opportunities for organic growth also remain strong and are being achieved withadmirable geographic diversity. At the same time we have significant downsideprotection to the Company in the unlikely event of any disruption to our USbusiness through any regulatory activities. Diluted earnings per share after amortisation and non recurring charges wereUS16.0cents per share for the year. The Board is pleased to recommend a finaldividend of $20m which is US 6.8cents (3.9pence) per share. Subject to approvalat the Company's AGM, the Company anticipates that the final dividend will bepaid in early June. Together with the interim dividend of $10m or US3.4cents (1.9pence) per share,this takes the dividends paid to shareholders since the IPO to $30m orUS10.2cents (5.8pence) per share. The Board reiterates its intention to continuewith a 50% dividend payout ratio going forward. The opportunities that lie ahead are excellent and the Board remains extremelyconfident about the future business and profitability of Empire Online. Lord SteinbergChairman Chief Executive's Review 2005 has been a year of considerable change for the Company. We end the year ina strong and secure position with the last six months in particular seeing aremarkable transformation in the Company. At the time of our IPO in June we wereprincipally a provider of marketing services to two of the largest online gamingcompanies in their respective fields: CasinoOnNet and PartyPoker. Now, we havean established and fast growing Licensed Gaming business which operates its ownplatforms (Club Dice and Noble Poker) and have $250m cash at our disposal topursue acquisitions which will enable us to play a leading part in industryconsolidation. Operating Review The twelve months to 31st December 2005 has seen further continued growth acrossall aspects and areas of the Company, albeit in a manner different to thatanticipated at the time of the Company's IPO in June 2005. The number ofregistered customers across the Group has risen over the course of the twelvemonths ending 31st December 2005, by 185,456 (2004: 121,257). Growth in our casino business has led to a total number of active players at theend of the year of 42,304 (2004: 32,711). Total pro-forma revenues for thedivision were $31.4m (2004: $21.8m) for the year which generated a pro-formagross profit of $16.6m (2004: $14.7m) for the year on a pro-forma gross profitmargin of 51% (2004: 67%). In addition, growth in our poker business has led to a total number of activeplayers at the end of the year of 123,006 (2004:71,466). Total pro-formarevenues for the division were $73.8m (2004: $43.3m) for the year whichgenerated a pro-forma gross profit of $35.3m (2004: $24.3m) for the year on apro-forma gross profit margin of 48% (2004: 56%). We have seen growth across Key Performance Indicators (KPI's) at our Club Dicecasino suite and our Noble Poker brand. Both of these platforms were acquired inAugust 2005, with the aim of reducing our reliance on our two technologyproviders at the time and to establish our move into licensed gaming, where weown and operate our own gaming licence. This growth has been achieved along with a relentless focus on cost containment.The average cost of acquiring a new real money player across the group during2005 was $230 (2004: $220). The Board believes that the stability of thismetric, along with the Company's ability to sustain a high level of playeracquisition emphasises the deliverability of future incremental profits. Club Dice Casino Empire Online completed the acquisition of the Club Dice Casino suite in August.The cost of the acquisition was $46.6m. Club Dice has seen substantial growth in revenues and new sign ups sinceinception. At the end of 2005, the Club Dice platforms in aggregate had 26,790active players. The net revenue per day averaged $79,946 during the fourthquarter (Q4) of 2005, compared to an average daily income of $65,334, anincrease of 22.4% on the third quarter (Q3) of 2005. Noble Poker Empire Online completed the acquisition of the player database, brand andintellectual property of Noble Poker in August 2005. Noble Poker is the largestpoker operator on the Playtech iPoker network, one of the fastest growing pokernetworks on the internet. The cost of the acquisition was $3.6 million. The Company has implemented strategies to help drive the rate of growth in newdaily signups. This has been successfully executed with Noble Poker achieving anaverage of 138 new real money signups per day during the fourth quarter of 2005against 118 new real money player signups during the third quarter of 2005. Thenumber of active players was 29,585 at the end of the fourth quarter of 2005,against 21,809 at the end of the third quarter. Industry Consolidation / Mergers and Acquisitions For many years, the industry has talked of consolidation. Now, we are startingto see that talk become reality. Empire Online has always seen its role at thecentre of this consolidation, believing that our core expertise in marketing isbetter leveraged across a larger platform. The Company has always expressed itsintention to pursue industry-consolidating deals as and when they becomeavailable. The large number of online gaming sites and the increasingly higherbarriers to profitable scale mean that consolidation will be seen by manyoperators as an attractive exit going forward. I believe that the cash reserves available to the Company, along with theability to use its equity give the Company considerable flexibility in pursuingmerger and acquisition activity over the remainder of the year. Our focus is toextend the range of the products that we can offer our customers, including asportsbook. We will assess areas of geographical acquisition in-line withregulatory and legislation trends. Industry Regulation Since the beginning of the year there has been renewed activity in the USCongress to bring forward bills that seek to either ban the use of financialinstruments for online gaming or extend existing federal laws to prohibit UScitizens from online gaming completely. Having established this Company in 1998,I am used to US regulatory threats as an ever present 'soundtrack' to theindustry. I cannot offer investors any certainty that prohibitive legislation will notpass Congress, but as CEO of Empire Online, it is my duty to take all actionsnecessary to position this Company so that it maximises its exposure to theupside from this industry and minimises the risks. Our Mergers and Acquisitionsfunction will seek to exploit, from a position of strength, any opportunitiesthat may arise from adverse legislation being passed. Financial Review Pro-forma net gaming revenue for the year ended 31 December 2005 was $105.2m (12months to December 2004: $65.2m), earning a pro-forma gross margin of $51.9m(2004: $39.0m) at 49.3% of turnover (2004: 59.8%). The reduction in pro-formagross margin has arisen from additional marketing costs incurred in order tostabilise the EmpirePoker platform following the separation form PartyPoker on8th October 2005. Additionally, significant offline campaigns were undertakenthroughout 2005, which initially yield a lower gross margin than the Company'smain online marketing activities. Pro-forma profit before tax was $50.1m (2004: $37.7m), before amortization andnon recurring costs of $4.5m (2004: nil.) Pro-forma diluted earnings per share before amortisation and non-recurring costswere 19cents (2004: $350). Pro-forma diluted earnings per share afteramortisation and non-recurring costs were 17cents (2004: $350). During the year ended 31 December 2005, the Company generated pro-forma cashfrom operating activities of $77.2m (2004: $37.4m). As at 31 December 2005 theCompany had $16.3m (2004: $21.8m) of cash and liquid resources on its balancesheet. Trading Outlook During the first 4 weeks of March in the new financial year the rate of new realmoney player growth was around 450 per day. The Company continues to believethat growth opportunities for all its platforms remain strong. In particular,the Company is pleased to note that more than 50% of new daily signups originatefrom outside of the USA. The cost of acquiring new customers continues to fallon a quarter by quarter basis. On the current rate of growth, the Company reiterates its confidence inachieving an EBITDA of $37 million for the current year. Noam LanirChief Executive Consolidated Income Statementfor the year ended 31 December 2005 Pre- Amortisation and amortisation and non recurring Note non recurring items items 2005 2005 2005 2004 $000 $000 $000 $000 Net gaming revenue 97,389 - 97,389 48,319 Cost of sales (49,644) - (49,644) (20,716) ------ ------ ------ ------Gross profit 47,745 - 47,745 27,603 Administrative expenses 2 (3,171) (4,581) (7,752) (1,643) ------ ------ ------ ------Operating profit 3 44,574 (4,581) 39,993 25,960Finance expenditure (55) - (55) (43)Finance income 1,246 - 1,246 309 ------ ------ ------ ------Profit before taxation 45,765 (4,581) 41,184 26,226 Taxation (10) - (10) - ------ ------ ------ ------Profit after taxation for the 45,755 (4,581) 41,174 26,226period ====== ====== ====== ====== Earnings per share Basic earnings per share ($) 4 $0.18 $0.16 $ 243.85 ====== ====== ====== Diluted earnings per share ($) 4 $0.17 $0.16 $ 243.85 ====== ====== ====== Dividends Proposed final dividend per share ($) $0.07 - ====== ======Proposed final dividend ($000) 20,000 - ====== ======Dividends paid during the period per share ($) $0.10 - ====== ====== Dividends paid during the period ($000) 49,043 - ====== ====== The notes on pages 10 to 11 form part of these financial statements. Consolidated Balance Sheetas at 31 December 2005 Note 2005 2004 $000 $000AssetsNon-current assetsProperty, plant and equipment 119 -Intangible assets 224,628 794 ------- ------- 224,747 794 ------- -------Current assetsTrade and other receivables 11,431 18,331Cash and cash equivalents 5 16,297 14,830 ------- ------- 27,728 33,161 ------- -------Total assets 252,475 33,955 ======= =======EquityShare capital - 1Share premium 209,807 604Share option reserve 277 -Retained earnings 22,297 30,166 ------- -------Total equity 232,381 30,771 ------- -------LiabilitiesCurrent liabilitiesTrade and other payables 20,088 3,184Current tax payable 6 - ------- -------Total liabilities 20,094 3,184 ------- -------Total equity and liabilities 252,475 33,955 ======= ======= These Financial Statements were approved by the Board of Directors on the 3rd ofApril 2006. The notes on pages 10 to 11 form part of these financial statements. Consolidated Statement of Changes in Equityfor the year ended 31 December 2005 Share Share Share Accumulated capital premium Option profits Total reserve $000 $000 $000 $000 $000 Balance at 1 January 2004 1 - - 3,940 3,941 Share capital issued - 604 - - 604Net profit for the year - - - 26,226 26,226 ------ ------- ------ ------ ------Balance at 31 December 2004 1 604 30,166 30,771 Net profit for the period - - - 41,174 41,174Issue of new 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 2005 - 209,807 277 22,297 232,381 ====== ======= ====== ====== ======= The notes on pages 10 to 11 form part of these financial statements. Consolidated Statement of Cash Flowsfor the year ended 31 December 2005 Note 2005 2004 $000 $000Cash flows from operating activities Profit before tax 41,184 26,226 Adjustments for Depreciation and amortisation 2,898 173 Interest income (1,159) (309) Interest expense 55 - Equity settled share options 277 - -------- -------- 43,255 26,090 -------- --------Changes in working capital Decrease in trade and other receivables 6,900 881 Increase/ (decrease) in trade and other payables 16,904 (2,109) Taxation paid (4) - -------- -------- 23,800 (1,228) -------- --------Net cash generated from operating activities 67,055 24,862 -------- --------Cash flows from investing activities Purchase of property, plant and equipment (131) - Purchase of intangible assets (5,528) (967) Acquisition of business (221,192) - Interest income received 1,159 309 -------- --------Net cash used in investing activities (225,692) (658) -------- --------Cash flows from financing activities Advance of loans to shareholders - (11,139) Dividends paid (49,043) - Proceeds from issue of shares 209,203 - Share capital cancellation (1) - Interest paid (55) - -------- --------Net cash from/(used in) financing activities 160,104 (11,139) -------- --------Net increase in cash and cash equivalents 1,467 13,065 Cash and cash equivalents at the beginning of the year 5 14,830 1,765 -------- --------Cash and cash equivalents at the end of the year 5 16,297 14,830 ======== ======== The notes on pages 10 to 11 form part of these financial statements. Notes to the Financial Statements 1. Basis of preparation The audited financial statements of Empire Online have been prepared inaccordance with International Financial Reporting Standards ("IFRS") as adoptedby the European Union. The significant accounting policies applied in theFinancial Statements of the Group in the prior years have been appliedconsistently in these Financial Statements. The Group adopted for the firsttime IFRS 2 Share Based Payments and IFRS 3 Business Combinations in 2005. Theadoption of the above had no impact on prior years. The financial information is presented in US dollars because that is thecurrency in which the Group primarily operates. 2. Amortisation and non recurring items Amortisation and non recurring items refer to: 2005 2004 $000 $000 Amortisation of intangible assets 2,266 -Amortisation of share options 277 -IPO related expenses 587 -Non recurring expenses 1,451 - ------ ------ 4,581 - ====== ======3. Operating Profit 2005 2004 $000 $000Operating profit is stated after charging: Administration services 936 1,460Depreciation 12 260Amortisation 2,886 173Operating leases 18 -Auditors' remuneration 90 37 ====== ======Auditor's remuneration is analysed as: Audit fees 90 37 ====== ====== 4. Earnings per share Basic earnings per share has been calculated by dividing the net profitattributable to ordinary shareholders (profit for the year) by the weightedaverage number of shares in issue during the relevant financial periods. Diluted earnings per share is calculated after taking into consideration thepotentially diluted shares in existence as at the year ended 31 December 2005.For the year ended 31 December 2004 there were no potentially diluted shares. Pre- amortisation Post amortisation and non recurring and non recurring items items 2005 2005 2004 Net profit attributable to ordinary shareholders ($000) 45,755 41,174 26,226 ============ ============ =========Weighted average number of ordinary shares in issue 260,689,492 260,689,492 107,550 ============ ============ =========Basic earnings per share ($) 0.18 0.16 243.85 ============ ============ =========Weighted average number of ordinary shares including the effect of potentially dilutedshares 261,862,570 261,862,570 107,550 ============ ============ =========Diluted earnings per share ($) 0.17 0.16 243.85 ============ ============ ========= Number of Shares Weighted average number of ordinary shares in issue 260,689,492 260,689,492 107,550 Effect of dilutive potential ordinary shares: Share options 1,173,078 1,173,078 - ------------ ------------ ---------Weighted average number of ordinary shares including the effect of potentially dilutedshares 261,862,570 261,862,570 107,550 ============ ============ ========= 5. Cash and cash equivalents Cash and cash equivalents included in the cash flow statement comprise thefollowing at the balance sheet date: 2005 2004 $000 $000 Short term deposits 14,607 12,495Cash at bank 1,690 2,335 ------ ------ 16,297 14,830 ====== ======Unaudited Pro-Forma Financial Information General Information The pro-forma financial information has been prepared so as to provide comparable information for the transitional year of 2005 during which certain assets 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. Balance Sheet The aggregated balance sheet as at 31 December 2005 is actually the same as theGroup Balance Sheet as Tradal Ltd's operations that related to the Group have,by the end of the year, been integrated into the group via the acquisition ofTradal Ltd's assets. Basis of aggregation The pro-forma results of the Group are an aggregation based on Empire OnlineGroup results for the year ended 31 December 2005 incorporating the tradingresults of the acquired business from Tradal Ltd for the first five months of2005. These results were aggregated so as to provide comparable information. Unaudited pro-forma Income Statementfor the year ended 31 December 2005 Pre- Amortisation amortisation and and non non recurring recurring items items 2005 2005 2005 2004 $000 $000 $000 $000 Net gaming revenue 105,181 - 105,181 65,186 Cost of sales (53,244) - (53,244) (26,192) -------- ------- -------- -------- -Gross profit 51,937 - 51,937 38,994 Administrative expenses (3,249) (4,581) (7,830) (1,827) -------- ------- -------- --------Operating profit 48,688 (4,581) 44,107 37,167Net finance income 1,392 - 1,392 531 -------- ------- -------- --------Profit before taxation 50,080 (4,581) 45,499 37,698 Taxation (22) - (22) (16) -------- ------- -------- --------Profit after taxation for the period 50,058 (4,581) 45,477 37,682 ======== ======= ======== ======== Earnings per shareBasic earnings per share ($) $0.19 $0.17 $350 ======== ======== ========Diluted earnings per share ($) $0.19 $0.17 $350 ======== ======== ======== Dividends Proposed dividend per share ($) $0.07 - ======== ========Proposed dividend ($000) 20,000 - ======== ========Dividends paid during the period per share ($) $0.10 - ======== ========Dividends paid during the period ($000) 49,043 - ======== ======== Unaudited pro-forma Cash Flow Statementfor the year ended 31 December 2005 2005 2004 $000 $000Cash flows from operating activities Profit before income tax 45,499 37,698 Adjustments for Depreciation and amortisation 2,928 317 Equity settled share options 277 - Interest income (1,395) (625) Interest expense 90 - Non cash item: aggregation adjustments - (3,384) -------- -------- 47,399 34,006 -------- --------Changes in working capital Decrease in trade and other receivables 14,039 855 Increase in trade and other payables 15,793 2,386 Taxation (paid)/received (4) 1 Decrease in trading investments - 104 -------- -------- 29,828 3,346 -------- --------Net cash generated from operating activities 77,227 37,352 -------- --------Cash flows from investing activities Purchase of property, plant and equipment (131) (152) Purchase of intangible assets (5,558) - Acquisition of business (221,192) (1,037) Elimination of Tradal Ltd assets and liabilities 216 - Interest income received 1,395 627 -------- --------Net cash used in investing activities (225,270) (562) -------- --------Cash flows from financing activities Advance of loans to shareholders - (16,413) Dividends paid (49,043) (5,004) Proceeds from issue of shares 209,203 - Decrease in Capital Account (18,010) - Decrease in Treasury Shares 445 - Interest paid (90) - -------- --------Net cash used in financing activities 142,505 (21,417) -------- --------Net (decrease)/ increase in cash and cash equivalents (5,538) 15,373 Cash and cash equivalents at the beginning of the year 21,835 6,462 -------- --------Cash and cash equivalents at the end of the year 16,297 21,835 ======== ======== The financial information of the Group set out above does not constitutestatutory accounts. The results for the year ended 31 December 2005 are basedon the audited annual report and consolidated financial statements of EmpireOnline Limited which have been reported on by the auditors. The report of theauditors was unqualified. Copies of the 2005 annual report and accounts will be sent to shareholders indue course. Copies of this announcement are available from the Company's website,www.ep.com. This information is provided by RNS The company news service from the London Stock Exchange