NPT.L Regulatory News (NPT)

25 Apr 2007 07:01

Netplay TV PLC25 April 2007 Date: 25 April 2007On behalf of: NetPlay TV plc ("NetPlay TV" or "the Company")Embargoed for: 0700hrs NetPlay TV plc Preliminary results for the year ended 31 December 2006 HIGHLIGHTS • Stream Live Services sold to the management for up to £3m in cash• New management team and direction for the business put in place on 1 December 2006• Vegas247 Limited acquired on 1 December• Change of name to NetPlay TV plc on 1 December• Live Roulette gross bets doubled since acquisition (December 2006 - £3.4m to March 2007 - £6.9m)• Cash balances at 31 December 2006 of £4.2m (2005: £3.2m) Martin Higginson, Executive Chairman and Chief Executive Officer, said: "The Company is at an exciting point in its life. Over the past four months, wehave radically transformed the strategy of the business and believe we are wellpositioned to build a sustainable interactive TV gaming business. We envisage2007 as a year of continued investment in the acquired businesses which arealready showing excellent growth potential. In the first quarter of 2007, theLive Roulette business has doubled gross bets, and our lottery business, PlayMonday, has recently seen week on week increases in ticket sales of over 10%.We are committed to developing new interactive TV gaming formats and lookforward to the launch of a fully interactive TV bingo show." "We are extremely positive about the future of the business and believe we arewell positioned, with the production of proprietary TV formats, to carve a nichein this exciting marketplace." Enquiries: NetPlay TV plc Via RedleafMartin Higginson, Executive Chairman http://www.netplaytv.plc.ukPat Greene, Finance Director Redleaf CommunicationsEmma Kane / Sanna Lehtinen / Susan Quigley Tel: 020 7822 0200 Chairman's statement Introduction 2006 was a challenging year for the business prior to its total transformationon 1 December to focus on becoming the market leader in the provision ofinteractive TV gaming. Group profit before tax for the year ended 31 December2006 was £1.7m (2005: £1.8m). In August 2006, as a result of the challenges facing the business, your board ofdirectors took the decision to conduct a detailed review of the business and theoptions available for the generation of future growth and development and todeliver increased shareholder value. Detailed discussions were conducted oversubsequent months and, as a result of these discussions, a new strategy was putforward to the non executives and the Company's advisors. The plan to overhaul the business completely - dispose of assets that showedlittle growth potential, review loss making assets, and to acquire assets tofacilitate a new direction for the business - was approved by the Company's nonexecutive directors and its advisors. Shareholders agreed that this new strategy should be adopted and sanctioned thedisposal of Stream Live Services Limited at an extraordinary general meeting ("EGM") on 1 December. The changes that were implemented on 1 December 2006 are summarised as follows: • Martin Higginson appointed to the board as Chairman and Chief Executive. • Disposal of Stream Live Services Limited to Gordon Robson and Michael Spencer for up to £3m. Cash of £1.5m was received on completion, with up to a further £1.5m payable over the next two years. It was the board's opinion that these businesses had limited growth prospects and, as a result of the sale, the Company is now able to invest in businesses with greater potential to generate shareholder value. • Gordon Robson, founder, Chairman and Chief Executive, and Michael Spencer, Group Managing Director, stood down from the board and resigned as executives of the business. Neither Mr Robson nor Mr Spencer received any compensation for loss of office, which if payable could, in aggregate, have amounted to £400,000. • Acquisition of Vegas247 Limited and Vegas247 Broadcasting Limited - producers of the TV programme Live Roulette which completed on 1 December. This initiative gives the business a solid presence in the interactive TV gaming market. At acquisition, this business was generating approximately £3.4m of gross bets per month which has already increased under our management to £6.9m in the month of March 2007, an increase of over 100%. • Instigation of a review of the MChex operation • Change of the Company's name to NetPlay TV plc Post Balance Sheet Events In January 2007, the Company acquired the PlayMonday charity lottery gametogether with the associated database of 280,000 players. We have utilised theexpertise of the Live Roulette operations to create a TV show for PlayMonday andthis is now produced on a weekly basis. In February 2007, the Company acquired Abstract Games Limited, a company whichspecialises in interactive print media based competitions. The Company will usethe marketing and management skills which Abstract brings to enhance further itsRoulette and Lottery businesses. Furthermore, it will leverage the database ofover 500,000 competition players to build player numbers in all areas ofactivity. The review of the MChex operation continues and we are currently in discussionsrelating to the possible disposal of this business. Financial overview During the year ended 31 December 2006, Group turnover was £12.6m (2005: £13.2m)with profit before tax, profit on sale of subsidiary, amortisation and sharebased payment for the year at £0.8m (2005: £2.2m) and profit before tax of £1.7m(2005: £1.8m). The decline in operating profitability was primarily due to a reduction inmobile revenues attributable to the widely reported downturn in consumerconfidence in the industry and the resultant increase in regulatory control. In light of the change in the focus of the Group and the need to invest in thegrowth of the new businesses, the directors do not recommend the payment of adividend in respect of the year ended 31 December 2006. Cash balances at 31 December 2006 were £4.2m (2005: £3.2m). Operating Overview Fixed Line The detailed review of this business concluded that, whilst profitable, itshowed little prospect for growth. This business unit was therefore sold tomanagement, leaving the Group able to focus on new opportunities and to investin businesses with a greater potential for the creation of shareholder value. Mobile The Group's mobile business consists of NetPlay TV Mobile Limited (formerlyStream Mobile Limited) and Mobileworkflow Limited. While the mobile business experienced a sharp downturn in April and May 2006,brought about by damaged consumer confidence and the consequent increase inregulatory control, volumes stabilised over subsequent months. Media partneradvertising was at a reduced level in the latter months of the year but with theconfirmation of the Group's commitment to the business, this has now resumed.Revenues generated via the Vodafone platform have increased month on month overthe last few months. It is the board's intention to continue the chat businessand to incorporate it into its interactive TV gaming shows over time. Following a detailed review of costs in this business the board recently decidedto outsource the SMS supervisor and technical support positions. These costsare now incurred on a per message basis. In addition, the Board has renegotiated the Mobileworkflow acquisition agreementsuch that a one off payment of £500,000 is to be made in full settlement of theearn-out arrangements. Pan American Mobile This US company, together with its subsidiary in Chile, was acquired in March2006. The transaction allowed for the payment of up to £4.4m depending on theresults of the businesses over a three year period. While the company in Chileoperated at about breakeven, the US company experienced technical problems withsome of its services. As result, the board has decided to exit this market,returning ownership of the operations to the current management for a nominalsum and cancelling the earn-out arrangements under the original agreement. EGET Partnership 2006 saw little progress in relation to the EGET partnership, with insignificantrevenues generated in the period. The board believes firmly in the interactivegaming market and the use of the mobile telephone in this sector. As a result,the Company has decided to continue its relationship with EGET on a nonexclusive basis. We have also entered into discussions with a number of othermobile gaming suppliers in order to explore the opportunity in this sector. MChex The MChex business continues to disappoint due to continued delays in the launchof the mobile banking application. Although several banks have signed up, theexpected marketing campaigns have yet to be implemented. Operating losses forthe year were £500,000 and continue to run at £35,000 per month in 2007. The board is reviewing this business with a view to a potential sale. TheCompany is currently in discussions with a potential acquirer. Live Roulette The board is extremely pleased with its investment in Vegas247 Limited andVegas247 Broadcasting Limited. The businesses have focused over the past fewmonths on improving both the TV channel and the website www.liveroulette.com.As a result of this focus, gross revenues for this business have increased byover 100% since acquisition, with March 2007 reporting £6.9m of gross betsagainst £3.4m for December 2006. As stated at acquisition, this business has never undertaken any marketing andit is the belief of the board that, with appropriate marketing, revenues can beincreased significantly. A test marketing campaign began in April 2007. Strategy The Company is at an exciting point in its life, we have over the past fourmonths radically transformed the strategy of the business and believe we arewell positioned to build a sustainable interactive TV gaming business. Weenvisage 2007 as a year of continued investment in the acquired businesses whichare already showing excellent growth potential. In the first quarter of 2007,the Live Roulette business has doubled gross bets, and our lottery business,Play Monday, has recently seen week on week increases in ticket sales of over10%. We are committed to developing new interactive TV gaming formats and lookforward to the launch of a fully interactive TV bingo show. We are extremely positive about the future of the business and believe we arewell positioned, with the production of proprietary TV formats, to carve a nichein this exciting marketplace. Martin HigginsonExecutive Chairman25 April 2007 Consolidated profit and loss accountfor the year ended 31 December 2006 2006 2006 2005 2005 Continuing Discontinued 2006 Continuing Discontinued 2005 operations operations Total operations operations Total (Unaudited) (Unaudited) (Unaudited) Audited Audited Audited Notes £'000 £'000 £'000 £'000 £'000 £'000 Restated* Restated* Restated* Turnover 1 5,837 6,787 12,624 7,222 6,004 13,226Cost of sales (3,677) (4,043) (7,720) (3,400) (2,934) (6,334) Gross profit 2,160 2,744 4,904 3,822 3,070 6,892Administrativeexpenses: (2,795) (2,020) (4,815) (2,629) (2,648) (5,277) Operatingprofit /(loss) 1 (635) 724 89 1,193 422 1,615Profit on saleof subsidiary - 1,452 1,452 - - -Interestreceivable 171 4 175 173 3 176 Interestpayable (7) - (7) - - - Profit onordinaryactivitiesbeforetaxation 1 (471) 2,180 1,709 1,366 425 1,791Tax on profiton ordinaryactivities 2 10 (195) (185) (453) (143) (596) Profit onordinaryactivitiesafter taxation (461) 1,985 1,524 913 282 1,195 Earnings pershare 3Basic (0.75p) 3.25p 2.50p 1.53p 0.47p 2.00pDiluted (0.74p) 3.19p 2.45p 1.41p 0.43p 1.84p The profit and loss account contains all recognised gains and losses for theyear and the preceding year. \* The comparative figures have been restated for the adoption of FRS 20 - "ShareBased Payment". Consolidated balance sheetat 31 December 2006 2006 2005 (Unaudited) Audited Notes £'000 £'000 Restated*Fixed assetsIntangible assets 5,397 5,323Tangible assets 185 239 5,582 5,562Current assetsDebtors 1,823 3,160Cash at bank and in hand 4,217 3,198 6,040 6,358Creditors: amounts falling due within one year (2,316) (2,712)Net current assets 3,724 3,646Total assets less current liabilities 9,306 9,208Creditors: amounts falling due after more than one year - (2,700)Provisions for liabilities and charges (9) -Net assets 9,297 6,508Capital and reservesCalled up share capital 4 3,397 3,013Share premium account 5 2,798 2,792Merger reserve 5 1,317 (925)Other reserve 5 560 288Profit and loss account 5 1,225 1,340Equity shareholders' funds 9,297 6,508 Consolidated cash flow statementfor the year ended 31 December 2006 2006 2005 (Unaudited) Audited Notes £'000 £'000 Net cash inflow from operating activities 6 1,742 876 Returns on investments and servicing of finance 6 180 177 Taxation paid (352) (806) Capital expenditure and financial investment 6 (88) (224) Acquisitions and disposals 6 (6) (1,818) Equity dividends paid (485) (416)Net cash inflow / (outflow) before financing 991 (2,211) Financing 6 28 59Increase / (decrease) in cash in the year 1,019 (2,152) Movement in net funds in the year 1,019 (2,152)Net funds at the start of the year 3,198 5,350 Net funds at the end of the year 4,217 3,198 Reconciliation of movements in equity shareholders' fundsfor the year ended 31 December 2006 Group 2006 2005 (Unaudited) Audited £000 £000 Restated* Profit for the financial year 1,524 1,195Dividends (485) (416)Profit / (loss) for the year attributable to equity shareholders 1,039 779 New share capital subscribed for cash 28 59Nominal value of shares issued for acquisition of subsidiaries 362 21Share premium on shares issued for acquisition of subsidiaries 1,088 229Share compensation expense 272 232Net movement in equity shareholders' funds 2,789 1,320Opening shareholders' funds 6,508 5,188Closing equity shareholders' funds 9,297 6,508 Notes to the preliminary results 1. Segmental information During the year, the Group operated three principal classes of business, theprovision of end user mobile and fixed line telephony services and TV gamingoperations. UK Rest of the world TotalSegmental analysis 2006 2005 2006 2005 2006 2005 (Unaudited) Audited (Unaudited) Audited (Unaudited) Audited £'000 £'000 £'000 £'000 £'000 £'000 Turnover by origin and destination Continuing operations: - Mobile telephony 5,605 6,986 137 236 5,742 7,222 Continuing operations - Acquisitions: - Gaming operations 95 - - - 95 - 5,700 6,986 137 236 5,837 7,222 Discontinued operations: 6,611 5,750 176 254 6,787 6,004 - Fixed line telephony 12,311 12,736 313 490 12,624 13,226 Operating profit / (loss)Continuing operations - Mobile telephony 302 1,863 (189) (85) 113 1,778 - Central costs (697) (585) - - (697) (585) (395) 1,278 (189) (85) (584) 1,193Continuing operations - Acquisitions: - Gaming operations (51) - - - (51) - (446) 1,278 (189) (85) (635) 1,193Discontinued operations: - Fixed line telephony 587 272 137 150 724 422 141 1,550 (52) 65 89 1,615Profit on sale of subsidiary 1,452 - - - 1,452 -Interest receivable 175 176 - - 175 176Interest payable (7) - - - (7) - Profit before taxation 1,761 1,726 (52) 65 1,709 1,791 Net assets 9,297 6,508 - - 9,297 6,508 For the acquired entities, profit before tax is not materially different fromthe operating profit / (loss). 2. Tax on profit on ordinary activities 2006 2005 (Unaudited) Audited(i) The taxation charge / (credit) for the year comprises: £'000 £'000 Current tax: UK corporation tax on the profit for the year 249 630 Adjustment in respect of prior years (93) (82)Total current tax 156 548 Deferred tax: 29 48Total tax charge 185 596 (ii) Factors affecting the tax charge for the year The tax assessed in the period is lower (2005: lower) than the standard rate ofcorporation tax in the UK of 30% (2005: 30%). The differences are explainedbelow: 2006 2005 (Unaudited) Audited £'000 £'000 Restated* Profit on ordinary activities before taxation 1,709 1,791 Current tax charge at 30% (2005: 30%) 513 537 Effects of:Expenses not (chargeable) / deductible for tax purposes 216 140Profit on sale of subsidiary not chargeable to tax (436) -Timing differences (22) (38)Utilisation of tax losses (20) -Profits taxable at small companies rate (2) (9)Adjustment in respect of prior years (93) (82)Current tax charge for the year 156 548 3. Earnings per share 2006 2005 (Unaudited) Audited £'000 £'000 Restated*Profit / (loss) attributable to shareholdersContinuing operations (461) 913Discontinued operations 1,985 282 1,524 1,195 Number Number Weighted average number of shares in issue 61,066,661 59,586,149Dilution effects of contingent consideration - 2,960,885Dilution effects of share options 858,818 2,329,427Dilution effects of employee share schemes 193,205 198,941Diluted weighted average number of shares in issue 62,118,684 65,075,402 Basic earnings per share Continuing operations (0.75p) 1.53p Discontinued operations 3.25p 0.47p 2.50p 2.00p Diluted earnings per share Continuing operations (0.74p) 1.41p Discontinued operations 3.19p 0.43p 2.45p 1.84p Basic earnings per share is calculated on the results attributable to ordinaryshares divided by the weighted average number of shares in issue during the yearexcluding those held by NetPlay TV Trustees Limited which are treated ascancelled. Diluted earnings per share calculations include additional shares to reflect thedilutive effect of employee share schemes and share option schemes. 4. Share capital Group and Company 2006 2005 (Unaudited) Audited £'000 £'000Authorised200,000,000 ordinary shares of 5p each 10,000 10,000Allotted, called up and fully paid67,931,786 (2005: 60,252,820) ordinary shares of 5p each 3,397 3,013 During the year, the Company issued 388,966 ordinary shares of 5p each, at aprice of 6.5p per share and 40,000 at a price of 6.75p, on the exercise of shareoptions and 7,250,000 ordinary shares of 5p each at 20p each as part of theconsideration for the acquisition of the Vegas Companies. 5. Reserves Share Merger Other Profit and premium reserve reserve loss account (Unaudited) (Unaudited) (Unaudited) (Unaudited) £'000 £'000 £'000 £'000 Restated* Restated* As at 31 December 2005: As previously reported 2,792 (925) (9) 1,637 Prior year adjustment - - 297 (297) As restated 2,792 (925) 288 1,340Shares issued on the exercise of share options 6 - - -Shares issued to acquire Vegas companies - 1,088 - -Transfer between reserves on sale of subsidiary - 1,154 - (1,154)Share based payment - - 272 -Profit for the year retained for equity shareholders - - - 1,039 As at 31 December 2006 2,798 1,317 560 1,225 The prior year adjustment reflects the implementation of FRS 20 - 'Share BasedPayments'. 6. Cash flows 2006 2005 (Unaudited) Audited £'000 £'000 Restated*Net cash inflow from operating activitiesOperating profit 89 1,615 Depreciation of tangible fixed assets 121 117Amortisation of goodwill 307 231Share compensation expense 272 232Foreign exchange 5 -Decrease / (increase) in debtors 671 (1,312)Increase / (decrease) in creditors 277 (7) 1,742 876Returns on investments and servicing of financeInterest received 180 177 Capital expenditure and financial investmentPurchase of tangible fixed assets (88) (224) Acquisitions and disposalsPurchase of subsidiary undertakings (1,430) (2,007)Less: Cash acquired with subsidiaries 56 189Proceeds of sale of subsidiary (net of costs and cash transferred) 1,368 - (6) (1,818) FinancingIssue of ordinary shares 28 59 7. Basis of preparation The figures for the year ended 31 December 2006 are unaudited. The figures forthe years ended 31 December 2006 and 2005 do not constitute statutory accountswithin the meaning of Section 240 (5) of the Companies Act 1985. The figuresfor the year ended 2005 are extracts from the full financial statementsdelivered to the Registrar of Companies. The report of the auditors on thosefinancial statements was unqualified and contained no statements under eitherSection 237 (2) or 237 (3) of the Companies Act 1985. The preliminary resultshave been prepared under the historical cost convention and in accordance withthe Group's accounting policies as set out in the financial statements for theyear ended 31 December 2005 except for the adoption of Financial ReportingStandard 20, "Share Based Payment. The change in policy resulted in a charge of£272,000 in respect of the fair value of share options granted which has beenincluded within admnistrative expenses. The 2005 comparatives have beenrestated to reflect a cost of £232,000. This together with prior year chargesof £65,000, has been charged to the Profit and Loss Account and credited to theOther Reserve by way of a prior year adjustment. This statement was approved by the board of directors on 24 April 2007. This information is provided by RNS The company news service from the London Stock Exchange