NPT.L Regulatory News (NPT)

RNS Number : 5581T

Netplay TV PLC

30 September 2010

 

 

Date:	30 September 2010
On behalf of:	NetPlayTV plc ('NetPlay TV', 'the Company' or 'the Group')
Embargoed until:	0700hrs

 

 

NetPlay TV plc

Interim Results 2010

 

NetPlay TV plc (AIM: NPT), the interactive gaming company, announces its interim results for the six months ending 30 June 2010.

 

Financial Highlights

·; Total revenues up 21% to £11.31m (2009: £9.34m)

·; Total Casino revenues up 73% to £8.81m (2009: £5.07m)

·; EBITDA pre-exceptionals and share based payments (£0.74m) (2009: (£0.12m))

·; Loss before tax (£7.9m) (2009: (£3.2m))

 

Operational Highlights

·; Migration of all casino services onto Playtech platform completed Q1 2010

·; Migration of Bingo services to Playtech Virtue fusion platform completed Q2 2010

·; Acquisition of ChallengeJackpot.com database from Virgin Media Television

·; Tele-shopping partnership trial entered into with ITV1 in April 2010

·; Launch of first real money casino iPhone roulette application in Q2 2010 with over 3,000 downloads in the first two weeks

 

Commenting on the results and the trading update, Clive Jones, NetPlayTV's Non Executive Chairman, said:

 

"NetPlay boasts one of the largest "live" gaming businesses in the world. We have a proven business model and an excellent suite of products which we deliver over a converged interactive gaming experience allowing our customers to interact on a variety of platforms, TV, Internet and mobile from a common integrated wallet.

 

"Building on our successful partnership with Channel Five, this year we entered into a six month trial to launch our roulette format and a new interactive soft gaming format on ITV1. Unfortunately, the new soft gaming format did not perform in line with our expectations and has been a major cost to the company. We have taken swift and decisive action and I am pleased to report the cost cutting exercise and the renewed focus on our proven "live" casino format is starting to show positive signs as we rationalise the business.

 

"We are grateful to our team and shareholders for their loyalty and support as we drive the business back to profitability."

 

Enquiries:

 

NetPlayTV plc	www.NetPlaytv.plc.uk
Martin Higginson, Chief Executive Officer	Via Redleaf
Redleaf Communications	Tel: 020 7566 6700
Emma Kane / Mike Ward	NetPlay@redleafpr.com
Panmure Gordon
Stuart Gledhill / Katherine Roe	Tel: 020 7459 3600

 

Notes to Editors:

 

Publication photographs are available from Redleaf Communications or www.redleafpr.com

 

About NetPlayTV plc

 

·; NetPlayTV plc is listed on the AIM market of the London Stock Exchange (NPT). NetPlayTV operates a number of interactive gaming services from the UK, Malta and Alderney, including 'SuperCasino.com', 'ChallengeJackpot.com', and 'Bingos.com'.

 

·; The Company is focused on the delivery of a converged interactive gaming experience allowing its customers to interact with its games on a variety of platforms, TV, Internet and mobile from a common integrated wallet.

 

Operational Review

 

The first half of 2010 has been a challenging time for the Company and this will have an impact on the Company for the full year. In the first quarter, the Company moved into profitability following investment in its terrestrial tele-shopping partnership with Channel Five.

 

In September 2009, the Company entered into a partnership with Channel Five. This followed the change in the Ofcom rules in June of the same year allowing all UK terrestrial broadcasters to broadcast interactive gaming under the label of "tele-shopping" for up to four hours in any 24 hour period. NetPlayTV took advantage of this rule change to enter into a long term agreement with Channel Five giving it an exclusive and unique marketing channel. As a direct result of the significant revenue growth in the final quarter of 2009, the Company invested heavily in new studio facilities, TV technology, the development of new services and people in order to try to replicate the success with Five with other broadcasters.

 

 In April this year, the Company entered into an agreement with ITV for a six month trial to broadcast gaming formats on ITV1. During this trial we launched a cross platform new interactive "soft" gaming format "Bingo Stars", a proprietary bingo game developed by NetPlayTV. Based on all our analysis, we expected significant returns from this format. Unfortunately the launch of "Bingo Stars" did not deliver the player numbers we expected, which were significantly lower than the lower end forecasts. Over the following days and weeks we worked to alter the format, and start times and, whilst we saw some improvement, the overall response and player values remained very disappointing. As such we have now terminated the Bingo Stars product and replaced it with the Challenge Jackpot brand.

 

In February of 2010, our casino services migrated onto the Playtech platform facilitating the move of our operations to Alderney and Guernsey. In the second quarter of 2010, we also migrated the majority of our bingo services onto the Playtech Virtue Fusion platform.

 

In the period under review, we acquired total rights to the database of players from Virgin Media Television and took a brand license on ChallengeJackpot.com allowing us more freedom to market the show and its website with other media partners such as ITV.

 

Upon the termination of the "Bingo Stars" product, the Company set about a detailed review of the business. This included a full review of staff numbers and key contracts, as well as a review of each business unit. Over the past few weeks, staff numbers have been reduced significantly and a number of non-core contracts have been terminated. The business has a renewed focus on NetPlay TV's core casino assets.

 

Current Trading & Outlook

 

The ITV trial comes to an end during November 2010, and our discussions with ITV are ongoing, as is the restructuring of our business and we will update shareholders on the outcome during the next quarter. NetPlayTV's core live casino business remains strong and, although July was impacted by a large numbers of winners with the gaming margin falling to 1.2%, it returned to normal patterns in August and September delivering gaming margins of 3% (our long term average).

 

Our business model is to deliver a great "live" gaming experience to our players; we have succeeded in doing this and today boast one of the largest "live" gaming businesses in the world. We use our terrestrial tele-shopping relationships to acquire new customers and our TV relationships allow us to work in an exclusive arrangement with broadcasters. We are able to fully explain our offering using the power of TV and as such have proven we can acquire a substantial number of quality high value players.

 

Unfortunately the soft gaming 'Bingo Stars' tele-shopping format did not work, which significantly affected the returns from the trial on ITV1. We have learnt a lot from this experience and we are using this knowledge to re-focus and expand our core live casino offering and return to sustainable profitability.

 

 

Martin Higginson, Chief Executive Officer

 

Consolidated statement of comprehensive income

for the six months ended 30 June 2010

		6 months ended 30 June 2010	6 months ended 30 June 2009	Year ended 31 Dec 2009
		£ 000's	£ 000's	£ 000's
	Note	(unaudited)	(unaudited)	(audited)
	1		restated	restated
Revenue		11,310	9,341	21,562
Cost of sales		(3,501)	(4,210)	(9,732)
Gross profit		7,809	5,131	11,830
Administrative expenses		(12,860)	(5,936)	(16,303)
Impairment of goodwill		-	(895)	(1,675)
Impairment of intangible assets		(1,971)	-	(990)
Amortisation of goodwill & intangible assets		(1,251)	(873)	(2,571)
Equity settled share based payments	3	385	(617)	(1,367)
Operating loss		(7,888)	(3,190)	(11,076)
Analysed as:
Operating loss before exceptional items		(4,008)	(2,753)	(7,996)
Exceptional items	4	(3,880)	(437)	(3,080)
Operating loss		(7,888)	(3,190)	(11,076)
Finance income		1	1	22
Finance costs		(12)	(12)	(23)
Loss before taxation		(7,899)	(3,201)	(11,077)
Income tax expense		11	(82)	(27)
Loss for the financial year		(7,888)	(3,283)	(11,104)
Other comprehensive income:
Foreign exchange arising on consolidation		105	35	24
Other comprehensive income, net of tax		105	35	24
Total comprehensive income for the period		(7,783)	(3,248)	(11,080)
Loss per share
Basic (p)	6	(3.97)	(2.56)	(7.19)
Diluted (p)	6	(3.97)	(2.56)	(7.19)

 

 

 

 

Consolidated statement of financial position

as at 30 June 2010

		As at 30 June 2010	As at 30 June 2009	As at 31 Dec 2009
		£ 000's	£ 000's	£ 000's
	Note	(unaudited)	(unaudited)	(audited)
Non-current assets
Property, plant and equipment		2,342	790	1,423
Goodwill		2,640	3,608	2,664
Intangible assets		5,685	9,576	7,390
Deferred tax assets		-	1	-
Total non-current assets		10,667	13,975	11,477
Current assets
Investments held for resale		88	-	-
Inventories		-	17	-
Trade and other receivables		2,277	3,750	3,852
Current tax recoverable		10	-	-
Cash and cash equivalents	8	4,916	1,388	10,165
Total current assets		7,291	5,155	14,017
Total assets		17,958	19,130	25,494
Equity
Share capital	7	9,820	6,837	9,811
Share premium		21,039	10,968	21,020
Merger reserve		1,317	1,457	1,317
Other reserves		168	761	1,511
Retained earnings		(22,358)	(7,491)	(15,183)
Total equity		9,986	12,532	18,476
Non-current liabilities
Borrowings		5	-	48
Total non-current liabilities		5	-	48
Current liabilities
Financial liabilities		-	1,350	-
Trade and other payables		7,796	4,598	6,780
Current income tax liabilities		-	251	-
Borrowings		171	399	190
Total current liabilities		7,967	6,598	6,970
Total equity and liabilities		17,958	19,130	25,494

 

 

 

Consolidated statement of cash flows

for the six months ended 30 June 2010

	6 months ended 30 June 2010	6 months ended 30 June 2009	Year ended 31 Dec 2009
	£ 000's	£ 000's	£ 000's
	(unaudited)	(unaudited)	(audited)
Cash flows from operating activities
Operating loss	(7,887)	(3,190)	(11,076)
Adjustments for:
Depreciation and amortisation	1,681	1,082	3,115
Impairment of intangible assets	1,971	-	990
Impairment of goodwill	-	895	1,675
Share based payments and similar (see note 3)	(735)	617	1,367
Foreign exchange differences	107	94	29
Decrease in inventories	-	40	57
Decrease/(increase) in trade and other receivables	1,575	(1,008)	(1,196)
Increase in trade and other payables	1,014	1,086	3,288
Cash used in operations	(2,274)	(384)	(1,751)
Interest paid	(12)	(12)	(23)
Income taxes paid	-	(7)	(202)
Net cash used in operating activities	(2,286)	(403)	(1,976)
Cash flows from investing activities
Acquisition of subsidiary undertakings	(88)	-	(1,100)
Net cash balances acquired with subsidiaries	-	-	(18)
Purchase of property, plant and equipment	(1,348)	(479)	(1,149)
Purchase of intangible assets	(1,492)	(639)	(1,224)
Interest received	1	1	22
Net cash used in investing activities	(2,927)	(1,117)	(3,469)
Cash flows from financing activities
Proceeds from issuance of ordinary shares	28	794	13,656
Proceeds from borrowings	-	-	238
Repayment of borrowings	(103)	(96)	(307)
Net cash (used in)/from financing activities	(75)	698	13,587
Net (decrease)/increase in cash	(5,288)	(822)	8,142
Cash & cash equivalents at beginning of period	10,118	1,976	1,976
Cash & cash equivalents at end of period	4,830	1,154	10,118

 

 

 

Consolidated statement of changes in equity

for the six months ended 30 June 2010

 

	Share capital	Share premium	Merger reserve	Other reserves	Retained earnings	Total
	£ 000's	£ 000's	£ 000's	£ 000's	£ 000's	£ 000's
As at 1 January 2009	6,162	8,763	1,457	371	(4,470)	12,283
Shares issued: As consideration	427	1,573	-	-	-	2,000
For cash	248	638	-	-	-	886
Cost of issuing shares	-	(6)	-	-	-	(6)
Share options vested or lapsed	-	-	-	(227)	227	-
Share based payments charge in period	-	-	-	617	-	617
Total comprehensive income for the period	-	-	-	-	(3,248)	(3,248)
As at 30 June 2009	6,837	10,968	1,457	761	(7,491)	12,532
Shares issued: As consideration	48	202	-	-	-	250
For cash	2,892	9,860	-	-	-	12,752
Share options exercised	34	79	-	-	-	113
Costs of issuing shares	-	(89)	-	-	-	(89)
Disposal of investments	-	-	(140)	-	140	-
Share based payments charge in period	-	-	-	750	-	750
Total comprehensive income for the period	-	-	-	-	(7,832)	(7,832)
As at 31 December 2009	9,811	21,020	1,317	1,511	(15,183)	18,476
Share options exercised	9	19	-	-	-	28
Share based payments: Charge in period	-	-	-	167	-	167
Prior period credit	-	-	-	(902)	-	(902)
Share options vested or lapsed				(608)	608	-
Total comprehensive income for the period	-	-	-	-	(7,783)	(7,783)
As at 30 June 2010	9,820	21,039	1,317	168	(22,358)	9,986

 

 

Notes to the interim financial statements

 

1. Basis of preparation

 

This interim report, which has neither been audited nor reviewed by independent auditors, was approved by the board of directors on 27 September 2010 and has been prepared under International Financial Reporting Standards (IFRS).

 

The company has taken the decision to re-categorise certain expenses from cost of sales to administrative expenses. Prior period comparative information has been restated for consistency which has not been audited. Otherwise the interim financial statements have been prepared using the same accounting policies and methods of computation as the audited financial statements prepared to 31 December 2009.

 

 

2. EBITDA analysis

 

	6 months ended 30 June 2010		6 months ended 30 June 2009		Year ended 31 Dec 2009
	£ 000's		£ 000's		£ 000's
Operating loss	(7,888)		(3,190)		(11,076)
Adjusted for:
Depreciation of property, plant and equipment	430		209		544
Amortisation of goodwill and intangible assets	1,251		873		2,571
Impairment of goodwill and intangible assets	1,971		895		2,665
Exceptional items	3,880		437		3,080
Aborted capital projects	-		36		-
Share based payments	(385)		617		1,367
	(741)		(123)		(849)

 

 

3. Share based payments charge

 

	6 months ended 30 June 2010		6 months ended 30 June 2009		Year ended 31 Dec 2009
	£ 000's		£ 000's		£ 000's
Share based payments charge in the period	167		617		1,367
Reversal of prior period charge	(902)		-		-
Cash consideration to revoke share options	350		-		-
	(385)		617		1,367

 

 

 

The company has realised a credit in the share based payment charge for the period as a result of the termination of the share options held by Virgin Media Television. The element of the 2009 share based payments charge applicable to these options has been reversed through the statement of comprehensive income in the current period. The company paid £350,000 to Virgin Media Television by way of consideration for the cancellation of the share options they held.

 

 

4. Exceptional items

	6 months ended 30 June 2010		6 months ended 30 June 2009		Year ended 31 Dec 2009
	£ 000's		£ 000's		£ 000's
Restructuring costs	690		437		1,544
Professional fees relating to regulatory fine	-		-		77
Onerous contracts	2,125		-		1,459
ITV setup costs	293		-		-
Potential VAT liability	210		-		-
Software migration adjustments	436		-		-
Bad debt provisions	126		-		-
	3,880		437		3,080

 

The 2009 Annual Report included a contingent liability relating to an additional assessment of VAT received from HMRC. The Directors taking a prudent view have decided to provide for this VAT although the company is still in discussions with HMRC in relation to this claim.

 

 

5. Segmental information

 

The Group operates the following business segments: Casino (comprising the SuperCasino and Challenge Jackpot services); Bingo (comprising the Bingos.com service); and Mobile (comprising Lucky Numbers and other SMS quiz services).

 

For the six months ended 30 June 2010:

	Casino	Bingo	Mobile	Other	Total
	£ 000's	£ 000's	£ 000's	£ 000's	£ 000's
Revenue	8,808	1,728	774	-	11,310
Loss after taxation	(4,285)	(2,331)	52	(1,324)	(7,888)

 

For the six months ended 30 June 2009:

	Casino	Bingo	Mobile	Other	Total
	£ 000's	£ 000's	£ 000's	£ 000's	£ 000's
Revenue	5,065	2,519	1,757	-	9,341
Loss after taxation	(1,306)	270	(660)	(1,587)	(3,283)

 

For the year ended 31 December 2009:

 

	Casino	Bingo	Mobile	Other	Total
	£ 000's	£ 000's	£ 000's	£ 000's	£ 000's
Revenue	13,996	4,491	3,075	-	21,562
Loss after taxation	(5,241)	(1,577)	(1,634)	(2,652)	(11,104)

 

 

6. Loss per share

	6 months ended 30 June 2010	6 months ended 30 June 2009	Year ended 31 Dec 2009
	£ 000's	£ 000's	£ 000's
Loss attributable to shareholders	(7,783)	(3,248)	(11,080)
	Shares	Shares	Shares
Weighted average numbers of shares in issue	196,210,827	126,730,839	154,155,470
Dilution effects of share options	15,068,251	9,249,452	20,591,205
Dilution effect of employee share schemes	99,933	99,933	99,933
Diluted weighted average number of shares	211,379,011	136,080,224	174,846,608
	Pence per share	Pence per share	Pence per share
Loss per share
Basic loss per share	(3.97)	(2.56)	(7.19)
Diluted loss per share	(3.97)	(2.56)	(7.19)

 

Basic loss per share is calculated on the results attributable to ordinary shares divided by the weighted average number of shares in issue during the year excluding those held by the AESOP employee share scheme, which are treated as cancelled.

 

The effect of the loss for the period is anti-dilutive and so in accordance with IAS 33 the diluted loss per share is equal to the basic loss per share.

 

 

7. Share capital

	6 months ended 30 June 2010	6 months ended 30 June 2009	Year ended 31 Dec 2009
	£ 000's	£ 000's	£ 000's
Balance at beginning of period	9,811	6,162	6,162
New shares issued in period	9	675	3,649
Balance at end of period	9,820	6,837	9,811

 

	6 months ended 30 June 2010
	Shares
Balance at beginning of period	196,224,649
New shares issued in period	166,666
Balance at end of period	196,391,315

 

 

 

8. Cash and cash equivalents

	6 months ended 30 June 2010	6 months ended 30 June 2009	Year ended 31 Dec 2009
	£ 000's	£ 000's	£ 000's
Sterling cash balances	4,916	1,388	10,165
Overdrafts	(86)	(234)	(47)
	4,830	1,154	10,118

 

As at 30 June 2010 the liability outstanding to our players is £923,000.

 

 

9. Acquisition

 

On 17 June 2010 the company acquired a 50% stake in Itechsoft for EUR 100,000. The investment in Itechsoft is currently held as an asset for resale on the group's statement of financial position.

 

 

10. Subsequent events

 

On 25 August 2010 Moshe Edree resigned his position as Non-Executive Director representing the interests of Direct Force Trading Limited. On the same date Tim Mickley was appointed to the board as a Non-Executive Director as his replacement.

 

 

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