NPT.L Regulatory News (NPT)

30 Sep 2009 07:00



NetPlay TV plc 

Interim results for the six months ended 30 June 2009

NetPlay TV plc (AIM: NPT), the interactive gaming company, is pleased to announce its interim results for the six months ended 30 June 2009 and provide its shareholders with a trading update.

Highlights

Total Gross Bets exceeded £204m for the period, an increase of 31% (H1 2008: £154m)

Total Gross Bets increased by 35% in Q3 2009 to £130m  compared to Q1 2009: £96m

Total Bets in August exceeded £43m, with SuperCasino.com gaming margin exceeding £0.75m, the highest recorded month to date

EBITDA^ of £0.1m loss due to significant investment in additional staff and associated costs to implement new media channels and divestment of non-core assets (H1 2008: £1.0m profit)

Placing in July raised £12.8m to fund future growth of business

Ofcom rule change in May 2009 allows company to exploit dominant position

Broadcast deals signed with terrestrial TV broadcasters, Channel Five, and STV, and digital broadcasters, Virgin Media Television, Freeview, Turner Media, and FreeSat

Daily depositing players has increased five-fold since launching on terrestrial TV in mid-September 2009

Five year software deal with Playtech plc

Launched first "live" Fixed Odds Betting Terminal through Stanleybet International. Roll out to commence later this year

Launched interactive Mobile to TV product, a world first for an interactive gaming company

Mobile gaming margin revenues have increased 450% compared to the same period last year (H1 2008: £0.208m / H1 2009: £0.926m)

^ EBITDA is stated pre-exceptionals and  Share based  payments

Commenting on the results, Clive Jones, Non executive Chairman of NetPlayTV said: 

"In 2009 NetPlayTV has successfully managed to transform itself from a small gaming business into a respected Interactive Media business. By signing new deals with some of the World's largest media businesses it has clearly established itself as a serious player in the interactive TV marketplace. It is clear to me that the TV market is looking for a sustainable replacement to the legacy premium rate telephony formats. NetPlayTV is able to deliver such a fully regulated product that consumers clearly enjoy. 

"Over the coming months we will further increase our investment in both new interactive TV formats and people. It is our intention to recruit the exciting new talent to allow us to develop and deliver the very best revenue generating interactive gaming formats. 

"As new territories become regulated we want to ensure we have proven formats we can roll out on a global basis. We have created a unique business and now intend need to build on the significant investment we have made to accelerate the growth of the business. We will continue to work with both UK and global broadcasters to deliver a solid and profitable business in the coming years."

Martin Higginson, Group CEO, said: 

"We have proved to both ourselves and major broadcasters we have a profitable business model and now need to build on these foundations to further grow the business. In the first part of 2009 the Ofcom rule changes allowed us to expand our dominant position in the interactive gaming market into the UK terrestrial TV market. By raising £13m of new funds we have been able to not only sign long term contracts with major broadcasters but also enter into a period of significant investment allowing us to transform the business into a global media player of scale and create additional shareholder value.

"We have successfully delivered a truly converged interactive gaming solution and we are uniquely positioned in terms of TV distribution. This will allow us to build a solid and sustainable media business as we move forward. I am extremely pleased with the progress the business has made so far and I look forward to the coming years with great confidence."

Enquiries:

Notes to Editors:

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

About NetPlay TV plc

NetPlay TV plc is listed on the AIM market of the London Stock Exchange (NPT). NetPlay TV 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.

CEO's Statement

This year has been one of great opportunities for the Company. The changes in the Ofcom rules have allowed us to capitalise on our area of expertise. The Directors believe that we now dominate the UK terrestrial interactive TV market and whilst this has come at a cost in terms of funding the early stages we are now uniquely positioned to take advantage of these opportunities and leverage the investment we have made. Furthermore as we prove our business model we will be able to roll out our product formats to other broadcasters.

2009 has so far been a "landmark" year for the business; NetplayTV has been transformed from a small opportunistic gaming company into what is quickly becoming a fully fledged media business. Turnover from our core products continues to grow, and in many cases is ahead of expectations. In May 2009 Ofcom changed the teleshopping rules allowing UK terrestrial TV channels to broadcast between midnight and 6am. It also reclassified all transactional gaming as teleshoping. As a result of this opportunity we have invested heavily in staff and technology allowing us to partner with "high end" Tier 1 media channels. In early 2009 we took the decision to divest our premium rate telephony business, Abstract Games. The closure of this business was in the view of the board a necessity if we were to seriously partner with major broadcasters. With these major changes our EBITDA is lower than expected, with the Group showing a small loss for the first six months of 2009. The Directors believe these short term costs are an essential investment in the future that will pay significant dividends in the coming years. 

Financial Overview 

Our core gaming business continues to grow with gross bets hitting £130m in the third quarter of 2009. We anticipate this to grow further with the addition of two terrestrial TV channels, STV and Channel Five in late September 2009.

Our SuperCasino.com business delivered a Net Gaming Margin for August in excess of £0.75m, the highest recorded margin to date. Our mobile business (excluding the divested Abstract Games and chat) also continues to grow. Revenue from this division in the first half of 2009 stood at £0.926m compared with £0.205m in the first half of 2008, a 4.5-fold increase. Challenge Jackpot, the gaming brand we produce on behalf of Virgin Media Television, has shown positive signs of growth; although integration costs have been slightly higher than initially anticipated. The Bingos.com brand has seen a decline in Net Gaming Margin, this is in line with our expectations pending the integration and launch of new TV bingo game formats.

Administration expenses were significantly higher in the period due to increased staff costs, and the amortisation of databases acquired in relation to Bingos.com, Infodownload and Challenge Jackpot, unrealised foreign exchange losses for the period of £0.147m and share based charge under IFRS 2 for the period was £0.617m, the increase mainly being attributable due to the Virgin warrant options issued in May. The company policy being adopted is to amortise the databases over two years.

Furthermore we have reduced the provision for the deferred consideration payable to the vendors of Abstract Games by £0.5m, thus reducing goodwill and liabilities. Given the divestment in the premium rate telephony business, we have decided to write off £0.9m, leaving £0.2m in the balance sheet. 

Operating Overview

During the period we have made a number of significant strategic decisions, all of which are as a result of the terrestrial TV market opening up. In early 2009 Ofcom ruled that terrestrial broadcasters could accept commercial programme airtime. Thus allowing gaming companies the ability to broadcast blocks of gaming content post midnight on terrestrial TV stations. These decisions, whilst adding to the cost base, mean the Company is uniquely positioned to seize the major global TV opportunities available today and grow the business in a sustainable manner over time. 

The investment in a new "backend" software deal with Playtech, the World's largest gaming software provider, has resulted in a delay to moving SuperCasino.com offshore from 1 April to Q4 2009. This decision is necessary in order to work with Tier 1 broadcasters allowing us to scale our business infrastructure with confidence. The EBITDA impact of this is estimated at circa £1.2m for the full year. Tests with terrestrial broadcasters undertaken during the year proved that with terrestrial channels broadcasting our interactive shows the number of depositing sign-ups could potentially increase significantly. The five year agreement with Playtech enables the Company to grow its business with broadcasters both in the UK and internationally with confidence. 

In early 2009 we took the decision to divest of our premium rate telephony subsidiary. This area of business was coming under increased regulatory pressure and as such all companies including TV broadcasters have been looking to exit this form of revenue. In exiting this business we have been able to offer major media partners a profitable alternative.  Agreement has been reached for this business to be sold back to the original owners by way of a reduced "earn out" payment and a nominal transactional sum. The Board believes this business represented an anticipated £0.75m of EBITDA profit for the current financial year. 

Whilst these costs are "one off" they will have a significant impact on the full year EBITDA number for 2009. These decisions have allowed us to fully exploit the UK terrestrial TV opportunities and are an important move if we are to enter into long term deals with major global broadcasters. During the year we have signed deals with Virgin Media Television, Freeview, Turner Media, STV, FreeSat and Five. As a result, the Company now dominates the UK terrestrial and digital TV interactive gaming market, and is able to generate stronger and better quality revenues. 

Supercasino.com, Challenge Jackpot and STVcasino.com

As the Group develops we are moving towards offering customers branded solutions. We believe investment in recognised and trusted brands builds loyalty and trust, thus increasing the life time value of a player. Currently we are focused on two brands, SuperCasino.com, and Challenge Jackpot.

SuperCasino.com is our interactive casino product. This brand is our serious casino offering. In time we will offer additional casino games including poker and tournament blackjack. We will also look to take these new products onto TV with exciting new interactive TV formats. 

The SuperCasino.com business has come a long way since we acquired the business. In 2009 we increased our staff numbers allowing us to focus on the terrestrial opportunities, and start to transform our business into a fully fledged media company. The deal with STV, and the five year agreement with Channel Five, an RTL subsidiary, will allow us to further develop the business in the UK as well as giving us the opportunity to offer a proven format to other broadcasters in the RTL family. On 17 September the Company started to broadcast SuperCasino.com on Channel Five. Early signs are extremely encouraging with new depositing sign-ups increasing some five-fold over the historic number. Whilst it is early days the Company is extremely pleased with the development of this business. Over the coming months we will introduce new formats to this airtime as well as improving the current show format. In the final quarter of 2009 we will move elements of its TV production, operations and databases offshore onto the Playtech software. This will achieve savings on UK betting duty of in excess of £100,000 per month and growing, as well as giving us a variety of new games. These will include a range of new Internet and mobile games. 

ChallengeJackpot.com, is a light hearted, fun product where customers can play everything from slots to roulette in a relaxed environment. Challenge Jackpot has progressed well since we took over the business in May this year. We have changed its computerised roulette wheel to a real wheel as well as implementing a new studio set and improving the production values. The website now boasts a range of new arcade games, a number of which offer jackpots in excess of £2m. In the next few weeks we will allow many of the games to be played on the mobile phone, an area we intend to grow rapidly in the coming months. This will give mobile players the opportunity to win up to £2m directly from their mobile phone. We will also introduce bingo on the website, plus a new interactive TV bingo game later this year. This will allow us to introduce our current bingo players to this brand, providing a wider gaming offering.

As we move forward we are looking to distribute the show to other broadcasters, enabling us to spread production costs across a number of TV channels thus improving quality and driving economies even further. Our Bingos.com business is performing in line with expectations and whilst revenues are down on the previous year our profit contribution remains healthy. In the coming months we will explore incorporating the Bingos.com and EuroTeleMillions.com businesses into the Challenge Jackpot brand, providing these customers with an even wider offering, with bigger jackpots and a larger player community. 

Our STVCasino.com product has started with extremely encouraging sign-ups. As we move forward our aim is to offer our Scottish viewers other formats, including formats from Challenge Jackpot. This will allow us to increase production values whilst sharing the production costs across multiple broadcast partners.

Mobile The Company has allocated additional investment to the mobile business as we begin to integrate our mobile offering into both the SuperCasino.com and ChallengeJackpot.com websites. We recognise that players want the ability to be able to interact with our services using a variety of devices. With our fully converged single wallet solution a user only needs to register with us once to be able to play on any device. 

The recent launch of our interactive Mobile to TV device has seen great take up by our customer base. This new product allows users to place bets against a live TV show using their mobile, a world first for an interactive gaming company. New mobile games will include interactive Stud Poker, Blackjack and classic arcade slots, presenting customers with a truly compelling converged gaming offering. Players will be able to win up to £2m from our mobile games giving us a significant marketing advantage in this fast growth emerging market.

Fixed Odds Betting Terminals

In September we launched our first "live" Fixed Odds Betting Terminal (FOBT) through StanleyBet International. We have the opportunity to roll out to a further 1,400 terminals in StanleyBet International shops. The roll out will take approximately 12 months starting with 400 shops in Italy over the coming months. We look forward to updating the market later in the year regarding the progress of this new revenue stream. 

We see great scope for "live" FOBT's as well a "live" pub version. We have committed resource and development funding into establishing a new team to focus on this emerging market and to take our brands and incorporate them into gaming terminals. We will invest in celebrity talent to produce and promote unique formats.

Outlook 

In the coming months the Company will invest significant funds in both new TV formats and people. We believe there is a major opportunity to deliver regulated interactive gaming formats to broadcasters in regulated markets. We will deliver a variety of new formats ranging from "soft" games, such as bingo and fixed odds draws, to "hard" gaming, including Tourmanent BlackJack, Roulette and Poker. The current investment in infrastructure and technology combined with the new investment in additional people and TV formats will enable the Company to offer its unique revenue generating interactive TV formats to other broadcasters around the World. 

NetPlayTV is transforming into a fully fledged media business delivering revenue generating interactive TV solutions to broadcasters. The major decisions made in the first half of 2009 will form the foundations for the business as we move forward. Over the coming months we will establish a new Business Development team, an ideas "hothouse" focused on delivering new converged interactive TV formats, including TV Bingo and Tournament Poker and BlackJack. Furthermore, we are intending to recruit some of the brightest TV and gaming talent in the industry allowing us to supply a variety of new TV formats to our current broadcast partners. 

The recent deals with STV, and the long term partnership deal with Channel Five will, we believe, allow us to grow our top line revenues substantially. This combined with streamlining our cost centres and the strength of our brands will ensure we maximise the potential profits going forward.

The Directors believe the business is now extremely well positioned to build on it current assets and relationships and are extremely positive about the year ahead.

Martin Higginson, Chief Executive Officer

NETPLAY TV PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the six months ended 30 June 2009

NETPLAY TV PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the six months ended 30 June 2009

Other reserves are comprised of share based payment reserve and investments in the companies own shares.

\* The transfer between reserves relates to share based payment charges for options lapsed or vested during the period. 

NETPLAY TV PLC

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

as at 30 June 2009

NETPLAY TV PLC

CONSOLIDATED CASH FLOW STATEMENT

for the period ending 30 June 2009

Notes to the interim reports 

1. Basis for preparation

This interim report, which has been neither audited nor reviewed by the company's auditors, was approved by the board of directors on 29 September 2009 and has been prepared under International Financial Reporting Standards (IFRS).

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 2008 with the exception of the amortisation of domain names, which is now calculated at 5% on a straight-line basis (2008 policy: 10% straight-line basis).

2. EBITDA 

3. Segmental information

During the period, the Group operated two principal classes of business; interactive gaming & competitions, and mobile telephony services.

For the six months ending 30 June 2009:

For the six months ending 30 June 2008:

For the year ending 31 December 2008:

4. Loss per share

5. Share Capital

6. Acquisition

On 12 May 2009 the Company completed the acquisition of the trading assets of Two-Way Gaming Limited. The acquisition included the trading assets and database of 16,000 registered players of the Challenge Jackpot service, a service which NetPlay has produced for Virgin Media TV as of the same date.

7. Material events subsequent to the period end

On 13 July 2009 the Company announced that it has entered into an agreement with Stanleybet International to provide NetPlay games on dedicated betting terminals, initially in 100 of Stanleybet's 1,400 betting shops.

On 20 July 2009 the Company announced a TV distribution deal with STV Group plc to provide Scotland's first live interactive TV casino on a national terrestrial broadcast channel. The service launched in September.

On 14 August 2009 the Company's shareholders passed the resolution to issue 58,352,476 new ordinary shares to Directforce Trading Limited, who currently hold 29.9% of the enlarged share capital. NetPlay also committed to a five year agreement with Playtech, a gaming software provider. Playtech will provide the software for NetPlay across all brands.

On 7 September 2009 the Company announced the signing of a legally binding heads of agreement to enter into a five year airtime deal with Channel Five Broadcasting Limited. Channel Five became NetPlay's second terrestrial TV partner after the announcement of the STV distribution deal on 20 July 2009. Following an initial trial with Channel Five in August the service launched in September.

8. Interim statement 

A copy of this statement will be on the Company's website at http://www.netplaytv.plc.uk.