NPT.L Regulatory News (NPT)

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NetPlay TV plc

Preliminary Results

NetPlay TV plc (AIM: NPT) (the "Company"), the interactive gaming company, is pleased to announce its preliminary results for the year ended 31 December 2011.

Financial Highlights

§ 12.4% increase in Group revenue to £22.3m (2010: £19.8m)

§ 18.6% increase in Casino Revenue to £20.6m (2010: £17.4m)

§ EBITDA* from continuing operations £3.4m (2010: negative EBITDA of £2.8m)

§ Profit before tax £0.6m (2010: Loss before tax of £14.2m)

§ Operational cash flow of £2.5m (2010: negative £3.8m)

Operational Highlights

§ Five year contract with Channel 5

§ Successful launch of Supercasino iPad app

§ New TV pre midnight advertising strategy

Post period Highlight

§ New two year broadcast agreement with ITV

§ Q1 2012 average daily revenue

- 20% increase on Q1 2011

- 9% increase on Q4 2011

§ iPhone and iPad applications for Jackpot 247

§ Capital reduction process will enable the Board to consider adopting a future dividend policy if approved

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Commenting on the results, Charles Butler, NetPlayTV's Chief Executive said:

"We are very proud of the significant strategic and commercial progress made over the past year, and the robust results announced today illustrate the strength of the Company's live TV casino proposition.

"We are confident in the opportunities for growth available in the existing UK markets through a combination of strong customer acquisition and product development, whilst also pursuing quality international expansion opportunities. We will continue to leverage our strong broadcaster relationships to drive growth and in turn create long term shareholder value.

"We are looking forward to 2012 with confidence and expect to continue to build on the positive momentum and successful results of 2011."

Enquiries:

Notes to Editors:

About NetPlayTV plc

NetPlayTV TV plc is listed on the AIM market of the London Stock Exchange (NPT). NetPlayTV operates a number of interactive gaming services under an Alderney gaming license, including SuperCasino.com and Jackpot247.com. These services can also be viewed 24 hours a day live on Sky Channel 866, every evening on Channel 5 and four nights a week on ITV1.

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.

Chairman's Statement

2011 was an excellent year for NetplayTV. Following the restructuring at the end of 2010, the year started very well, gathered momentum and ultimately exceeded expectations.

With the correct internal structure in place and costs firmly under control at the start of the year we were able to concentrate on developing the core revenue drivers behind the business. This involved investing heavily in marketing with a particular emphasis on TV advertising. This advertising proved increasingly successful as the year progressed resulting in four impressive quarters of KPI growth and three profit upgrades during the year. I believe we have a great team of people working at NetplayTV and their enthusiasm and hard work combined with our USP of live TV casino has helped us deliver a strong set of results. I want to thank all of our staff for their hard work this year.

In October after working closely with Channel 5 for two years we signed a new five year partnership agreement to continue broadcasting seven nights a week, thereby securing one of the key channels for customer acquisition for Supercasino.com until 2016. This was a milestone for the Group as it illustrates not only the strength of the SuperCasino brand, but also that the commercial relationship between the companies is creating value for both parties and that the brand SuperCasino is going from strength to strength. The new agreement incorporates the existing post midnight teleshopping airtime which in turn is complimented by a significant amount of pre midnight advertising spots.

In December the Group launched its iPad application to add to the already successful iPhone application and the uptake so far has been very encouraging. We see mobile and tablet as one of the key growth drivers for the Group in 2012 and we are uniquely positioned through our TV presence to exploit the potential of this rapidly growing market.

I am extremely happy with the Company's performance in 2011 and I am pleased to report that 2012 has commenced strongly with Q1 KPIs ahead of both Q1 2011 and Q4 2011. Furthermore, the Group is making progress with its share capital reorganisation, which if approved will create positive distributable reserves which will in turn facilitate the potential introduction of a future dividend policy. We are in a good position to drive shareholder value from our existing UK business whilst continuing to consider newly regulated market opportunities.

Clive Jones

Non-Executive Chairman

23 April 2012

Chief Executive Officer's statement

2011 has been a highly successful year for the Group and 2012 has started strongly.

2011 Review

We started the year with a solid management structure in place and a clear strategy to deliver continued growth in our core live TV casino business. I am pleased to announce we delivered on every element of this strategy which has resulted in strong total revenue growth of 12.4%, casino revenue growth of 18.6%, and generated an EBITDA profit of £3.4m compared to an EBITDA* loss of £2.8m, giving an overall EBITDA margin of 15.4% (2010: negative 14.0%). Cash balances increased by £2.4m during the year to £7.9m and the Group made profit after taxation of £0.6m (2010: loss after taxation of £13.7m).

During the first half of the year we focused on improving the live product offering to enable us to extract maximum player acquisitions from our existing TV teleshopping post midnight airtime on Channel 5 and ITV1. This strategy proved to be successful and the results of this were clearly demonstrated by the interim results posting both a very healthy EBITDA of £1.7m and positive cash flow of £0.5m.

The second half of the year was mostly about continued product development whilst also looking to new channels for customer acquisition. After a successful trial advertising campaign on pre midnight airtime across multiple terrestrial and digital channels the Group increased its TV advertising expenditure significantly from July onwards. By leveraging our strong broadcaster relationships we were able to optimise our advertising spend and maximise acquisition of players by linking the adverts with the existing post midnight airtime on both Channel 5 and ITV1. The benefit of this increased advertisement spend can be seen in strong H2 revenue growth of 10.3% compared with H1 and resultant EBITDA of £1.7m and an increase in cash flow of £1.9m.

We spent a lot of time during the year working closely with our broadcast partners looking at ways to improve efficiency of TV as a medium for acquiring new customers and it was a real endorsement of our live TV casino product to sign a new five year deal with Channel 5 in October. In a market that is highly competitive for new customer acquisitions this puts the Group in a very strong position knowing it has secured one of its main marketing channels for the next five years.

It has also been a year in which the mobile industry has seen huge growth in the sale of smart phones and NetplayTV has positioned itself to ensure it takes maximum advantage of this exponential growth and the resultant changes in consumer behaviour when interacting with smartphones and tablets while watching TV.

Current Trading and Outlook

2012 has started strongly with Q1 new depositing customer acquisitions up 69.9% year on year and 34.3% quarter on quarter with active depositing players up 43.9% and 23.0% respectively. This resulted in average daily casino revenue growth of 20.3% year on year and 8.5% quarter on quarter.

Since the year end we disposed of our UK Bingo business allowing the Group to focus on the core live TV casino business where the marketing strategy is paying off and yielding much higher returns on investment.

The Group launched its Supercasino.com iPad application in December 2011 and in March 2012 launched iPhone and iPad for Jackpot247.com. Both brands have benefited from this launch and we expect to see strong quarter on quarter growth from customers accessing our brands via mobile and tablet while we continue to invest in this area of product development and take advantage of our unique position of acquiring customers watching TV directly into the smartphone and tablet applications.

The Group have started the process of a capital reduction to create positive distributable reserves. The special resolution was passed at an EGM on 3 April 2012 and the court hearing to confirm the capital reduction will take place on 2 May 2012. If approved, this will give the board greater flexibility when considering its future dividend policy.

We are confident the Group has strong growth opportunities in the UK and can continue to take market share. Whilst driving growth in the business is a key focus of the Board we are at the same time keeping a close eye on the European markets that are going through a process of regulation. We will look for broadcast partners in markets where we can leverage our existing fixed cost base and where the tax rates makes sense to build long term shareholder value.

We are excited about 2012 and are looking forward to building further on the positive momentum and successful results of 2011.

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*EBITDA is a non-GAAP, company specific measure and excludes share based payment charges and exceptional charges described in note 4. Where not explicitly mentioned, EBITDA refers to EBITDA from continuing operations.

Charles Butler

Chief Executive Officer

23 April 2012

Financial Overview

2011 was a record year for NetPlayTV with revenue up 12.4% to £22.3m (2010: £19.8m), positive EBITDA* of £3.4m (2010: negative EBITDA of £2.8m), Profit before tax of £0.6m (2010: Loss before tax of £14.2m) and net cash from operating activities of £2.5m (2010: negative £3.8m).

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* EBITDA is a non-GAAP, company specific measure and excludes share based payment charges and exceptional charges described in note 4. Where not explicitly mentioned, EBITDA refers to EBITDA from continuing operations.  

Product segmentation

Casino revenue accounted for £20.6m during 2011 representing year on year growth of 18.6%. Casino EBITDA was £4.6m (2010: EBITDA loss of £1.6m). Bingo only contributed £1.7m in revenue for 2011 (2010: £2.5m) and EBITDA of £0.1m (2010: £0.3m).

During the year the Group continued its strategy of focussing management time and marketing in its core live TV casino business and this can be seen by Casino accounting for 97.6% of segmental EBITDA. Overall EBITDA Margin increased during the year from negative 14.0% to positive 15.4%

In 2012 the Group has disposed of its UK Bingo operation for £375,000. This operation was continuing at 31 December 2011. The EBITDA from continuing operations excluding the Bingo operation is £3,305,000 (2010: EBITDA loss of £3,111,000).

Expenses

Although the Group has seen a 12.4% increase in revenue during the year, expense control remains a key focus within the business. Cost of sales have reduced by £1.3m and administrative expenses have reduced by £11.0m. There were no exceptional or impairment charges during 2011 (2010: £8.0m).

For comparison purposes, adjusted administrative expenses is £3.7m (2010: £6.0m). This reduction is a result of the restructuring carried out at the end of 2010 and management's continued focus on keeping fixed costs to a minimum and linking variable costs, where possible, to performance.

The result of the above increased revenue and reduced costs has increased the Group's gross profit margin to 31.2% (2010: 16.2%) and EBITDA margin to 15.4% (2010: negative 14.0%).

Cash flow

The Cash balance at 31 December 2011 is £7.9m (2010: £5.6m) representing an increase of £2.4m. Cash generated from operations was £2.5m and is one of the key performance indicators used by the directors in running the business. This measure not only reflects the liquidity of the Group but also on the EBITDA to cash conversion. The increase of £2.5m during 2011 was after taking into account £1.2m of prior year restructuring costs. There are no outstanding prior year restructuring costs at 31 December 2011. The Adjusted Earnings per Share calculated using net cash generated from operating activities is 0.89 pence for 2011 (2010: Adjusted loss per share of 1.77 pence).

Key financial metrics

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* 2010 average quarterly data has excluded Q1 2010, as during this period the business moved the casino player database to Playtech and these KPIs cannot be reliably recreated for this quarter.

Business Model

The NetPlayTV business model is focused around the online casino gambling market with TV customer acquisition as the key differentiating factor. The Group operates with a combination of propriety front-end technology and third party back-end software. NetPlayTV offers its customers licensed games with the added layer of its live TV casino games broadcast on over 30 hours of terrestrial television per week.

Our approach differentiates NetPlayTV significantly from its competitors. The high level of exposure on TV creates strong brand awareness and trust and loyalty with its customers. This has resulted in some of the highest player values and player retention rates in the market.

The TV coverage acts as a unique marketing tool and is filled with continual calls to action, attracting new customers to open an account. Customers see the live roulette show on TV then have the option of opening and funding an account either via traditional telephone, web, smartphone or tablet. Once the account is opened the customer has the choice of playing the live games broadcast on television or any of the other games on the website. All games are available 24 hours a day and not just while the show is being broadcast.

NetPlayTV is focused on two brands, Supercasino.com on Channel 5 and Jackpot247.com (previously known as Challengejackpot.com) on ITV. The commercial agreements with these broadcasters are structured in such a way that both parties benefit as the performance of the brand improves. This ensures NetPlayTV and the broadcaster act in partnership with a common goal rather than a straight-forward airtime purchase.

Broadcast Platforms

Players are able to interact with SuperCasino and Jackpot247 by a variety of methods. The Group offers its full range of products currently via the following platforms:

·; Web - via an interactive Flash client

·; Interactive Voice Response - telephony system allowing customers to play via a touch-tone telephone

·; Mobile

o HTML5 Browser interface for iPhone

o Application in the iPhone App Store

o Java based application for other phones

·; Tablet - specific HTML5 site for the iPad.

·; The group plans to launch a dedicated Android application in the first half of 2012

NetPlayTV operates from its own state of the art TV studios which were fully refurbished in 2010. The running of the live TV casino shows are largely a fixed cost. The Group is trading well above this fixed cost base allowing a high percentage of incremental revenue to flow straight to EBITDA*.

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* EBITDA is a non-GAAP, company specific measure and excludes share based payment charges and exceptional charges described in note 4. Where not explicitly mentioned, EBITDA refers to EBITDA from continuing operations.

Strategy

NetPlayTV is the UK's largest interactive TV gaming company and the key focus of 2012 is to increase UK market share while looking for quality overseas expansion opportunities.

Market Drivers

TV Partnerships

NetPlayTV broadcasts in excess of 30 hours per week on two of the UK's leading TV broadcasters. The Group also undertakes commercial advertising on these channels as well as other terrestrial, digital and cable channels. This strategy delivers extensive viewer reach to target potential new customers.

Product Differentiation & Innovation

NetPlayTV is the only company offering live TV casino on terrestrial television channels in the UK. The Group controls all front end customer interfaces including iPhone and iPad which are seeing significant growth and already accounts for over 15.9% of all SuperCasino players. The Group sees its mobile and tablet as a very strong growth area for 2012 with 64% of people who own a tablet, watching TV and using the device at least once a week known as dual screening*.

Development of other acquisition channels

The Group will develop other acquisition channels, such as the affiliate network, display, pay per click and SEO marketing.

New Markets

Europe is experiencing rapid change with many countries opening up, going through the process of regulating online gambling and issuing licenses.

Strategy

Continued focus on core live TV Casino

The Group intends to increase UK market share by leveraging existing broadcaster relationships and expanding commercial advertising to compliment the core Teleshopping airtime. It also sees significant growth in the ability to target customers watching TV who have a smartphone or tablet live at the same time.

Retention of existing players

Driving player life-time value and with 40.0% of revenues from players who have been registered over 12 months old there is significant value in the existing customer base. The Group has very high retention rates and has a dedicated team of account managers and retention specialists in place alongside the best retention tool being that the customer sees the brand every night on terrestrial TV rather than just traditional email marketing.

New Markets

Due consideration will be given to newly regulated markets such as Italy, Spain, France, Denmark and potentially the Netherlands. Not all markets will be attractive due to onerous tax rates. The Group will only look to enter with the right airtime partner for that particular country.

Performance / KPIs

New depositing casino players

Average quarterly new depositing casino players in 2011 was 7,879 (2010**: 7,189)

Active depositing casino players

Average quarterly active depositing casino players in 2011 was 15,873 (2010**: 14,504)

Revenue

Casino Revenue increased by 18.6% to £20.6m (2010: £17.4m)

EBITDA and Operational Cash flow

EBITDA*** from continuing operations increased to £3.4m (2010: EBITDA loss of £2.8m) and operational cash flow to £2.5m (2010: negative £3.8m)

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NetPlay TV plc

Consolidated statement of comprehensive income

for the year ended 31 December 2011

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NetPlay TV plc

Consolidated statement of financial position

as at 31 December 2011

NetPlay TV plc

Consolidated statement of cash flows

for the year ended 31 December 2011

Consolidated statement of changes in equity

for the year ended 31 December 2011

Notes to the financial statements

1. Basis of preparation

The financial information set out in these preliminary results does not constitute the company's statutory accounts for the years ended 31 December 2011.

Statutory accounts for the year ended 31 December 2010 have been filed with the Registrar of Companies and those for the year ended 31 December 2011 will be delivered to the Registrar in due course; both have been reported on by the Independent Auditors. The independent auditors' reports on the Annual Report and accounts for the year ended 31 December 2010 and 31 December 2011 were unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

The financial information in these preliminary results has been prepared using the recognition and measurement principles of International Accounting Standards, International Financial Reporting Standards and Interpretations adopted for use in the European Union (collectively Adopted IFRSs). The principal accounting policies adopted have been consistently applied to all the years presented and are consistent with the policies published in the statutory accounts for the year ended 31 December 2010. 

2. Segmental information

Description of the types of products and services from which each reportable segment derives its revenues

The Group has reportable segments as follows:

·; Casino - this division consists of online casino products. The brands operated in this division are Supercasino.com and Jackpot247.com which are aggregated into one reportable segment.

·; Bingo - this division runs a number of different online bingo websites operating in the UK and Europe.

·; Mobile - this division was discontinued in 2010. Its results are included within note 3.

Factors that management used to identify the Group's reportable segments

The Group's reportable segments are strategic business units that offer different products and services. Each segment has its own management team. These divisions are managed separately because each business requires different software technology and marketing strategies.

Measurement of operating segment profit or loss, assets and liabilities

The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies. The Group evaluates performance on the basis of segment EBITDA which is defined as the segment profit or loss excluding segment depreciation and amortisation and non-recurring losses, such as exceptional items, intangible asset impairment, and the effects of share-based payments. Head office costs not derived from operations of any segment and are only disclosed in total.

During the year, the Group traded in the following geographical segments:

·; UK (comprising Supercasino.com, Jackpot247.com, and an element of the Bingos.com service)

·; The British Virgin Islands which holds Bingo Domain Names.

·; The 'rest of the world' segment includes Italy, Spain, Poland and Sweden (comprising an element of the Bingos.com service).

3. Discontinued operations

There were no discontinued operations in the financial year up to 31 December 2011.

On 26 November 2010, the Group disposed of the 'Lucky Numbers' and 'Grab a Grand' SMS-based subscription services for initial cash consideration of £100,000 and contingent cash consideration of up to £50,000 dependent on performance conditions. At the reporting date £19,000 of the contingent consideration had accrued.

As a result of the above transaction, discontinued operations comprise the 'Mobile' business segment as reported in past annual reports.

The post-tax gain on disposal of discontinued operations was determined as follows:

Analysis of the result of discontinued operations is as follows:

Analysis of the cash flows of discontinued operations is as follows:

4. Exceptional items

There were no exceptional items disclosed in the financial year up to 31 December 2011

Aborted projects and restructuring costs include items of expenditure arising from strategic decisions which affect the Group's direction. This category of expenses includes items such as office closure costs and staff redundancies.

Onerous contracts relate to TV airtime and distribution agreements entered into by the Group which have become loss-making. Since the Group has been able to establish itself with significant presence on terrestrial channels, it rendered obsolete some of the existing airtime agreements on non-terrestrial platforms, such as Freeview and Freesat. 

5. Income tax

6. Earnings per share

The effect of the loss in 2010 is anti-dilutive and so in accordance with the IAS 33 the diluted loss per share is equal to the basic loss per share.

Adjusted Earnings per Share

The Directors believe that EPS calculated using net cash generated from operating activities better reflects the underlying performance of the business and assists in providing a clearer view of the performance of the Group. It is also a performance measure used internally to manage the operations of the business.

7. Property, plant and equipment - Group