TTR.L Regulatory News (TTR)

9 Mar 2009 07:00



32Red Plc

("32Red" or "the Company")

Preliminary results for the year ended 31 December 2008

32Red, the award-winning casino operator, today announces preliminary results for the year ended 31 December 2008

Key points:

Management refocus on 32Red Casino product has had immediate and positive impact

Net gaming wins for the business have increased 27%

Earnings before interest, tax, depreciation, amortisation and share option costs ahead of market expectations 

Profit before tax and share option costs in line with market expectations

32Red Bingo, 32Red Mobile and 32Red Spreadbet all successfully launched with 32Red Bet sportsbook planned for 2009

TV advertising and launch of new initiative set to deliver further new income in 2009

Best casino award from Casinomeister for sixth consecutive year

Key casino performance indicators

Net gaming wins (000's) up 30.1% to £11,704 (2007: £8,996)

Active casino players up 14.8% to 21,808 (2007: 18,992)

New casino players up 6.7% to 15,567 (2007: 14,586)

Cost per acquisition reduced to £119 (2007:£137)

Financial 

* 2007 comparatives exclude the results of the discontinued Betdirect business 

Current trading

Business continuing to perform well and in line with expectations

Management anticipate a successful year in 2009

Commenting on the results Ed Ware, Chief Executive Officer, said:

"2008 has been a year of consolidation for us and the benefits of this are already bearing fruit. The refocus on the core product, 32Red Casino, has yielded encouraging results. 32Red Bingo, 32Red Mobile and 32Red Spreadbet have all been added to our platform and are helping us to grow our customer base. 

The business continues to perform encouragingly in 2009 and provides encouragement that our sector is proving to be resilient in the current economic climate. An increasing number of offline marketing opportunities are becoming available at cost-effective rates and management anticipate a successful 2009."

  Chairman's Statement 

I am pleased to set out below my review of the Directors' Report and Consolidated Financial Statements of 32Red Plc ("the Group") for the year ended 31 December 2008.

Financial review 

The re-focusing of the Group's activities has had an immediate, positive impact and I am delighted to report an increase of 27% in the Group's net gaming wins for the 12 months to 31st December 2008 to £13.0m (2007: £10.2m*). 

This significant growth in revenue has resulted in an operating profit before share option costs for the year of £1.5m (2007: £1.3m*) and earnings before interest, taxation, depreciation, amortisation and share option costs (clean EBITDA) of £1.8m (2007: £1.6m*). 

Profit after taxation of £1.3m (2007: loss of £12.9m) for the Group supports the Board's decision to dispose of the loss-making Betdirect business in 2007, which contributed an exceptional loss of £14.2m in that period. The Board does not recommend the payment of a dividend for the financial year ended 31 December 2008 (2007: nil). 

Strategy

The focus remains on expanding the profile of our core casino product to a wider audience through targeted and cost effective marketing campaigns. The regulated and expanding market in the United Kingdom continues to be 32Red's main source of new players and revenue which enables the Group to be progressive but sure-footed with marketing investment and activity.

Our brand continues to be attractive to our target audiences and early interest in our mobile casino and 32RedBingo.com are encouraging. Other new gaming-related services and products will be launched in the first half of 2009, all of which are activities modelled to leverage the 32Red brand. However, shareholders can rest assured that the launch of these new products require minimal up-front investment and will not distract us from our main enterprise, the 32Red Casino. 

32Red Spreadbet, a financial spread betting platform will be launched on 9th March 2009 and 32Red Bet, our new online sportsbook in partnership with Global Betting Exchange, will launch imminently. The Group is also exploring other new gaming product opportunities.

Resolutions proposed at forthcoming AGM and EGM

I would like to draw attention to the special resolutions proposed at the forthcoming Annual and Extraordinary General Meetings to be held back to back on Wednesday 15th April, 2009. In particular, I would urge shareholders to join the Board in voting in favour of the following special resolutions:-

Resolution 7 proposed at the Annual General Meeting seeks to renew the authority of the Board to buy back its own shares through the market, a strategy which the Board believes will deliver value to shareholders at a time when difficult market conditions can lead to the undervaluation of companies. 

Resolutions 1 and 2 proposed at the Extraordinary General Meeting seek shareholder approval to offset retained losses derived from the performance of the Betdirect business against the share premium account. This accounting entry will bring forward the date by which the Company will have distributable reserves and be able to re-instate its dividend policy.

Further details of all resolutions are contained in the Notice to the Meetings.

Best Casino Award for sixth successive year

The 32Red proposition is founded on providing excellent player support and offering a distinctive and distinguished service to casino players. We were therefore delighted to have the prestigious "Best Casino of the Year" award bestowed upon us for an unprecedented sixth consecutive year by independent watchdog and player advocate site, Casinomeister. I would like to take this opportunity to congratulate and thank all our employees for their continued hard work and commitment during 2008. 

Current Trading and Outlook

Our business continues to perform encouragingly and in line with market expectations. We anticipate a successful year ahead with 2009 proving to be another step forward for 32Red.

David Fish 

Chairman, 32Red Plc

* 2007 comparatives exclude the results of the discontinued Betdirect business

  Chief Executive's Statement 

The year ended 31 December 2008 was one of consolidation and re-focusing on our core activity of operating an industry-leading online casino. I am delighted to report that a renewed management focus on the core 32Red Casino product, following the sale of the Betdirect business in December 2007, has yielded encouraging results. Net gaming wins for the 32Red business as a whole increased by 27%, principally as a result of a 30% increase in net gaming wins from the 32Red Casino. I believe that this trading performance justifies the strategy implemented at the start of the year. We are once again cash generative and delivered record levels of income. Clearly the business has taken a significant step forward following a turbulent period in our history.

32Red Key Performance Indicators

Casino

The 32Red Casino continues to dominate the Group's trading representing 90% of total Group revenues (2007: 88%*). Total casino revenues increased by 30% to £11.7m (2007: £9.0m) during the year, a direct result of an increase in active player levels and higher yield per active player. 

It is particularly pleasing to see the increased yield per active player, which at £537 (2007: £474) is one of the highest reported yield per player performances in the gaming industry and underlines the quality of service provided to players by the 32Red team. This yield, allied with the higher number of active players, demonstrates both the focus and commitment to out-perform our competitors in a key discipline which ultimately delivers shareholder value. To be recognised once again by such an esteemed authority as Casinomeister is extremely satisfying for all involved at 32Red. 

Cost per acquisition (CPA) reduced to £119 (2007: £137) per new casino player during the year partly influenced by the conclusion of 32Red's successful sponsorship of Aston Villa FC in May 2008. The Group continues to adopt a cost-effective approach to marketing, but expects an increased CPA in 2009 as 32Red enhances its brand awareness with more offline activity. 

Other products

Revenues from our poker operation, which represents 8% of total Group revenue for 2008, have fallen by 13% on 2007 which is unsurprising given the wider pressures on the poker market during the year. Our decision to increase casino marketing and decrease poker marketing has proved to be well founded.

The poker industry remains challenging as the market matures, with the impact of operators accepting bets from US customers having a negative impact on player liquidity. Our strategy of focusing on existing loyal players has seen our yield per active player increase by 45% to £119. We continue to evaluate all aspects of the 32Red Poker experience in the face of competitive conditions and are mildly encouraged by trading levels in the first two months of 2009.

32Red Bingo launched in the early part of 2008 and, whilst we still have several areas of this business to develop, performance has been relatively pleasing (revenues at £0.2m in 2008). Key to Bingo revenues will be the continued development in the offering of casino games in our Bingo environment. This allied with further TV advertising in the UK and the launch of new initiatives will deliver further new income for 32Red in 2009.

32Red Spreadbet - 32Red announces the launch of 32Red Spreadbet on 9 March 2009, a platform for financial spread betting and contracts for difference (CFDs). 32Red Spreadbet is the result of a partnership with CMC Spreadbet Plc and CMC Markets UK Plc who are authorised and regulated by the Financial Services Authority. This partnership offers 32Red customers access to a multitude of financial markets around the globe.

Edward Ware, Chief Executive Officer

32Red Plc

* 2007 comparatives exclude the results of the discontinued Betdirect business

  Notes:

The financial statements have been prepared in accordance with International Financial Reporting Standards ('IFRSs') as adopted by the European Union. These accounting policies comply with each IFRS that is mandatory for accounting periods ending on or after 31 December 2008. The financial statements have been prepared under the historical cost convention and on a going concern basis.

Amortisation and depreciation are charged to administrative expenses. Share issue expenses have been offset against the share premium account.

Business segment

Performance can be analysed by business segment as follows:

Non-current assets are used by all the business segments and a meaningful split is not possible. Furthermore "other employee obligations" and bank loans relate to all business segments equally and can not be split in a meaningful way.

  Geographical segment

The Group's performance can also be reviewed by considering the geographical markets in which the Company operates.

The following amounts have been included in the income statement for the reporting periods presented:

Basic earnings per share have been calculated by dividing the net results attributable to ordinary shareholders by the weighted average number of shares in issue during the relevant financial periods.

The weighted average number of shares used for basic earnings per share amounted to 69,174,315 shares (2007: 65,352,055).

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. For share options, a calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company's shares) based on the monetary value of the subscription rights attached to the outstanding share options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options.

The Company has been granted tax exempt status under the Companies (Taxation and Concessions) Act . Under the terms of such status an annual charge of £450 is payable to the Government of Gibraltar. Provided the Company complies with the necessary criteria, payment of such charges will satisfy the company's tax obligation in Gibraltar in relation to the year ended 31 December 2008.

The Group has UK tax losses of approximately £5.2m (2007: £5.2m) available to offset against future taxable profits in the UK.

7 Intangible assets

8 Property, plant and equipment

9  Discontinued operations in 2007

10 Publication of Non-Statutory Accounts

The financial information set out in this preliminary announcement does not constitute statutory accounts as defined under Gibraltar company law.

The summarised consolidated balance sheet at 31 December 2008 and the consolidated summarised income statement, summarised statement of changes in equity, summarised statement of cash flows and associated notes for the year then ended have been extracted from the Group's 2008 statutory financial statements upon which the auditor's opinion is unqualified and unmodified.

Those financial statements have not yet been delivered to the registrar of companies.