TTR.L Regulatory News (TTR)

RNS Number : 0155S

32Red Plc

02 September 2010

 

 

32Red Plc

("32Red'' or ''the Company")

 

 

Interim results for the six months ended 30 June 2010

 

32Red Plc, the award-winning online gaming operator, today reports interim results for the half year ended 30 June 2010. 

As reported in its trading update on 15 July 2010, 32Red is delighted to confirm an encouraging first half's trading in 2010, building further on the strong trading experienced in the second half of 2009. Record revenues for a six month period in the first half of 2010 of £7.8m, up 33% on 2009, have resulted in a 38% increase in PBT before exceptional items. The result is underpinned by excellent trading at the Company's flagship operation, the 32Red Casino, which continues to grow in all key areas in 2010.

Key Financials:

	H1 2010	H1 2009
Casino Revenues	£6.8m	£5.2m	+29%
Poker Revenues	£0.4m	£0.5m	-12%
Revenue from Bingo and emerging products	£0.1m	£0.1m	+4%
Total revenue (excluding casino acquisitions)	£7.3m	£5.8m	+25%
Revenue from Casino acquisitions	£0.5m	-
Total Revenue	£7.8m	£5.8m	+33%
EBITDA before share option costs and exceptional items*	£0.6m	£0.5m	+12%
PBT before exceptional items*	£0.3m	£0.2m	+38%

*exceptional costs of £162,000 (H1 09: nil) relate to costs in respect of ongoing legal case being brought against William Hill

Key Casino Performance Indicators (excluding acquisitions):

·; Casino Gross Win of £6.8m, up 29% on H1 2009

·; Active casino players in the first 6 months: 19,497, up 35% on H1 2009

·; New casino players in the first 6 months: 12,289, up 26% on H1 2009

·; New casino players recruited at cost per acquisition of £86 each (H1 2009: £89)

·; Casino player yield in the first 6 months: £346 (H1 2009: £360)

Other Highlights

·; Successful integration of acquired casinos contributing £0.5m Gross Win in the first half

·; The Group has no bank debt and has cash resources of £1.5m (30 June 2009: £1.1m)

·; Strong current trading with daily average casino revenue for July and August up 19% on the corresponding period in 2009 and up 6% on first half of the year.

Ed Ware, CEO commented:

 

 "We are pleased to announce another strong performance by 32Red. The first half of 2010 represents a record performance and follows a previous set of records achieved in the second half of 2009. This is in contrast to the negative growth experienced in H1 2009 and supports both our ongoing marketing investment in 32Red and our resolve to protect our brand and intellectual property rights. Our long term strategy has been centred on the United Kingdom's online casino market and while we will continue to increase investment in this area, we remain convinced that other 32Red products and services, along with expansion into new territories, remain part of our future growth.

 

Our case against William Hill for trade mark infringement (due to the operation of a casino called 32Vegas which was renamed in August 2009) continues with trial set for the second week of October 2010.

 

The underlying strength in the business has continued into July and August with revenues up 19% on the corresponding period in 2009. We benefit from a full portfolio of gaming and betting services and our business is based on a sound operational and financial platform which we believe will enable us to fulfil growth plans for casino and other products in and out of the United Kingdom'.  

 

2 September 2010

Enquiries:

32Red Plc	Tel: 00 350 200 49396
Ed Ware, CEO
Jon Hale, Finance Director
Numis Securities Limited	Tel: +44 (0) 20 7260 1000
Chris Wilkinson (Corporate Broking)
Michael Meade (Nominated Adviser)
College Hill Associates	Tel: + 44 (0) 20 7457 2020
Matthew Smallwood
Jamie Ramsay

 

32Red plc

Performance Summary

 

On 15 July 2010, the Company reported a 33% increase in revenues for the first half of the year and this marked step up in trading levels has resulted in a 38% increase in Profit before taxation and exceptional items.

 

The performance is particularly pleasing given the continued challenging economic conditions faced by UK and European players during the first half of the year and given the added distraction of the World Cup in June 2010. The results are primarily due to excellent trading at the Company's flagship operation, the 32Red Casino, which represented 87% of total group revenues in the first half of the year (H1 09: 89%).

 

Casino (excluding acquisitions)

 

	H1 2010	H1 2009
Casino Revenues	£6.8m	£5.2m	+29%
Active Casino customers	19,497	14,490	+35%
Casino player yield	£346	£360	-4%
New casino players	12,289	9,733	+26%
Casino cost per acquisition	£86	£89	-3%

 

Player yields remained virtually constant and the 29% increase in revenues is attributed to a record level of active casino players for a six month period (up 35% on H1 09). The high level of traffic to the 32Red Casino is a combined result of a record number of new players recruited in the period (up 26% on H1 09) and improved retention performance following the software investment made during the second half of 2009.

 

Increased investment in targeted marketing activities has enabled a record 12,289 new casino players to be recruited during the first half of the year (9,733 in H1 2009). These players were recruited at a reduced Cost Per Acquisition of £86 (H1 09: £89). This reflects the renewed effectiveness of our marketing and follows the withdrawal of the 32Vegas casino by William Hill in August 2009. The Board believes that these results support the action taken to protect the Company's trade marks and provides an update on litigation proceedings below.

Casino player yields remained suppressed, an inevitable result of the continued heavy recruitment of new players, but also reflecting reduced high-roller activity over the last 18 months. The Board will continue to reinvest profits into marketing the business while attractive opportunities exist. The expansive growth of the player database leaves the business well positioned for future years, a factor that will be further underlined should player yields revert back to higher levels.

32Red was delighted to receive the award of 'Casino of the Decade' from independent watchdog and player advocate, Casinomeister earlier in 2010. This significant award recognises the level of care and attention the 32Red team have consistently delivered over a number of years. This level of excellence continues to be a strong focus for the management team as 32Red develops more scale and depth.

 

Casino Acquisitions

On 15 February 2010, the Company announced the acquisition of the assets of two European-focused online casinos, Nedplay (www.nedplay.com) and Golden Lounge (www.goldenlounge.com), both purchased for nominal consideration. Both casinos have been fully integrated and have generated £0.5m revenues from the period since acquisition up to 30 June 2010. Players of both Nedplay and Golden Lounge have responded well to our direct marketing and we are assessing the marketability of both brands going forwards.

 

Other products

 

32Red Poker operations have generated revenues of £0.4m in the first half of the year (H1 2009: £0.5m). As reported by other operators, the poker market remains tough but the Board hopes that moves to attempt to restrict those operators still accepting bets from the US may lead to a more level playing field.

 

32Red Bingo operations generated £0.1m of revenue in the first half of the year (H1 09: £0.1m). Initial reaction to the re-launched website has been very positive and the Company will increase Bingo marketing activities in the second half of 2010, spearheaded by more television advertising along with a focus on search engine optimisation.

 

32Red Rummy offers 32Red players the chance to play one of the world's best-known and compelling card games and provides the Company with the opportunity to reach a new audience. The integration into the 32Red central wallet has now been completed and fully tested and allows the product to be marketed in a more effective manner.

 

32Redbet enables the Company to operate a sportsbook on a no-risk basis with the ability to fully or partially hedge through the Betdaq betting exchange. The Board believes that the sportsbetting service is a valuable addition to the 32Red suite of products and provides a degree of protection against existing 32Red players spending time with rival sportsbetting operators (who may also offer casino games). The product has been fully tested and integrated into the 32Red wallet and will be marketed in advance of notable betting opportunities, including the resumption of the English Premier League, the Ryder Cup and the Ashes. Importantly, where opportunities arise, 32Red has the ability to manage the risk, and to offer specialised markets designed to attract new customers to 32Red in a different way.

 

Litigation

 

In 2009, 32Red initiated legal proceedings against three William Hill companies ("William Hill") in respect of the online casino, 32Vegas. The directors believe that the name 32Vegas infringes various 32Red registered trade marks and other intellectual property rights. 32Red served a claim in the High Court of Justice on 3 July 2009 and William Hill changed the 32Vegas website name on 4 August 2009.

 

In respect of the claim, William Hill filed a defence and counterclaim on 11 August 2009 challenging the validity of the 32Red trade marks. 32Red has always registered and protected its valuable trade marks and is fully prepared to defend their validity in the courts if necessary. Following various disclosures from both parties, witness statements have been exchanged and the trial is scheduled to be heard in the High Court during the second week of October 2010. The Board will update shareholders further once the result of the hearing has been determined.

 

Strategy

Along with action being taken to protect the intellectual property, brand and identity of 32Red, the Board is committed to increasing significantly the marketing investment in 32Red during 2010. This investment will be primarily in its core product, the 32Red casino in its core marketplace, the UK. However, the Board continues to monitor regulatory developments in Europe and beyond and believes that the PLC status of the Company may become a significant factor if and when 32Red decides to make applications to licensing authorities for additional gaming licences.

 

Current Trading and Outlook

The second half of the year has started encouragingly with revenues for July and August up 19% on the corresponding period in 2009 and with average daily revenues up 6% on H1 10. The Company will continue to reinvest profits into targeted marketing campaigns while remaining watchful of economic indicators and confirms that trading remains in line with expectations.

32Red Plc

Consolidated Income Statement

for the six months ended 30 June 2010

 

			Notes		Six months ended 30 June 2010		Six months ended  30 June 2009
					Unaudited		Unaudited
					£		£
Net gaming wins					7,776,974		5,838.552
Cost of sales					(5,992,325)		(3,976,644)
Gross Profit					1,784,649		1,861,908
Administrative expenses					(1,160,446)		(1,278,228)
Other operating expenses					(47,158)		(68,291)
EBITDA before share option costs and exceptional items					577,045		515,389
Share option costs					(77,345)		(82,355)
Depreciation and Amortisation					(173,314)		(193,007)
Exceptional costs			2		(161,670)		-
Profit before tax and finance costs					164,716		240,027
Finance income					2,122		2,069
Finance costs					(5,694)		(7,869)
Profit before taxation					161,144		234,227
Tax on ordinary activities			4		(450)		(450)
Profit for the period					160,694		233,777
Earnings per share (p)
	Basic		3		0.23p		0.34p
	Diluted		3		0.22p		0.32p

 

Consolidated Statement of Comprehensive Income

for the six months ended 30 June 2010

 

		Six months ended 30 June 2010		Six months ended  30 June 2009
		Unaudited		Unaudited
		£		£
Profit and total comprehensive income for the period		160,694		233,777

 

32Red Plc

Consolidated Statement of Changes in Equity

for the six months ended 30 June 2010

 

Unaudited		Equity attributable to equity holders of 32Red Plc
		Share  capital	Share  premium	Share options reserve	Retained earnings	Total Equity
		£	£	£	£	£
Balance at 1 January 2010		138,810	14,171,715	408,484	(14,599,333)	119,676
Share Premium offset		-	(14,171,025)	-	14,171,025	-
Profit and total comprehensive income for the year		-	-	-	160,694	160,694
Share options charge		-		77,345	-	77,345
Share options exercised		1,050	12,075	-	-	13,125
Balance 30 June 2010		139,860	12,765	485,829	(267,614)	370,840

 

On 26 February 2010, the Company received approval from the Supreme Court of Gibraltar to effect a special resolution passed by shareholders at the Extraordinary General Meeting held on 15 April 2009. This resolution allows the Company to reduce its share premium account by £14,171,025 and offset the amount by which the Company's share premium account is reduced against retained losses. 

 

32Red Plc

Consolidated Balance Sheet

as at 30th June 2010

 

			Six months ended 30-Jun 2010 Unaudited		Six months ended 30-Jun 2009 Unaudited
		Notes	£		£
Assets
Non-current
Intangible assets		5	616,046		185,856
Tangible assets		6	124,528		253,319
			740,574		439,175
Current assets
Trade and other receivables			403,627		407,029
Cash and cash equivalents			1,501,640		1,129,276
			1,905,267		1,536,305
Total assets			2,645,841		1,975,480
Equity
Equity attributable to shareholders of 32Red Plc
Called up share capital			139,860		138,750
Share premium			12,765		14,171,025
Share option reserve			485,829		414,844
Retained earnings			(267,614)		(15,038,615)
Total equity			370,840		(313,996)
Liabilities
CurrentTrade and other payables			2,275,001		1,789,476
Bank loans			-		500,000
			2,275,001		2,289,476
Total liabilities			2,275,001		2,289,476
Total equity and liabilities			2,645,841		1,975,480

 

32Red Plc

Consolidated Statement of Cash Flows

for the six months ended 30 June 2010

									Six months ended 30-Jun 2010 Unaudited		Six months ended 30-Jun 2009 Unaudited
									£		£
Operating activities
Results for the year before interest and after tax									164,266		239,577
Amortisation									92,052		75,866
Depreciation									81,262		117,141
Change in trade and other receivables									(186,112)		(80,932)
Change in trade and other payables									225,417		(321,324)
Share option costs									77,345		82,355
									454,230		112,683
Investing activities
Additions to intangible assets									(392,423)		(66,190)
Additions to tangible assets									(26,092)		(71,032)
Interest received									2,122		2,069
									(416,393)		(135,153)
Financing activities
Share options exercised									13,125		-
Proceeds from borrowings									-		500,000
Repayment of bank loans									(250,000)		(250,000)
Interest paid									(5,694)		(7,869)
									(242,569)		242,131
Cash and cash equivalents, beginning of period									1,706,372		909,615
Net increase in cash and cash equivalents									(204,732)		219,661
Cash and cash equivalents, end of period									1,501,640		1,129,276

 

Notes:

1. Accounting policies

 

The consolidated interim financial results have been prepared in accordance with the measurement principles of applicable International Financial Reporting Standards (''IFRSs'') as adopted by the EU. The accounting policies have remained unchanged from the previous year, as set out in the Annual Report for the year ended 31 December 2009, available on www.32redplc.com.

2. Exceptional item

		Six months ended		Six months ended
		30-Jun		30-Jun
		2010		2009
		£		£
Legal and other costs associated with ongoing litigation		161,670		-

 

During 2009, 32Red initiated legal proceedings against three William Hill companies (''William Hill'') in respect of the online casino, 32Vegas. The directors believe that the name 32Vegas infringes various 32Red registered trade marks and other intellectual property rights. 32Red issued a claim in the High Court of Justice on 4 March 2009 and this claim was served on 3 July 2009. Subsequent to service of the claim, William Hill has changed the 32Vegas website name, a move that was welcomed by 32Red. Exceptional items relate to legal and other expenses incurred in the accounting period in relation to the ongoing litigation dispute with William Hill.

3. Earnings per share

 

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 69,555,829 shares (2009: 69,375,000).

 

To calculate the diluted earnings per share figure, the weighted average of employee share options expected to vest has been added. This number represents management's best estimate at the balance sheet date, which is also used for calculating employee payments relating to share based payment transactions. At 30 June 2010, the weighted average number of share options expected to vest was 4,319,275 (2009: 3,953,000).

 

								Six months ended		Six months ended
								30-Jun		30-Jun
								2010		2009
Net profit attributable to ordinary shares								£160,694		£233,777
Weighted average number of ordinary shares:
For basic earnings for diluted earnings								69,555,829		69,375,000
								73,875,104		73,328,000
Basic earnings per share								0.23p		0.34p
Diluted earnings per share								0.22p		0.32p
Weighted average number of ordinary shares for basic earnings								69,555,829		69,375,000
Weighted average number of share options								4,319,275		3,953,000
Weighted average number of ordinary shares for diluted earnings								73,875,104		73,328,000

 

4. Taxation

 

 

		Six months ended		Six months ended
		30-Jun		30-Jun
		2010		2009
		£		£
Tax on profit on ordinary activities		450		450

 

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 period.

 

5. Intangible assets

 

 

				Total
				£
Cost
At 1 January 2010				735,078
Additions				392,423
At 30 June 2010				1,127,501
Depreciation
At 1 January 2010				419,403
Charge for the period				92,052
At 30 June 2010				511,455
Net book value
At 30 June 2010				616,046
At 30 June 2009				185,856

 

 

On 21 January 2010 the Group acquired the trade and assets of Nedplay casino from Floryntia Play Group NV. On 12 February 2010 the Group acquired the trade and assets of Golden Lounge casino from Golden Lounge Limited. The business assets acquired in both cases comprise of the player database, software agreements, the domain names and other intellectual property that were purchased for a nominal consideration. The sole liabilities assumed by the Group are in respect of player balances and certain outstanding payments to affiliates and total £223,383.

 

 

6. Property, plant and equipment

 

	Motor Vehicles		Computer and Office Equipment		Leasehold Improve-ments		Total
	£		£		£		£
Cost
At 1 January 2010	107,800		1,028,554		78,116		1,214,470
Additions	-		26,092		-		26,092
At 30 June 2010	107,800		1,054,646		78,116		1,240,562
Depreciation
At 1 January 2010	98,017		888,493		48,262		1,034,772
Charge for the period	3,324		70,126		7,812		81,262
At 30 June 2010	101,341		958,619		56,074		1,116,034
Net book value
At 30 June 2010	6,459		96,027		22,042		124,528
At 30 June 2009	27,458		188,196		37,665		253,319

 

This information is provided by RNS

The company news service from the London Stock Exchange