TTR.L Regulatory News (TTR)

 32Red Plc

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

Interim results for the six months ended 30 June 2015

"Record revenue performance"

32Red, the award-winning online gaming operator, today reports Interim results for the six months ended 30 June 2015.

Key Financials:

Financial highlights:

· Record revenue performance with NGR for the period up 22%

· 85% of revenues from regulated and taxed markets

· Underlying EBITDA on a like for like basis excluding the impact of POCT up 57%

· Interim dividend increased by 10% to 1.1p (2014: 1.0p)

· Confident of meeting full year expectations

Operational highlights:

· Mobile casino driving growth and represents 42% of total casino revenues (2014: 32%)

· Active casino players in first 6 months up 22% to 62,214 (H1 2014: 50,890)

· Casino player yield £380 (H1 2014: £400)

· New Casino players recruited up 12% to 26,407 (H1 2014: 23,566) 

Post period end events and current trading:

· Acquisition of Roxy Palace business acquired post period end brings strong complimentary brand and expertise to the Group

· Current trading in the second half of the year to date remains strong, with LFL NGR up 52%,

· Roxy Palace business generated a further £2.5m of NGR since acquisition

Ed Ware, CEO commented:

"We are delighted to report a record revenue performance for 32Red in the first half of 2015 with NGR from the business up by 22%. This performance was underpinned by our strong brand, leading customer offer and return on investment-driven marketing expertise. Excluding the impact of the newly introduced point of consumption tax in the UK, underlying EBITDA* was up 57% reflecting the strong operational momentum in the business.

In July we announced the acquisition of Roxy Palace which is a superb fit for our business bringing a strong complementary brand which we are confident will generate significant incremental revenue opportunities. Current trading remains strong with like-for-like NGR up 52% on the prior year in the second half to date and the Board remains confident of meeting its expectations for the year as a whole given our well-focused and exciting offering."

Enquiries:

*Underlying EBITDA is Earnings before Interest, Tax, Depreciation and Amortisation derived from the traditional 32Red business i.e. excluding results from its new Italian operations and is stated before share option costs and exceptional items.

** Adjusted Earnings Per Share is calculated on Underlying Earnings adding back exceptional items, share option costs and amortisation and uses the weighted average number of ordinary shares for diluted earnings as calculated in note 3 to this interim statement.

32Red plc

Performance Summary

As indicated in our trading update dated 22 July 2015, 32Red is pleased to report another record-breaking performance in the first half of the year, with Group Net Gaming Revenue (''NGR'') for the six months ended 30 June 2015 (the "period") increasing by 22% to £18.6m (H1 2014: £15.2m). The underlying business, which excludes results from Italy where we are building our presence, reported NGR of £17.7m, up 20% on H1 2014. We made further progress in Italy where we continue to see strong long term growth opportunities and delivered a 67% increase in NGR from that market to £0.9m. 

The very strong organic growth and operational momentum in the underlying business yielded like-for-like EBITDA excluding UK point of consumption tax ("POCT"), which was introduced in December 2014, of £4.2m (H1 2014: £2.7m). After the payment of £2.0m in POCT (H1 14: nil) during the first half of the year, underlying EBITDA is £2.2m for the period (H1 14: £2.7m). As indicated earlier in the year, the Company has also increased its marketing activity in Italy to capitalise on the strong growth opportunities in that market and this increased investment resulted in a £1.0m loss in Italy (H1 2014: loss of £0.4m) for the period.

After accounting for the increased investment in Italy and the payment of POCT in the UK, where the group generates the vast majority of its revenue, the Company reports EBITDA of £1.2m for the first half of the year (H1 14: £2.3m). Profit before taxation totalled £0.1m (H1 2014: £1.2m) and earnings per share totalled 0.10p (H1 2014: 1.63p). Adjusted Earnings per Share** totalled 2.48p (H1 2014: 3.22p).

In line with the strong performance of the business and the Board's confidence in the outlook for 32Red, the Company today declares an interim dividend of 1.1p per share (H1 2014: 1.0p) to be paid on 2 October 2015 to all shareholders on the Company's share register on 30 October 2015.

Casino - strong growth in new and active players driven by efficient ROI-led marketing

The growth in underlying casino revenues reflects a 22% increase in active casino players, which in turn reflects the combination of accelerated new player recruitment (up 12% on H1 14) and improved results from player retention and reactivation activities. This is reflective of 32Red's award-winning customer service and our ROI-led marketing expertise, which efficiently drives brand loyalty and strongly differentiates 32Red in the market. Once again, it is particularly encouraging to see resilient player yields given the increased levels of new and active players. The 32Red mobile casino continues to flourish with revenues now representing 42% of total casino revenues (H1 2013: 32%).

32Red.it - investing in long term growth

In line with the strategy outlined in the 2014 Annual Report, the Company stepped up its investment in marketing in Italy during the first half of the year to capitalise on the long term growth opportunities in that market and NGR increased by 67% to £0.9m. A total of 4,285 new players were recruited in the first half (H1 2014: 3,084) bringing the total number of active players to 8,443 (H1 2014: 5,793). Marketing investment has expanded the Italian customer base, but there remains a lag between player growth and revenue growth. One reason for this lag lies in the quality and breadth of games of the casino product in Italy, which is still behind our well established UK offering. That said, we will introduce further games to the 32Red.it portfolio later this year which will further boost the appeal and competitiveness of our offer.

Post balance sheet acquisition of Roxy Palace

On 14 July 2015, the Company was pleased to announce the acquisition of the remote online gaming business known as Roxy Palace for total consideration of £8.4 million comprising £2.0m in cash and the issuance of 10,000,000 new Ordinary Shares. The Company has acquired the customer database, intellectual property rights and certain other assets used in connection with the Roxy business, a business that was founded in 2002 and had built up a player database containing 230,000 registered players. The Roxy business reported Net Gaming Revenue of £10.1m and Gross Profit of £3.4m for the year ended 31 December 2014. After fixed costs, estimated Earnings Before Interest, Tax, Depreciation and Amortisation totalled £1.6m for the year. 

Roxy Palace is an excellent addition to the Group with a strong and well established complimentary brand and market expertise. The integration of the Roxy business with the 32Red business has commenced well and will deliver enhanced scale and market diversification to the Group. Aside from the more obvious cost synergies, a number of exciting revenue synergies have already become apparent. The Group will operate both brands in the UK where the exchange of marketing knowhow and cross-sell opportunities will benefit the entire Group.

Current Trading and Outlook

The second half of the year has started strongly with NGR for the first 12 weeks up 52% on the same period in 2014, excluding trading from the acquired Roxy business. The Roxy Business has performed well and generated NGR of £2.5m since acquisition. The integration process of the newly acquired business is progressing well.

Underpinned by 32Red's exceptional brand, customer offering and marketing expertise, the Board remains confident in the Group's growth opportunities, both organically and via acquisitions. The regulatory landscape continues to evolve and we remain encouraged by developments in new European markets. With the strong start to the second half of the year and the excellent progress integrating the Roxy Palace business, the Board is confident in delivering its expectations for the full year.

*Underlying EBITDA is Earnings before Interest, Tax, Depreciation and Amortisation derived from the traditional 32Red business i.e. excluding results from its new Italian operations and is stated before share option costs and exceptional items.

** Adjusted Earnings Per Share is calculated on Underlying Earnings adding back exceptional items, share option costs and amortisation and uses the weighted average number of ordinary shares for diluted earnings as calculated in note 3 to this interim statement.

32Red Plc

Statement of profit or loss and other comprehensive income

for the six months ended 30 June 2015

32Red Plc

Consolidated Statement of Financial Position

as at 30 June 2015

32Red Plc

Consolidated Statement of Cash Flows

for the six months ended 30 June 2015

Notes:

1. Accounting policies

The consolidated annual financial statements are 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 2014, available on www.32redplc.com, except for the application of the following standards, effective from 1 January 2015:

· Defined Benefit Plans: Employee Contributions - Amendments to IAS 19

· Annual Improvements to IFRSs - 2010-2012 Cycle

· Annual Improvements to IFRSs - 2011-2013 Cycle

The accounting policies as at 31 December 2014 and the standards effective 1 January 2015 have been applied in the preparation of the interim financial results, with the exception of some of the disclosures required by IAS 34 Interim Financial Reporting.

2. Exceptional item 

During the period, net legal costs of £19,039 (H1 2014: £150,000) were incurred in respect of legal and strategic advice received in connection with the UK Government's recently introduced remote gambling regulatory regime. 

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 73,680,056 shares (2014: 72,209,962).

To calculate the diluted earnings per share figure, the weighted average of employee share options and awards made under the Long Term Incentive Plan expected to vest has been added. This number represents management's best estimate at 30 June 2015, which is also used for calculating employee payments relating to share based payment transactions. At 30 June 2015, the weighted average number of share options expected to vest was 5,714,366 (2014: 5,591,502).

4. Taxation

5. Intangible assets

6. Property, plant and equipment

7. Post Balance Sheet Event

On 14 July 2015, the Company announced that it had acquired the remote online gaming business known as Roxy Palace (the "Business") for total consideration of £8.4 million comprising £2.0m in cash and the issuance of 10,000,000 new Ordinary Shares. The Company purchased the customer database, intellectual property rights and certain other assets used in connection with the Business via the acquisition of the entire issued share capital of Eucalyptus Investment Limited, a wholly-owned subsidiary of Hyperlink Media Limited and Applied Logics Limited (the "Sellers"). Other service companies associated with the Sellers will continue to provide services to the Buyer following Completion.

The consideration comprises the issuance to the Sellers of, in aggregate, 10,000,000 new ordinary shares of 0.2p each (the "Consideration Shares") and, in aggregate, £2m in cash. The cash consideration is payable in instalments as follows: £1m on Completion; £0.5m six months thereafter and the remaining £0.5m on 31 December 2016, provided there has been no warranty or other claim in that period. The sole liabilities assumed by the Group are in respect of player balances and totalled £147,535 and this amount was deducted from the initial £1,000,000 of consideration paid on completion.