Webis Regulatory News (WEB)

26 Sep 2007 07:01

betinternet.com PLC26 September 2007 FOR IMMEDIATE RELEASE26 September 2007 BETINTERNET.COM PLC("the Company" or "betinternet")PRELIMINARY RESULTS FOR THE YEAR ENDED 27 MAY 2007 betinternet.com plc, the global on-line gaming group, today announcespreliminary results for the year ended 27 May 2007. Highlights are: • EBITDA profit for the year of £162k (2006: loss of £1,055k) • Gross profit increased by 30% to £3.0m (2006: £2.3m) • Group turnover increased to £87.1m (2006: £67.6m) • Sportsbook turnover rose to £62.4m (2006: £57.5m) • Pari-mutuel turnover grew by 148% to £24.8m (2006: £10.0m) • Administration expenses reduced by 14.5% on a 'like for like' basis • Group operating loss reduced to £0.076m (2006: £1.821m) Commenting on the results, Denham Eke, Chairman of betinternet.com, said: "Anyone involved in the gaming sector, whether as a shareholder or an employee,could not have anticipated the changes that have taken place over the course ofthe last year. It has been a difficult time for the sector, but the Company'sexecutive management team has steered a course through these challenges to bringthe business to profitability at EBITDA level and create a stronger operationfor the future". ENDS For further information: betinternet.com plc Tel: 01624 698141Garry Knowles, Managing Director Evolution Securities Tel: 0113 2431619Joanne Lake Britton Financial PR Tel: 020 7251 2544Tim Blackstone Chairman's Statement Introduction In what has been a turbulent year for gaming companies, I am pleased to reportthat your Company has achieved a profit of £162k (2006: loss of £1,055k) atEBITDA level for the financial year, building on the positive progress announcedat the half-year. Our pari-mutuel operation, European Wagering Services (EWS)has continued to perform well, with its range of services being used by anincreasing number of customers. The Company has benefited from the ownership of its own sportsbook websitesoftware and a number of customer-facing enhancements have been introducedthroughout the year. These include the addition of more sports betting contentand fixed-odds games and we now offer betting on a number of additional footballleagues around the world. In conjunction with this, we have improved ourinternal systems to enable our traders to better manage this extended offering.Furthermore, we have continued to enhance the look-and-feel of the website, itscustomer-facing features and ease of navigation. Strategy Following the appointment of a new Chief Operating Officer, the board hasfocused on developing the growth strategy for the business. Initially, thiscentred on the enhancement of our pari-mutuel website, as this generates thehighest margins. Our aim was to take advantage of the restrictions on fixed-oddshorseracing betting imposed by the Unlawful Internet Gaming Enforcement Act(UIGEA) by enhancing our UIGEA compliant offering. However, following theintroduction of the UIGEA and the withdrawal of Neteller's payment solutionsfrom the US gaming market, it became apparent that banking and financialinstitutions were taking a risk-averse view of any gaming that originated fromthe US, whether compliant with the UIGEA or not. As a result, EWS has recentlyfound it increasingly difficult to find suitable banking partners for itsbusiness. Processes have been established which enable EWS to trade as normaland work is ongoing to establish a suitable long-term robust payment solution.Accordingly, the planned redesign of our pari-mutuel website will be progressedonce this solution has been put in place. Due to the nature of pari-mutuel betting and the composition of EWS' customerbase, there has been no material impact as a result of the banking issue on theexisting operation. The board remains confident that current activity levelswill be maintained going forward and our Managing Director, in his OperationalReview, reflects on the post-year end developments that we are currentlyundertaking to ensure further growth for EWS. With regard to the sportsbook operation, following the launch of our newplatform prior to the 2006 World Cup finals, we have made a number ofenhancements to the www.betinternet.com website. These have included amuch-simplified inputting engine for football markets, which has enabled ourtraders to offer betting opportunities on many more matches to keep pace withdemand from our customers, who increasingly have access to more live pictures.For example, we now offer Asian Handicap betting on the Singapore, Russian,Brazilian and Argentinean leagues, amongst others. In parallel with this, wehave developed a number of monitoring tools that alert our trading team to anyglobal price movements or potential arbitrage opportunities. In the last two months of the financial year, our developers worked on theintegration of our UK and Irish horseracing offering. This was soft-launchedprior to Royal Ascot in June and we plan a full marketing launch of this productin October 2007 when full-functionality is implemented. We anticipate that thiswill increase the appeal of our website www.betinternet.com within the BritishIsles and help to reduce our reliance on football betting. The sportsbook operation has maintained a good relationship with its banking andindustry partners and, as previously announced, also remains fully compliantwith the UIGEA. We have continued to seek a strategic acquisition for our sportsbook operationas part of our strategy for growth; however, the board has yet to identify asufficiently compelling opportunity. This will remain an area of focus for theforthcoming year, but not to the detriment of driving the organic growth of ourexisting sportsbook business. Overview of Results During the period under review, group turnover was £87m (2006: £68m) and grossprofit was £3.0m (2006: £2.3m). Revenue growth has continued to be strong for EWS with turnover rising to £25mfor the period (2006:£10m). This is generated from a number of channels: ourtelephone call centre, direct business through our totalisator hub and ourwebsite, www.link2bet.com. The casinos and games provide the majority of revenue for the sportsbook.However, customers are still coming to our website to bet on sports,particularly football and Asian Handicaps, where we have enhanced our offeringover the course of the last year. A more detailed analysis of the results is presented in the Operational Reviewon page 5. Fund Raising The Company was able to fund the continual development of its sportsbook websitewww.betinternet.com, through the issue of a convertible loan note to our majorshareholder, Burnbrae Ltd, raising £300,000 before costs. The Company has setaside some of these funds for the development of the pari-mutuel website, asmentioned above. Executive Changes As announced earlier this year, Ed Comins joined as Chief Operating Officer forEWS in February 2007. Ed's experience and contacts within the pari-mutuelindustry are already having a positive impact on the business. Company Reorganisation As a consequence of some of the issues that we have experienced with EWS'banking arrangements, the board, in conjunction with its lawyers, has reviewedthe existing structure of the Company. Following this review, the board intendsto re-organise the betinternet.com sportsbook portal and the EWS pari-mutuelbusinesses. The operations and trading names of both businesses will beunaffected by this change. Subject to shareholder approval, the board intends tochange the name of the Company to more accurately reflect its role in the group.A Special Resolution will be tabled at the forthcoming Annual General Meeting toeffect this change. Summary Anyone involved within the gaming sector, either as a shareholder or anemployee, could not have anticipated the changes that have taken place over thecourse of the last year. There has been a less than positive focus on thesector, but throughout these volatile times the Company's executive has managedto steer a course through these challenges to bring the business toprofitability at EBITDA level. During the next financial year, we intend to focus on further development andpromotion of the sportsbook to broaden its global appeal and bring sustainedprofitability to this part of the operation. Through the utilisation of moretechnically advanced or third-party systems we anticipate being able to grow ouroffering without the need for additional personnel. For EWS, there remain a number of unrealised opportunities for growth in ourpari-mutuel business. We are hopeful of an early clarification of instructionsto financial institutions regarding dealing with pari-mutuel wagering in respectof the UIGEA. This clarification will enable a continuation of the growth thatwe have experienced during the last 18 months. I would like to take this opportunity to express my thanks to the staff atbetinternet.com, who have proved to be both adaptable and committed to thesuccess of the Company. Operational Review The financial year started with the roll-out of the new website for thesportsbook and the promotion of our newly integrated casino and gaming products.This is the platform on which we have continued to build our product offeringand we have made a number of enhancements, both customer-facing and internal,during the course of the year. We have concentrated on increasing content,improving customer navigation and enhancing our marketing through moregraphically appealing promotional content. The main regional focus of the sportsbook remains in the Far East, where thebetinternet brand has a strong reputation. We also continue to attract customersfrom Europe, especially the United Kingdom, which is now our second biggestmarket for active customers, where our affiliate partners greatly assist withregistrations. We are keen to grow our presence in Europe, whilst not losing sight of the factthat the Far East will remain our core market. This expansion will have theadditional advantage of spreading our business across sports other thanfootball, which in the 2006/07 financial year was responsible for three-quartersof the stake money placed on singles bets. The margin on sports betting has increasingly come under pressure. Ourcompetitors in the Far East market operate on a considerably lower return thanis traditionally achieved in Europe and in order to compete, we have seen someerosion of the margin percentage that we can achieve from customers in thisregion. However, the increase in revenues that we have achieved from the casinosand fixed-odds games means that this reduction in sports betting margin is lesscritical than it once would have been. There is a continued influence on sportsprices from arbitrage play; either through customers playing the differencesbetween the Eastern and Western bookmakers' odds or through the bettingexchanges. In order to minimise the effect of this, we have introduced a numberof real-time reporting systems that alert our traders to potential globalarbitrage opportunities and we take a view on individual customers who areactive only in arbitrage play. We have postponed the introduction of Mahjong, taking the view that this gamehas yet to establish itself online - although we will continue to review this,as we will for the addition of an Asian-style Poker offering. The requests ofour customers help determine our prioritisation of website enhancements. We were unable to progress with our proposed white-label partner due tolegislative changes in Russia, which was the proposed launch country. Our pari-mutuel operation, EWS, has progressed very well through the period,with the extensive range of services that we provide appealing to a widercustomer base. As mentioned in the Chairman's Statement, the operation has hadto manage through some challenges in the second half of the year and these havediverted the management's attention away from our growth strategy, whilst weaddressed some aspects of the business that were affected by the fall-out fromthe UIGEA. The fact that the operation maintained its revenues throughout thisperiod demonstrates its resilience and the loyalty shown by our customers. Results The results show a profit at EBITDA level for the year, which meets our initialexpectations despite a number of unexpected challenges throughout the latterhalf of the year. EWS has been the main driver of revenue growth but we havealso seen a sustainable revenue stream from the casinos and games offerings andthe positive impact of the World Cup finals in June 2006 on the sportsbook. The group operating loss was much reduced to £0.076m (2006: £1.821m operatingloss). Through an increasingly efficient operation and the introduction of enhancedtechnologies, we have further reduced our overheads by 15% to £2.8m (2006:£3.3m). Current trading and outlook The business has continued to operate according to expectations during the firstquarter of the new financial year, which included periods of limited footballcontent for the sportsbook during June and July. Casinos and games turnover hasremained strong and we have seen a number of higher-staking customers playingour live dealer product throughout this period. The introduction of UK and Irishhorseracing has generated an initial small revenue stream and I anticipate thiswill grow noticeably once we start our marketing for this product in October2007. There has been a limited impact on EWS' profit from the previously discussedbanking issue and our initial estimate is that EWS' profit will reduce byapproximately £50k as a result of this. However, we have now integrated aninitial payment solution which enables EWS to trade as normal and are currentlyin the process of integrating further solutions which should ensure its profitsreturn to previous levels within a short time-frame. We are now able to turn ourfocus to our growth strategy for our business by seeking additional content andmaking enhancements to the website offering. The board was also pleased to note that the Isle of Man was included on theUnited Kingdom's 'White List' for jurisdictions where licencees will be allowedto advertise in the UK under the new Gambling Act, which took effect from 1September 2007. The duty payable on bets originating from the UK has also beenreduced from 15% to 1.5%. As a result, the promotion of our new horse racingoffering will be more beneficial as the Company will retain a larger part of anygross margin. The Company has made very good progress in many areas of its operation duringthe last year and has overcome a number of challenges that have affected theindustry. I am confident that in the forthcoming year the Company will continueto advance by broadening its customer base, improving its technical systems andincreasing its product portfolio. Garry KnowlesManaging Director Consolidated Profit and Loss Accountfor the period ended 27 May 2007 Note 2007 2006 £000 £000TurnoverBetting stakes receivedSportsbook 62,374 57,496Pari-Mutuel 24,750 10,073 ---------- ----------Total group turnover 1 87,124 67,569Cost of salesWinnings paid and bets laid off 1 (84,157) (65,246)Betting duty paid 1 (17) (58) ---------- ----------Gross profit 1 2,950 2,265Administration expenses (2,838) (3,320)Other operating income 50 - ---------- ----------Earnings before interest, tax, depreciation and amortisation 162 (1,055)Depreciation (166) (268)Share-based costs (29) -Amortisation of goodwill (43) (498) ---------- ----------Total operating loss (76) (1,821)Interest paid (18) (87)Interest received 25 4 ---------- ----------Loss on ordinary activities before and after taxation and retained loss for the (69) (1,904)year ---------- ----------Basic and diluted loss per share (pence) 2 (0.03) (1.18) ---------- ---------- Consolidated Balance Sheetfor the period ended 27 May 2007 2007 2007 2006 2006 £000 £000 £000 £000Fixed assetsIntangible assets - 43Tangible assets 284 224Investments 313 271 ---------- ---------- 597 538Current assetsDebtors 812 549Cash at bank and in hand 455 458 ---------- ---------- 1,267 1,007 ---------- ---------CreditorsAmounts falling due within one year (1,498) (1,490) ---------- ----------Net current liabilities (231) (483) CreditorsAmounts falling due after more than one year (300) - ---------- ----------Net assets 66 55 ---------- ----------Capital and reservesCalled up share capital 1,970 1,969Share premium 9,600 9,550Share option reserve 29 -Profit and loss account (11,533) (11,464) ---------- ----------Equity shareholders' funds 66 55 ---------- ---------- Consolidated Cash Flow Statementfor the period ended 27 May 2007 Note 2007 2006 £000 £000 Net cash outflow from operating activities 3 (197) (1,467)Returns on investments and servicing of 7 (83)financeCapital expenditure (226) (141)Acquisition 4 (42) (188) ---------- ----------Cash outflow before use of liquid resources and (458) (1,879)financingFinancing 4 351 1,738 ---------- ----------Decrease in cash during the period (107) (141) ---------- ---------- Reconciliation of net cash flow to movement in net funds 2007 2006 £000 £000 Operating net funds 338 479Decrease in cash during the period (107) (141) ---------- ----------Closing net funds 5 231 338 ---------- ---------- Notes to the Accounts 1 Segmental Analysis Period ended 27 May 2007 Sportsbook Pari-Mutuel Total £000 £000 £000 Betting stakes received 62,374 24,750 87,124 Winnings paid and bets laid off (60,829) (23,328) (84,157) ---------- ---------- ---------- Gross Margin 1,545 1,422 2,967 ---------- ---------- % 2.5% 5.7% Betting Duty (17) ---------- Gross Profit 2,950 ---------- Period ended 28 May 2006 Sportsbook Pari-Mutuel Total £000 £000 £000 Betting stakes received 57,496 10,073 67,569 Winnings paid and bets laid off (56,146) (9,100) (65,246) ---------- ---------- ---------- Gross margin 1,350 973 2,323 ---------- ---------- % 2.3% 9.7% Betting duty (58) ---------- Gross profit 2,265 ---------- In line with the development of our one stop entertainment website, casino and games results are now included under the sportsbook segment. No analysis related to geographic segmental information is disclosed as the directors of the Company are of the opinion that all the Group's activities arise from transactions where the geographical environments are subject to similar risks and returns. 2 Loss per share The basic loss per share is calculated by dividing the losses attributable to ordinary shareholders by the weighted average number of ordinary shares during the year. Calculation of loss per share is based on losses of £68,781 (2006: £1,903,950) and the weighted average number of ordinary shares being the equivalent of 196,958,908 (2006: 161,915,279) ordinary 1p shares. An adjustment for the dilutive effect of share options in the period has not been reflected in the calculation of the diluted loss per share as the effect would have been anti-dilutive. 3 Reconciliation of operating loss to net cash outflow from operating activities 2007 2006 £000 £000 Operating loss (76) (1,821) Share-based costs 29 - Depreciation and amortisation charges 209 766 Increase in debtors (263) (342) Decrease in creditors (96) (70) ---------- ---------- Net cash outflow from operating activities (197) (1,467) ---------- ---------- 4 Analysis of cash flows for headings netted in the cash flow statement 2007 2006 £000 £000 Acquisition Investment (42) (188) ---------- ---------- (42) (188) Financing Issue of new shares including share premium 51 1,801 Amounts falling due after more than one year 300 (63) ---------- ---------- 351 1,738 ---------- ---------- 5 Analysis of net funds At 29 May2006 Cash Flow At 27 May 2007 £000 £000 £000 Cash in hand and at bank 458 (3) 455 Bank overdraft (120) (104) (224) ---------- ---------- ---------- 338 (107) 231 ---------- ---------- ---------- 6 Basis of preparation of the final statements (i) The results for the period ended 27 May 2007 are prepared in accordance with applicable UK accounting standards, using the same account policies as set out in the group accounts for the year ended 28 May 2006 with the exception of FRS 20 - share based payments, which has been adopted in the period under review. The fair value of share options granted is recognised as an employee expense with corresponding increase in equity. Fair value has been determined using the Black Scholes model. There is no charge to the prior year. These preliminary statements are unaudited, but have been reviewed, in accordance with Auditing Practices Board guidance by the Auditors, KPMG Audit LLC, whose report will be included in the report and accounts to be sent to shareholders. (ii) The abridged accounts for the year to 28 May 2006 are an extract from the full group accounts for that period on which an unqualified report was made by the group's auditors and which have been delivered to the Registrar of Companies. (iii) In preparing these financial statements the directors considered the adequacy of the cash resources and working capital available to the group for the next 12 months. 7 Other information (i) All profits derive from continuing activities. (ii) The preliminary statement was approved by the board on 26 September 2007. (iii) The report and accounts upon which KPMG Audit LLC will deliver their report will be posted to shareholders on 5th October 2007. Following posting, copies will be available for inspection at the Company's Registered Office; Viking House, Nelson Street, Douglas, Isle of Man IM1 2AH. (iv) The Company's nominated advisor and broker is Evolution Securities Limited, Kings House, 1 King Street, Leeds LS1 2HH End This information is provided by RNS The company news service from the London Stock Exchange