Webis Regulatory News (WEB)

7 Sep 2006 10:31

betinternet.com PLC07 September 2006 FOR IMMEDIATE RELEASE 07 September 2006 BETINTERNET.COM PLC ("the company" or "betinternet") PRELIMINARY RESULTS FOR THE YEAR ENDED 28 MAY 2006 betinternet.com plc, the global on-line gaming group, today announcespreliminary results for the year ended 28 May 2006 Highlights are: • Group turnover decreased to £67.6m (2005: £93.7m) due to the cessation in International Players Association activity as announced in January 2005 • Sportsbook turnover rose to £57.5m (2005: £47.9m) • Pari-mutuel turnover shows continued signs of growth after last year's setback • Administration expenses reduced 13.9% on "like for like" basis • Group loss of £1.9m maintained as last year • New sportsbook platform launched May 2006 • Enhanced platform with diversity of sports, casinos and games • EBITDA profit achieved in April and May 2006 • Continued support of principal shareholder Commenting on the results, Denham Eke, chairman of betinternet.com, said: "Wehave made considerable and encouraging progress towards our stated aim of havinga compelling and exciting one-stop entertainment website for the fixed-oddsbusiness. I am confident that this will be the boost that is required to bringsustainable profitability in the coming financial year. "We can also expect a continued strong profitable performance from ourpari-mutuel business, European Wagering Services, as it builds on the growth andsuccess that we have seen during the last six months." ENDS For further information:betinternet.com plc Tel: 01624 698141Garry Knowles, Managing Director Evolution Securities Tel: 01132 431619Joanne Lake Britton Financial PR Tel: 020 7251 2544Tim Blackstone Notes to editors: The following are attached: Chairman's StatementOperational ReviewConsolidated Profit & LossConsolidated Balance SheetsConsolidated Cash Flow StatementsNotes to the Accounts Chairman's Statement Introduction Following the announcement of our interim results, our pari-mutuel operation,European Wagering Services (EWS), continued with its strong performance for theremainder of the year. After last year's set-back, its operations have expandedto offer a variety of wagering services through the Isle of Man hub. Turnoverhas improved and this, coupled with strong margins, now means that this companyis again operating profitably. As we indicated, our fixed-odds business,betinternet.com, still faced challenges in the second half of the year, againplacing considerable pressure on operating margins and profitability. However, we fully expect that the fixed-odds revenue will increase significantlyfollowing the development of a new website with added functionality and acontemporary look, together with an enhanced games suite and a more substantialcasino offering. The improved site, launched at the end of May 2006, has alreadyreceived favourable reports. The early indications confirm that income from thissource is increasing and this, coupled with further cost cutting, means that weexpect that fixed-odds wagering and gaming will produce a sustainable profitthroughout the forthcoming year. Strategy Our initial strategy was to improve the fixed-odds performance by using Curacaoas a hosting jurisdiction, developing a new and enhanced betting platformincorporating additional games, and by accepting wagers from the USA. The execution of this strategy, however, was hindered as our chosen softwaresupplier for the development of our new platform, IGW, was unable to provide aworking product that suited our specific needs in time for the World Cup finalsin June 2006. The board took the early decision to terminate the IGW contract,obtaining a full refund of costs, and to pursue a different route in order tohave a new website live in time for the World Cup. We opted to acquire an unencumbered licence for our existing platform's sourcecode and contracted with a local software company to complete our planneddevelopment by our deadline. As the software company we selected to carry outthis project was responsible for the development of a large part of the existingplatform's code, they had an intimate working knowledge of the product and thegaming industry. In addition, our own Marketing Manager, Graphic Designer and ITteam worked round the clock to complete the project. The decision to control our own fixed-odds platform and development is alreadyproving to be a success. We are now able to implement additions and enhancementsto the sportsbook site much more speedily. The new site with its contemporarylook-and-feel, incorporating a new suite of games and an additional casino, waslaunched in time for the World Cup. The new look to the site has been extremelywell received by our customers and the new gaming products have all proved to besuccessful revenue generators for the Company, as well as offering our customersa greater variety of gaming options. It is the board's intention to continue with the development of our ownsoftware. This will give the Company much greater control over its future plansand give a quicker route to market for new products or improved functionality. Iam sure that the shareholders have seen the progress that the fixed-oddsbusiness has made in the short time that we have followed this strategy. Alongside these developments, it became clear that the Company would be able toaccept wagers from US customers without having to relocate its fixed-oddsservers away from the Isle of Man. The board therefore decided to continue tooperate the fixed-odds servers under its licence in the Isle of Man, althoughthe games and casino will operate on servers based in Curacao, where the Companyhad successfully been granted a gaming licence. However, in the light of the recent increasingly negative political focus ononline gaming within the US, the Company has decided to take a more cautiousview of the US market. As such, the Company's exposure in this region is verysmall and represents an insignificant percentage of its current turnover. Theboard will continue to monitor developments and adapt its strategy accordingly. We will continue to develop the Group as a holding company with two separate anddistinct operating profit centres. This will allow our pari-mutuel operation tofurther demonstrate independence from our fixed-odds activities and remove anypotential conflict that this could create. We will also continue to grow the fixed-odds activities into an integratedgaming platform with a strong customer focus. As part of this strategy, we hopeto include coreFootball, the initial product from our investment in GlobalCoresports Limited which is currently undergoing advanced beta-testing, into thesite. We believe that this football manager game demonstrates two opportunities:It is the first peer-to-peer game to use an 'artificial intelligence' to powerthe action; and it will be the first skill-based game to appeal to a masswagering environment. Overview of results Group turnover fell to £67.6m (2005: £93.7m), a decrease of 28%, as a result ofthe previously announced setback in pari-mutuel turnover and the effect of thereduction in fixed-odds marketing, held back pending the new website launch.Despite being able to maintain the pari-mutuel gross operating profit, the grouploss was £1.9m, the same as the previous period. This is the last year that thehigh amortisation figure will be charged. It is important to note that the Group ended the year very strongly, showingEBITDA profits in the months of April and May following the impact of the newstrategy. This trend has continued into the new financial year and the board isconfident that the new initiatives in place show every indication that the Groupwill produce a full year profit for the coming financial year. A more detailed analysis of the results is presented in the Operational Review. Fund-raising The original strategy of developing the fixed-odds website and locating gamingservers in Curacao was supported through a further placement of shares toBurnbrae Ltd in January 2006. Board and executive changes In May 2006, we appointed Simon Nicholls as an executive director withresponsibility for the Company's pari-mutuel operation. Simon resigned from thisposition in August 2006. We are actively seeking a replacement for this role. In February 2006, we strengthened our financial team with the appointment ofDamon Waddington as the Group Financial Controller and subsequently he hasrecently taken over the role of Company Secretary. Damon had previously been aFinancial Controller for the Fortis group. Damon has substantially increased thequality of financial reporting provided to the board and has been able toidentify many areas for cost reductions. Summary We have made considerable and encouraging progress towards our stated aim ofhaving a compelling and exciting one-stop entertainment website for thefixed-odds business. I am confident that this will be the boost that is requiredbring to bring sustainable profitability in the coming financial year. We can also expect a continued strong profitable performance from EuropeanWagering Services as it builds on the growth and success that we have seenduring the last six months. Finally, the staff at betinternet have worked very hard throughout the year toensure that the business continues to be better positioned for the future. Iwould like to thank them for their continued dedication and commitment. Denham Eke Chairman Operational Review The key project in making the sportsbook website more attractive to customersand offering a better variety of betting products has been the main focus of thedevelopment of the business through the latter part of the year. Our plans tohave this done by a recognised software development company, unfortunatelydidn't work out as we had planned, as they were unable to complete the contractin the required time, and this set us back several months whilst we awaiteddelivery. Under these circumstances, the only decision that we could make was toterminate the contract and concentrate on getting control of our own source codeand completing the project under our own, more closely monitored instructions. This decision has proved to be the catalyst for a number of very quick,revenue-generating improvements to the website, which were launched at the veryend of the Company's financial year and prior to the World Cup finals in June2006. The look of the website and its associated brand has a much morecontemporary feel and the introduction of a suite of fixed-odds games togetherwith a download casino from Real Time Gaming has added greatly to the revenuestream potential for the business. These additional new products complement ourexisting Play Live Casino product, which continues to be very popular with ourFar East based customers. Further products will be added to the website in thecoming months, including a fully embedded flash casino and Mahjong, amulti-player game popular in the Far East. Importantly, these additionalproducts reduce the company's reliance on the volatile fixed-odds sportswagering. The development team will also be working on a white-label version ofthe website for potential future business ventures and to consolidate theEuropean Wagering Services (EWS) platform onto one operating system. EWS is now running as a successful profitable operation. The levels of turnoverhave increased throughout the year and our margin remains strong. We are able totake advantage of our position of owning our own totalisator hub in the Isle ofMan, by offering direct electronic access to racecourse pools to our customersas well as providing a telephone call centre and B2C website. There are a numberof development projects in the pipeline that will bring additional revenue inthe coming financial year. In addition, we plan to continue to increase theturnover through the hub by offering incentives to a select group of customersbetting predominantly on greyhound racing as well as increasing our marketingspend to bring more customers to the link2bet.com website. During the financial year, we took the decision to dispose of our share in ourjoint venture with Phumelela Gold Enterprises. The Company has received littlerevenue from this joint venture and there were apparent conflicts of interestsbetween the two Companies. Coresports (Global Coresports Limited), in which betinternet.com purchased a22.5 per cent stake, is due to launch their first product, coreFootball, tocoincide with the new football season. The delay in the previously announcedlaunch date is as a result of personnel and technical issues that have now beenresolved. coreFootball is a dynamic football management game using artificialintelligence and its offering will be unique in the gaming environment. Theboard eagerly awaits the commercial launch of this exciting project. Results The results, although accurately reflecting the challenging year that we havehad, do not highlight the progress that the company has made within the lastquarter. Many of the operational changes that have been made with both thesportsbook and EWS have only made their way through to the bottom line withinthe last few months of the reporting year. As a result of these changes, thecompany reached a break-even point for the last quarter. The first half of the year was impacted by the fall in turnover within EWS andthe lack of marketing for the sportsbook as we awaited the new platform'sarrival. Consequently, group turnover dropped to £67.6m (2005: £93.7m). The group operating loss before amortisation was £1.3m compared with £1.1m lastyear. The overall loss was similar to last year at £1.9m which includes anamortisation charge of £0.5m, which will fall away after the first quarter ofthe new financial year. As expected, we have continued to reduce overheads, which fell by 14% to £3.6m(2005: £4.2m), through a series of cost-cutting measures including a reductionin the number of higher paid staff. We expect a further reduction in this figureduring the coming year. Post year Subsequent to the year end, we have seen the business reach profitability in thefirst quarter and the board is confident that this will continue through to thehalf year and beyond. The revenue streams from the additional products added tothe sportsbook are already outperforming our expectations and the World Cupproved a successful time for the Company, with a significant increase in thenumber of registrants. Our aim will now be to continue to grow our customerbase, in the knowledge that we have a much improved and diverse offering. Furthermore, the pari-mutuel turnover through EWS has consistently improvedmonth-on-month and it is pleasing to see that there are regular enquiries forthe variety of services that we are able to offer. It has been an interesting but productive time since I took on the role ofManaging Director in January. The business is now on a very sound base fromwhich I am confident that it will continue to grow. We have addressed manyissues and have achieved a great deal, especially in the last quarter, but thereare many more projects for us to focus on. This is an industry that rarely sitsstill and opportunities continue to present themselves. It is my intention toensure that betinternet.com is correctly positioned to take advantage of theseopportunities to guarantee its future success. Garry KnowlesManaging Director Consolidated Profit and Loss Accountfor the period ended 28 May 2006 2006 2005 Note £000 £000Turnover including share of joint ventureBetting stakes receivedSportsbook 57,496 47,904Pari-Mutuel 10,073 47,197 ---------- ---------- 67,569 95,101Less: share of joint venture - (1,403) ---------- ---------- Total group turnover 1 67,569 93,698Cost of salesWinnings paid and bets laid off 1 (65,246) (90,564)Betting duty paid 1 (58) (82) ---------- ---------- Gross profit 1 2,265 3,052Administration expenses (3,588) (4,169) ---------- ---------- Operating loss before amortisation (1,323) (1,117)Amortisation of goodwill (498) (675) ---------- ---------- Operating loss after amortisation (1,821) (1,792)Share of operating loss in joint venture - (105) ---------- ---------- Total operating loss including share of (1,821) (1,897)joint ventureInterest paid (87) - Interest received 4 5 ---------- ----------Loss on ordinary activities before andafter taxation and retained loss for theyear (1,904) (1,892) ---------- ---------- Basic and diluted loss per share (pence) 2 (1.18) (1.4) ---------- ---------- Consolidated Balance Sheetfor the period ended 28 May 2006 2006 2006 2005 2005 £000 £000 £000 £000Fixed assetsIntangible assets 43 541Tangible assets 224 351Investments 271 83 ---------- ---------- 538 975 ---------- ----------Current assetsDebtors 549 207Cash at bank and in hand 458 650 ---------- ---------- 1,007 857 ---------- ----------CreditorsAmounts falling due within one year (1,490) (1,611) ---------- ----------Net current liabilities (483) (754) ---------- ---------- CreditorsAmounts falling due after more than one - (63)year ---------- ---------- Net assets 55 158 ---------- ---------- Capital and reservesCalled up share capital 1,969 1,505Share premium 9,550 8,213Profit and loss account (11,464) (9,560) ---------- ---------- Equity shareholders' funds 55 158 ---------- ---------- Consolidated Cash Flow Statementfor the period ended 28 May 2006 2006 2005 Note £000 £000 Net cash outflow from operating 3 (1,467) (1,182)activitiesReturns on investments and servicing (83) 5of financeCapital expenditure (141) (94)Acquisition 4 (188) 328 ---------- ---------- Cash outflow before use of liquid resources (1,879) (943)and financingFinancing 4 1,738 985 ---------- ---------- (Decrease) / increase in cash during (141) 42the period ---------- ---------- Reconciliation of net cash flow to movement in net funds 2006 2005 £000 £000 Operating net funds 479 437Decrease in cash during the period (141) 42 ---------- ---------- Closing net funds 5 338 479 ---------- ---------- Notes to the Accounts 1 Segmental Analysis 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 (56,146) (9,100) (65,246) off ---------- ---------- ---------- Gross Margin 1,350 973 2,323 ---------- ---------- % 2.3% 9.7% Betting Duty (58) ---------- Gross Profit 2,265 ---------- Period ended 29 May 2005 Sportsbook Pari-Mutuel Total £000 £000 £000 Betting stakes received 47,904 45,794 93,698 Winnings paid and bets laid (45,836) (44,728) (90,564) off ---------- ---------- ---------- Gross margin 2,068 1,066 3,134 ---------- ---------- % 4.3% 2.3% Betting duty (82) ---------- Gross profit 3,052 ---------- In line with the development of our one stop entertainment website, casino and games results are now included under the sportsbook segment. 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 £1,903,950 (2005: £1,892,156) and the weighted average number of ordinary shares being the equivalent of 161,915,279 (2005: 135,517,660) ordinary 1p shares. The diluted loss per share is the same as the basic loss per share as the adjustment to assume conversion of dilutive ordinary shares would decrease the loss per share. Notes to the Accounts (continued) 3 Reconciliation of operating loss to net cash outflow from operating activities 2006 2005 £000 £000 Operating loss (1,821) (1,792) Depreciation and amortisation 766 1,140 charges (Increase) / decrease in debtors (342) 537 Decrease in creditors (70) (1,067) ---------- ---------- Net cash outflow from operating (1,467) (1,182) activities ---------- ---------- 4 Analysis of cash flows for headings netted in the cash flow statement 2006 2005 £000 £000 Acquisition Investment (188) (83) Cash acquired from subsidiary - 411 ---------- ---------- (188) 328 ---------- ---------- Financing Issue of new shares including 1,801 922 share premium Amounts falling due after more (63) 63 than one year ---------- ---------- 1,738 985 ---------- ---------- 5 Analysis of net funds At 30 May Cash Flow At 28 May 2005 2006 £000 £000 £000 Cash in hand and at bank 650 (192) 458 Bank overdraft (171) 51 (120) ---------- ---------- ---------- 479 (141) 338 ---------- ---------- ---------- 6 Basis of preparation of the final statements (i) The results for the period ended 28 May 2006 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 29 May 2005. 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 29 May 2005 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. Notes to the Accounts (continued) 7 Other information (i) All profits derive from continuing activities. (ii) The preliminary statement was approved by the board on 7 September 2006. (iii) The report and accounts upon which KPMG Audit LLC will deliver their report will be posted to shareholders on 13 September 2006. 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