Webis Regulatory News (WEB)

30 Nov 2005 15:53

betinternet.com PLC30 November 2005 BETINTERNET.COM PLC ("the company" or "betinternet") PRELIMINARY RESULTS FOR THE YEAR ENDED 29 MAY 2005 betinternet.com plc, the global on-line gaming group, today announcespreliminary results for the year ended 29 May 2005 Highlights of the results are: • Group turnover rose to £93.7m (2004: £45.5m) - an increase of 106% • European Wagering Services ('EWS') turnover of £45.8m in 48 weeks followingacquisition. • Casino and Games turnover of £18.7m in 24 weeks following launch. • Administration expenses reduced 27.6% on 'like for like' basis. • Operating loss before amortisation reduced sharply to £1.1m (2004: £2.0m). • Group Loss of £1.9m same as last year, after increased amortisation charge of£0.7m (2004: £0.2m) • Enhanced platform with diversity of sports and games being developed. • Decision taken to accept US wagers. • Continued support of principal shareholder - arrangements for share placingbeing finalised Commenting on the results, Denham Eke, chairman of betinternet, said: "We havereacted positively to what we believe is a temporary setback in the otherwiseexcellent progress of European Wagering Services and have directed our attentioncreatively on the performance of the sportsbook. I am confident that thecombination of an enhanced sportsbook platform, soon to be accepting wagers fromUS customers, and the return to full potential of European Wagering Servicesduring 2006, will hold betinternet.com on its course of developing one of themost compelling and exciting one-stop gaming and entertainment platformsavailable to customers across the world." ENDS For further information: betinternet.com plc Tel: 01624 698141Paul Doona, Managing Director Britton Financial PR Tel: 020 7251 2544Tim Blackstone Notes to editors: The following are attached: * Chairman's statement * Operational Review * Consolidated Profit & Loss Accounts * Consolidated Balance Sheets * Consolidated Cash Flow Statements * Notes to the Accounts Chairman's Statement Introduction Following the announcement of promising interim results in January 2005, theremainder of the financial year, which ended on 29 May 2005, offered somesignificant challenges. On the basis of excellent results from European WageringServices in the first half of the year, it was your board's intention toconcentrate on developing this risk-free and potentially very lucrative side ofthe business further. Our strategy was to grow the global link between majortrack operators, content providers and customers wishing to make use of thewagering platform, multi-currency and technical services that the company offersthrough the Isle of Man hub. Unfortunately, the company was mentioned in news reports relating to legalproceedings which took place in New York in January 2005. Two of the individualsunder investigation were officers of the International Players Association, anorganisation which had for two years referred 'high rolling' players to EuroOff-Track, now European Wagering Services. As a result of the unwelcomepublicity and reaction of the tracks, we had no option but to cease thisactivity. This had a detrimental effect on our turnover and profitability. I should emphasise that your company was not in any way involved in the legalproceedings and we were not contacted by any legal or regulatory authority inrespect of them. Our probity was not in question. Indeed, some six months beforethese matters became public your board had reported its concerns regarding oneof the defendants in the later proceedings, to the appropriate regulatoryauthority. It is our belief that this action led, in part, to the chain ofevents which was triggered in January 2005. Since the year-end we have modestly begun to offer incentives to a small base ofcustomers, but this is restricted to greyhound racing only. As part of the process of rebuilding the potential of our wagering services andto maintain our good reputation as a global online gaming group, we invited theUS Thoroughbred Protective Bureau (TRPB) - which body is, in effect, theconscience of US racecourses - to carry out an audit of our business. We arefully confident of the results of the audit which are to be reported later in2005. Strategy As progress in European Wagering Services is temporarily held back, we havefocused the company's energies on developing the performance of the sportsbookside of the business. Notably, we have decided to take wagers from US customersand will do so as soon as our new sportsbook platform, referred to below, iscomplete. We expect that this will be early in 2006. This strategic move will involve us in relocating our sportsbook servers to adifferent jurisdiction, Curacao, which encourages the acceptance of wagers fromthe USA. The majority of our sportsbook staff and European Wagering Serviceswill continue to operate from the Isle of Man, which we continue to believeprovides a supportive environment for the majority of our activities. Since the year-end, significant progress has been made in developing an improvedplatform with a more complete sports offering and a comprehensive suite of bothcasino and 'fun' games for our customers. After detailed investigation we choseas software development partner, IGW, a Florida-based company whose experiencein developing software for the US market and knowledge of the Curacaojurisdiction is likely to prove invaluable. Accordingly, we are confident ofseeing a significant boost to performance within the sportsbook during thecurrent financial year. We report in more detail on these positive achievements, and provide an accountof other strategic investments, in the Operational Review that follows. Overview of results Group turnover rose to £93.7m (2004: £45.5m), an increase of 106%. However,after taking account of a sharply increased amortisation charge of £0.7m (2004:£0.2m), the group loss was £1.9m, the same as the previous period. The results are more fully analysed in the Operational Review. Fund-raising The strategy for the first half of the year, which focused on the fullacquisition and development of Euro Off-Track - now called European WageringServices - was supported through a placement of shares to Burnbrae Ltd inDecember 2004. To support recent developments within the sportsbook business,the board is in the process of finalising arrangements for Burnbrae to subscribefor a further placement of shares, details of which will be circulated toshareholders within the next few weeks. Board and executive changes We announced shortly after the end of the financial period that Hugh Mac GiollaRi, a non-executive director, had tendered his resignation, due to ill health.We wish Hugh a speedy recovery and would like to thank him for his valuablecontribution as a non-executive director since he joined the board in April2003. Also in June 2005, we were delighted to appoint Garry Knowles as SportsbookDirector. He joined us initially in November 2003 as Head of Trading Operations.Of immediate importance to Garry is the responsibility for leading the projectsto upgrade the sportsbook platform and its relocation to Curacao. We strengthened our executive team with two senior appointments. On 30 March,Simon Nicholls was appointed as Chief Operating Officer of European WageringServices. Simon was previously Managing Director of GG.com, the Internet arm ofGG Media which holds the media rights to ten independent UK racecourses. At thesame time, we also welcomed Tony Elder, previously a management consultant withWhitechapel Corporate Services, who was appointed Financial Controller ofbetinternet.com plc. Following the establishment of this new management team, our Managing Director,Paul Doona, felt able to stand down from the role of leading the company, whichhe has undertaken for the last three years. Paul will step down from the boardat the conclusion of the forthcoming annual general meeting, and will besucceeded by Garry Knowles. We wish Paul every success as he pursues newinterests. Summary The setback in the otherwise excellent progress of European Wagering Serviceswas a disappointment but it has served to direct our attention creatively on theperformance of the sportsbook. I am confident that the combination of astrengthened sportsbook and the return to full potential of European WageringServices during 2006, will hold betinternet.com on its course of developing oneof the most compelling and exciting one-stop gaming and entertainment platformsavailable to customers across the world. I should like to add my thanks to all betinternet staff for their hard work andcommitment during the year. Together, we have many opportunities to explore andenjoy. Chairman Operational Review The focus on strengthening the attraction and performance of the sportsbook sideof the business during the last year and since the year end is progressing well.The Board's decision to take play from the US required us to site the company'sservers in a new jurisdiction and we have selected Curacao for this purpose.This decision was also influenced by the presence in Curacao of IGW Software, acompany based in Miami which has substantial experience in designing andpowering software specifically for sportsbook applications. We are currentlyworking with IGW Software to create a new and dynamic sportsbook website whichwill enable us to diversify and build our range of sports and games forcustomers all over the world. The site in its revamped form will be launchedearly in 2006. Last December we launched an online casino in partnership with CasinoWebcam andthis has proved very successful. To add to the potential which thisdemonstrated, we have contracted with Real Time Gaming, a provider of gamingsoftware to some of the most successful internet casino sites, to launch arandom number casino and slots offering on the new sportsbook platform. Lastyear we also introduced a new game, Play Football, offering virtual footballmatches and this too has proved popular, especially in the summer months,traditionally our quiet period. We are continually seeking new bettingopportunities and will be adding to the suite of sports and new leagues duringthe forthcoming year to develop our customer-base in Asia, while enhancing theplatform in Europe and the US. In March 2005, we announced an agreement to take a 22.5 per cent stake inCoresports (Global Coresports Limited). This is a company established to exploitartificial intelligence technology to create a virtual reality gaming experiencewhich can be played in real-time and on demand in a multi-player format. Thesystem architecture has been developed by a team of six leading Cambridgeacademics, all of whom have extensive experience of start-up ventures,particularly in the area of biotechnology. The first application, to be launchedin the current financial year, is an exciting football management game, thetechnology for which can be adapted for other team sports. As these ventures demonstrate, we are working at the forefront of online gamingtechnology and, in due course, will offer a sportsbook platform that is utterlycompelling to customers. Part of our strategy has been to invest in order to develop opportunities inpromising new territories. Last year we announced the formation of a jointventure company, Isle of Man Tote Limited, with Phumelela Gold Enterprises ofSouth Africa. This was created to exploit the opportunities of our Isle ofMan-based hub and to provide an international service for South Africanthoroughbred racing. In due course the venture is intended to host pool bettingon a variety of tote activities. Although progress has been slower thananticipated, we have seen the start of an income stream in the period followingthe end of the financial year. Results Our financial performance was severely impacted by events within EuropeanWagering Services, which are more fully described by the Chairman in his earlierstatement. This was particularly frustrating as turnover increased significantlyand underlying administration expenses were reduced sharply. Group turnover increased by 106% to £93.7m (2004: £45.5m). Turnover fromEuropean Wagering Services contributed £45.8 during the 48 weeks it was whollyconsolidated. However, much of this growth was made during the first half of theyear before the termination of contracts in the US and the cessation of rebatinghad taken effect. It is likely that the downturn in turnover will continue forat least the first half of the current year after which we expect significantrevival and further growth. The margin achieved from pari-mutuel business (2.3%) reflects its risk-freenature and the gross profit earned, before betting duty, was £1.1m for the 48weeks that the operation was consolidated. Turnover from the fixed odds business, including casino and games, was £47.9m(2004: £45.5m). The blended margin for the fixed odds business fell to 4.8%(2004: 5.5%) due to the lower margin arising from casino and games. Gross margin before betting duty, was £2.1m, compared with £2.5m in the previousperiod. Administration expenses, which included 48 weeks for European Wagering Services,were £4.2m, a reduction of 6.7% compared with the previous period. Stripping outthose additional expenses, the period on period reduction was 27.6%. The group operating loss before amortisation was therefore reduced sharply to£1.1m from £2.0m in the previous period. The overall loss at £1.9m was identical to the previous period, but takes intoaccount a substantially increased amortisation charge arising as a result of theEuropean Wagering Services acquisition of £0.7m; (2004: £0.2m) and the loss fromthe joint venture prior to its acquisition. Having spent the last three years involved in developing the strategy, tradingphilosophy and systems that are now in place in your Company, it is my intentionto step down from the Board following the conclusion of the forthcoming annualgeneral meeting. I am delighted that Garry Knowles has agreed to succeed me asManaging Director. I am particularly confident in the steer that will beprovided by Garry and Simon Nicholls as they develop the fortunes ofbetinternet.com's sportsbook and European Wagering Services, respectively. Paul Doona Managing Director Consolidated Profit and Loss Account for the period ended 29 May 2005 Continuing operations Acquisitions 2005 2004 Note £000 £000 £000 £000Turnover including share of joint ventureBetting stakes receivedFixed odds 29,157 - 29,157 45,494Pari-Mutuel 1,403 45,794 47,197 22,513Casino & Games 18,747 - 18,747 - ---------- ---------- ---------- ---------- 49,307 45,794 95,101 68,007Less: share of joint venture (1,403) - (1,403) (22,513) ---------- ---------- ---------- ---------- 1 Total group turnover 47,904 45,794 93,698 45,494Cost of salesWinnings paid and bets laid off 1 (45,836) (44,728) (90,564) (43,004)Betting duty paid 1 (50) (32) (82) (53) ---------- ---------- ---------- ---------- 1 Gross profit 2,018 1,034 3,052 2,437Administration expenses (3,236) (933) (4,169) (4,467) ---------- ---------- ---------- ---------- Operating loss before amortisation (1,218) 101 (1,117) (2,030)Amortisation of good will (675) (219) ---------- ---------- Operating loss after amortisation (1,792) (2,249)Share of operating (loss)/profit in joint venture (105) 354 ---------- ---------- Total opening loss including share of joint (1,897) (1,895)ventureInterest 5 1 ---------- ----------Loss on ordinary activities before and aftertaxation and retained loss for the year (1,892) (1,894) ---------- ---------- Basic and diluted loss per share (pence) 2 (1.4) (1.6) ---------- ---------- Consolidated Balance Sheet for the period ended 29 May 2005 2005 2005 2004 2004 £000 £000 £000 £000Fixed assetsIntangible assets 541 219Tangible assets 351 620Investments 83 - ---------- ---------- 975 839 ---------- ----------Current assetsDebtors 207 851Cash at bank and in hand 650 444 ---------- ---------- 857 1,295 ---------- ----------CreditorsAmounts falling due within one year (1,611) (1,517) ---------- ---------- (222) Net current liabilities (754) ---------- ---------- Provision for liabilities and chargesInvestment in joint ventureShare of gross assets - 446Share of gross liabilities - (636) ---------- ---------- Share of net liabilities - (190) CreditorsAmounts falling due after more than one year (63) - ---------- ---------- Net assets 158 427 ---------- ---------- Capital and reservesCalled up share capital 1,505 1,167Share premium 8,213 6,928Profit and loss account (9,560) (7,668) ---------- ---------- Equity shareholders' funds 158 427 ---------- ---------- Consolidated Cash Flow Statement for the period ended 29 May 2005 2005 2004 Note £000 £000 Net cash outflow from operating activities 3 (1,182) (984)Returns on investments and servicing of finance 5 1Capital expenditure (94) (345)Acquisition 4 328 - ---------- ---------- Cash outflow before use of liquid resources and (943) (1,328)financingFinancing 4 985 - ---------- ---------- Increase/(decrease) in cash during the period 42 (1,328) ---------- ---------- Reconciliation of net cash flow to movement in net funds 2005 2004 £000 £2004 Operating net funds 437 1,765Increase/(decrease) in cash during the period 42 (1,328) ---------- ---------- 5 Closing net funds 479 437 ---------- ---------- Notes to the Accounts 1 Segmental Analysis Period ended 29 May 2005 Fixed Odds Pari-Mutuel Casino & Games Total £000 £000 £000 £000 (48 weeks)* (24 weeks)** Betting stakes received 29,157 45,794 18,747 93,698 Winnings paid and bets laid off (27,460) (44,728) (18,376) (90,564) ---------- ---------- ---------- ---------- Gross Margin 1,697 1,066 371 3,134 ---------- ---------- ---------- % 5.8% 2.3% 2.0% Betting Duty (82) ---------- Gross Profit 3,052 ---------- Period ended 30 May 2004 Fixed Odds Total £000 £000 Betting stakes received 45,494 45,494 Winnings paid and bets laid off (43,004) (43,004) ---------- ---------- Gross margin 2,490 2,490 ---------- % 5.5% Betting duty (53) ---------- Gross profit 2,437 ---------- *Pari-Mutuel operations are the activities of European Wagering Services Limited. In previous periods, these activities were undertaken by way of joint venture. The group acquired the 50% of European Wagering Services Limited, not previously owned, on 28 June 2004. From that date, the activities were fully consolidated. **As explained more fully in the Operation Review, casino and games activities, not previously offered by the sportsbook platform were launched in December 2004. 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 £1,892,156 (2004: £1,893,941) and the weighted average number of ordinary shares being the equivalent of 135,217,660 (2004: 116,687,254) 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. 3 Reconciliation of operating loss to net cash outflow from operating activities 2005 2004 £000 £000 Operating loss (1,792) (2,249) Depreciation and amortisation charges 1,140 785 Decrease in debtors 537 760 Decrease in creditors (1,067) (280) ---------- ---------- Net cash outflow from operating (1,182) (984) activities ---------- ---------- 4 Analysis of cash flows for headings netted in the cash flow statement 2005 2004 £000 £000 Acquisition Investment (83) - Cash acquired from subsidiary 411 - ---------- ---------- 328 - ---------- ---------- Financing Issue of new shares including share 922 - premium Amounts falling due after more than one 63 - year ---------- ---------- 985 - ---------- ---------- 5 Analysis of net funds At 30 May 2004 Cash Flow At 29 May 2005 £000 £000 £000 Cash in hand and at bank 444 206 650 Bank overdraft (7) (164) (171) ---------- ---------- ---------- 437 42 479 ---------- ---------- ---------- 6 Basis of preparation of the final statements (i) The results for the period ended 29 May 2005 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 30 May 2004. 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 30 May 2004 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. The Directors noted that the group is in the process of arranging for a placing of new ordinary shares with Burnbrae Limited in order to raise further funding of £1.5 million (before issue costs). The proceeds of this issue will be used to repay a working capital facility which Burnbrae has provided to allow the company to proceed with the strategies described in the Chairman's Statement. It is anticipated that this will result in additional funds of £965,000 (before issue costs) being received. The placing will be subject to, and conditional upon, the approval of the independent shareholders to the waiver of the requirements of Rule 9 of the City Code. 7 Other information (i) All profits derive from continuing activities. (ii) The preliminary statement was approved by the board on 29 November 2005. (iii) The report and accounts upon which KPMG Audit LLC will deliver their report will be posted to shareholders on 29 November 2005. 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 Williams de Broe, PO Box 515, 6 Broadgate, London EC2M 2RP. End This information is provided by RNS The company news service from the London Stock Exchange