17:00 Tue 05 Jun 2018
Gaming Realms PLC - Final Results
("
Final Results for the year ended
Maiden Positive EBITDA
2017 Financial Highlights:
· Delivered a maiden full year Adjusted EBITDA of
· Real money gaming ("RMG") EBITDA increased 113% to
· Social publishing EBITDA loss reduced 97% to
· Total Revenue down by 7% to
· Revenue excluding disposed non-core assets down by 1%
o RMG revenue increased by 5% to
o RMG marketing spend decreased by 17%
o Social publishing revenue decreased by 13% to
o Licensing revenue was
2017 Operational Highlights:
· Game library growth to 19 proprietary games on our Grizzly platform (2016: 8)
· Total game library growth to 683 games on our Grizzly platform (2016: 458)
· Own game content and IP generated 38% (2016: 37%) of real money gaming and social publishing revenue
· Strategic brand partnership deployments with ITV and STORM for LoveIslandgames as well as growing previous partnerships with Fremantle and
· Integration of real money gaming and social game development roadmap
· Launched new content licensing business in addition to brand licensing. In 2017 the Remote Game Server was certified and deployed in
· Secured a 10-year services agreement and
· Settled
Operational Update 2018:
· 4 new licensing agreements signed with 888 Holdings,
· Partnership launch with the
· Slingo launched on Ladbrokes Coral
"Achieving profitability marks a major milestone for
"The focus on content licensing has shown excellent early success and will provide
Enquiries:
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0845 123 3773 |
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020 7418 8900 |
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07747 788 221 |
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About
Chairman's Statement
I am pleased to report that the Group delivered a positive Adjusted EBITDA of
The Group's strategy of disposing of non-core assets, and concentrating on delivering operating profit in its two main business units, has resulted in the Group ending 2017 in a much stronger position than the previous year. Following this strategy, we sold our non-core affiliate business for
We were able to grow Real Money Gaming revenue by 5% to
The
We had a significant year in
We continued to execute synergies and leverage Slingo across our business. For example we took Slingo Originals games produced in our studio in
With the increase in our library of proprietary games, we are developing high margin revenue opportunities in game content licensing. We launched into the
In
As part of the arrangements between the two companies, the
In summary, the Group has delivered an annual positive Adjusted EBITDA for the first time, significantly reduced run rate costs, has achieved a break-even position in
Outlook for 2018
The Board has approved the 2018 operating plan which is to increase top line growth in
We plan to expand our presence in
Capitalising on our success in
Based on the Company's performance to date in 2018, the board believes that the results for the year ending
Chairman
Chief Executive's Review
Overview
In 2017, the Group continued its strategy to focus on developing its unique proprietary content, 'Slingo Originals', and achieve a positive Adjusted EBITDA result.
Real Money Gaming delivered revenue growth in the very competitive
The investment in both our proprietary platform and mobile content development has led to the continued growth in a younger, more casual player set. Mobile play has increased to 84.0% (2016: 80.0%) of gross gaming revenue.
Growth in 2017 has been supported by key media deals with ITV, including
Gambling player deposits increased to
bonus costs to 26% (2016: 29%) of gross gaming revenue. The cost per acquisition on the platform was
Demand for our unique content has led to the development of a Remote Game Server ("RGS") which allows our 'Slingo Original' games to be licensed to third party operators as premium content. 2017 saw the launch of Slingo Originals in
We have further integrated the social business in H2 2017 with the creation of a shared development path which now allows us to deliver content simultaneously to both real money gaming and social audiences. The first offering in this regard is
Market overview
We are continuing to focus on the younger more casual gambling demographic. We are targeting them through mobile delivery and original game IP. This is enabling us to acquire and engage players away from the more crowded, male orientated sportsbook market. The 25 to 34 year-old group are our largest segment accounting for over 40% of all players. As a result of our content strategy, women are delivering higher lifetime values on the platform despite the fact that the active players, male to female ratio is 50:50.
Key Goals for 2018
1. Continued profitability in
2. Continue strategic investment in Slingo Originals content library for overall revenue growth but with greater emphasis on content licensing
3. Increase B2B partners on Grizzly platform
4. Increase new licensees for Slingo Original content
5. Further expansion of strategic media partnerships across all revenue streams
Chief Executive Officer
Financial Review
Overview
Year-on-year revenue declined 7% to
Marketing for the year, was
Loss after tax from continuing operations reduced by
2017
|
Real money gaming |
Affiliate marketing |
Social publishing |
Licensing |
Other |
Intra-group |
Total |
|
£ |
£ |
£ |
£ |
£ |
£ |
2017 |
|
|
|
|
|
|
|
£ |
Revenue |
22,717,729 |
1,322,713 |
6,878,760 |
839,541 |
179,315 |
(291,506) |
31,646,552 |
Marketing expense |
(8,022,410) |
(128,316) |
(2,171,341) |
- |
(109,514) |
- |
(10,431,581) |
Operating expense |
(8,867,787) |
(76,316) |
(1,754,450) |
(24,961) |
- |
291,506 |
(10,432,008) |
Administrative expense |
(3,153,222) |
(226,035) |
(3,010,164) |
(1,036,352) |
(2,720,598) |
- |
(10,146,371) |
Share-based payments |
- |
- |
- |
- |
149,810 |
- |
149,810 |
Adjusted EBITDA |
2,674,310 |
892,046 |
(57,195) |
(221,772) |
(2,650,797) |
- |
786,402 |
2016
|
Real money gaming |
Affiliate marketing |
Social publishing |
Licensing |
Other |
Intra-group |
Total |
|
£ |
£ |
£ |
£ |
£ |
£ |
2016 |
|
|
|
|
|
|
|
£ |
Revenue |
21,543,708 |
3,697,951 |
7,884,101 |
786,843 |
45,515 |
- |
33,958,118 |
Marketing expense |
(9,685,716) |
(1,161,390) |
(3,937,053) |
- |
(26,756) |
- |
(14,810,915) |
Operating expense |
(7,464,252) |
(264,810) |
(1,608,789) |
- |
- |
- |
(9,337,851) |
Administrative expense |
(3,138,644) |
(676,922) |
(4,140,794) |
(343,488) |
(2,526,921) |
- |
(10,826,769) |
Share-based payments |
- |
- |
- |
- |
(993,349) |
- |
(993,349) |
Adjusted EBITDA |
1,255,096 |
1,594,829 |
(1,802,535) |
443,355 |
(3,501,511) |
- |
(2,010,766) |
Segmental revenue includes
EBITDA and Adjusted EBITDA are non-GAAP measures and exclude exceptional items, depreciation, and amortisation. Exceptional items are those items the Group considers to be non-recurring or material in nature that may distort an understanding of financial performance or impair comparability.
Real money gaming
Real money gaming on the Grizzly platform has grown 5% to
Operating expenses include point of consumption tax, third party royalties and transaction costs. Operating costs have increased 15% to
Adjusted EBITDA improved by 113% to
Affiliates
Affiliate marketing generated revenues of
The Affiliate business was reclassified as held for sale as at
We achieved profit for
During the year, Gaming Realms closed its Seattle operations resulting in restructuring costs of
Licensing
Licensing revenue increased 7% to
Cashflow, Balance Sheet and Going Concern
Net cash decreased by
Net assets totalled
Following the restructure of
Dividend
During the year, Gaming Realms did not pay an interim or final dividend. The Board of Directors are not proposing a final dividend for the current year.
Corporation and deferred taxation
The Group received
Mark Segal
Chief Financial Officer
Consolidated Statement of Comprehensive Income
For the year ended
|
2017 |
2016 |
Continuing |
£ |
£ |
Revenue |
30,323,839 |
32,188,618 |
Marketing expenses |
(10,303,265) |
(14,526,772) |
Operating expenses |
(10,355,692) |
(9,220,384) |
Administrative expenses |
(10,655,593) |
(10,280,232) |
Share-based payments |
4,810 |
(993,349) |
|
|
|
Adjusted EBITDA total |
786,402 |
(2,010,766) |
Adjusted EBITDA - discontinued |
(892,046) |
(1,140,187) |
Profit on disposal |
- |
318,834 |
Restructuring costs |
(880,257) |
- |
EBITDA |
(985,901) |
(2,832,119) |
|
|
|
Amortisation of intangible assets |
(4,932,699) |
(3,979,941) |
Depreciation of property, plant and equipment |
(173,638) |
(120,789) |
Finance expense |
(752,600) |
(1,178,154) |
Finance income |
239,603 |
3,022 |
Loss before tax |
(6,605,235) |
(8,107,981) |
Tax credit |
612,903 |
272,451 |
Loss for the financial year - continuing |
(5,992,332) |
(7,835,530) |
Loss/profit for the financial year - discontinued |
(2,235,335) |
1,140,187 |
Loss for the financial year - total |
(8,227,667) |
(6,695,343) |
|
|
|
Other comprehensive income |
|
|
Fair value gain on available for sale assets |
207,222 |
- |
Exchange (loss)/gain arising on translation of foreign operations |
(1,022,056) |
1,836,352 |
Total other comprehensive income |
(814,834) |
1,836,352 |
Total comprehensive income |
(9,042,501) |
(5,999,178) |
|
|
|
Loss attributable to: |
|
|
Owners of the parent |
(8,225,956) |
(6,685,120) |
Non-controlling interest |
(1,711) |
(10,223) |
|
(8,227,667) |
(6,695,343) |
Total comprehensive income attributable to: |
|
|
Owners of the parent |
(9,007,324) |
(4,882,234) |
Non-controlling interest |
(35,177) |
23,243 |
|
(9,042,501) |
(4,858,991) |
|
|
|
(Loss)/gain per share |
Pence |
Pence |
Basic and diluted - continuing |
(2.15) |
(2.99) |
Basic and diluted - discontinued |
(0.80) |
0.43 |
Basic and diluted - total |
(2.95) |
(2.56) |
* EBITDA and Adjusted EBITDA are non-GAAP measures and exclude exceptional items, depreciation, and amortisation. Exceptional items are those items the Group considers to be non-recurring or material in nature that may distort an understanding of financial performance or impair comparability.
Consolidated Statement of Financial Position
As at
|
|
|
|
£ |
£ |
Non-current assets |
|
|
Intangible assets |
20,464,170 |
28,661,837 |
Available-for-sale investment |
747,222 |
540,000 |
Property, plant and equipment |
263,069 |
373,307 |
Other assets |
163,865 |
152,000 |
|
21,638,326 |
29,727,144 |
Current assets |
|
|
Trade and other receivables |
3,759,434 |
3,347,595 |
Cash and cash equivalents |
2,283,302 |
2,616,267 |
|
6,042,736 |
5,963,862 |
Assets classified as held for sale |
2,292,881 |
- |
Total assets |
29,973,943 |
35,691,006 |
Current liabilities |
|
|
Trade and other payables |
9,269,732 |
7,058,781 |
Deferred consideration |
- |
3,135,356 |
|
9,269,732 |
10,194,137 |
Non-current liabilities |
|
|
Deferred tax liability |
881,512 |
1,202,889 |
Other Creditors |
2,843,529 |
- |
Derivative liabilities |
600,000 |
- |
|
4,325,041 |
1,202,889 |
Total liabilities |
13,594,773 |
11,397,026 |
Net assets |
16,379,170 |
24,293,980 |
Equity |
|
|
Share capital |
28,442,874 |
27,413,329 |
Share premium |
87,198,410 |
87,095,455 |
Merger reserve |
(67,673,657) |
(67,673,657) |
Available for sale reserve |
207,222 |
- |
Foreign exchange reserve |
1,419,842 |
2,408,432 |
Shares to be issued |
145,000 |
- |
Retained earnings |
(33,530,345) |
(25,154,580) |
Total equity attributable to owners of the parent |
16,209,346 |
24,088,979 |
Non-controlling interest |
169,824 |
205,001 |
Total equity |
16,379,170 |
24,293,980 |
Consolidated Statement of Cash Flows
For the year ended
|
2017 |
2016 |
|
£ |
£ |
Cash flows from operating activities |
|
|
Loss for the period |
(8,227,667) |
(6,695,343) |
Adjustments for: |
|
|
Depreciation of property, plant and equipment |
173,638 |
120,789 |
Amortisation of intangible fixed assets |
4,932,699 |
3,979,941 |
Impairment |
3,127,381 |
- |
Finance income |
(239,603) |
(3,022) |
Finance expense |
312,904 |
36,850 |
Movement in deferred consideration |
479,987 |
1,141,304 |
Unwind of deferred tax recognised on business acquisitions |
(223,617) |
(248,941) |
Unrealised currency translation gains |
(57,957) |
(191,548) |
Loss on disposal of property, plant and equipment |
11,670 |
6,531 |
Profit on disposal of assets |
- |
(318,834) |
Share-based payments (release)/expense |
(4,810) |
993,349 |
(Increase)/decrease in trade and other receivables |
(411,839) |
643,961 |
Increase in trade and other payables |
1,166,029 |
2,759,244 |
Net cash flows from operating activities |
1,038,815 |
2,224,281 |
|
|
|
Investing activities |
|
|
Acquisition of subsidiary, net of cash acquired |
- |
18,759 |
Purchases of property, plant and equipment |
(91,447) |
(289,256) |
Purchase of intangibles |
(3,197,971) |
(3,969,611) |
Proceeds from disposal of property, plant and equipment |
382 |
- |
Proceeds from disposal of assets |
- |
1,200,000 |
Interest received |
1,294 |
3,022 |
Net cash used in investing activities |
(3,287,742) |
(3,037,086) |
|
|
|
Financing activities |
|
|
Proceeds of Ordinary Share issue |
1,132,499 |
4,025,000 |
Issuance cost of shares |
- |
(45,000) |
Payment of deferred consideration |
- |
(3,071,447) |
Proceeds from issue of convertible debt |
122,966 |
- |
Cost relating to issue of convertible debt |
(96,763) |
- |
Interest paid |
(173,192) |
(36,850) |
Net cash from financing activities |
985,510 |
871,703 |
Net (decrease)/increase in cash and cash equivalents |
(1,263,417) |
58,898 |
Cash and cash equivalents at beginning of period |
2,597,465 |
2,516,820 |
Exchange (gain)/losses on cash and cash equivalents |
(14,950) |
21,747 |
Cash and cash equivalents at end of period |
1,319,098 |
2,597,465 |
Consolidated Statement of Changes in Equity
For the year ended
|
Share capital |
Share premium |
Merger reserve |
Available for sale reserve |
Foreign Exchange Reserve |
Shares to be issued |
Retained earnings |
Total to equity holders of parents |
Non-controlling interest |
Total equity |
|
£ |
£ |
£ |
£ |
£ |
£ |
£ |
£ |
£ |
£ |
1 January 2016 |
24,920,829 |
85,127,955 |
(68,393,657) |
- |
605,546 |
- |
(19,462,809) |
22,797,864 |
- |
22,797,864 |
Loss for the year |
- |
- |
- |
- |
- |
- |
(6,685,120) |
(6,685,120) |
(10,223) |
(6,695,343) |
Other comprehensive income |
- |
- |
- |
- |
1,802,886 |
- |
- |
1,802,886 |
33,466 |
1,836,352 |
Total comprehensive income for the year |
- |
- |
- |
- |
1,802,886 |
- |
(6,685,120) |
(4,882,234) |
23,243 |
(4,858,991) |
Contributions by and distributions to owners |
|
|
|
|
|
|
|
|
|
|
Shares issued as part of the consideration in a business combination |
480,000 |
- |
720,000 |
- |
- |
- |
- |
1,200,000 |
- |
1,200,000 |
Shares issued as part of the capital raising |
2,012,500 |
2,012,500 |
- |
- |
- |
- |
- |
4,025,000 |
- |
4,025,000 |
Cost of issue of Ordinary Share capital |
- |
(45,000) |
- |
- |
- |
- |
- |
(45,000) |
- |
(45,000) |
Share-based payment on share options |
- |
- |
- |
- |
- |
- |
993,349 |
993,349 |
- |
993,349 |
Non-controlling interests on acquisition of subsidiary |
- |
- |
- |
- |
- |
- |
- |
- |
181,758 |
181,758 |
31 December 2016 |
27,413,329 |
87,095,455 |
(67,673,657) |
- |
2,408,432 |
- |
(25,154,580) |
24,088,979 |
205,001 |
24,293,980 |
Loss for the year |
- |
- |
- |
- |
- |
- |
(8,225,956) |
(8,225,956) |
(1,711) |
(8,227,667) |
Other comprehensive income |
- |
- |
- |
207,222 |
(988,590) |
- |
- |
(781,368) |
(33,466) |
(814,834) |
Total comprehensive income/(loss) for the year |
- |
- |
- |
207,222 |
(988,590) |
- |
(8,225,956) |
(9,007,324) |
(35,177) |
(9,042,501) |
Contributions by and distributions to owners |
|
|
|
|
|
|
|
|
|
|
Shares issued as part of the capital raising |
1,029,545 |
102,955 |
- |
- |
- |
- |
- |
1,132,500 |
- |
1,132,500 |
Share-based payment to Director |
- |
- |
- |
- |
- |
145,000 |
- |
145,000 |
- |
145,000 |
Share-based payment on share options |
- |
- |
- |
- |
- |
- |
(149,810) |
(149,810) |
- |
(149,810) |
31 December 2017 |
28,442,874 |
87,198,410 |
(67,673,657) |
207,222 |
1,419,842 |
145,000 |
(33,530,345) |
16,209,346 |
169,824 |
16,379,170 |
Notes to the Preliminary Results
For the year ended
1. Accounting policies
General information
Gaming Realms Plc (the "Company") and its subsidiaries (together the "Group").
The Company is admitted to trading on AIM of the
Basis of preparation
The consolidated financial statements are presented in sterling.
These financial statements have been prepared in accordance with International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively IFRSs) as adopted by the EU and on a basis consistent with those policies set out in our audited financial statements for the year ended
The financial information set out in this document does not constitute the Group's statutory accounts for the year ended
Statutory accounts for the year ended
The preparation of financial statements in compliance with adopted IFRSs requires the use of certain critical accounting estimates. It also requires Group management to exercise judgement in applying the Group's accounting policies.
Basis of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of the Company as at
Where the Company has control over an entity, it is classified as a subsidiary. The Company controls an entity if all three of the following elements are present: power over the entity, exposure to variable returns from the entity, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.
Intercompany transactions, balances and unrealised gains on transactions between entities in the Group are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
The consolidated financial statements incorporate the results of business combinations using the acquisition method. In the statement of financial position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated statement of comprehensive income from the date on which control is obtained. They are deconsolidated from the date on which control ceases.
Going concern
The Directors consider that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the consolidated financial statements.
2. Adjusted EBITDA
Adjusted EBITDA is stated before exceptional items as follows:
|
2017 |
2016 |
|
£ |
£ |
Adjusted EBITDA - Total |
786,402 |
(2,010,766) |
Profit on disposal |
- |
318,834 |
Adjusted EBITDA - discontinued |
(892,046) |
(1,140,187) |
Restructuring costs |
(880,257) |
- |
EBITDA |
(985,901) |
(2,832,119) |
Discontinued
The Affiliate marketing CGU has been reclassified as held for sale as management were actively seeking a sale of this business as at
Restructuring costs
During 2017 the Group closed the Seattle office. Restructuring costs relate to the closure costs associated with this including employee severance payments.
3. Segment information
The Board is the Group's chief operating decision-maker. Management has determined the operating segments based on the information reviewed by the
The Group has four reportable segments. The social publishing segment provides freemium games to the US and Europe. Licensing segment includes IP brand and content licensing to partners in the US and Europe. The real money gaming division operates our brands direct to the end user. In 2016 the Group disposed of its white label and agency business which formed part of the RMG segment. It has been separated in the revenue by product table below for information. The Affiliate marketing segment provides digital marketing and referrals for group and third-party brands and has been classed as held for sale during the year (see note 8).
Revenue by product:
|
2017 |
2016 |
|
£ |
£ |
Real money gaming |
22,717,729 |
21,543,708 |
Disposed white label and agency business |
- |
1,928,451 |
Social publishing |
6,878,760 |
7,884,101 |
Licensing |
839,541 |
786,843 |
Other |
179,315 |
45,515 |
Total - continuing |
30,615,345 |
32,188,618 |
Affiliate marketing - discontinued |
1,322,713 |
1,769,500 |
Total |
31,938,058 |
33,958,118 |
Segmental revenue includes
There were no customers who generated more than 10% of total revenue.
Geographical information
The Group considers that its primary geographic regions are the UK, including Channel Islands, US and the Rest of World. No revenue was derived from real money gaming in the US. Revenues from customers outside the UK (including Channel Islands) and US are not considered sufficiently significant to warrant separate reporting. All non-current assets are based in the UK.
|
External revenue by location of customers |
External revenue by location of customers |
|
2017 |
2016 |
|
£ |
£ |
UK, including Channel Islands |
23,751,919 |
23,925,469 |
US |
6,780,327 |
6,754,016 |
Rest of the World |
1,114,306 |
3,278,633 |
|
31,646,552 |
33,958,118 |
Segmental reporting for the year is as below:
|
Real money gaming |
Affiliate marketing |
Social publishing |
Licensing |
Other |
Intra-group |
Total |
|
£ |
£ |
£ |
£ |
£ |
£ |
2017 |
|
|
|
|
|
|
|
£ |
Revenue |
22,717,729 |
1,322,713 |
6,878,760 |
839,541 |
179,315 |
(291,506) |
31,646,552 |
Marketing expense |
(8,022,410) |
(128,316) |
(2,171,341) |
- |
(109,514) |
- |
(10,431,581) |
Operating expense |
(8,867,787) |
(76,316) |
(1,754,450) |
(24,961) |
- |
291,506 |
(10,432,008) |
Administrative expense |
(3,153,222) |
(226,035) |
(3,010,164) |
(1,036,352) |
(2,720,598) |
- |
(10,146,371) |
Share-based payments |
- |
- |
- |
- |
149,810 |
- |
149,810 |
Adjusted EBITDA |
2,674,310 |
892,046 |
(57,195) |
(221,772) |
(2,650,797) |
- |
786,402 |
Restructuring costs |
|
|
|
|
|
|
(735,257) |
Restructuring costs - share-based payment |
|
|
|
|
|
|
(145,000) |
Adjusted EBITDA - discontinued |
|
|
|
|
|
|
(892,046) |
EBITDA |
|
|
|
|
|
|
(985,901) |
Amortisation of Intangible assets |
|
|
|
|
|
|
(4,932,699) |
Depreciation of property, plant and equipment |
|
|
|
|
|
|
(173,638) |
Finance expense |
|
|
|
|
|
|
(752,600) |
Finance income |
|
|
|
|
|
|
239,603 |
Loss before tax |
|
|
|
|
|
|
(6,605,235) |
The affiliate marketing segment has been treated as a discontinued operation in the income statement for the year ended 31 December 2017 and 31 December 2016. Prior year affiliate marketing segment included white label and agency revenue of £1,928,451 and EBITDA of £454,642. Affiliate revenue of £1,769,500 and EBITDA of £1,140,187 has therefore been shown as discontinued for 2016. See note 8.
|
Real money gaming |
Affiliate marketing |
Social publishing |
Licensing |
Other |
Intra-group |
Total |
|
£ |
£ |
£ |
£ |
£ |
£ |
2016 |
|
|
|
|
|
|
|
£ |
Revenue |
21,543,708 |
3,697,951 |
7,884,101 |
786,843 |
45,515 |
- |
33,958,118 |
Marketing expense |
(9,685,716) |
(1,161,390) |
(3,937,053) |
- |
(26,756) |
- |
(14,810,915) |
Operating expense |
(7,464,252) |
(264,810) |
(1,608,789) |
- |
- |
- |
(9,337,851) |
Administrative expense |
(3,138,644) |
(676,922) |
(4,140,794) |
(343,488) |
(2,526,921) |
- |
(10,826,769) |
Share-based payments |
- |
- |
- |
- |
(993,349) |
- |
(993,349) |
Adjusted EBITDA |
1,255,096 |
1,594,829 |
(1,802,535) |
443,355 |
(3,501,511) |
- |
(2,010,766) |
Profit on disposal |
|
|
|
|
|
|
318,834 |
Adjusted EBITDA - discontinued |
|
|
|
|
|
|
(1,140,187) |
EBITDA |
|
|
|
|
|
|
(2,832,119) |
Amortisation of Intangible assets |
|
|
|
|
|
|
(3,979,941) |
Depreciation of property, plant and equipment |
|
|
|
|
|
|
(120,789) |
Finance expense |
|
|
|
|
|
|
(1,178,154) |
Finance income |
|
|
|
|
|
|
3,022 |
Loss before tax |
|
|
|
|
|
|
(8,107,981) |
Other segment noted above includes unallocated head office activities. Management do not report segmental assets and liabilities internally and as such an analysis is not reported.
4. finance income and expense
|
2017 |
2016 |
|
£ |
£ |
Finance income |
|
|
Interest received |
1,294 |
3,022 |
Foreign exchange movement on deferred consideration |
238,309 |
- |
Total finance income |
239,604 |
3,022 |
|
|
|
Finance expense |
|
|
Bank interest expense paid |
272,613 |
36,850 |
Deferred consideration movement |
479,987 |
292,212 |
Foreign exchange movement on deferred consideration |
- |
849,092 |
Total finance expense |
752,600 |
1,178,154 |
The deferred consideration in relation to the acquisition from RealNetworks, Inc. is denominated in USD and was settled on 15th December 2017. The retranslation of this balance resulted in a £238,309 gain in the current year (2016: £849,092 loss).
5. tax credit
|
2017 |
2016 |
|
£ |
£ |
Tax credit |
|
|
Current tax |
|
|
Adjustment for over provision in prior periods |
(67) |
(4,451) |
Current tax credit for the period |
389,354 |
27,961 |
Total current tax |
389,287 |
23,510 |
Deferred tax expense |
|
|
Origination and reversal of temporary differences |
223,617 |
- |
Total deferred tax |
223,617 |
- |
Total tax credit |
612,903 |
23,510 |
The reasons for the difference between the actual tax credit for the period and the standard rate of corporation tax in the UK applied to profits for the year are as follows:
|
2017 |
2016 |
|
£ |
£ |
Loss for the period |
(8,840,570) |
(6,967,794) |
Expected tax at effective rate of corporation tax in the UK of 19.3% (2016: 20%) |
(1,701,507) |
(1,393,559) |
Expenses not deductible for tax purposes |
7,840 |
224,896 |
Effects of overseas taxation |
179,516 |
(224,795) |
Adjustment for over provision in prior periods |
67 |
4,451 |
Research and Development tax credit |
(389,354) |
(27,961) |
Tax losses for which no deferred tax assets have been recognised |
1,290,535 |
1,144,517 |
Total tax credit |
(612,903) |
(272,451) |
6. Loss per share
Basic loss per share is calculated by dividing the loss attributable to ordinary shareholders by the weighted average number of shares in issue during the year. For fully diluted loss per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of dilutive potential ordinary shares. The Group's potentially dilutive securities consist of share options, performance shares and a convertible bond. As the Group is loss-making, none of the potentially dilutive securities are currently dilutive.
|
2017 |
2016 |
|
£ |
£ |
Loss after tax - continuing |
(5,992,332) |
(7,835,530) |
(Loss)/profit after tax - discontinued |
(2,235,335) |
1,140,187 |
Loss after tax - total |
(8,227,667) |
(6,695,343) |
|
|
|
|
Number |
Number |
Weighted average number of ordinary shares used in calculating basic loss per share |
278,166,853 |
262,432,743 |
Weighted average number of ordinary shares used in calculating dilutive loss per share |
278,166,853 |
262,432,743 |
|
|
|
|
Pence |
Pence |
Basic and diluted loss per share - continuing |
(2.15) |
(2.99) |
Basic and diluted loss/(profit) per share - discontinued |
(0.80) |
0.43 |
Basic and diluted loss per share - total |
(2.95) |
(2.56) |
7. Intangible assets
|
Goodwill |
Customer database |
Software |
Development costs |
Domain names |
Intellectual Property |
Total |
|
£ |
£ |
£ |
£ |
£ |
£ |
£ |
Cost |
|
|
|
|
|
|
|
Balance at 1 January 2016 |
18,092,116 |
4,543,648 |
1,091,241 |
2,888,724 |
363,401 |
5,354,379 |
32,333,509 |
Acquired through business combination |
75,413 |
- |
217,216 |
- |
- |
- |
292,629 |
Additions |
- |
- |
- |
3,969,611 |
- |
- |
3,969,611 |
Disposals |
(2,513,765) |
(698,446) |
- |
- |
- |
- |
(3,212,211) |
FX Movement |
892,100 |
266,769 |
230,043 |
- |
66,217 |
1,047,051 |
2,502,180 |
At 31 December 2016 |
16,545,864 |
4,111,971 |
1,538,500 |
6,858,335 |
429,618 |
6,401,430 |
35,885,718 |
Additions |
- |
- |
- |
3,197,971 |
- |
- |
3,197,971 |
Disposals |
- |
- |
- |
- |
- |
- |
- |
Reclassified as held for sale |
(5,420,262) |
(2,343,632) |
- |
- |
- |
- |
(7,763,894) |
FX Movement |
(480,045) |
(141,830) |
(134,559) |
(9,198) |
(35,287) |
(558,338) |
(1,359,257) |
At 31 December 2017 |
10,645,557 |
1,626,509 |
1,403,941 |
10,047,108 |
394,331 |
5,843,092 |
29,960,538 |
Amortisation |
|
|
|
|
|
|
- |
Balance at 1 January 2016 |
- |
2,055,945 |
135,717 |
919,856 |
45,581 |
248,609 |
3,405,708 |
Amortisation charge |
- |
1,156,153 |
440,219 |
1,517,989 |
132,965 |
732,615 |
3,979,941 |
Disposals |
- |
(452,365) |
- |
- |
- |
- |
(452,365) |
FX Movement |
- |
81,939 |
67,052 |
260 |
20,386 |
120,960 |
290,597 |
At 31 December 2016 |
- |
2,841,672 |
642,988 |
2,438,105 |
198,932 |
1,102,184 |
7,223,881 |
Amortisation charge |
- |
916,459 |
490,691 |
2,627,075 |
135,287 |
763,187 |
4,932,699 |
Disposed |
- |
- |
- |
- |
- |
- |
- |
Reclassified as held for sale |
- |
(2,343,632) |
- |
- |
- |
- |
(2,343,632) |
FX Movement |
- |
(86,841) |
(76,019) |
(3,918) |
(21,606) |
(128,196) |
(316,580) |
At 31 December 2017 |
- |
1,327,658 |
1,057,660 |
5,061,262 |
312,613 |
1,737,175 |
9,496,368 |
Net book value |
|
|
|
|
|
|
- |
At 1 January 2016 |
18,092,116 |
2,487,703 |
955,524 |
1,968,868 |
317,820 |
5,105,770 |
28,927,801 |
At 31 December 2016 |
16,545,864 |
1,270,299 |
895,512 |
4,420,230 |
230,686 |
5,299,246 |
28,661,837 |
At 31 December 2017 |
10,645,557 |
298,851 |
346,281 |
4,985,846 |
81,718 |
4,105,917 |
20,464,170 |
8. assets and liabilities classfified as held for sale
During H2 2017 the Board concluded to pursue the sale of the affiliate marketing business. Advisors were appointed and offers invited, which were actively being discussed during late 2017. The group has therefore reclassified this business as held for sale as at 31 December 2017.
As a result, an impairment of £3.1m has been recognised based on the recoverable amount of goodwill attributable to this segment. Recoverable amount has been calculated as fair value less the costs of disposal. Fair value is measured at £2.4m based on active offers received during late 2017. The impairment has been included in discontinued operations as below.
In March 2018 the Group sold its Affiliate business, for total consideration of £2.4 million to First Leads Ltd. First Leads has paid £2.0m on closing, and a further £0.4m will be payable on 31 December 2018, based on the achievement of performance targets.
|
2017 |
|
|
£ |
|
Net carrying amount of disposal group |
5,420,262 |
|
Impairment of held for sale goodwill |
(3,127,381) |
|
|
2,292,881 |
|
Discontinued operations:
|
|
2017 |
2016 |
|
|
£ |
£ |
Revenue |
|
1,322,713 |
1,769,500 |
Marketing expenses |
|
(128,316) |
(284,143) |
Operating expenses |
|
(76,316) |
(117,467) |
Administrative expenses |
|
(226,035) |
(227,703) |
|
|
|
|
EBITDA |
|
892,046 |
1,140,187 |
|
|
|
|
Impairment of held for sale assets |
|
(3,127,381) |
- |
Loss for the financial year - discontinued |
|
(2,235,335) |
1,140,187 |
Cash flow from discontinued operations:
|
2017 |
2016 |
|
£ |
£ |
Cash flows from operating activities |
|
|
Profit/(Loss) for the period |
(2,235,335) |
1,140,187 |
Adjustments for: |
|
|
Impairment |
3,127,381 |
- |
Net cash flows from operating activities |
892,046 |
1,140,187 |
The Affiliate marketing segment did not have any material financing or investing cash flows in the current or prior year.
9. Arrangement with JackpotJoy group
In December 2017 the group entered into a £3.5m secured convertible loan agreement with Jackpotjoy plc and group companies (together "Jackpotjoy Group") alongside a 10-year framework services agreement for the supply of various real money services.
Under the framework services agreement the first £3.5m of services are provided free-of-charge within the first 5 years. This will be recognised as revenue as it is utilised.
The convertible loan has a duration of 5 years and carries interest at 3-month LIBOR plus 5.5%. It is secured over the Group's Slingo assets and business. At any time after the first year, Jackpotjoy Group may elect to convert all or part of the principal amount into ordinary shares of Gaming Realms Plc at a discount of 20% to the share price prevailing at the time of conversion. To the extent that the price per share at conversion is lower than 10p (nominal value), then the shares can be converted at nominal value and the difference paid in cash. Under this arrangement, the maximum dilution to Gaming Realms shareholders will be approximately 12%, assuming the convertible loan is converted in full.
The number of shares is variable. The option therefore violates the fixed-for-fixed criteria for equity classification and as a result is classified as a liability. The fair value of the conversion feature is determined at each reporting date with changes recognised in profit or loss. The fair value as at 31 December 2017 was £0.6m based on a probability assessment of conversion and future share price. This is a level 2 valuation as defined by IFRS 13.
The remaining £2.9m of proceeds plus an estimate for free-of-charge services is accounted for as an interest-bearing loan. The interest rate used to discount the loan was calculated as 30.8%.
|
Other Creditors |
Derivative Liability |
Total |
|
|
£ |
£ |
£ |
|
At 1 January 2017 |
- |
- |
- |
|
Proceeds from issue of convertible debt |
2,900,000 |
600,000 |
3,500,000 |
|
Cost relating to issue of convertible debt |
(96,763) |
- |
(96,763) |
|
Effective interest (30.8%) |
40,232 |
- |
40,232 |
|
At 31 December 2017 |
2,843,469 |
600,000 |
3,443,469 |
|
|
|
|
|
|
The proceeds are first allocated to the fair value of the derivative liability. The key assumptions used to estimate the derivative liability are as follows:
· Future share price
· Probability assessment of expected conversion
· Timing and proportion converted to shares by JackpotJoy Group
The proceeds are then allocated between the use of the free services and the interest-bearing loan. The key assumptions used to estimate this split are:
· Timing and amount of usage of the free services
· Future 3-month LIBOR rates
Key sensitivities in the calculation of the above values include:
· For every £0.5m reduction in the estimate of free services, there will be an equal reduction in the interest expense over the term
· Each 1% increase in 3-month LIBOR would result in an additional £35k interest payable per annum, or £140k in total assuming no capital is repaid or converted to shares
· If the share price does not exceed 12p there will be no value in the conversion element meaning the carrying value of the loan will increase by £0.6m and interest expense will decrease by £0.6m
10. Share capital
Ordinary shares
|
2017 |
2017 |
2016 |
2016 |
|
Number |
£ |
Number |
£ |
Ordinary shares of |
284,428,747 |
28,442,874 |
274,133,292 |
27,413,329 |
10 pence each |
On 11 August 2017 10,295,455 shares were issued at £0.11 per share for a total consideration of £1,132,500.
On 2 March 2016, 7,625,000 shares were issued at £0.20 per share for a total consideration of £1,525,000.
On 9 June 2016, 4,800,000 shares were issued at £0.25 per share to the previous shareholders of Blueburra Holdings Limited to satisfy the final £1,200,000 share element of vendor consideration.
On 2 September 2016, 12,500,000 shares were issued at £0.20 per share for a total consideration of £2,500,000.
11. Post balance sheet events
After the balance sheet date the Group renewed and increased its overdraft facility with Barclays to £2m, available for two years with a reducing facility.
In March 2018 the Group sold its Affiliate CGU for total consideration of £2.4 million to First Leads Ltd. First Leads has paid £2.0m on closing, and a further £0.4m will be payable on 31 December 2018, based on the achievement of performance targets.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
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