16:00 Tue 08 Sep 2020
Gaming Realms PLC - Interim Results

(the "Company" or the "Group")
Interim Results
Revenue growth of 66%
High margin revenue growth resulting in significant operational leverage - adjusted EBITDA growing from
The Company grew revenues 66% from
About
Introduction
The Company's real money Slingo games are licensed by some of the biggest online gaming operators in the world, including DraftKings,
In addition to licensing its real money games, the Company also generates revenue from licensing the Slingo brand/IP to adjacent markets (e.g. lottery scratch cards), and from publishing its Slingo games in the social casino market.
The Company has an experienced team of 62 employees, based in
Markets - large and growing
The Company's games are distributed globally. In H1'20, 56% of revenues were generated in the US with the balance generated in other markets. The international online casino market is a large and high growth market, having grown at a compound rate of 11% over the last five years and today is worth
Route to market - strong relationships and scalable
The Company's strong relationships with Distributors and Operators has been key to unlocking new markets and to further penetrate existing markets. The Company's business model of primarily using Distributors to access Operators, and Operators to access end players, is highly scalable - as demonstrated by the financial performance in the Period, during which the Company has been able to grow revenues with little additional variable cost, resulting in significant operational leverage.
Growth strategy
The Company has clear and attainable growth opportunities:
· Expanding internationally - specifically focusing on newly regulated US markets such as
· Adding new Distributors, Operators and IP licensees ("Customers"); and
· Further penetrating existing Customers, primarily through continuing to extend our game portfolio.
Financial highlights for the Period:
| H1 2020 | H1 2019 * | Movement |
| £m | £m | % |
Revenue - Licensing | 3.4 | 1.7 | 104% |
Revenue - Social | 1.8 | 1.4 | 29% |
Revenue - Other | 0.0 | 0.1 | (97%) |
Total | 5.2 | 3.1 | 66% |
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Adjusted EBITDA1[1] | 1.24 | (0.1) |
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* H1/19 excludes RMG segment classified as discontinued operations (see note 11)
· Licensing revenue grew 104% to
· Social revenue increased 29% to
· Revenue growth has benefitted from the effects of the COVID-19 lockdown, however, the Company has maintained similar levels of growth post Period-end, giving the Board confidence in the future performance of the Company; and
· Adjusted EBITDA for continuing operations increased to
Operational highlights:
International expansion and increased distribution:
· Went live with five tier-1 Operators: Gamesys,
· Filed for game content supplier licence in
Extending game portfolio:
· Released four new games into the market, including Slingo Centurion in partnership with Inspired Entertainment. The Group now has 40 games in its portfolio (Dec'19: 34 games).
Post-Period end trading:
Financial highlights:
· Licensing revenue increased 140% in the two months post Period-end compared to the same period in 2019;
· Social revenue increased 56% in the two months post Period-end compared to the same period in 2019;
· Cash balance of
· The Board expects FY20 to be cash flow positive as a result of high margin growth offsetting development costs spent on new games and the RGS platform.
Operational highlights:
International expansion and increased distribution:
· Live with three new Operators (total 53); including Jumpman Gaming, White Hat Gaming and MrQ;
· Distribution deal signed with Oryx Gaming a major European games distributor; and
· Direct integration and expanded deal in US with Rush Street Interactive.
Extending game portfolio:
· Release of two new Slingo games
Outlook for FY20:
The Company has strategically expanded its network of distribution partners in order to bring its Slingo Originals content to a greater international audience. Recent partnership agreements with DraftKings and Oryx Gaming have consolidated and expanded
As
Commenting on the first half performance,
"Our exceptional performance in the first half of this year is testament to the strength of the Company's strategy of developing and licensing games to market-leading brands and gaming operators using our Slingo IP, which continues to deliver high margin revenues. Whilst our results were enhanced during the COVID-19 period of self-isolation, I am pleased to say revenues in the second half are holding onto levels achieved during the first six months.
"We are delighted to report that our innovative Slingo Originals content continues to gain momentum, reaching new international audiences thanks to our global network of distribution partners. We remain committed to building on this, and growing our global reach during the second half of the year by investing in our unique content and securing further strategic partnership deals. Our planned expansion into
"The Group is currently performing in line with market expectations and, with a number of new commercial developments in the pipeline, the Board is confident in the future performance of the business."
Enquiries
| 0845 123 3773 |
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020 7418 8900 |
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020 3004 9512 |
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Business review
Overview
Licensing
The Licensing business has continued the strong momentum built up through 2019, with revenue for the Period increasing 104% to
Social
The Social business has seen a strong period of growth, with revenues increasing 29% to
Cash
The Company's cash position at
Discontinued operations
Discontinued operations in the previous period relate to the B2C RMG assets referred to above. The loss before tax for the previous period from discontinued operations was
Consolidated statement of comprehensive income
for the 6 months ended
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| 6M | 6M |
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| Unaudited | Unaudited |
Continuing | Note | £ | £ |
Revenue | 2 | 5,180,058 | 3,122,752 |
Marketing expenses |
| (101,408) | (113,220) |
Operating expenses |
| (1,043,235) | (717,162) |
Administrative expenses |
| (3,007,154) | (2,815,364) |
Share-based payments | 13 | (40,075) | - |
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Adjusted EBITDA - continuing | 2 | 1,239,067 | (102,096) |
Restructuring expenses | 4 | (250,881) | (100,045) |
Loss on disposal | 4 | - | (320,853) |
EBITDA - continuing | 2 | 988,186 | (522,994) |
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Amortisation of intangible assets | 7 | (1,393,651) | (1,535,449) |
Depreciation of property, plant and equipment | 6 | (108,464) | (89,844) |
Finance expense | 3 | (287,335) | (363,917) |
Finance income | 3 | 108,686 | 42,016 |
Loss before tax |
| (692,578) | (2,470,188) |
Tax credit |
| 62,881 | 104,835 |
Loss for the financial year - continuing |
| (629,697) | (2,365,353) |
Loss for the financial year - discontinued | 11 | - | (829,041) |
Loss for the financial year - total |
| (629,697) | (3,194,394) |
Other comprehensive income |
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Items that will or may be reclassified to profit or loss: |
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Exchange gain arising on translation of foreign operations |
| 489,466 | 25,418 |
Total other comprehensive income |
| (140,231) | (3,168,976) |
Total comprehensive income |
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Loss attributable to: |
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Owners of the parent |
| (627,692) | (3,120,172) |
Non-controlling interest |
| (2,005) | (60,986) |
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| (629,697) | (3,181,158) |
Total comprehensive income attributable to: |
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Owners of the parent |
| (138,226) | (3,094,754) |
Non-controlling interest |
| (2,005) | (60,986) |
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| (140,231) | (3,155,740) |
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Loss per share |
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Basic and diluted - continuing | 5 | (0.22) | (0.81) |
Basic and diluted - discontinued | 5 | - | (0.29) |
Basic and diluted - total |
| (0.22) | (1.10) |
Consolidated statement of financial position
as at
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| 30 June | 31 December |
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| Unaudited | Audited |
| Note | £ | £ |
Non-current assets |
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Intangible assets | 7 | 11,958,091 | 11,702,553 |
Other investments |
| 262,936 | 289,511 |
Property, plant and equipment | 6 | 673,121 | 760,763 |
Finance lease asset |
| 70,522 | 157,166 |
Other assets |
| 151,725 | 150,885 |
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| 13,116,395 | 13,060,878 |
Current assets |
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Trade and other receivables | 8 | 3,010,548 | 1,850,863 |
Deferred consideration |
| 1,395,706 | 1,298,663 |
Finance lease asset |
| 159,515 | 126,354 |
Cash and cash equivalents | 9 | 846,793 | 2,626,837 |
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| 5,412,562 | 5,902,717 |
Total assets |
| 18,528,957 | 18,963,595 |
Current liabilities |
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Trade and other payables | 10 | 1,847,409 | 2,125,257 |
Lease liabilities |
| 295,105 | 256,527 |
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| 2,142,514 | 2,381,784 |
Non-current liabilities |
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Deferred tax liability |
| 421,457 | 457,492 |
Other Creditors | 14 | 3,216,030 | 3,126,673 |
Derivative liabilities | 14 | 272,000 | 272,000 |
Lease liabilities |
| 497,588 | 646,122 |
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| 4,407,075 | 4,502,287 |
Total liabilities |
| 6,549,589 | 6,884,071 |
Net assets |
| 11,979,368 | 12,079,524 |
Equity |
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Share capital | 12 | 28,442,874 | 28,442,874 |
Share premium |
| 87,198,410 | 87,198,410 |
Merger reserve |
| (67,673,657) | (67,673,657) |
Foreign exchange reserve |
| 2,095,248 | 1,605,782 |
Retained earnings |
| (38,158,218) | (37,570,601) |
Total equity attributable to owners of the parent |
| 11,904,657 | 12,002,808 |
Non-controlling interest |
| 74,711 | 76,716 |
Total equity |
| 11,979,368 | 12,079,524 |
Consolidated statement of cash flows
for the 6 months ended
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| 30 June | 30 June |
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| Unaudited | Unaudited |
| Note | £ | £ |
Cash flows from operating activities |
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Loss for the period |
| (629,697) | (3,194,394) |
Adjustments for: |
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Depreciation of property, plant and equipment | 6 | 108,464 | 95,657 |
Amortisation of intangible fixed assets | 7 | 1,393,651 | 1,535,449 |
Finance income | 3, 11 | (108,686) | (315,867) |
Finance expense | 3 | 287,335 | 363,917 |
Income tax credit |
| (62,881) | (104,835) |
Exchange differences |
| (127,423) | 538 |
Loss on disposal of property, plant and equipment |
| - | 28,747 |
Loss on disposal of assets |
| - | 84,377 |
Share of loss of associate | 11 | - | 157,307 |
Share based payments expense | 13 | 40,075 | - |
(Increase) / decrease in trade and other receivables |
| (1,152,422) | 1,319,608 |
Decrease in trade and other payables |
| (293,848) | (319,024) |
Increase in other assets |
| (840) | - |
Net cash flows used in operating activities before taxation |
| (546,272) | (348,520) |
Tax credit received in the period |
| - | 39,988 |
Net cash flows used in operating activities |
| (546,272) | (308,532) |
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Investing activities |
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Acquisition of property, plant and equipment | 6 | (18,891) | (110,678) |
Capitalised development costs | 7 | (1,099,406) | (1,532,978) |
Interest received | 3 | 1 | 3,705 |
Finance lease asset - sublease receipts |
| 83,700 | 52,611 |
Net cash used in investing activities |
| (1,034,596) | (1,587,340) |
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Financing activities |
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Receipt of deferred consideration |
| - | 385,000 |
IFRS 16 lease payments |
| (167,193) | (113,856) |
Interest paid |
| (116,669) | (191,309) |
Net cash (used in) / from financing activities |
| (283,862) | 79,835 |
Net decrease in cash and cash equivalents |
| (1,864,730) | (1,816,037) |
Cash and cash equivalents at beginning of period |
| 2,608,455 | 1,550,140 |
Exchange gain on cash and cash equivalents |
| 84,686 | 1,992 |
Cash and cash equivalents at end of period |
| 828,411 | (263,905) |
Consolidated statement of changes in equity
for the 6 months ended
| Share capital | Share premium | Merger reserve | Foreign Exchange Reserve | Retained earnings | Total to equity holders of parents | Non-controlling interest | Total equity |
| £ | £ | £ | £ | £ | £ | £ | £ |
1 January 2019 | 28,442,874 | 87,198,410 | (67,673,657) | 1,911,453 | (32,308,495) | 17,570,585 | 152,324 | 17,722,909 |
Adjustment on the initial application of IFRS 16 | - | - | - | - | 69,591 | 69,591 | - | 69,591 |
Adjusted balance at | 28,442,874 | 87,198,410 | (67,673,657) | 1,911,453 | (32,238,904) | 17,640,176 | 152,324 | 17,792,500 |
Loss for the period | - | - | - | - | (3,120,172) | (3,120,172) | (60,986) | (3,181,158) |
Other comprehensive income | - | - | - | 25,418 | - | 25,418 | - | 25,418 |
Total comprehensive income for the year | - | - | - | 25,418 | (3,120,172) | (3,094,754) | (60,986) | (3,155,740) |
Contributions by and distributions to owners |
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Share-based payment on share options | - | - | - | - | - | - | - | - |
30 June 2019 (unaudited) | 28,442,874 | 87,198,410 | (67,673,657) | 1,936,871 | (35,359,076) | 14,545,422 | 91,338 | 14,636,760 |
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1 January 2020 | 28,442,874 | 87,198,410 | (67,673,657) | 1,605,782 | (37,570,601) | 12,002,808 | 76,716 | 12,079,524 |
Loss for the period | - | - | - | - | (627,692) | (627,692) | (2,005) | (629,697) |
Other comprehensive income | - | - | - | 489,466 | - | 489,466 | - | 489,466 |
Total comprehensive income for the year | - | - | - | 489,466 | (627,692) | (138,226) | (2,005) | (140,231) |
Contributions by and distributions to owners |
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Share-based payment on share options | - | - | - | - | 40,075 | 40,075 | - | 40,075 |
30 June 2020 (unaudited) | 28,442,874 | 87,198,410 | (67,673,657) | 2,095,248 | (38,158,218) | 11,904,657 | 74,711 | 11,979,368 |
Notes forming part of the consolidated financial statements
For the 6 months 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
The results for the six months ended
Basis of preparation
The financial information for the year ended
This interim report, which has neither been audited nor reviewed by independent auditors, was approved by the board of directors on
The consolidated financial statements are presented in Sterling.
Going concern
The Group meets its day-to-day working capital requirements from the cash flows generated by its trading activities and its available cash resources.
The Group prepares cash flow forecasts and re-forecasts regularly as part of the business planning process. A re-forecasting process has been completed for H2 2020 to 2022 in light of current business performance and economic situation given the uncertainty arising from the COVID-19 pandemic. These forecasts show that the Group will continue to have sufficient cash resources available to meet its liabilities as they fall due.
Accordingly, these financial statements have been prepared on the basis of accounting principles applicable to a going concern, which assumes that the Group will realise its assets and discharge its liabilities in the normal course of business.
Changes in significant accounting policies
In preparing the Group financial statements for the current period, the Group has adopted the following amendments to IFRSs:
· IAS 8 (amended): Accounting Policies, Changes in Accounting Estimates and Errors
· IFRS 3 (amended): Business Combinations
· IFRS 7 (amended): Financial Instruments: Disclosures
· IFRS 16 (amended): Leases
All adopted new and revised standards have not had a significant impact on the results or net assets of the Group.
Adjusted EBITDA
EBITDA is a non-GAAP company specific measure defined as loss before tax adjusted for finance income and expense, depreciation and amortisation.
Adjusted EBITDA excludes non-recurring material items which are outside the normal scope of the Group's ordinary activities. Adjusted EBITDA is considered to be a key performance measure by the Directors as it serves as an indicator of financial performance. The adjusting items are separately disclosed in order to enhance the reader's understanding of the Group's profitability and cash flow generation. Adjusting items include EBITDA from discontinued operations, costs arising from a fundamental restructuring of the Group's operations and relocation costs.
Restatement of comparatives
The comparative results for the period ending
2. 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 two continuing reportable segments.
· Licensing - B2B brand and content licensing to partners in the US and Europe; and
· Social publishing - provides B2C freemium games to the US and Europe.
The results of the discontinued segment are included in note 10. Management do not report segmental assets and liabilities internally and as such an analysis is not reported.
Revenue
The Group has disaggregated revenue into various categories in the following table which is intended to:
· Depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic date; and
· Enable users to understand the relationship with revenue segment information provided below.
| Licensing | Social | Other | Total |
H1 2020 continuing revenue | £ | £ | £ | £ |
Primary geographical markets |
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UK, including Channel Islands | 226,376 | - | - | 226,376 |
USA | 1,092,749 | 1,809,774 | 2,400 | 2,904,923 |
Isle of Man | 1,295,490 | - | - | 1,295,490 |
Rest of the World | 753,269 | - | - | 753,269 |
| 3,367,884 | 1,809,774 | 2,400 | 5,180,058 |
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Contract counterparties |
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Direct to consumers (B2C) | - | 1,809,774 | - | 1,809,774 |
B2B | 3,367,884 | - | 2,400 | 3,370,284 |
| 3,367,884 | 1,809,774 | 2,400 | 5,180,058 |
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Timing of transfer of goods and services |
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Point in time | 3,207,576 | 1,809,774 | 2,400 | 5,019,750 |
Over time | 160,308 | - | - | 160,308 |
| 3,367,884 | 1,809,774 | 2,400 | 5,180,058 |
| Licensing | Social | Other | Total |
H1 2019 continuing revenue | £ | £ | £ | £ |
Primary geographical markets |
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UK, including Channel Islands | 28,540 | - | - | 28,540 |
USA | 756,664 | 1,398,767 | 41,287 | 2,196,718 |
Isle of Man | 601,971 | - | - | 601,971 |
Rest of the World | 267,400 | - | 28,123 | 295,523 |
| 1,654,575 | 1,398,767 | 69,410 | 3,122,752 |
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Contract counterparties |
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Direct to consumers (B2C) | - | 1,398,767 | - | 1,398,767 |
B2B | 1,654,575 | - | 69,410 | 1,723,985 |
| 1,654,575 | 1,398,767 | 69,410 | 3,122,752 |
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Timing of transfer of goods and services |
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Point in time | 1,477,273 | 1,398,767 | 69,410 | 2,945,450 |
Over time | 177,302 | - | - | 177,302 |
| 1,654,575 | 1,398,767 | 69,410 | 3,122,752 |
Adjusted EBITDA
| Licensing | Social publishing | Head Office | Total |
H1 2020 | £ | £ | £ | £ |
Revenue | 3,367,884 | 1,809,774 | 2,400 | 5,180,058 |
Marketing expense | (8,608) | (34,051) | (58,749) | (101,408) |
Operating expense | (515,894) | (529,567) | 2,226 | (1,043,235) |
Administrative expense | (1,112,048) | (413,001) | (1,231,224) | (2,756,273) |
Share-based payments | - | - | (40,075) | (40,075) |
Adjusted EBITDA - continuing | 1,731,334 | 833,155 | (1,325,422) | 1,239,067 |
Restructuring expenses |
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| (250,881) |
Loss on disposal |
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| - |
EBITDA - continuing |
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| 988,186 |
| Licensing | Social | Head Office | Total |
H1 2019 | £ | £ | £ | £ |
Revenue | 1,654,575 | 1,398,767 | 69,410 | 3,122,752 |
Marketing expense | - | (104,691) | (8,529) | (113,220) |
Operating expense | (279,976) | (436,250) | (936) | (717,162) |
Administrative expense | (646,539) | (468,055) | (1,279,872) | (2,394,466) |
Share-based payments | - | - | - | - |
Adjusted EBITDA - continuing | 728,060 | 389,771 | (1,219,927) | (102,096) |
Restructuring expenses |
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| (100,045) |
Loss on disposal |
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| (320,853) |
EBITDA - continuing |
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| (522,994) |
3. Finance income and expense
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| 6M | 6M |
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| £ | £ |
Finance income |
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Interest received |
| 1 | 3,705 |
Interest income on finance lease asset |
| 11,642 | 16,278 |
Interest income on unwind of deferred consideration receivable |
| 97,043 | 22,033 |
Total finance income |
| 108,686 | 42,016 |
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Finance expense |
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Bank interest paid |
| 8,722 | 25,374 |
Fair value loss on other investments |
| 26,575 | 111,041 |
Effective interest on other creditor |
| 213,304 | 198,488 |
Interest expense on lease liability |
| 38,734 | 29,014 |
Total finance expense |
| 287,335 | 363,917 |
4. Adjusted EBITDA
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.
Adjusted EBITDA is stated before exceptional items as follows:
| 6M | 6M |
| £ | £ |
Restructuring expenses | (250,881) | (100,045) |
Loss on disposal | - | (320,853) |
Adjusting items | (250,881) | (420,898) |
Restructuring expenses
Restructuring costs of £0.3m (H1 2019: £0.1m) were incurred relating to redundancy, consulting and relocation costs.
Loss on disposal
£0.3m of expenses were incurred in the prior period associated with the B2C RMG disposal completed in July 2019. These expenses associated with the B2C RMG disposal were subsequently included in the profit on disposal of the segment that was disclosed in the 2019 full year financial statements. No such expenses occurred in H1 2020.
5. Loss per share
Basic loss per share is calculated by dividing the result attributable to ordinary shareholders by the weighted average number of shares in issue during the period. For fully diluted loss per share, the weighted average number of ordinary shares 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 continuing operations of the Group are loss making, none of the potentially dilutive securities are currently dilutive.
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| 6M | 6M |
| Note | £ | £ |
Loss after tax - continuing |
| (627,692) | (2,291,131) |
Loss after tax - discontinued | 10 | - | (829,041) |
(Loss) / profit after tax - total |
| (627,692) | (3,120,172) |
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| Number | Number |
Weighted average number of ordinary shares used in calculating basic loss per share | 11 | 284,428,747 | 284,428,747 |
Weighted average number of ordinary shares used in calculating dilutive loss per share |
| 284,428,747 | 284,428,747 |
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| Pence | Pence |
Basic and diluted loss per share - continuing |
| (0.22) | (0.81) |
Basic and diluted loss per share - discontinued |
| - | (0.29) |
Basic and diluted loss per share - total |
| (0.22) | (1.10) |
6. Property, plant and equipment
| ROU lease assets | Leasehold improvements | Computers and related equipment | Office furniture and equipment | Total |
| £ | £ | £ | £ | £ |
Cost |
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At 1 January 2020 | 760,334 | 76,532 | 182,195 | 75,766 | 1,094,827 |
Additions | - | - | 17,588 | 1,303 | 18,891 |
Exchange differences | 2,745 | 153 | 2,608 | 796 | 6,302 |
At 30 June 2020 | 763,079 | 76,685 | 202,391 | 77,865 | 1,120,020 |
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Accumulated deprecation |
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At 1 January 2020 | 116,172 | 13,891 | 150,757 | 53,244 | 334,064 |
Depreciation charge | 82,173 | 8,723 | 13,593 | 3,975 | 108,464 |
Exchange differences | 1,098 | (266) | 1,092 | 2,447 | 4,371 |
At 30 June 2020 | 199,443 | 22,348 | 165,442 | 59,666 | 446,899 |
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Net book value |
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At 31 December 2019 | 644,162 | 62,641 | 31,438 | 22,522 | 760,763 |
At 30 June 2020 | 563,636 | 54,337 | 36,949 | 18,199 | 673,121 |
7. Intangible assets
| Goodwill | Customer database | Software | Development costs | Domain names | Intellectual Property | Total |
| £ | £ | £ | £ | £ | £ | £ |
Cost |
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At 1 January 2020 | 6,849,048 | 1,520,509 | 1,420,374 | 11,798,373 | 9,053 | 5,962,772 | 27,560,129 |
Additions | - | - | - | 1,099,406 | - | - | 1,099,406 |
Exchange differences | 370,764 | 105,230 | 84,803 | 14,169 | 628 | 414,250 | 989,844 |
At 30 June 2020 | 7,219,812 | 1,625,739 | 1,505,177 | 12,911,948 | 9,681 | 6,377,022 | 29,649,379 |
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Accumulated amortisation and impairment |
|
|
|
|
| ||
At 1 January 2020 | 1,650,000 | 1,520,509 | 1,420,374 | 7,986,035 | 9,053 | 3,271,605 | 15,857,576 |
Amortisation charge | - | - | - | 1,004,210 | - | 389,441 | 1,393,651 |
Exchange differences | - | 105,230 | 84,803 | 12,621 | 628 | 236,779 | 440,061 |
At 30 June 2020 | 1,650,000 | 1,625,739 | 1,505,177 | 9,002,866 | 9,681 | 3,897,825 | 17,691,288 |
|
|
|
|
|
|
|
|
Net book value |
|
|
|
|
|
|
|
At 31 December 2019 | 5,199,048 | - | - | 3,812,338 | - | 2,691,167 | 11,702,553 |
At 30 June 2020 | 5,569,812 | - | - | 3,909,082 | - | 2,479,197 | 11,958,091 |
8. Trade and other receivables
|
| 30 June | 31 December |
|
| £ | £ |
Trade receivables |
| 1,829,002 | 974,321 |
Other receivables |
| 153,286 | 145,855 |
Tax and social security |
| 107,546 | 123,919 |
Prepayments and accrued income |
| 920,714 | 606,768 |
|
| 3,010,548 | 1,850,863 |
All amounts shown fall due for payment within one year.
9. Cash and cash equivalents
|
| 30 June | 31 December | 30 June |
|
| £ | £ | £ |
Cash and cash equivalents |
| 846,793 | 2,626,837 | 277,510 |
Cash - held for sale |
| - | - | 447,961 |
Restricted cash |
| (18,382) | (18,382) | (18,382) |
Bank overdraft |
| - | - | (970,994) |
Cash and cash equivalents for Statement of Cash Flows | 828,411 | 2,608,455 | (263,905) |
Restricted cash relates to funds held in Swiss subsidiaries which are currently undergoing liquidation. The funds are restricted and are not included in the consolidated statement of cash flows.
10. Trade and other payables
|
| 30 June | 31 December |
|
| £ | £ |
Trade payables |
| 175,786 | 488,755 |
Other payables |
| 472,983 | 634,807 |
Tax and social security |
| 100,929 | 170,931 |
Accruals |
| 1,097,711 | 830,764 |
|
| 1,847,409 | 2,125,257 |
The carrying value of trade and other payables classified as financial liabilities measured at amortised cost approximates fair value.
11. Discontinued operations
At the previous period end, the Group was sufficiently progressed with active discussions concerning the remainder of the B2C real money gaming brands and real money gaming platform, that these elements were classified as held for sale as at 30 June 2019. The sale of the real money gaming assets completed in July 2019 and details of the transaction were fully disclosed in the 2019 financial statements.
Results of discontinued operations:
|
| 6M | 6M |
|
| £ | £ |
Revenue |
| - | 5,762,066 |
Marketing expenses |
| - | (640,772) |
Operating expenses |
| - | (4,493,143) |
Administrative expenses |
| - | (1,567,923) |
EBITDA for the period - discontinued |
| - | (939,772) |
|
|
|
|
Depreciation of property, plant and equipment |
| - | (5,813) |
Share of loss of associate |
| - | (157,307) |
Finance income |
| - | 273,851 |
Loss for the period - discontinued |
| - | (829,041) |
12. Share capital
| 30 June | 30 June | 31 December | 31 December |
Ordinary shares | Number | £ | Number | £ |
Ordinary shares of | 284,428,747 | 28,442,874 | 284,428,747 | 28,442,874 |
10 pence each |
13. Share based payments
On 1 May 2020, certain employees of the Group were granted a total of 6,650,000 share options, which vest in three equal tranches on 3 February 2021, 3 February 2022 and 3 February 2023. The options have an exercise price of 10 pence per share.
On 2 June 2020, the two Executive Directors of the Group were each granted 3,000,000 share options, which vest in three equal tranches on 3 February 2021, 3 February 2022 and 3 February 2023. The vesting of each tranche is subject to delivery of adjusted EBITDA targets for the financial years ending 31 December 2020, 2021 and 2022. The options have an exercise price of 10 pence per share.
For both grants, the fair value of each tranche is being charged to the income statement over the vesting period. This resulted in a share-based payment charge for the period of £40,075 (H1 2019: £nil).
On 1 May 2020, a consultant of the Group was granted 750,000 replacement share options in lieu of waiving the rights over 5,750,000 options that had previously been granted (whilst an employee of the Group) but not exercised. The replacement options have an exercise price of 10 pence per share and are immediately fully vested. The fair value of the replacement options was calculated to be lower than the share options being waived, and as such no share based payment charge has been recognised in the income statement.
14. Arrangement with Gamesys Group plc (previously Jackpotjoy Group)
In December 2017 the Group entered into a complex transaction with Gamesys Group plc (previously Jackpotjoy plc) and Group companies (together 'Jackpotjoy Group'). The transaction includes a £3.5m secured convertible loan agreement 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.
The convertible loan has a duration of 5 years and carried 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, Gamesys Group plc 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 with a cash payment equal to the aggregate value of the convertible loan outstanding multiplied by the shortfall on nominal value payable to Jackpotjoy Group. Under this arrangement the maximum dilution to Gaming Realms shareholders will be approximately 11% assuming the convertible loan is converted in full.
The option violates the fixed-for-fixed criteria for equity classification as the number of shares is variable and as a result is classified as a liability.
The fair value of the conversion feature is determined each reporting date with changes recognised in profit or loss. The initial fair value was £0.6m based on a probability assessment of conversion and future share price. This is a level 3 valuation as defined by IFRS 13. The fair value as at 30 June 2020 was £0.3m (31 December 2019: £0.3m) based on revised probabilities of when and if the option will be exercised. The key inputs into the valuation model included timing of exercise by the counterparty (based on a probability assessment) and the share price.
The initial fair value of the host debt was calculated as £2.7m, being the present value of expected future cash outflows. The rate used to discount future cash flows was 14.1%, being the Group's incremental borrowing rate. The rate was calculated by reference to the Group's cost of equity in the absence of reliable alternative evidence of the Group's cost of borrowing given it is predominantly equity funded. Expected cash flows are based on the directors' judgement that a change in control event would not occur. Subsequently the loan is carried at amortised cost.
The residual £0.2m of proceeds were allocated to the obligation of provide free services.
| Fair value of debt host | Obligation to provide free services | Fair value of derivative Liability | Total |
| £ | £ | £ | £ |
At 1 January 2020 | 2,925,673 | 201,000 | 272,000 | 3,398,673 |
Utilisation of free services | - | (16,000) | - | (16,000) |
Effective interest | 213,304 | - | - | 213,304 |
Interest paid | (107,947) | - | - | (107,947) |
At 30 June 2020 | 3,031,030 | 185,000 | 272,000 | 3,488,030 |
15. Related party transactions
Jim Ryan is a Non-Executive Director of the Company and the CEO of Pala Interactive, which has a real-money online bingo site in New Jersey. During the period, total license fees earned by the Group were $22,592 (H1 2019: $6,507) with $7,599 due at 30 June 2020 (30 June 2019: $1,390).
Jim Ryan is a Non-Executive Director of Gamesys Group plc. In December 2017 the Group entered into a 10-year framework services agreement and a 5-year convertible loan agreement for £3.5m with Gamesys Group plc (previously Jackpotjoy Group) (see Note 13).
During the period £48,333 (H1 2019: £75,000) of consulting fees were paid to Dawnglen Finance Limited, a company controlled by Michael Buckley. No amounts were owed at 30 June 2020 (30 June 2019: £nil).
16. Events after reporting date
On 28 July 2020, the Group's two executive Directors were granted a total of 8,846,153 share options in replacement of their existing options for B shares, which were due to lapse on 31 July 2020. The replacement options vest in two equal tranches on 1 August 2021 and 1 August 2022, with all options having an exercise price of 20 pence per share.
[1] EBITDA is profit before interest, tax, depreciation, amortisation and impairment expenses and is a non-GAAP measure. Adjusted EBITDA is EBITDA excluding non-recurring material items which are outside the normal scope of the Group's ordinary activities. The Group uses EBITDA and Adjusted EBITDA to comment on its financial performance. Adjusting items include EBITDA from discontinued operations, costs arising from a fundamental restructuring of the Group's operations and relocation costs. See note 4 for further details.
* Comparative numbers for the period ended 30 June 2019 have been restated. See note 1 for further details.
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