Gaming Realms PLC (LON:GMR)

Gaming Realms PLC (LON:GMR)


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5.45 p
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0.025 (0.46 %)
Market Cap
£15.50 m
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Gaming Realms PLC RNS Release

Interim results


RNS Number : 0842C
Gaming Realms PLC
27 September 2018
 

Gaming Realms plc

 

(the "Company" or the "Group")

 

Interim results for the six months ended 30 June 2018

 

Positive Adjusted EBITDA for H1 2018 of £0.4m, up £1.5m from H1 2017 loss of £1.1m
 

 

Gaming Realms plc (GMR.L), the developer, publisher and licensor of mobile real money and social games, today announces its interim results for the six months to 30 June 2018.

 

Financial highlights:

 

 Like-for-like ongoing business*

H1 2018

H1 2017

 Movement

 

 £m

 £m

 %

 Revenue - Real Money & Licensing

4.8

3.7

28%

 Revenue - Social

2.1

4.0

(48%)

 Total

6.8

7.7

(11%)

 

 

 

 

 Marketing spend - Real Money & Licensing

1.9

2.7

(31%)

 Marketing spend - Social

0.2

1.6

(88%)

 Total

2.1

4.4

(53%)

* excludes UK B2C brands sold post-period end

 

 UK B2C brands sold post period end

H1 2018

H1 2017

 Movement

 

 £m

 £m

 %

 Revenue - Real Money 

4.1

7.2

(43%)

 Marketing spend - Real Money

0.7

2.0

(65%)

 

·      Real Money revenue excluding UK B2C brands sold to River UK Casino post-period end increased by 18% to £4.1m (H1/17: £3.5m)

·      Licensing revenue increased by 175% to £0.6m (H1/17: £0.2m)

Social publishing revenue decreased by 48% to £2.1m (H1/17: £4.0m) with a reduction in marketing spend of 88% to £0.2m (H1/17: £1.7m)

 Group

H1 2018

H1 2017

 Movement

 

 £m

 £m

 %

 Total revenue excluding disposals **

11.0

15.0

(27%)

 Adjusted EBITDA before Share Based Payments

0.4

(1.1)

n/a

** excludes £0.2m in respect of affiliate business disposed May 2018 (H1/17 £0.7m)

·      Adjusted EBITDA before share-based payments increased by £1.5m to £0.4m (H1/17: loss of £1.1m)

·      Decrease in Group revenue driven by Social

·      Cash at bank at 30 June 2018 was £0.4m before the receipt of the £4.2m cash payment from River UK Casino for the sale of the UK B2C brands

·      Capitalised development costs were £1.5m in the period (H1/17: £1.7m) as there was further investment in content and platform development

Operational highlights:  

·      6 new contracts signed to license the Company's 'Slingo Originals' portfolio of games in New Jersey and Europe (H1 2017: 4 licenses signed)

·      Launch of new 'white label' real money gambling sites for Health Lottery

·      Sale of Affiliate Business for £2.4m

Post-period end trading:

·      Disposal of 70% of UK B2C brands to River UK Casino for up to £23.1m, with £4.2m received in August 2018. Of the remaining £18.9m, £4.2m will be received upon the completion of the June 2019 audit and up to £14.7m will be subject to the earn out for the same period

·      Licensing revenue increased 88% in the 9 weeks post period end

·      Real Money Gaming revenue, excluding UK B2C brands sold, increased 10% in the 9 weeks post period end

·      Successful launch, on time and on budget, of a new faster mobile optimized gambling platform

·      Launch of 'Slingo Originals' games on GVC and Rank, also on time and budget, which have both been very well received 

Outlook for FY 2018:

Following the sale of the UK B2C brands the business will be focussed on executing the following growth strategy to create value for shareholders:

·      Expand existing market-leading 'Slingo Originals' library with additional internally developed content

·      Sign further licensing deals for proprietary 'Slingo Originals' content, which will deliver higher margin returns

·      Grow Partnership base in the Real Money B2B business. This will diversify customer concentration, provide a higher quality of income, increase revenues and allow the sharing of marketing spend. The business has a market leading proprietary platform for gaming products which needs to be built upon

·      Maximise the earn out from the B2C sale to River UK Casino

The Board expects the Company to continue to incur capital expenditure on game and platform development, of approximately £2.5m per annum. However, given the sale of the assets to River UK Casino, the Board believes that the Group will have sufficient cash resources to cover these costs until such time as the Group is cash generative after all capitalised costs.

Alongside building on this strategy, Gaming Realms will continue to evaluate strategic opportunities for our non-core activities such as the social publishing business. 

Patrick Southon, Chief Executive, said:

 

 "Our strategy moving forward is to leverage our real money gaming platform and our market leading 'Slingo Originals' games library into the UK and international gaming markets.  We believe that licensing our platform and content to leading brands and gaming operators will deliver high margin revenues, and we have been very pleased with the results of our efforts over the first half of 2018. We look forward to delivering news about more developments on our strategy during the second half of the year."

 

 

For more information contact

 

Gaming Realms plc

Patrick Southon, CEO

Mark Segal, CFO

 

 0845 123 3773

Peel Hunt LLP, Nomad and Broker

Dan Webster, George Sellar

 

020 7418 8900

 

Yellow Jersey

020 7457 2020

Charles Goodwin

07747 788 221

Georgia Colkin

08725 916 715

 

 

 

 

 

 

About Gaming Realms

 

Gaming Realms creates and publishes innovative real money and social games for mobile, with operations in the UK, U.S and Canada. Through its market-leading mobile platform and unique IP and brands, Gaming Realms is bringing together media, entertainment and gaming assets in new game formats. The Gaming Realms management team includes accomplished entrepreneurs and experienced executives from a wide range of leading gaming and media companies.

 

Business review

 

Overview

 

The Board is pleased to report that the Group has generated positive Adjusted EBITDA before Share Based Payments of £0.4m during the first half of the year (H1/17: £1.1m loss). This improvement was primarily due to the Group's cost synergy execution and focused marketing strategy in the period, which included a reduction in marketing spend of £3.6m to £2.8m (H1/17: £6.4m).

 

Gaming Realms has undergone a number of changes in recent months as part of the Group's strategy to focus on international licensing and content development. Whilst this transition is ongoing, the Board believes that Gaming Realms is now in a stronger position to capitalise on its skill set of creating entertaining, immersive gaming content which plays to a licensing-focused model, led by its popular Slingo gaming format.

 

Real money gaming

 

The Group's real money division has undergone significant change with the disposal of the affiliate marketing business and, since the period end, the sale of a 70% stake in most of its UK online casino B2C business to River UK Casino Limited. Excluding disposals to River UK Casino, real money revenues grew by 18% despite a significant reduction in marketing spend, illustrating the quality of our real money games portfolio and player loyalty. Whilst the Group now holds a minority stake, it will be working closely with River UK Casino to improve the platform, with revenue generated becoming a significant source of income for the Group's B2B platform.

 

Licensing

 

The Group has made significant progress with its licensing business with a number of high-profile agreements for Slingo Originals content signed in the period, which includes those with 888 Holdings, GVC, Sony Pictures Television and Golden Nugget Casino, one of New Jersey's largest casino operators. Licensing revenue has increased 175% to £0.6m (H1/17: £0.2m) during the period as the Slingo format went live on 6 new licensee platforms. The Group is already experiencing the benefits of the stable, higher margin revenues this brings and expects this to continue as licensees grow player numbers and new agreements are signed.

 

Social publishing

 

Social Publishing continues to generate a profit each month following the closure of Seattle operations in H2 2017 and minimal investment in marketing.

 

The Group continues to review its allocation of resources and investment.

 

 

 

 

 

 

Consolidated statement of comprehensive income

for the 6 months ended 30 June 2018

 

 

Note

6M 30 Jun 18

6M 30 Jun 17

 

 

Unaudited

Unaudited

 Continuing

 

 £

 £

 Revenue

2

10,965,299

14,979,111

 Marketing expenses

 

(2,778,560)

(6,443,240)

 Operating expenses

 

(4,138,132)

(4,748,425)

 Administrative expenses

 

(3,799,441)

(5,465,868)

 Share-based payments

 

(154,986)

(373,049)

 

 

 

 

 Adjusted EBITDA total

 

195,462

(1,474,541)

 Adjusted EBITDA - discontinued

 

(48,084)

(516,241)

 Profit/(Loss) on disposal

 

(53,198)

-

 Exceptional items

 

-

(60,689)

 EBITDA continuing

 

94,180

(2,051,471)

 

 

 

 

 Amortisation of intangible assets

7

(2,462,140)

(2,487,333)

 Depreciation of property, plant and equipment

 

(75,093)

(84,122)

 Finance expense

4

(511,774)

(125,992)

 Finance income

4

88,012

170,824

 Loss before tax

 

(2,866,815)

(4,578,094)

 Tax credit

5

194,557

305,405

 Loss for the period - continuing

 

(2,672,258)

(4,272,689)

 Profit for the period - discontinued

 

48,084

516,241

 Loss for the period - total

 

(2,624,174)

(3,756,448)

 

 

 

 

 Other comprehensive income

 

 

 

 Exchange gain/(loss) arising on translation of foreign operations

 

195,066

(456,058)

 Total other comprehensive income

 

195,066

(456,058)

 Total comprehensive income

 

(2,429,108)

(4,212,506)

 

 

 

 

 Loss attributable to:

 

 

 

 Owners of the parent

 

(2,618,121)

(3,738,614)

 Non-controlling interest

 

(6,053)

(17,835)

 

 

(2,624,174)

(3,756,449)

 Total comprehensive income attributable to:

 

 

 

 Owners of the parent

 

(2,423,055)

(4,167,966)

 Non-controlling interest

 

(6,053)

(44,541)

 

 

(2,429,108)

(4,212,507)

 

 

 

 

 (Loss)/gain per share

 

Pence

Pence

 Basic and diluted - continuing

 

(0.94)

(1.56)

 Basic and diluted - discontinued

 

0.02

0.19

 Basic and diluted - total

6

(0.92)

(1.37)

 

 

 

Consolidated statement of financial position

as at 30 June 2018

 

 

Note

30 June 2018

31 December 2017

 

 

Unaudited

Audited

 

 

 £

 £

 Non-current assets

 

 

 

 Intangible assets

7

19,631,075

20,464,170

 Equity investments

8

776,981

747,222

 Property, plant and equipment

 

204,365

263,069

 Other assets

9

164,136

163,865

 

 

20,776,557

21,638,326

 Current assets

 

 

 

 Trade and other receivables

10

3,485,466

3,759,434

 Cash and cash equivalents

11

1,086,280

 

 

4,571,746

6,042,736

 Assets classified as held for sale

 

-

2,292,881

 Total assets

 

25,348,303

29,973,943

 Current liabilities

 

 

 

 Trade and other payables

12

6,761,874

9,269,732

 

 

6,761,874

9,269,732

 Non-current liabilities

 

 

 

 Deferred tax liability

 

659,560

881,512

 Other Creditors

13

3,221,821

2,843,529

 Derivative liabilities

13

600,000

600,000

 

 

4,481,381

4,325,041

 Total liabilities

 

11,243,255

13,594,773

 Net assets

 

14,105,048

16,379,170

 Equity

 

 

 

 Share capital

14

28,442,874

28,442,874

 Share premium

 

87,198,410

87,198,410

 Merger reserve

 

(67,673,657)

(67,673,657)

 Available for sale reserve

 

207,222

207,222

 Foreign exchange reserve

 

1,614,909

1,419,842

 Shares to be issued

 

145,000

145,000

 Retained earnings

 

(35,993,481)

(33,530,345)

 Total equity attributable to owners of the parent

 

13,941,277

16,209,346

 Non-controlling interest

 

163,771

 Total equity

 

14,105,048

16,379,170

 

 

 

Consolidated statement of cash flows

for the 6 months ended 30 June 2018

 

 

 Note

6M 30 Jun 18

6M 30 Jun 17

 

 

Unaudited

Unaudited

 

 

£

 £

 Cash flows from operating activities

 

 

 

 Loss for the period

 

(2,624,174)

(3,756,449)

 Adjustments for:

 

 

 

 Depreciation of property, plant and equipment

 

75,093

84,122

 Amortisation of intangible fixed assets

 7

2,462,140

2,487,333

 Finance income

 4

(88,012)

(1,513)

 Finance expense

 4

511,774

40,482

 Movement in deferred consideration

 

-

(83,800)

 Unwind of deferred tax recognised on business acquisitions

 

(205,623)

(305,223)

 Unrealised currency translation gains

 

49,338

126,441

 Loss on disposal of property, plant and equipment

 

(11,734)

115

 Loss on disposal of assets

 

43,748

-

 Share-based payments expense

 

154,986

                373,049

 Decrease/(increase) in trade and other receivables

 

673,969

(41,263)

 (Decrease)/Increase in trade and other payables

 

(2,202,200)

1,374,712

 Net cash flows from/(used in) operating activities

 

(1,160,695)

298,006

 

 

 

 

 Investing activities

 

 

 

 Purchases of property, plant and equipment

 

(23,503)

(49,971)

 Purchase of intangibles

 7

(1,464,628)

(1,739,245)

 Proceeds from disposal of assets

 

1,849,133

-

 Interest received

 4

58,253

1,513

 Net cash from/(used in) investing activities

 

419,255

(1,787,703)

 

 

 

 

 Financing activities

 

 

 

 Cost relating to issue of convertible debt

 13

(24,846)

-

 Interest paid

 4

(107,831)

(40,482)

 Net cash used in financing activities

 

(132,677)

(40,482)

 Net (decrease)/increase in cash and cash equivalents

 

(874,117)

(1,530,179)

 Cash and cash equivalents at beginning of period

 

1,319,098

2,597,465

 Exchange (loss)/gain on cash and cash equivalents

 

(16,440)

17,385

 Cash and cash equivalents at end of period

11

428,541

1,084,671

 

 

 

 

 

 

 

Consolidated statement of changes in equity

for the 6 months ended 30 June 2018

 

 

 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 2017

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 period

-

-

-

-

-

-

(3,738,614)

(3,738,614)

(17,835)

(3,756,449)

 Other comprehensive income

-

-

-

-

(429,352)

-

-

(429,352)

(26,706)

(456,058)

 Total comprehensive income for the period

-

-

-

-

(429,352)

-

(3,738,614)

(4,167,966)

(44,541)

(4,212,507)

 Contributions by and distributions to owners

 

 

 

 

 

 

 

 

 

 

 Share-based payment on share options (Note 26)

-

-

-

-

-

-

373,049

373,049

-

373,049

 Non-controlling interests on acquisition of subsidiary

-

-

-

-

-

-

-

-

-

-

 30 June 2017 (unaudited)

27,413,329

87,095,455

(67,673,657)

-

1,979,080

-

(28,520,145)

20,294,062

160,460

20,454,522

 31 December 2017

28,442,874

87,198,410

(67,673,657)

207,222

1,419,842

145,000

(33,530,345)

16,209,345

169,824

16,379,169

 Loss for the period

-

-

-

-

-

-

(2,618,121)

(2,618,121)

(6,053)

(2,624,174)

 Other comprehensive income

-

-

-

-

195,067

-

-

195,067

-

195,067

 Total comprehensive income/(loss) for the period

-

-

-

-

195,067

-

(2,618,121)

(2,423,054)

(6,053)

(2,429,107)

 Contributions by and distributions to owners

 

 

 

 

 

 

 

 

 

 

 Share-based payment on share options (Note 26)

-

-

-

-

-

-

154,986

154,986

-

154,986

 30 June 2018 (unaudited)

28,442,874

87,198,410

(67,673,657)

207,222

1,614,909

145,000

(35,993,480)

13,941,277

163,771

14,105,048

 

 

 

 

 

Notes forming part of the consolidated financial statements

For the 6 months ended 30 June 2018

 

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 London Stock Exchange. It is incorporated and domiciled in the UK. The address of its registered office is One Valentine Place, London, SE18QH.

 

The results for the six months ended 30 June 2018 and 30 June 2017 are unaudited.

 

Basis of preparation

 

The financial information for the year ended 31 December 2017 does not constitute the full statutory accounts for that year. The Annual Report and Financial Statements for 2017 have been filed with the Registrar of Companies. The Independent Auditors' Report on the Annual Report and Financial Statement for 2017 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

 

This interim report, which has neither been audited nor reviewed by independent auditors, was approved by the board of directors on 12 September 2018. The financial information in this interim report has been prepared in accordance with the recognition and measurement requirements of International Financial Reporting Standards as adopted for use in the EU (IFRSs). The accounting policies applied by the Group in this financial information are the same as those applied by the Group in its financial statements for the year ended 31 December 2017 and which will form the basis of the 2018 financial statements.

 

There are no new standards, interpretations or amendments which became effective in the period which have had a material effect on the Group's financial information.

 

As a result of IFRS 9, management have reclassified available for sale investments as equity investments with fair value movements taken to the income statement. Management have established that the adoption of the expected credit loss impairment model did not have a material impact on reported results.

 

Management have considered the impact of IFRS 15 on the business by product. Management consider the recognition basis will remain unchanged for RMG, Affiliate and Social publishing revenues, which generate the majority of the Groups revenues. Management continue to review revenue recognition under IFRS 15 for the licensing revenues, where terms differ by contract, but do not anticipate a material impact on the financial statements.

 

When considering IFRS 16, the Group operates from leased offices in 4 countries. Management are undertaking a review to calculate the initial recognition of right of use assets and the related liabilities.

 

The consolidated financial statements are presented in sterling.

 

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, acquisition costs, and revaluation of balances denominated in non-presentational currency. Management have observed the FRC's guidance published in November 2017 regarding the treatment of share-based payments and have now included this charge in Adjusted EBITDA.

 

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 Board for the purposes of allocating resources and assessing performance. The Group has three reportable segments. The social publishing provides freemium games to the US and Europe. Licensing includes IP brand and content licensing to partners in the US and Europe. The real money gaming products and marketing services operates our brands and provides other digital marketing services to both gaming and non-gaming clients in the UK.

 

Revenue by product

 

 

 6M 30 Jun 18

 6M 30 Jun 17

 

 £

 £

 Real money gaming

8,262,230

10,727,949

 Social publishing

2,074,853

3,989,943

 Licensing

628,215

228,639

 Other 

194,142

32,580

 Total - continuing

11,159,440

14,979,111

 Affiliate marketing - discontinued

170,384

713,311

 Total 

11,329,824

15,692,422

 

 

Geographical information

 

The Group considers that its primary geographic regions are the UK, including Channel Islands, USA and the rest of the world. No revenue is derived from real money gaming in the US. All non-current assets are based in the UK.

 

 

 

 External revenue by location of customers

 External revenue by location of customers

 

 6M 30 Jun 18

 6M 30 Jun 17

 

 £

 £

 UK, including Channel Islands

8,296,799

11,427,248

 US

2,462,436

2,782,952

 Rest of the World

570,589

1,482,222

 

11,329,824

15,692,422

 

Adjusted EBITDA

 

 

 RMG

 Affiliates

 Social

 Licensing

 Other

 Total 6M 30 Jun 18 

 

 £

 £

 £

 £

 £

 £

 Revenue

8,262,231

170,384

2,074,853

628,215

-

11,135,682

 Marketing expense

(2,583,698)

(20,834)

(202,542)

-

7,680

(2,799,394)

 Operating expense

(3,479,517)

(15,809)

(569,536)

(88,679)

(400)

(4,153,941)

 Administrative expense

(1,610,505)

(84,944)

(285,438)

(456,890)

(1,394,123)

(3,831,901)

 Share-based payments

-

-

-

-

(154,986)

(154,986)

 Adjusted EBITDA

588,511

48,797

1,017,337

82,646

(1,541,829)

195,460

 

 

3. Disposal of Affiliate business

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.

 

 

 

4. Finance income and expense

 

 

 6M 30 Jun 18

 6M 30 Jun 17

 

 £

 £

 Finance income

 

 

 Interest received

58,253

1,513

 Fair value changes

29,759

                       -  

 Foreign exchange movement on deferred consideration

                             -  

169,311

 Total finance income

88,012

170,824

 

 

 

 Finance expense

 

 

 Bank interest expense paid

52,439

40,482

 Deferred consideration movement

                             -  

85,511

 Effective interest on Other Creditor

459,335

-

 Total finance expense

511,774

125,993

 

 

5. Tax credit

 

 

 6M 30 Jun 18

 6M 30 Jun 17

 

 £

 £

 Current tax credit

 

 

 Adjustment for over provision in prior periods

(11,066)

-

 Current tax credit for the period

-

175,000

 Total current tax

(11,066)

175,000

 Deferred tax expense

 

 

 Origination and reversal of temporary differences

205,623

130,405

 Total deferred tax

205,623

130,405

 Total tax credit

194,557

305,405

 

 

The reasons for the difference between the actual tax charge for the period and the standard rate of corporation tax in the UK applied to profits for the period are as follows:

 

 

 6M 30 Jun 18

 6M 30 Jun 17

 

 £

 £

 Loss for the period

(2,818,731)

(4,061,853)

 Expected tax at effective rate of corporation tax in the UK of 19% (2017: 20%)

(535,559)

(812,371)

 Expenses not deductible for tax purposes

58,881

63,466

 Depreciation in excess of capital allowances

-

16,824

 Effects of overseas taxation

64,732

39,316

 Adjustment for over provision in prior periods

(11,066)

-

 Unwind of deferred tax recognised on business acquisition

(205,623)

(130,405)

 Research and Development tax credit

-

(175,000)

 Tax losses for which no deferred tax assets have been recognised

823,193

692,765

 Total tax credit

194,557

(305,405)

 

 

6. Loss per share

 

 

 6M 30 Jun 18

 6M 30 Jun 17

 

 £

 £

 Loss after tax - continuing

(2,672,258)

(4,272,689)

 (Loss)/profit after tax - discontinued

48,084

516,241

 Loss after tax - total

(2,624,174)

(3,756,448)

 

 

 

 

 Number

 Number

 Weighted average number of ordinary shares used in calculating basic loss per share

284,428,746

274,133,291

 Weighted average number of ordinary shares used in calculating dilutive loss per share

284,428,746

274,133,291

 

 

 

 

 Pence

 Pence

 Basic and diluted loss per share - continuing

(0.94)

(1.56)

 Basic and diluted (loss)/profit per share - discontinued

0.02

0.19

 Basic and diluted loss per share - total

(0.92)

(1.37)

 

 

 

7. Intangible assets

 

 

 Goodwill

 Customer database

 Software

 Development costs

 Domain names

 Intellectual Property

 Total

 

 £

 £

 £

 £

 £

 £

 £

 Cost

 

 

 

 

 

 

 

 Balance at 31 December 2017

10,645,557

1,626,509

1,403,941

10,047,108

394,331

5,843,092

29,960,538

 Additions

-

-

-

1,464,628

-

-

1,464,628

 Disposals

-

-

-

-

(319,646)

-

(319,646)

 Reclassified as held for sale

 

 

-

-

-

-

-

 FX Movement

114,926

33,956

32,215

6,587

(47,941)

133,671

273,414

 At 30 June 2018

10,760,483

1,660,465

1,436,156

11,518,323

26,744

5,976,763

31,378,934

 Amortisation

 

 

 

 

 

 

-

 Balance at 31 December 2017

-

1,327,658

1,057,660

5,061,262

312,613

1,737,175

9,496,368

 Amortisation charge

-

244,890

231,514

1,576,696

48,780

360,260

2,462,140

 Disposed

-

-

-

-

(338,605)

-

(338,605)

 Reclassified as held for sale

-

-

-

-

-

-

-

 FX Movement

-

36,661

33,215

3,695

266

54,119

127,956

 At 30 June 2018

-

1,609,209

1,322,389

6,641,653

23,054

2,151,554

11,747,859

 Net book value

 

 

 

 

 

 

-

 At 31 December 2017

10,645,557

298,851

346,281

4,985,846

81,718

4,105,917

20,464,170

 At 30 June 2018

10,760,483

51,256

113,767

4,876,670

3,690

3,825,209

19,631,075

 

 

 

8. Equity investments

 

 

 Equity Investments

 

 £

 At 31 December 2017

747,222

 Change in Fair Value through profit & loss

29,759

 At 30 June 2018

776,981

 

 

9. Other assets

 

 

 30 Jun 18

 31 Dec 17

 

 £

 £

 Other Assets

163,865

152,000

 

 

 

Other assets represent the rental deposits on operating leases.

 

 

10. Trade and other receivables

 

 30 Jun 18

 31 Dec 17

 

 £

 £

 Trade and other receivables

2,364,537

2,461,523

 Prepayments and accrued income

1,120,930

1,447,824

 

3,485,466

3,909,347

 

All amounts shown fall due for payment within one year

 

 

11. Cash and cash equivalents

 

 

 30 Jun 18

 31 Dec 17

 

 £

 £

 Cash and cash equivalents

1,086,280

2,283,302

 Restricted cash

(18,702)

(18,702)

 Overdraft

(639,038)

(945,501)

 Cash and cash equivalents for Statement of Cash Flows

428,539

1,319,098

 

 

 

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.

 

Included within cash and cash equivalents is the Group's overdraft facility. The total facility is £1,000,000.

 

 

 

12. Trade and other payables

 

 

 30 Jun 18

 31 Dec 17

 

 £

 £

 Trade and other payables

                4,744,004

5,655,862

 Bank Overdraft

                   639,038

945,501

 Accruals

                   929,566

2,270,675

 Player liabilities

                   449,266

397,693

 

6,761,874

9,269,732

 


The carrying value of trade and other payables classified as financial liabilities measured at amortised cost approximates fair value.

 

 

13. Arrangement with JackpotJoy

 

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 30 June 2018 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 2018

2,843,529

600,000

3,443,469

 Cost relating to issue of convertible debt

(24,846)

-

(24,846)

 Interest paid

(61,773)

-

(61,773)

 Effective interest (30.8%)

464,911

-

464,911

 At 30 June 2018

3,221,821

600,000

3,821,821

 

 

 

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

 

 

14. Share capital

 

Ordinary Shares

 

 

 30 Jun 18

 30 Jun 18

 31 Dec 17

 31 Dec 17

 

 Number

 £

 Number

 £

 Ordinary shares of

284,428,747

28,442,874

284,428,747

28,442,875

 10 pence each

 

Movements in share capital

 

 

 Number

 £

 At 30 June 2017

274,133,292

27,413,329

 Ordinary shares issued for cash consideration

10,295,455

1,029,545

 At 31 December 2017

284,428,747

28,442,874

 At 30 June 2018

284,428,747

28,442,874

 

 

15. Events after reporting date

 

On 16th August 2018 the Group entered into an Asset Purchase Agreement with River iGaming Plc (River iGaming) for the sale of 4 of the Group's Real Money brands for minimum consideration of £8.4m.

 

Further consideration is achievable on an earn-out basis, payable no later than 31 August 2019 based on 5.5 times River UK Casino's EBIT for the 12 months to 30 June 2019 to a maximum of £14.7m.

 

Following the completion of the transaction, River iGaming will hold 70% of the issued share capital of a newly created UK subsidiary (River UK Casino), with Gaming Realms holding the remaining 30%.

 

There is a Put and Call option for River iGaming to purchase Gaming Realms' 30% share of River UK Casino at the end of the earn out period based on an Enterprise value of 5.5 times River UK Casino's EBIT.

 

River UK Casino has entered into a five-year B2B platform and content agreement with the Group on normal commercial terms.  River iGaming and Gaming Realms will jointly provide a working capital loan facility of £3m to River UK Casino (£2.1m from River iGaming and £0.9m from Gaming Realms).

 


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 [email protected] or visit www.rns.com.
 
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