RNS Number:3897J
Leisure & Gaming plc
25 September 2006
25 September 2006
Leisure and Gaming plc
Interim results for the six months ended 30 June 2006
Leisure and Gaming plc ("L&G" or "the Group") the online betting and gaming
group, today announces its interim results for the six months ended 30 June
2006.
Operational Highlights
* Strong growth in customer signups in core brands, and extension of VIP
average customer lifetime to 21 months (2005: 17 months)
* Integration plan on track with substantial benefits & savings expected in
2007
* Acquisition of the fully licensed BetShop Group (Europe) Limited for
initial consideration of up to #12.7m, significantly expanding Group
operations in Europe
* Acquisition of IGW assets delivers ownership of core technology and
software platform
Financial Highlights
* Turnover $339.9m, up 33% (2005 pro-forma $254.7m)
* Net win $45.7m, up 24% (2005 pro-forma $36.9m)
* Growth in operating EBIT* of 22% to $9.5m (2005 pro forma: $7.8m)
* Strong operating cash flows of $7.4m (2005: $0.2m outflow)
* Strong cash balances of $27.5m** (2005:$10.5m) before player funds of
$8.2m (2005: $3.3m)
* Entered into a secured loan facility of $20m
* excluding Group central costs and share option charges
** excluding $8.7m (2005 $nil) of cash held in escrow
Alistair Assheton, Chief Executive of Leisure and Gaming plc, said:
"The results for the half year are very pleasing showing continued growth across
our business and the last twelve months has been one of progress for the Group.
Our recently acquired European business in particular is showing encouraging
signs and following this acquisition, the Group has growing revenue streams from
an increasing number of sources. We have a strong cash balance and a solid
business model and remain well placed to capitalise on opportunities for growth
in the coming periods.
"The first half is traditionally the slower half of the year and it is
disappointing however, that our performance as we enter the main sportsbook
trading season has been weaker than our expectations. While I remain confident
in the prospects for the Group, the Board is taking a prudent view that we may
not meet external expectations in this financial year. We continue to monitor
regulatory developments and are aware of the macro industry challenges we face.
As a Group, we remain focused on growing our core business and deriving
additional benefits through the robust integration of our acquisitions."
For further information please contact:
Leisure and Gaming plc 020 7248 6343
Alistair Assheton, CEO
Josh Joshi, CFO
Financial Dynamics 020 7831 3113
Jonathon Brill
Billy Clegg
Caroline Stewart
There will be a presentation for analysts at the offices of Financial Dynamics,
26 Southampton Buildings, London, WC2A 1PB at 9:30am today.
Interim results for the six months ended 30 June 2006
L&G made its first acquisition, VIP, on 28 June 2005 and a further three
acquisitions, Stanley Entertainment, Nine.com and English Harbour by the end of
2005. In order to provide a meaningful basis for comparing performance, restated
pro forma profit and loss accounts for the six months to 30 June 2005 and the
year ended 31 December 2005 have also been provided below as if all acquisitions
in 2005 had taken place on 1 January 2005. On 23 June 2006, the acquisition of
BetShop Group (Europe) Limited ("BSG") was completed and its results have been
incorporated into the Group financial statements from that date.
Financial results
Turnover for the first half of 2006 was $339.9m (2005 pro forma: $254.7m) and
represents a 33% increase on the comparable period last year. Net win for the
first half was $45.7m (2005 pro forma: $36.9m) an increase of 24%. Sportsbook
(including racebook) net win was $22.3m (2005 pro forma: $17.5m) an increase of
27% on the prior year and at a net margin of 7.1% (2005 pro forma: 7.1%). Net
win arising from our Casino operations was $22.0m (2005 pro forma: $19.2m) a 14%
increase and on our Poker operations was $1.4m (2005 pro forma: $0.2m).
Cost of sales at $22.5m (2005 pro forma: $15.1m) reflect a significant increase
in activity over the same period last year, particularly from our affiliate
partners, including an increase of deposits during the period of 37% compared to
the same period last year. As expected this has led to increases in payment
processing costs and commission payments to our affiliates. Gross profit for the
first half was $24.3m (2005 pro forma: $22.2m) an increase of 9% over the same
period last year.
Administrative expenses before Group central costs and share option charges have
increased by 3% leading to an increase in operating profit before Group central
costs and share option charges of 22% to $9.5m (2005 pro forma: $7.8m). Group
central costs were $2.0m in the first half of 2006 compared to $0.2m in the same
period last year reflecting the additional head office and Board costs since its
first acquisition at the end of the first half last year. In line with
management expectations, the profit before tax of the Group for the first half
was $6.8m against a pro forma result of $7.4m in the same period last year.
Taxation costs at $0.3m (2005 pro forma: $0.1m) continue in line with management
expectations. The Group's policy is to manage, control and operate group
companies only in the countries in which they are registered. However, the rules
and practice governing the taxation of e-commerce activity are evolving in many
countries. Discussions are ongoing with the relevant tax authorities and
particularly in the UK.
Basic earnings per share, before share option charges was 12.2 cents (2005 pro
forma: 12.6 cents). Diluted earnings per share, before share options charges was
11.9 cents (2005 pro forma: 12.6 cents).
The Group generated $7.4m of cash from operating activities in the first half of
2006 compared to a small cash outflow of $0.2m in the same period last year. At
30 June 2006 the Group's cash balances were healthy at $27.5m (2005: $10.5m)
excluding cash held in escrow of $8.7m (2005: Nil). Player funds were $8.2m
(2005: $3.3m). To fund our recent acquisitions $18.2m was drawn down in the
period against a $20m secured loan facility provided by Barclays plc.
Operating review
It has been a period of growth, progress and consolidation for the Group which
has expanded significantly over the last year, with our most recent acquisition
being BSG in Europe.
During the period we have concentrated on integrating the acquisitions of
Nine.com, English Harbour and Stanley Entertainment. Integration planning and
activity has continued to progress well in the first half of 2006 with success
in key areas. These have prepared the Group to ensure it can fully capitalise on
the busy American football season and pave the way for further operational
integration opportunities in the second half.
Operating performance at both VIP and English Harbour has been very pleasing in
the first half and to date, ahead of our expectations. Operating performance at
Nine has been weaker than expected and management is focussed on actively
addressing this trend.
The centralisation of the Group's e-commerce and processing capabilities using
the expertise held within English Harbour is now complete. This has enabled the
Group to use its new scale to benefit from rate savings generated from higher
processing volumes. Cross-marketing and brand consolidation activities are now
well underway and will be substantially complete by the end of the year.
Completed milestones include the launch of the core VIP.com brand, the new
Nine.com casino platform in July 2006 and the StanleyVIP casino and poker
platform in September 2006. With the American football season now underway, we
expect to see the benefits of this work in the remaining part of 2006.
Activity in the remainder of the year will be focussed on driving value through
the integration of a common affiliate programme across the Group, a common
loyalty rewards platform and a common wallet programme. Once complete, this
should significantly enhance the cross marketing proposition and retention
activities within the Group, building on the successful brand consolidation
strategy already in effect. Further integration in these areas is expected in
the remainder of the year. In addition, there has been an ongoing review of the
Group's operating activities with management continuing to pursue opportunities
for cost and operating efficiencies which are on track to be delivered before
the end of the year.
VIP continues to lead the industry with customer retention, averaging 21 months
against 17 months a year ago and an industry average of approximately 12 months.
Unique active players across the Group have increased by over 12% compared to
the same period last year and at the same time real money sign ups have
increased by 9%. Customer value has also improved; yield per active customer
increased to $738 (2005 pro forma: $652). Cost per acquisition was $296 in the
period (2005 pro forma: $257). Approximately 30% of real money new signs ups are
referred to the Group from our affiliate partners. The recently derived industry
harmonised basis for calculating cost per acquisition excludes the affiliate
customer base and their associated costs. In the first half the harmonised cost
per acquisition was $497 (2005 pro forma: $511).
At present, approximately 30% of Group net win comes from US sportsbook
customers. However, across all products, including Casino and Poker,
approximately 80% of Group net win is from the US. The recent acquisition of BSG
brings not only the added dimension of geographical diversity but also a capable
team with significant experience in Europe who will lead our planned growth
outside of North America. Immediate benefits to the Group have been the
broadening of the product content available to our customers in both the US and
international markets thereby improving cross marketing opportunities. In
addition BSG has continued to grow within its core Italian market and now has in
excess of 800 land based affiliate relationships up more than 200 against the
600 it had when it was acquired.
Finally, in June 2006, L&G acquired its key technology assets and software from
IGW, the Group's historic software provider enabling the group to own and
directly control its core software and infrastructure.
Regulatory developments
There has been much speculation about recent industry developments in both the
US and Europe. None of the Board plan to travel to the US in the near future
while we await clarity over the actions currently being undertaken against
individuals associated with two of our competitors in the market.
Whilst the successful action by Antigua & Barbuda at the World Trade
Organisation in obtaining a ruling against the US regarding online gambling is
encouraging, in practice there is little sign that as a result the US is
relaxing its stance on the industry. Although we do not anticipate further
legislative developments in the US Congress this year, it cannot be completely
ruled out at this stage.
There have also been some recent challenges in Germany and France, against our
competitors there. The Group has an active license in Italy through BSG, and
continues to generate a substantial majority of European based revenue from
within that jurisdiction. We are also actively involved in the preparation of a
new regulatory environment in Curacao, where we are substantially based.
We continue to closely monitor the macro environment while undertaking extensive
reviews and checks of our own internal policies and procedures. We are also
taking legal opinion and developing plans to seek to ensure the business is
safeguarded in every foreseeable circumstance. We feel this investment in
process and planning, while it may potentially incur additional costs, is
worthwhile to protect our business, and we will conduct ongoing reviews of our
operating policies on a regular basis.
Acquisitions
Following the acquisition of Nine.com on 6 December 2005, a subsequent review of
the fair value of assets and liabilities acquired has identified a fair value
adjustment of $1.7m. In order to provide a meaningful comparison the pro forma
profit and loss account for the year ended 31 December 2005 has been restated to
reflect this.
On 19 June 2006, the Group announced the acquisition of BSG for a total
potential consideration of #32m. The acquisition was completed on 23 June 2006.
BSG is a European online sportsbetting and casino gaming business, headquartered
in London. The acquisition represents a significant expansion of the Group's
online business reach in Europe through the BetShop.com website and BSG's
land-based affiliate network, concentrated in Italy. Initial consideration of
#12.7m comprised #4.9 million in cash and the issue of 3,788,639 new ordinary
shares in the capital of L&G with up to a further #2.0m deferred for up to 18
months.
Additional consideration of up to a maximum of #19.4 million in aggregate is
payable by the issue of loan notes (guaranteed on issue) to the vendor. No
additional consideration is payable unless the EBIT for BSG for the three years
ending 31 December 2006, 31 December 2007 and 31 December 2008 meets or exceeds
#2.7m, #5.2m or #7.3m respectively.
The balance sheet as at 30 June 2006 recognises goodwill of $38.3m in relation
to the BSG acquisition.
On 21 June 2006 the Group announced that it had agreed, subject to the
satisfaction of certain conditions, to acquire key technology assets and
software from IGW Software NV ("IGW"), a Netherlands Antilles based online
betting software business, for $4.9m. The acquisition was completed on 18
September 2006 and cash consideration comprised $3.9m net of $1.0m in
receivables from IGW to L&G's subsidiary VIP. As a result of this and the
subsequent creation of an enlarged software development group, led by the
English Harbour team, and having regard to the trading performance of English
Harbour, the Board announced on 22 June 2006 that it had agreed with the vendors
of English Harbour to buy out their earn out for both 2006 and 2007 for a one
off cash payment of $3.4m which was made at the beginning of July 2006.
In acquiring IGW, the Group has completed a key strategic objective of owning
our core technology software and infrastructure. By integrating this acquisition
into the English Harbour technology group we look forward to leveraging these
assets across the Group to improve our customer experience as we scale our
business.
Trading outlook
Trading in the second half to date has been mixed. For the 80 day period to 18
September 2006 total net win has increased by 34% compared to the same period
last year. This is detailed further below:
% Growth in Net Win for the 80 day period to 18 September 2006 (1)
Sports and Race book 17%
Casino 43%
Poker 290%
Total 34%
(1) Compared to pro forma Net Win for the same period in 2005
The increase in year to date Unique Active Players has been 15%, Real Money Sign
Ups 13% with the start of the American football season seeing record customer
deposits. However, operating margins in the last week, particularly in the
sportsbook, have been weak. Furthermore, as noted above, Nine's operating
performance has been below expectations. This has, until recently, been matched
by a better than expected performance at both VIP and English Harbour.
Therefore, in light of current trading, the Board has taken the prudent view
that were the recent weakness in sportsbook margins at both VIP and Nine to
continue, the Group would expect to report results for the full year below
market expectations.
Unaudited Consolidated Income Statement
Audited
6 months ended 6 months ended 16 months & 22
days ended 31 Dec
30 June 2006 30 June 2005 2005
$m $m $m
Notes
Turnover 2 339.9 - 261.1
Net win 2 45.7 - 23.3
Other income 2 1.1 - 0.3
46.8 - 23.6
Cost of sales (22.5) - (10.2)
Gross profit 24.3 - 13.4
Operating Profit 6.6 (0.2) 1.4
Underlying operating profit 9.5 - 3.6
Share option charge (0.9) - (1.2)
Group central costs (2.0) (0.2) (1.0)
Net interest and similar income 0.2 - 0.3
Profit before tax 6.8 (0.2) 1.7
Tax (0.3) - (0.4)
Profit for the period attributable to 6.5 (0.2) 1.3
equity holders of the parent
Earnings pre share (cents)
Earnings per share - basic 3 10.8c (11.9c) 9.9c
Earnings per share - diluted 3 10.5c (11.9c) 9.6c
All activities relate to continuing and acquired operations.
Unaudited Consolidated Income Statement with pro forma comparatives
Pro forma Restated pro
forma (*) year
6 months ended 6 months ended ended
30 June 2006 30 June 2005 31 Dec 2005
$m $m $m
Notes
Turnover 2 339.9 254.7 607.2
Net win 2 45.7 36.9 80.9
Other income 2 1.1 0.4 1.6
46.8 37.3 82.5
Cost of sales (22.5) (15.1) (39.0)
Gross profit 24.3 22.2 43.5
Operating Profit 6.6 7.4 10.1
Underlying operating profit 9.5 7.8 12.3
Share option charge (0.9) (0.2) (1.2)
Group central costs (2.0) (0.2) (1.0)
Net interest and similar income 0.2 - 0.2
Profit before tax 6.8 7.4 10.3
Tax (0.3) (0.1) (0.5)
Profit for the period attributable to equity 6.5 7.3 9.8
holders of the parent
Earnings pre share (cents)
Earnings per share - basic 3 10.8c 12.3c 16.3c
Earnings per share - basic (excluding share 3 12.2c 12.6c 18.3c
option charge)
Earnings per share - diluted 3 10.5c 12.3c 16.0c
Earnings per share - diluted (excluding share 3 11.9c 12.6c 17.9c
option charge)
All activities relate to continuing and acquired operations.
(*) The 2005 Pro forma includes the results of all subsidiaries (except BSG) as
though they were acquired on 1 January 2005. The full year pro forma has been
restated for reasons explained in note 5.
Unaudited Consolidated Balance Sheets at
Audited
30 June 2006 30 June 2005 31 Dec 2005
Notes $m $m $m
ASSETS
Non-current assets
Property, plant and equipment 1.3 0.5 1.4
Goodwill 4, 5 147.6 36.9 106.7
Other intangibles 7.4 - 4.2
156.3 37.4 112.3
Current assets
Trade and other receivables 11.7 4.9 12.3
Cash and cash equivalents 6 36.2 10.5 24.8
47.9 15.4 37.1
Total assets 204.2 52.8 149.4
LIABILITIES
Current liabilities
Borrowings (10.0) - -
Trade and other payables (28.8) (5.2) (15.7)
Current tax liabilities (0.8) (0.5) (0.5)
(39.6) (5.7) (16.2)
Non-current liabilities
Deferred and contingent consideration (21.5) - (17.4)
Borrowings (8.2) - -
(29.7) - (17.4)
Total liabilities (69.3) (5.7) (33.6)
Net Assets 134.9 47.1 115.8
EQUITY
Share capital 7 28.5 13.9 26.4
Share premium 93.0 34.0 82.6
Share option reserve 2.1 - -
Other reserves 3.7 - 4.6
Retained earnings 7.6 (0.8) 2.2
Equity attributable to equity holders of 134.9 47.1 115.8
the parent
Unaudited Consolidated Statement of Changes in Equity
Share option Future share
reserve issue
Share Share Retained
capital premium $m $m earnings Total
$m $m $m $m
Balance as at 1 January 2005 0.5 0.2 - - 0.1 0.8
Loss for the period - - - - (0.2) (0.2)
Foreign exchange movements - - - - (0.7) (0.7)
Total recognised income and expense - - - - (0.9) (0.9)
Issue of ordinary shares 13.4 33.8 - - - 47.2
Balance as at 30 June 2005 13.9 34.0 - - (0.8) 47.1
Profit for the period - - - - 1.4 1.4
Foreign exchange movements - - - - 0.4 0.4
Total recognised income and expense - - - - 1.8 1.8
Issue of ordinary shares 12.5 50.2 - - - 62.7
Share option charge - - - - 1.2 1.2
Future issue of ordinary shares - - - 4.6 - 4.6
Costs attributable to share issue - (1.6) - - - (1.6)
Net change directly in equity 12.5 48.6 - 4.6 1.2 66.9
Balance as at 31 December 2005 26.4 82.6 - 4.6 2.2 115.8
Profit for the period - - - - 6.5 6.5
Foreign exchange movements - - - - 0.1 0.1
Total recognised income and expense - - - - 6.6 6.6
Issue of ordinary shares 2.1 10.4 - (1.8) - 10.7
Share option charge - - 2.1 - (1.2) 0.9
Future issue of ordinary shares - - - 0.9 - 0.9
Net change directly in equity 2.1 10.4 2.1 (0.9) (1.2) 12.5
Balance as at 30 June 2006 28.5 93.0 2.1 3.7 7.6 134.9
Unaudited Consolidated Cashflow Statements
Audited
16 months
6 months 6 months & 22 days
ended ended ended
Notes 30 June 2006 30 June 2005 31 Dec 2005
$m $m $m $m $m $m
Operating Profit 6.6 (0.2) 1.4
Adjustments for:
Decrease / (Increase) in trade and other 0.4 - (1.5)
receivables
(Decrease) / Increase in trade and other (1.3) - 2.5
payables
Depreciation and amortisation 0.8 - 0.2
Share option charge 0.9 - 1.2
Net cash from operating activities 7.4 (0.2) 3.8
Tax paid (0.1) - -
Investing activities
Purchases of subsidiary undertakings (net of 4 (9.5) (3.2) (31.9)
cash acquired)
Settlement of deferred consideration (1.3) - -
Purchases of intangible assets (3.2) - (1.5)
Purchases of property, plant and equipment (0.2) - (0.1)
Net cash used in investing activities (14.2) (3.2) (33.5)
Financing activities
Proceeds from issue of ordinary shares - 13.2 54.4
Loan 18.2 - -
Interest received 0.1 - 0.1
Net cash from financing activities 18.3 13.2 54.5
Cash and cash equivalents at beginning of period 24.8 0.7 -
Cash and cash equivalents at end of period 6 36.2 10.5 24.8
Significant non-cash transactions related to acquisitions of subsidiary
undertakings; consideration of $26.2m ($76.4m in the period ended 31 Dec 2005)
was in the form of equity instruments and obligations to pay deferred and
contingent consideration.
Notes
1. Summary of significant accounting policies
Basis of preparation
The interim financial statements have been prepared in accordance with
International Financial Reporting Standards ("IFRS") as adopted for use in the
European Union and on the historical cost basis.
Unless stated otherwise the interim financial statements are unaudited and do
not comprise full financial statements within the meaning of the Companies Act
1985.
The interim financial statements have been prepared using policies consistent
with those in the annual report and accounts for the period ended 31 December
2005 on which the auditors gave an unqualified report and did not contain a
statement under Sec 237 (2) or (3) of the Companies Act 1985.
The annual report and accounts for the period ended 31 December 2005 have been
delivered to Companies House and copies are available on-line at www.lngplc.com
or by post from the Company's registered office.
The financial statements have been prepared on the historical cost basis.
Accounting for subsidiaries
The results of the subsidiaries acquired during the period are included in the
income statement from the effective date of acquisition. Where necessary,
adjustments are made to the financial statements of subsidiaries to bring their
accounting policies into line with those of other members of the Group.
The purchase method of accounting is used to account for the acquisition of
subsidiaries by the Group. The cost of an acquisition is measured as the fair
value of the assets given, equity instruments issued and liabilities incurred or
assumed at the date of exchange, plus costs directly attributable to the
acquisition. Contingent consideration is recognised to the extent that it is
probable that it will result in the issue of additional equity instruments or
the transfer of economic value.
The excess of the cost of acquisition over the fair value of the Group's share
of the identifiable net assets acquired is recorded as goodwill.
All intra-group transactions, balances, income and expenses are eliminated on
consolidation
Foreign currency
Functional and presentation currency
Items included in the financial statements of each of the Group's entities are
measured using the currency of the primary economic environment in which the
entity operates ("the functional currency"). The consolidated financial
statements are presented in US dollars, which is the Group's presentation
currency.
Cash and cash equivalents
Cash and cash equivalents, including amounts held in escrow are carried at cost.
For the purposes of the statement of cash flows, cash and cash equivalents
comprise balances less than 90 days to maturity from the date of acquisition and
include cash on hand, current account balances and amounts at call with banks
and other unrestricted short-term deposits with original maturities of three
months or less. Cash and cash equivalents also include bank deposits held on
escrow.
Turnover
Turnover represents the total amount placed by the customers in respect of bets
on sports events, the net amount held by the house for casino products and
commission (rake) taken from poker.
Net win
Net win represents the net amount won (or lost) by the house in respect to bets
placed on sports events, the net amount held by the house for casino products
and commission (rake) taken from poker.
2. Segmental information
The Group analyses its business based on the 3 key products it operates
By product
Turnover Net win
6 months Pro forma 6 Pro forma 6 months ended Pro forma 6 Pro forma
ended 30 months ended year ended 31 30 June 2006 months ended Year ended
June 2006 30 June 2005 Dec 2005 $m 30 June 2005 31 Dec 2005
$m $m $m $m $m
Sports and race book 315.4 234.9 559.6 22.3 17.5 34.9
Casino 22.0 19.2 44.9 22.0 19.2 44.9
Poker 1.4 0.2 1.1 1.4 0.2 1.1
338.8 254.3 605.6 45.7 36.9 80.9
Other income 1.1 0.4 1.6 1.1 0.4 1.6
339.9 254.7 607.2 46.8 37.3 82.5
3. Earnings per share
Basic
Basic earnings per share is calculated by dividing the profit attributable to
equity holders of the Company by the weighted average number of ordinary shares
in issue during the period.
Audited Restated
6 months 6 months 16 months and Pro forma Pro forma
ended 30 ended 30 22 days 6 months Year ended 31
June 2006 June 2005 ended 31 Dec ended 30 June Dec 2005
2005 2005
$m $m $m $m $m
Profit attributable to equity 6.5 (0.2) 1.3 7.3 9.8
holders of the Company
Profit attributable to equity 7.4 (0.2) 2.5 7.5 11.0
holders (excluding share
option charge)
Weighted average number of 60,456,915 1,250,544 13,417,900 59,088,198 60,245,735
ordinary shares for the
purposes of basic earnings
per share
Basic earnings per share 10.8c (11.9c) 9.9c 12.3c 16.3c
(cents)
Basic earnings per share 12.2c (11.9c) 18.8c 12.6c 18.3c
(cents) - excluding share
option charge
Diluted earnings per share is calculated adjusting the weighted average number
of ordinary shares outstanding to assume conversion of all dilutive potential
ordinary shares.
The only potentially dilutive ordinary shares the company has are share options.
A calculation is undertaken to determine the number of shares that could have
been acquired at fair value (determined as the average market share price of the
Company's shares over the period) based on the monetary value of the
subscription rights attached to outstanding share options.
The number of shares calculated as above is compared with the number of shares
that would have been issued assuming the exercise of the share options.
Audited Restated
6 months ended 6 months 16 months Pro forma 6 Pro forma
30 June 2006 ended 30 and 22 days months ended Year ended
June 2005 ended 31 30 June 2005 31 Dec 2005
Dec 2005
$m $m $m $m $m
Profit attributable to equity 6.5 (0.2) 1.3 7.3 9.8
holders of the Company
Profit attributable to equity 7.4 (0.2) 2.5 7.5 11.0
holders (excluding share option
charge)
Weighted average number of 60,456,915 1,250,544 13,417,900 59,088,198 60,245,735
ordinary shares for the
purposes of basic earnings per
share
Adjustment for share options 1,570,631 0 488,721 258,328 1,162,424
Weighted average number of 62,027,546 1,250,544 13,906,621 59,346,526 61,408,159
ordinary shares for diluted
earnings per share
Diluted earnings per share 10.5c (11.9c) 9.6c 12.3c 16.0c
(cents)
Diluted earnings per share 11.9c (11.9c) 18.2c 12.6c 17.9c
(cents) - excluding share
option charge
4. Business Combination
Betshop
On 23 June 2006 Leisure & Gaming Plc acquired 100% of the share capital of
Betshop Group (Europe) Limited which operates online and land based gaming
businesses in Europe (mainly in Italy and Germany). The acquired businesses
contributed net win of $0.5m and profit before tax of $0.0m to the Group for the
period from 23 June 2006 to 30 June 2006.
Details of net assets acquired and goodwill are as follows:
$m
Purchase consideration:
Cash paid 8.9
Fair value of shares issued (3,788,639 shares) 10.7
Direct costs relating to the acquisition 1.9
Deferred and contingent consideration 15.5
Total purchase consideration 37.0
Fair value of net liabilities acquired 1.3
Goodwill 38.3
The fair value of the shares issued is derived from the market price at the date
of issue. The goodwill represents the difference between the fair value of the
consideration paid and the fair value of the net liabilities acquired and
represents the opportunity cost of the potential to earn future profits. Any
attempt to split out the goodwill any further would be purely arbitrary.
The deferred and contingent consideration is to be settled as follows:
$m
Creditors - less than one year 0.3
Creditors - more than one year 14.3
Future issue of shares 0.9
15.5
The assets and liabilities arising from the acquisition are as follows:
Acquiree's Fair Value
carrying amount
$m
$m
Cash and cash equivalents 1.3 1.3
Property, plant and equipment 0.1 0.1
Intangible assets 0.3 0.3
Receivables 1.4 1.4
Payables (4.4) (4.4)
Net (liabilities) acquired (1.3) (1.3)
Purchase consideration settled in cash 10.8
Cash and cash equivalents in subsidiary acquired (1.3)
Cash outflow on acquisition 9.5
The contingent consideration is based on BSG achieving certain earnings targets.
If BSG were to meet their maximum earnout targets, a further $22.2m cash would
be paid or shares issued.
5. Goodwill
30 June 2006 30 June 2005 Audited
$m $m 31 Dec 2005
$m
Opening balance 106.7 - -
Acquisition of subsidiaries 38.3 36.9 106.7
Additional acquisition costs 0.6 - -
Fair value adjustment to net liabilities acquired 1.7 - -
in Nine
Foreign exchange movements 0.3 - -
147.6 36.9 106.7
After the acquisition of Nine it was discovered that certain assets had been
overstated and as a result the Net liabilities acquired on 6 December 2005 were
understated by $1.7m. As a result we have restated the 2005 pro forma income
statement to correctly reflect Nine's contribution to the consolidated Income
Statement.
6. Cash and cash equivalents
30 June 2006 30 June 2005 Audited
$m $m 31 Dec 2005
$m
Cash at bank and in hand 27.5 10.5 14.9
Cash held in escrow 8.7 - 9.9
36.2 10.5 24.8
Cash is held in escrow for payment of deferred and contingent consideration some
of which is dependent on performance of the acquired businesses
7. Share capital
Authorised:
100 million ordinary shares of 25p each
No. $m
Alloted, issued and fully paid:
As at 31 December 2005 59,332,689 26.4
Deferred consideration to vendors of English Harbour 798,950 0.3
Issued to vendors of BSG 3,788,639 1.7
As at 30 June 2006 63,920,278 28.4
As at 30 June 2006 the Company had the following share options outstanding:
Date of grant Option name 25p ordinary shares Period of option Exercise price
1 June 2005 Marwyn 1,525,241 50% 28 June 2006 - 28 June 2012 88p
50% 28 June 2007 - 28 June 2012 88p
1 June 2005 EBT (1) 2,237,862 28 June 2006 - 28 June 2012 88p
26 June 2006 EBT (2a) 1,057,500 31 March 2008 - 31 March 2010 133p
26 June 2006 EBT (2b) 1,057,500 31 March 2009 - 31 March 2011 133p
26 June 2006 EBT (2c) 1,057,500 31 March 2010 - 31 March 2012 133p
The exercise of the Marwyn options that are exercisable in the period 28 June
2006 - 28 June 2012, is conditional upon the 30 day average mid-market price of
an ordinary share being equal or greater than 125 per cent of the exercise price
at any time after 28 June 2005 and prior to expiry of the option.
The exercise of the Marwyn options that are exercisable in the period 28 June
2007 - 28 June 2012, is conditional upon the 30 day average mid-market price of
an ordinary share being equal or greater than 140 per cent of the exercise price
at any time after 28 June 2005 and prior to expiry of the option.
The exercise of the Employee Benefit Trust (1) options is conditional upon the
30 day average mid-market price of an ordinary share being equal or greater than
132.5 per cent of the exercise price at any time after 28 June 2005 and prior to
expiry of the option.
The exercise of the Employee Benefit Trust (2) options is conditional upon the
diluted EPS growth of an ordinary share being greater than CPI growth over the
relevant performance period.
Those relevant performance periods are:
EBT (2a) 1 January 2006 - 31 December 2007
EBT (2b) 1 January 2006 - 31 December 2008
EBT (2c) 1 January 2006 - 31 December 2009
8. Capital Commitments
On the 7 July 2006 the Company paid $3.4m to the vendors of English Harbour as
final settlement of all earnout agreements. This represents 50% of the maximum
earnout and was fully provided as at 31 December 2005.
In addition, on 18 September 2006, VIP paid $3.9m in cash for the key technology
assets and software of IGW Software NV.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR FZLLLQKBFBBE
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