TIDMPBTY
RNS Number : 9076V
Probability plc
19 December 2013
19 December 2013
Probability plc
('Probability' or 'the Company')
Interim Results for the six months ended 30 September 2013
Probability, the AIM-quoted mobile entertainment gambling
specialist, announces its unaudited interim results for the six
months ended 30 September 2013.
Financial Highlights for period from 1 April 2013 to 30
September 2013 (unaudited)
-- Net gaming revenue GBP3.6m (H1 FY2012/13: GBP4.5m).
-- B2B Revenues (including Italy) GBP1m (H1 FY2012/13:
GBP0.9m).
-- EBITDA loss for period of GBP1.4m (H1 FY2012/13: loss
GBP0.5m).
-- Unaudited pre-tax loss for period of GBP1.6m (H1 FY2012/13:
loss GBP0.7m).
-- Average Revenue Per User ("ARPU") from B2C and White Label
players managed by Probability in the six months to September
increased by 8% versus the same period last year.
-- Cash and cash equivalents at the end of the period were
GBP1.7m (H1 FY2012/13: GBP0.7m).
Operational Highlights
-- Accelerating revenues from new and existing Italian B2B
customers from Q2 onwards.
-- Significant expansion in product offering with over a dozen
new games added for the UK and Italy.
-- Review of B2C commercial functions to address disappointing
performance in the period to July 2013 resulted in leadership and
strategic changes. A subsequent reduction of new customer cost of
acquisition ("CPA") by two thirds, improved trends in player
retention and yield have since been achieved.
-- Strengthening of senior management team with appointment of
Qurban Hussain as Chief Financial Officer (from April 2013) and of
Michael Byrne as Chief Commercial Officer (from 1 November).
-- Certification of the Company's platform in Italy, paving the
way for the launch of White Label services planned for early
CY2014.
Direct to consumer ("B2C") update
As noted in previous statements, H1 trading was negatively
impacted by television focused campaigns in December 2012 and in
June/July 2013 delivering fewer customers than would have been
expected based on earlier experience. Mobile and online marketing
continued to perform as expected, despite increased competition and
fragmentation of the media landscape.
Following the departure of Matthew Sunderland (COO), a complete
review of all B2C activities and organisation was undertaken in
August 2013, renewing our focus on proven direct-response digital
marketing and our core LadyLuck's mobile casino brand. In October
2013, Michael Byrne was appointed Chief Commercial Officer.
Formerly the head of William Hill Mobile, Mr. Byrne has taken over
control of all commercial activities for B2C and White Label from
November 1 2013, based in Gibraltar.
Following the recalibration of the marketing strategy and
changes to retention campaigns, trading in October and November has
improved with revenue growth in all areas.
In November cost-per-acquisition of a cash player to our core
B2C brands was a third of the equivalent cost in July, and
provisional data indicates a close to break-even outcome at the
EBITDA level for the month.
In B2C underlying trading conditions are also benefitting from
new products and payment options for players launched in H1 or in
the period immediately after. These include a new style of
promotional mechanism for LadyLuck's, a "Daily Bonus Bonanza" which
brings a social casino style feature to real money gaming on mobile
for the first time.
Higher yields from existing players are also being achieved and
higher conversion rates thanks to improved CRM and deposit options.
A number of new initiatives and games are planned for the new
year.
Gaming margins have broadly stabilised since September when some
big winners affected the bottom line. Gross win from B2C smartphone
customers in November was higher than at any time in the previous
six months. Revenues from legacy featurephone customers have
continued to decline in line with expectations.
Business to business ("B2B") update
In B2B, revenues from White Label are also benefitting from
improved retention strategies and new content. Revenues from
smartphone customers in this segment are now at or above levels of
a year ago.
During H1, the Company's Italian business was also held back by
delayed approval of new games by the Italian regulator. This was
reported by other companies in the sector and was not unique to
Probability. Towards the end of H1 these delays were resolved and
we have been able to release a number of new products for our B2B
customers as well as progress the certification of our platform for
White Label.
We now expect our first White Label services to launch early in
2014.
Revenues from other Italian B2B customers have grown strongly in
the second half of H1 and accelerated in the period since September
30(th) on the back of further product launches.
Commenting on the Interim Statement, Probability CEO Charles
Cohen said:
"We are dealing with the legacy of the challenges we faced in
the first half of the financial year following the disappointing
performance of some of our B2C marketing activities.
"During the summer, once it became clear that the B2C commercial
strategy was not delivering we took decisive action in
recalibrating this side of the business, bringing in new talent and
fresh thinking and focusing back onto proven and controllable
methodologies for acquisition.
"Whilst recovery is still incomplete we have begun to see growth
again and our unrelenting focus is to build on this renewed
momentum.
"At the same time, the Playyoo business which we acquired in
August 2012 is now making a positive net contribution to the group
from customers in Italy.
"The growth of demand for our unique local games in the App
Store has been fantastic. Approval times for new games by the
regulator are now coming down, meaning we can speed up our release
schedule for this important market in the coming months after the
frustrations of 2013 which held us all back.
"We remain focused on our medium term goal of reducing our
dependence on B2C activities and continuing to grow our higher
margin B2B business, in particular through our managed service
offerings.
"A big part of this will be entry into the regulated gambling
market in the United States which we hope to achieve in 2014. The
Company is in an advanced stage of negotiation with two potential
customers to supply our platform, content and management services
for regulated activity in their respective US States. These are
multi-site, land based Casino operators.
"We look forward updating investors on our continued progress in
the normal way at the next quarterly update."
For further information, please contact:
Charles Cohen, Chief Executive +44(0) 20 7092
Probability plc Officer 8801
Qurban Hussain, Chief Financial
Officer
Numis Securities Richard Thomas, Nominated Adviser +44(0) 20 7260
Limited Alex Ham, Corporate Broking 1000
+44(0) 20 7929
Square 1 Consulting David Bick, Public Relations 5599
Consolidated Statement of Comprehensive Income
Half year Half year Year ended
30 September 30 September 31 March
Note 2013 2012 2013
GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
Net gaming revenue 3,639 4,526 8,627
Marketing (1,729) (1,927) (3,025)
Operating expenses (400) (546) (1,027)
Share based payment (38) (47) (116)
Administrative expenses -
exceptional 5 129 - 309
Administrative expenses -
other (3,040) (2,532) (5,166)
---------------------------------- ------ -------------- --- -------------- --- ------------
Administrative expenses (2,911) (2,532) (4,857)
Adjusted EBITDA (1,336) (225) 41
EBITDA business acquisition (65) (254) (323)
Share based payment (38) (47) (116)
EBITDA (1,439) (526) (398)
---------------------------------- ------ -------------- --- -------------- --- ------------
Amortisation of intangible
assets (164) (75) (246)
Depreciation of tangible
assets (63) (50) (107)
Operating loss (1,666) (651) (751)
-------------- -------------- ------------
Finance income 34 1 1
Finance costs - (8) (14)
Loss before tax (1,632) (658) (764)
Tax credit 42 - 63
-------------- -------------- ------------
Loss after tax (1,590) (658) (701)
Other comprehensive income
Exchange gain on translation
of overseas operations (27) - 107
Total other comprehensive
income (27) - 107
Total comprehensive income
attributable to equity holders
of the parent (1,617) (658) (594)
============== ============== ============
Loss per share (pence)
Basic and diluted (4.97) (2.24) (2.41)
============== ============== ============
Consolidated Statement of Financial Position
Note As at As at As at
30 September 30 September 31 March
2013 2012 2013
GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
Assets
Non-current assets
Property, plant and equipment 262 241 267
Intangible assets 2,784 2,860 2,981
Total non-current assets 3,046 3,101 3,248
Current assets
Trade and other receivables 1,085 1,625 1,059
Cash and cash equivalents 1,698 685 3,382
Total current assets 2,783 2,310 4,441
Total assets 5,829 5,411 7,689
--------------- --------------- -----------
Liabilities
Non-current liabilities
Deferred taxation 391 475 439
Contingent consideration 4 310 638 439
Total non-current liabilities 701 1,113 878
Current liabilities
Trade and other payables 462 573 566
Provisions - 238 -
Total current liabilities 462 811 566
Total liabilities 1,163 1,924 1,444
--------------- --------------- -----------
TOTAL NET ASSETS 4,666 3,487 6,245
=============== =============== ===========
Consolidated Statement of Financial Position
As at As at As at
30 September 30 September 31 March
2013 2012 2013
GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
Capital and reserves attributable
to equity holders of the
Company
Share capital 338 293 338
Share premium 10,010 7,430 10,010
Merger reserve 1,779 1,779 1,779
Reverse acquisition reserve 1,380 1,380 1,380
Foreign exchange reserve 80 - 107
Retained earnings (8,921) (7,395) (7,369)
4,666 3,487 6,245
TOTAL EQUITY ATTRIBUTABLE
TO EQUITY HOLDERS OF THE
PARENT 4,666 3,487 6,245
=============== =============== ===========
Consolidated Cash Flow Statement
Half year Half year Year ended
30 September 30 September 31 March
2013 2012 2013
GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
Cash flows from operating activities
Loss after tax (1,590) (658) (701)
Adjustments for:
Depreciation 63 50 107
Amortisation 164 75 246
Provision release - - (238)
Movement in contingent consideration (129) - (71)
Share based payment expense 38 47 116
Tax credit (42) - (63)
Finance income (34) (1) (1)
Finance expense - 8 14
--------------
Net cash flows from operating activities
before changes in working capital (1,530) (479) (591)
(Increase)/decrease in trade and other
receivables (26) (527) 56
(Decrease)/increase in trade and other
payables (104) (175) (182)
--------------
(130) (702) (126)
Cash flow from operating activities (1,660) (1,181) (717)
-------------- -------------- ------------
Cash used from investing activities
Capital expenditure (58) (12) (97)
Intangible expenditure - - (286)
Net cash received on acquisition of
Playyoo SA - 39 24
Finance income 34 1 1
Finance Expense - (8) (14)
-------------- -------------- ------------
Net cash flow from investing activities (24) 20 (372)
-------------- -------------- ------------
Cash flow from financing activities
Issue of ordinary shares (net of expenses) - - 2,625
-------------- -------------- ------------
Net cash Flow from financing activities - - 2,625
-------------- -------------- ------------
Increase/(decrease) in cash and cash
equivalents (1,684) (1,161) 1,536
Cash and cash equivalents at the beginning
of the year 3,382 1,846 1,846
Cash and cash equivalents at the end
of the year 1,698 685 3,382
============== ============== ============
Consolidated Statement of Changes in Equity - unaudited
Reverse Foreign
Share Share Merger acquisition exchange Retained
capital premium reserve reserve reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
31 March 2013 338 10,010 1,779 1,380 107 (7,369) 6,245
Comprehensive Income for
the year
Loss after tax - - - - - (1,590) (1,590)
Other comprehensive income - - - - (27) - (27)
Total Comprehensive Income
for the year - - - - (27) (1,590) (1,617)
Contribution by and
distribution
to owners
Share based payments - - - - - 38 38
Total contribution by and
distribution to owners - - - - - 38 38
30 September 2013 338 10,010 1,779 1,380 80 (8,921) 4,666
========== ========== ========== ============== =========== =========== =========
Reverse Foreign
Share Share Merger acquisition exchange Retained
capital premium reserve reserve reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
31 March 2012 269 7,430 - 1,380 - (6,849) 2,230
Comprehensive Income for
the year
Loss after tax - - - - - (658) (658)
Total Comprehensive Income
for the year - - - - - (658) (658)
Contribution by and
distribution
to owners
Issue of share capital 24 - 1,779 - - - 1,803
Share based payments - - - - 112 112
Total contribution by and
distribution to owners 24 - 1,779 - - 112 1,915
30 September 2012 293 7,430 1,779 1,380 - (7,395) 3,487
========== ========== ========== ============== =========== =========== =========
Consolidated Statement of Changes in Equity - audited
Reverse Foreign
Share Share Merger acquisition exchange Retained
capital premium reserve reserve reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
1 April 2012 269 7,430 - 1,380 - (6,849) 2,230
Comprehensive Income for
the year
Loss after tax - - - - - (701) (701)
Other comprehensive income - - - - 107 - 107
Total Comprehensive Income
for the year - - - - 107 (701) (594)
Contribution by and
distribution
to owners
Issue of share capital 45 2,580 - - - - 2,625
Share issued as part of
consideration
in business combination 24 - 1,779 - - - 1,803
Share based payments - - - - - 181 181
Total contribution by and
distribution to owners 69 2,580 1,779 - - 181 4,609
31 March 2013 338 10,010 1,779 1,380 107 (7,369) 6,245
========== ========== ========== ============== =========== =========== =========
General information
Probability is a public limited company incorporated in the
United Kingdom under the Companies Act (Registration No. 5830059).
The Company's registered address is Staple Court, 11 Staple Inn
Buildings, London, WC1V 7QH. The company's ordinary shares are
traded on the Alternative Investment Market ('AiM'). Copies of this
report will be available to shareholders on the Company's website.
Further copies of the report may be obtained from the above address
or on the Investor Relations section of the Company's website at
www.probabilityplc.com
Note 1 Basis of accounting
Basis of preparation
These interim results has been prepared using the recognition
and measurement principles of International Accounting Standards,
International Financial Reporting Standards and Interpretations
adopted for use in the European Union (collectively Adopted IFRSs).
The accounting policies adopted in these interim results have been
consistently applied to all periods presented and are consistent
with the policies used in the preparation of the statutory accounts
for the year ended 31 March 2013.
The comparative financial information for the year ended 31
March 2013 included within these interim results does not
constitute the full statutory accounts for that year. The Annual
Report and Financial Statements for 31 March 2013 have been filed
with the Registrar of Companies. The Independent Auditors' Report
on that Annual Report and Financial Statements for 2013 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.
The financial information for the half years ended 30 September
2013 and 30 September 2012 is unaudited.
Administration expenses
Since reporting the 30 September 2012 Interim results t he
directors have chosen to provide greater clarity and disclosure to
the face of the Consolidated Statement of Comprehensive Income by
modifying the presentational layout. As a consequence the
following, which were previously included within administrative
expenses, have been shown separately: share-based payment,
amortisation of intangible assets and depreciation.
Note 2 Net gaming revenue
Net gaming revenue comprises net gaming revenue derived from
mobile phone gambling operations and commission.
Net gaming revenue derives from mobile phone gambling operations
and is defined as the difference between the amounts of bets placed
by the players less amounts won by players. It is stated after
deduction of certain bonuses and jackpots. For our White Label
Partner Managed and International Partner Managed channel we
recognise only the commission element as our net gaming revenue.
Commission is defined as the revenue share attributable to the
Group. The amount of revenue share or revenue share percentage is
dependent on individual partner contracts. See note 2 for further
detail of the Group's revenue channels.
Net gaming revenue is recognised to the extent that it is
probable that economic benefits will flow to the Group and the
revenue can be reliably measured. Revenue is recognised in the
accounting periods in which the wager is settled.
Note 3 (Loss) per share
The basic loss per ordinary share has been calculated using the
loss for the financial period of
GBP1,590,000 (30 September 2012 - loss of GBP658,000 and 31
March 2013 - loss of GBP701,000) and weighted average number of
ordinary shares of 32,019,000 (30 September 2012- 29,344,170 and 31
March 2013- 29,075,000).
As the Group made losses in all periods the loss per share has
not been diluted for all periods.
Note 4 Acquisition of Playyoo SA ("Playyoo")
Terms of the Acquisition
The Company announced on 19 July 2012 the acquisition of the
entire share capital of Playyoo SA, a private company registered
and headquartered in Lugano, Switzerland. Playyoo's principal
activity is the development of games and software for the mobile
gambling market. The principal reasons for this acquisition was to
allow the group to use Playyoo's expertise in games and software
development, and enable the group to enhance its B2B offering
internationally focussing initially on the Italian gambling
market.
At the time of acquisition it was agreed that up to a further
1,700,000 Ordinary Shares may be issued depending on the
performance of Playyoo SA during the period of 1 January 2013 to 31
December 2013 (the relevant period). This was recognised as
contingent consideration of GBP510,000 (representing the directors'
best estimate of the shares to be issued being 680,000 shares at a
share price of 75p each as at the date of acquisition).
In March 2013 the Group Board agreed to amend the relevant
period to 1 June 2013 to 31 May 2014 (the revised relevant period).
All other terms of the original Playyoo SA Share Purchase Agreement
were to remain unchanged.
The above being an acknowledgement that despite the best
endeavours on the part of both the Group and original shareholders
of Playyoo SA, the likelihood of having to allot additional shares
seemed unlikely in the original relevant period. The Group believe
that although the short term performance of Playyoo SA had been
impacted due to external factors, this was merely a timing
difference and that the strategic value of the acquisition remained
unchanged.
Given the above, the Group has recorded a contingent liability
of GBP309,000 in its financial statements as at 30 September 2013
(being 680,000 shares at a share price of 45.5p each as at 30
September 2013). This is the Directors' best estimate of the
expected contingent consideration issuable at the end of the
revised relevant period.
Note 5 Administration expenses - exceptional
Exceptional administrative expenses comprise:
30 September 30 September 31 March
2013 2012 2013
GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
Contingent consideration at 31 March
2013/acquisition 439 - 510
Contingent consideration at the end
of period (310) - (439)
Net impact on income statement of contingent
consideration 129 - 71
Release of provision - - 238
Exceptional administration expense 129 - 309
========================= =============== ============
Note 6 Business combinations
For business combinations cost comprises the fair value of
assets given, liabilities assumed and equity instruments issued,
plus the amount of any non-controlling interests in the acquiree
plus, if the business combination is achieved in stages, the fair
value of the existing equity interest in the acquiree. Contingent
consideration is included in cost at its acquisition date fair
value and, in the case of contingent consideration classified as a
financial liability, remeasured subsequently through profit or
loss. Direct costs of acquisition are recognised immediately as an
expense.
Goodwill is capitalised as an intangible asset with any
impairment in carrying value being charged to the consolidated
statement of comprehensive income. Where the fair value of
identifiable assets, liabilities and contingent liabilities exceed
the fair value of consideration paid, the excess is credited in
full to the consolidated statement of comprehensive income on the
acquisition date. Other intangible assets identified are amortised
over their useful economic lives.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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