RNS Number:2936Y
TradingSports Exchange Systems PLC
5 May 2004
For Immediate Release Wednesday 5th May 2004
TradingSports Exchange Systems plc
Results for the period ended 31 December 2003
Placing of 1,000,000 Placing Shares at a price of 21.5p per share
TradingSports Exchange Systems plc ("TradingSports" or "the Company"), the
provider of person-to-person ("P2P") betting exchange software listed on the
Alternative Investment Market ("AIM"), announced today the Group's results for
the year ended 31 December 2003 and that it proposes to raise #215,000 by way of
a placing of 1,000,000 Placing Shares at a price of 21.5p per Placing Share. The
net proceeds of the Placing will strengthen the Company's balance sheet and
provide it with additional working capital to enable it to continue to deliver
on its existing business model, the focus of which has changed since the Company
floated and is explained in more detail below.
Highlights:
*Successful flotation in May 2003 raising #4m before expenses
*On an annualised pro forma basis, turnover for the period was #228,000
*Five contracts signed during the period including Betfanatic, Las Palmas,
WITEuro Sportsbook and Costa Rican International Sportsbook (CRIS),
consolidating TradingSports' position as one of the leading providers of P2P
betting exchange software
Post period events
*Appointment of Andrew Tottenham and Mark Banwell as Group Non-Executive
Chairman and Non-Executive Director respectively
*Two new contracts since the year end with Binexx.com (a division of City
Index) and Golanta Sports (a Cyprus based betting company)
*Well positioned to take advantage of future opportunities
*Ray Ranson to become a significant shareholder pursuant to Placing
Commenting on the results and the proposed Placing, Joe Tighe, Chief Executive
of TradingSports, said:
"The financial results achieved last year demonstrate the progress TradingSports
has made in terms of the long term contracts with some of the world's largest
online bookmakers but also highlights the slower adoption of person to person
betting in North America than anticipated. Meanwhile, since the year-end,
significant progress has been made in Europe with the signing of contracts with
City Index and Golanta Sports. In reaction to the market conditions,
TradingSports has altered its business model towards a broader revenue
generation platform, including a stronger emphasis on technical development,
implementation charges, and service fees."
"We are also delighted to welcome Ray Ranson as a significant shareholder in our
business. Mr Ranson is a very successful entrepreneur in his own right and we
look forward to working with him on a number of new business initiatives."
For further information:
TradingSports Exchange Systems plc Tel: 020 8780 6000
Joe Tighe, Chief Executive Officer
Mark Banwell, Director of Investor Relations
Buchanan Communications Tel: 020 7466 5000
Bobby Morse / James Strong
Attached Chairman's Statement
Consolidated profit and loss account
Consolidated balance sheet
Consolidated cashflow statement
Notes to the accounts
* The consolidated financial information for TradingSports presents
the results of TradingSports Exchange Systems plc from 3 February
2003, date of incorporation, and of TradingSports Limited from 19
May 2003, date of acquisition, to 31 December 2003.
CHAIRMAN'S STATEMENT
INTRODUCTION AND SUMMARY
Your Board announced today the Group's results for the year ended 31 December
2003 and that it proposes to raise #215,000 by way of a placing of 1,000,000
Placing Shares at a price of 21.5p per Placing Share. The net proceeds of the
Placing will strengthen the Company's balance sheet and provide it with
additional working capital to enable it to continue to deliver on its existing
business model, the focus of which has changed since the Company floated and is
explained in more detail below.
The Placing Shares will be entirely subscribed for by Ray Ranson. Mr. Ranson is
a well-known specialist in the area of sports financial products and is viewed
by the board as an important addition to the shareholding structure of
TradingSports and to the future prospects for the Company. The Placing Shares
will, when issued, rank pari passu with the Existing Shares.
BACKGROUND TO AND REASONS FOR THE PLACING
On 24 November 2003, the Company announced that implementation of some of its
larger contracts had been later than planned and that this would result in the
year-end sales' numbers falling below forecasts for the year ended 31 December
2003. The delays continued through to the end of the accounting period, although
I am very pleased to say that since then, we have been able to make several
positive announcements which I will discuss below.
However, delays in implementation have led to delays in achieving revenue
targets and the Directors therefore thought it prudent to undertake the Placing
to provide additional working capital for the next stage of the Company's
development, to implement and support recently announced contracts and to pursue
new opportunities.
RESULTS FOR THE PERIOD ENDED 31 DECEMBER 2003
The principal focus of the business over the period has been business
development and the implementation of existing contracts as well as educating
our clients on the rapidly emerging person-to-person betting market. During the
period, our fee earning client base consisted of signed contracts with eight
sportsbooks.
As previously announced to the market, the results were materially behind where
we expected them to be at the time of flotation and we will discuss this in the
'Outturn for 2003' paragraph below, where I will go into more detail about why
this was the case.
The consolidated financial information for TradingSports presents the results of
TradingSports Exchange Systems plc from 3 February 2003, date of incorporation,
and of TradingSports Limited from 19 May 2003, date of acquisition, to 31
December 2003.
Group turnover was #160,000 during this period and this resulted in a loss on
ordinary activities of just over #2.0 million, following expenses of #1.7
million and re-organisation costs of #485,000. The turnover was generated
through the implementation, operation and maintenance of our partners' P2P
betting exchanges.
OUTTURN FOR 2003
The outturn in 2003 was significantly affected by two major issues being poor
support from key partners and the fact that the Company outsourced business
development outside of the North American market to a third party who did not
deliver any significant contracts in any of the UK, Europe or Australasia, both
of which are discussed below.
PARTNER SUPPORT
The main reason for the revenue shortfall is that the Company did not receive
the level of support from some of its key partners and sportsbooks, not because
they do not believe in the exchange offering because the consensus is that the
market, as in the UK, will move that way, but more because the sportsbooks in
the Caribbean have not yet had their margins come under pressure from a
sophisticated exchange offering and until that happens they will not commit the
necessary support to it. However, while we believe in these existing contracts
and their inherent long-term capacity to generate substantial revenue.
OUTSOURCED BUSINESS DEVELOPMENT
At the time of the flotation, the Company had already secured several long term
and exclusive agreements with sportsbooks in the North American market. The
focus was therefore to make sure that these contracts were implemented and
supported and, as a result, the Company outsourced UK, European and Australasian
business development to a third party connected to the Company. The forecasts at
the time of the IPO allowed for several of such books to be signed up to the
TradingSports exchange and this has not happened do to regulatory uncertainty
amongst the core target market.
As a result, this function has been brought back 'in house', the results of
which have been announced recently to the market in the form of the contracts
with City Index and Golanta and we hope to follow these with more announcements
in the near future.
STRATEGY
Whilst we have achieved our initial aims of signing up some of the world's
largest sports gaming companies to long term contracts, we have found ourselves
ahead of the market curve, especially in US facing jurisdictions where the take
up of P2P betting has been much slower than predicted. It was the Board's view
that the use of betting exchanges would follow the rates of take up experienced
in the UK and this did not materialise resulting in the Company's accelerated
secondary aims of moving into parallel markets in the UK as well as expanding
into Europe and Australasia.
We have addressed what went wrong in 2003 above and, whilst disappointing, 2003
was still a year of dramatic change and progress for the Group and this will
form the basis of the strategy in 2004.
BUSINESS DEVELOPMENT
Several new clients were signed up in 2003 and whilst these have taken longer
than expected to start generating significant revenues for the business, they
clearly play an important role in terms of the global sports betting market.
The move into parallel markets and Europe was therefore particularly important
and 2004 has already been a busy year from that point of view.
In March 2004, the Company launched Binexx.com, which specialises in providing
the ultimate exchange for binary betting on financial markets. Binexx.com is a
division of City Index, the company that pioneered the modern development of
spread betting.
Additionally, in March 2004, we were delighted to announce our expansion into
the European market through a signed contract with Golanta Sports ("Golanta").
The launch of Golanta's interactive P2P exchange will enable bettors to place
in-running bets on a wide range of European, UK and Turkish sporting events to
customers worldwide and it is expected that this will be launched in time for
Euro 2004. Golanta is the sister company to Falconforce Ltd, the fast growing UK
company that owns Wilson Sports and Racing, which operates an international
telephone betting call centre and 20 betting shops in London and the South-East
of England.
NEW CONTRACT STRUCTURE
In recognition of shortcomings in the commercial terms set out in our initial
contracts, the Company has adopted several new elements. Partners are required
to pay monthly minimum fees for the services provided by TradingSports, thus
encouraging support and active promotion of the exchange. Additionally,
development fees have been adjusted to more accurately reflect the effort
required by TradingSports staff and also to clarify the interest of potential
partner groups.
As a result of the changes above the Company has begun to cover a significant
portion of the running costs associated with the exchange service. The Board
believes that this commercial structure will ensure that all new exchanges are
properly supported by partners, as well as giving the Company better visibility
on monthly earnings.
IMPROVED APPLICATIONS
The creation of an exchange serving several large sportsbooks simultaneously
requires technology that is far more advanced than that found on individual
gambling sites in terms of scalability, reliability and security. During this
period we have enhanced our technology platform with a new redundancy structure
through a second hosting facility and delivered new features and functionality
to our market leading technology platform.
REDUCED COST BASE
The Company is in the process of closing its Putney offices in order to
consolidate all operations in Glasgow. There will remain a small London office
to support sales and marketing but costs will be minimal.
STRATEGIC CHANGES
The core focus of TradingSports has shifted to the UK and European based betting
industry while other jurisdictions continue to be monitored closely. Additional
exchange products are also being pursued which allow the Company to leverage its
substantial technical infrastructure.
As the legal landscape clarifies itself to that of governmental support for
betting exchanges in the UK, TradingSports position in the market is becoming
more solidified. As an experienced technology solution provider for exchange
betting maintaining a high degree of cost effectiveness, the Company will look
to capitalise on the growing need for traditional bookmakers to offer their
clients an exchange betting product along side their current offerings.
The Company is still at an early stage in its development and, with the growth
in our turnover and the strengthening of our partner base, it is the Board's
belief that there is an excellent opportunity to build a rapidly growing
business-to-business exchange service. By drawing together a number of both
smaller and larger operations into one pooled liquidity group we are able to
take advantage of economies of scale and provide increased value for our
partners and shareholders.
PARTNERSHIPS AND STAFF
The strength of our business model lies in our strategy of continuing to focus
on business development and implementation within the key betting markets.
We place great emphasis on the ability, aptitude and attitude of all our staff,
and seek to enhance our level of service through providing on-going training and
management support at all levels. This, combined with our company-wide share
option scheme and good remuneration packages, assists us in recruiting and
retaining high calibre staff.
A strong working relationship with our partners remains a high priority for the
Company. The combination of attention to the needs of our staff and partners has
ensured that we meet and regularly exceed our clients' expectations and often
become an integral part of their operations.
TRADING AND PROSPECTS
Trading for the period has seen steady growth for the Company and a total of
#102 million of bets (money at risk) has been matched in the exchange on a pro
forma basis for the year to 31 December 2003. Whilst the underlying growth of
the business in terms of client numbers, number of bets placed, and overall
revenue continues to rise, client marketing campaigns and end-user education
initiatives remain challenging areas.
These areas are continually being addressed through training programmes and
support designed to assist our clients with their marketing endeavours and
educate them on how to use the exchange system most effectively.
The current year has begun well for the Company with the signing of new
contracts with Binexx.com and Golanta Sports. The Directors believe that other
sportsbooks with which the Company has existing agreements will be increasing
their offering to their customers over the next few months and that the
additional liquidity expected to result from this will strengthen the Company's
offering. We are constantly seeking new business opportunities in order to
further consolidate our position as a market leader.
OUTLOOK
Our strategy of developing the business through the growth of contractual
arrangements with major online betting companies and investing in the quality of
our technology platform continues to drive TradingSports' development as a
provider of P2P betting exchange systems with high-quality ongoing revenue
streams and a fixed cost base from which to deliver rapid growth in earnings for
our shareholders.
I am pleased to report that our first year since flotation has shown steady
progress. In a fragmented industry, there are a number of real opportunities to
add to our potential for earnings growth and I look forward during the coming
year to working with our new partners, Binexx.com (a division of City Index) and
Golanta Sport, as well as further developing relationships with an expanding
base of partners.
Board Changes
TradingSports welcomes Andrew Tottenham as its Non Executive Chairman and also
Mark Banwell who replaces Andrew White as a Non Executive Director.
Details of the Placing
As stated above, the Company proposes to raise #215,000 through the issue of
1,000,000 Placing Shares at the closing middle market price of 21.5p per
Existing Share on 1 May 2004. The Placing Shares represent 9.5% of the existing,
and 8.7% of the enlarged, issued share capital.
Application will be made to the London Stock Exchange for the Placing Shares to
be admitted to trading on AIM. It is expected that such Admission will occur on
Wednesday 12 May 2004.
Yours faithfully
Andrew Tottenham
Chairman
CONSOLIDATED PROFIT AND LOSS ACCOUNT for the period ended 31 DECEMBER 2003
Note 2003
#
Turnover 160,536
Cost of sales (42,819)
--------
Gross profit 117,717
Administrative expenses (1,735,631)
---------
Operating loss (1,617,914)
Reorganisation costs 2 (485,239)
---------
Loss on ordinary activities before interest and (2,103,153)
taxation
Interest receivable 39,475
Interest payable (3,624)
---------
Loss on ordinary activities before taxation (2,067,302)
Tax on loss on ordinary activities -
---------
Retained loss for the financial period (2,067,302)
=========
Loss per ordinary share
Basic loss per share 3 29 pence
=========
All of the group's operations were acquired during the period and are classed as
continuing. There were no gains or losses in the period other than those
included in the above profit and loss account.
CONSOLIDATED BALANCE SHEET as at 31 DECEMBER 2003
2003
#
Fixed assets
Tangible assets 1,059,375
Current assets
Debtors 286,309
Cash at bank 1,233,062
---------
1,519,371
Creditors: amounts falling due within one year (559,607)
---------
Net current assets 959,764
---------
Net assets 2,019,139
=========
Capital and reserves
Called up share capital 1,049,426
Share premium account 3,037,015
Profit and loss account (2,067,302)
---------
Shareholders' funds 2,019,139
=========
CONSOLIDATED CASH FLOW STATEMENT for the period ended 31 DECEMBER 2003
2003
#
Net cash outflow from operating activities (2,283,457)
---------
Returns on investment and servicing of finance
Interest received 39,475
Interest paid (3,624)
---------
Net cash inflow from returns on investment
and servicing of finance 35,851
---------
Capital expenditure
Payments to acquire tangible fixed assets (40,824)
---------
Acquisitions and disposals
Acquisition of subsidiary (1)
Disposal of subsidiary 1
Net cash acquired with subsidiary 136,651
---------
Net cash inflow from acquisitions and disposals 136,651
---------
Net cash outflow before financing (2,151,779)
---------
Financing
Issue of ordinary share capital 4,000,000
Cost of share issue (615,159)
---------
Net cash inflow from financing 3,384,841
---------
Increase in cash in the period 1,233,062
=========
NOTES TO THE PRELIMINARY ANNOUNCEMENT OF RESULTS FOR THE PERIOD ENDED
31 DECEMBER 2003
Notes:
1. Basis of Preparation
TradingSports Exchange Systems plc was incorporated on 3 February 2003. On 19
May 2003 the Company acquired the entire issued share capital of TradingSports
Holdings SAH from former shareholders of TradingSports Holdings SAH in return
for the issue of 7,016,000 shares. Subsequently the Company acquired the entire
issued share capital of TradingSports Limited from TradingSports Holdings SAH
for #1 (being the fair value thereof). After conclusion of the acquisition of
TradingSports Limited the Company disposed of its interest in TradingSports
Holdings SAH to an independent third party for an amount of #1 (being the fair
value thereof), leaving TradingSports Limited as the sole wholly owned
subsidiary of the Company.
The consolidated financial information for TradingSports Exchange Systems plc
presents the results of TradingSports Exchange Systems plc from 3 February 2003,
date of incorporation, and of TradingSports Limited from 19 May 2003, date of
acquisition, to 31 December 2003.
The financial information set out above does not constitute the Company's
statutory accounts for the period ended 31 December 2003 but is derived from
these accounts. Statutory accounts for the period ended 31 December 2003 will be
delivered to the Registrar of Companies in England and Wales following the
Company's annual general meeting.
2. Reorganisation costs
These costs arose entirely as the result of the corporate transactions that took
place on 19 May 2003 as described in note 1 above and did not result in any cash
out flow.
3. Loss per ordinary share
The basic loss per share of 29 pence is based upon a loss of #2,067,302 and the
weighted average number of shares ranking for dividend during the period of
7,070,529.
4. Published accounts
Copies of the published accounts of the Company will be sent in due course to
all shareholders and will be available from the offices of Evolution Beeson
Gregory at 100 Wood Street, London, EC2V 7AN.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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