RNS Number:6035H
Betcorp Limited
14 August 2006
Betcorp Limited
Monday 14 August 2006
AUDITED RESULTS FOR THE SIX MONTHS ENDED 2 JULY 2006
Betcorp Limited, a leading online gaming operator offering customers a seamless
range of sports betting, casino and poker products, is pleased to announce final
audited results for the six months ended 2 July 2006.
FINANCIAL HIGHLIGHTS - SIX MONTHS ENDED 2 JULY 2006
* Total gross revenue from players up 75% to US$22.0m (H1 2005: US$12.6m)
* Active customers during the period up 33% to 27,281 (H1 2005: 20,530)
* New funded players up 28% to 8,337 (H1 2005: 6,486)
* Profit before tax up 146% to US$4.6m (H1 2005: US$1.9m)
* Basic earnings per share up 113% to US$ 22.6 cents (H1 2005: US$10.6
cents)
* Change of year end from December to June. Proforma profit after tax for
the year ended 2 July 2006 of US$7.0m and proforma earnings per share of US$
35.1 cents
OPERATIONAL HIGHLIGHTS
* Continued growth in the company's three major income streams of sports,
poker and casino
* Launch of multi-currency European site in time for World Cup
* Successful integration of Oasis, an online sports book and casino,
acquired on 11 July 2006 and trading is matching expectations
* Telephone bets no longer accepted from US residents
Betcorp Chief Executive, Colin Walker said: "Betcorp's substantial increase in
profitability over the last six months is testament to the strength of the
Group's multi-product strategy and focus on attracting higher margin and lower
risk recreational customers. Betcorp continues to be highly cash generative and
plans to reduce the risk profile of the business by geographical expansion
outside North America."
14 August 2006
Enquiries:
Betcorp Limited
Colin Walker, Chief Executive Officer colin@betcorpplc.com
Charles Moore, Group Finance Director charlesm@betcorpplc.com
KBC Peel Hunt Ltd (Nominated Adviser and Broker)
Matt Goode matt.goode@kbcpeelhunt.com
Tel: +44 20 7418 8900
CPR Communications, Sydney (Investor Relations/Media - Australia)
Martin Cole m.cole@cprcomm.com.au
Tel: +61 2 8213 3082
College Hill Associates, London (Investor Relations/Media - UK)
Matthew Smallwood matthew.smallwood@collegehill.com
Tel: + 44 20 7457 2020
About Betcorp
Betcorp is an online gaming group offering customers a comprehensive range of
betting and gaming products. Customers can move seamlessly between Betcorp's
choice of casinos, sports betting and poker room. The Group's trading operation
is headquartered in Antigua, West Indies and its IT and marketing divisions are
based in Toronto, Canada. Betcorp is incorporated in Australia and holds a
gaming licence in Antigua and a bookmaker's permit in the UK. The Company's
shares are listed on both the Australian Stock Exchange and on the AIM market
of the London Stock Exchange under the symbol "BCL". Further details can be
found at the Company's website www.betcorp.com.au or www.betcorpplc.com.
Chairman's Statement
I am delighted to be able to report another period of progress for the Group
with substantial earnings growth. For the six months ended 2 July 2006, profits
after tax increased by 146% to $4.63m compared with $1.88m for the comparable
period in 2005 and earnings per share were up by 113% to 22.6 US$ cents per
share.
We are reporting on this 6 month transitional period as a result of the change
in the Company's financial year end from 31 December to 30 June. The next
statutory reporting period will be the year ending 1 July 2007.
London is the leading global market for shares in the online gaming sector and
in March 2006, Betcorp shares were admitted to trading on the AIM market of the
London Stock Exchange. Admission was followed by a share placing of 1.6m shares
at #2.25 (A$5.44) per share with institutional investors that raised US$5.5m net
of expenses.
It became quickly apparent that maintenance of a dual listing in Australia and
the UK for a company the size of Betcorp was not conducive to achieving a stable
market for the shares on either market and the Board concluded that the Company
should move towards a single listing in London.
Shareholders have been notified of the administrative arrangements that have
been put in place to ensure an orderly transition and to assist existing
shareholders to continue to trade their shares on AIM. The de-listing from ASX
is expected to be effective on 31 October 2006. The Board believes that this is
in the best long term interests of all shareholders.
The ASX de-listing will not change Betcorp's status as an Australian public
company and shareholder meetings will continue to be held in Australia. Should
dividends be declared in the future, these will be paid in the same manner as
any other Australian public company.
The funds raised in the AIM placing, together with cash generated from
operations during the first half of 2006, were utilised shortly after the period
end to acquire the business and assets of Oasis, a long established online
gaming operator based in Curacao, for a cash consideration of US$9.76m.
Since the period end, the online gaming sector has been impacted by legal and
regulatory developments in the United States, on which our Chief Executive
comments in his Review. In these difficult circumstances, I would like to place
on record our thanks for the continued commitment to the Company of the
executive management team.
The key challenge facing Betcorp in the current environment is to improve the
risk profile of the business and a number of new initiatives are being pursued
with this objective.
David Hudd
Chairman
14 August 2006
Chief Executive's Review
We are pleased to have achieved a substantial increase in profits in the six
months ended 2 July 2006 with a profit after tax of US$4.63m, compared with
US$1.88m for the first six months of 2005 and US$4.27m for the full calendar
year 2005. This performance confirms the strength of the Group's multi-product
strategy and its focus on attracting high margin recreational customers.
The statutory accounts report audited results for the six months ended 2 July
2006 with comparative figures for the year ended 1 January 2006. Presented below
is a table showing the audited income statement for the six months ended 2 July
2006 compared with the unaudited income statement for the six months ended 3
July 2005 and a proforma income statement for the year ended 2 July 2006.
Consolidated
Audited Unaudited Unaudited
Proforma
26 weeks 26 weeks 52 weeks
2 July 3 July 2 July
2006 2005 2006
US$000 US$000 US$000
Gross revenue from players 22,018 12,568 38,811
Costs directly associated with gross revenue from (3,369) (2,522) (6,529)
players
Net revenue from players 18,649 10,046 32,282
Other income 181 31 606
Advertising and marketing (7,264) (2,450) (13,142)
Operating expenses (6,581) (5,433) (12,065)
Profit / (loss) before depreciation, amortisation,
taxation and finance costs 4,985 2,194 7,681
Depreciation (318) (222) (617)
Amortisation of intangible assets (34) (13) (50)
Profit / (loss) before taxation and finance costs 4,633 1,959 7,014
Finance costs - (74) -
Profit / (loss) before taxation 4,633 1,885 7,014
Taxation - - -
Profit / (loss) after taxation attributable to members
of the parent entity 4,633 1,885 7,014
Basic earnings per share (US$ cents per share) 22.6 10.6 35.1
Diluted earnings per share (US$ cents per share) 22.1 10.4 34.5
Operating Review
The six months to 2 July 2006 returned significant increases across all key
performance indicators over the corresponding period in 2005.
Total turnover US$468m + 36%
Gross revenue from players US$22m + 75%
Profit after tax US$4.6m + 146%
Sports betting margin 6.72% + 63%
Active players 27,281 + 33%
The main contributor to the improved performance was the much improved trading
margin on sports betting. An excellent first quarter yielded a sports margin of
8.33%. In the second quarter, the margin moved back towards long term
expectation due, in part, to the greater proportion of baseball in the overall
mix. Continued restrictions on "wise" and knowledgeable players had an impact on
betting turnover but contributed to the achievement of a 6.72% margin for the
first half, compared to 4.13% in the first half of 2005.
We believe that the Company's current trading strategy is capable of delivering
margins above historical norms. The acquisitions of Sinsational Intertainment in
2005 and Oasis in 2006 have introduced higher yielding recreational clients,
which is contributing to these favourable trends.
In the casino business, clients are offered a range of different casino themes
in both instant play ("flash") and download versions and this has continued to
reap rewards with gross revenue from casino activity up by 103% on the first
half of 2005.
Poker revenues were $3.5m, up 446% on 2005, but we were adversely affected by
needing to return "rake" to clients to retain their business and increasing
customer acquisition costs are beginning to cause some concern.
Operating expenses increased by 21% compared with the first half of 2005,
despite a 36% increase in turnover and a 75% increase in gross revenues,
demonstrating the scalability of the business model and the benefits that accrue
from the Group's policy of rapid migration of acquired businesses onto a common
operating and back office platform.
In contrast, marketing expenses were up by $4.8m, reflecting much greater
activity now that all of the Group's products and systems are fully competitive.
A significant part of the growth resulted from the increase in gross trading
margin, resulting in higher payments to affiliates and white label partners.
However, only 48% of total marketing spend (down from 60% in 2005) is "hard"
cash cost. The remainder is "soft" cost reflecting player bonuses and rebates to
new and current players. These are posted to players' accounts and have turnover
conditions attached to them. They therefore encourage continued player activity.
Oasis Sportsbook and Casino
On 11 July 2006, we acquired the business of Oasis, a long established Curacao
based online sportsbook and casino, for a total outlay of US$9.76m payable in
cash and funded from existing resources. Oasis generated gross revenues of
US$7.4m in the year to 30 June 2006 and a profit before tax of US$1.3m.
The business was migrated onto the Group's IT platform immediately on
acquisition, and the elimination of overheads means that annual cost savings of
over US$1m are expected to be achieved. The existing offices of the business in
Curacao were left with the vendors and only two members of their staff have been
retained to fill current vacancies. Since the purchase, the business has
performed in line with expectations.
The rapid integration of acquired businesses remains a core competency of the
Group and results in the early realisation of cost synergies and the immediate
introduction of Betcorp controls and operating procedures. The integration of
Oasis has gone smoothly and we are on target to achieve the synergies announced
at the time of the deal.
Balance Sheet and Cash Flow
The Group generated profit before depreciation, amortisation, taxation and
finance costs, or "EBITDA" of just under US$5m during the six month period and
the AIM placing raised US$5.5m after expenses. Capital expenditure during the
period was US$377,000. The overall increase in net current assets was US$9.9m,
ending the period at US$11.4m.
The increase in cash balances was offset by a seasonal decrease of US$4.6m in
customer deposits between 1 January 2006 and 2 July 2006 resulting in cash
balances at the end of the period of US$14m.
US$9.76m of this was used to fund the Oasis acquisition after the period end.
Positive trading results in the first six weeks of the new year mean that
customer account balances and trade payables remain comfortably covered by cash
and payment processor receivables.
Regulatory Environment
In Spring 2006, two bills were introduced to the US legislative agenda by
Congressmen Goodlatte and Leach. These were merged into a single bill HR4411
that was passed by the House of Representatives on 11 July 2006. If passed by
the US Senate, HR4411 will update the wording of the 1961 Wire Act explicitly to
cover internet gambling and also to restrict the use of credit cards and other
payment mechanisms for internet gambling.
In July 2006, a legal action by the US Department of Justice (DoJ) involving the
founder and the CEO of a London listed online gaming operator, BetonSports Plc,
triggered substantial declines in share prices in the sector.
The Board, with the assistance of advisors with extensive experience of the US
legal environment, is reviewing all aspects of the Group's operations relative
to customers located in the USA, and taking steps to minimize legal risk
associated with the US market to the maximum extent practical.
As a result of this review process, the Board decided in July 2006 that the
Group should no longer accept telephone bets from customers located in the USA.
This initiative is likely to have an adverse effect on sports betting turnover
but will be partially offset by personnel and telecommunication cost reductions
and the migration of telephone activity to the internet. We anticipate that the
overall effect on profitability will not be material.
People
Over the last 18 months, management at the operational level has been
strengthened extensively in preparation for future Group development.
I am delighted to announce that Gabriel Heskin, the former Chief Operating
Officer of Sinsational Intertainment Inc, has taken over the role of General
Manager of our Antiguan operations and we also welcome Justin Gisz, an
Australian lawyer who joined in June 2006 as Group General Counsel.
Outlook
Betcorp has created a highly competent operational infrastructure on which to
expand into new geographic markets which, given the regulatory uncertainty in
North America, will be a priority for the next 12 months. The Group continues to
be highly cash generative, which will provide the catalyst for continued growth
in shareholder value.
Colin Walker
Chief Executive Officer
14 August 2006
Income Statement
For the six months ended 2 July 2006
Consolidated Company
Notes 26 weeks 52 weeks 26 weeks 52 weeks
2 July 1 January 2 July 1 January
2006 2006 2006 2006
US$000 US$000 US$000 US$000
Gross revenue from players 2 22,018 29,361 - -
Costs directly associated with (3,369) (5,682) - -
gross revenue from players
Net revenue from players 18,649 23,679 - -
Other income 3 181 456 214 230
Advertising and marketing (7,264) (8,328) - -
Operating expenses 4 (6,581) (10,917) (1,171) (1,510)
Profit/(loss) before depreciation,
amortisation, taxation and finance
costs 4,985 4,890 (957) (1,280)
Depreciation 7 (318) (521) (1) (1)
Amortisation of intangible assets 8 (34) (29) - -
Profit/(loss) before taxation and 4,633 4,340 (958) (1,281)
finance costs
Finance costs - (74) - -
Profit/(loss) before taxation 4,633 4,266 (958) (1,281)
Taxation 6 - - - -
Profit/(loss) after taxation
attributable
to members of the parent entity 4,633 4,266 (958) (1,281)
Basic earnings per share (US$ cents 9 22.6 23.4
per share)
Diluted earnings per share (US$ 9 22.1 23.4
cents per share)
Balance Sheet
as at 2 July 2006
Consolidated Company
Notes As at As at As at As at
2 July 1 January 2 July 1 January
2006 2006 2006 2006
US$000 US$000 US$000 US$000
Assets
Non-current assets
Plant and equipment 7 863 1,040 2 2
Intangible assets 8 39,440 39,248 - -
Other financial Assets (investments - - 21,952 21,952
on subsidiaries)
Receivables - - 15,810 7,288
Total non-current assets 40,303 40,288 37,764 29,242
Current assets
Other current assets 657 386 423 116
Receivables 5,390 6,296 126 34
Cash and cash equivalents 14,041 8,693 12 4,538
Total current assets 20,088 15,375 561 4,688
Total assets 60,391 55,663 38,325 33,930
Liabilities
Current liabilities
Trade and other payables 8,706 13,926 384 346
Net current assets 11,382 1,449 177 4,342
Total net assets 51,685 41,737 37,941 33,584
Equity
Issued capital 61,015 55,499 61,015 55,499
Profit and loss account (9,391) (14,024) (23,135) (22,177)
Share option reserve 423 262 423 262
Foreign currency translation reserve (362) - (362) -
Total equity 51,685 41,737 37,941 33,584
Cash Flow Statement
for the six months ended 2 July 2006
Consolidated Company
26 weeks 52 weeks 26 weeks 52 weeks
2 July 1 January 2 July 1 January
2006 2006 2006 2006
US$000 US$000 US$000 US$000
Cash flows from operating activities
Gross win from players 22,925 27,055 - -
Interest income received 217 102 216 90
Payments to suppliers and employees (22,934) (25,535) (1,736) (1,472)
Borrowing costs - (74) - -
Net cash flows from operating activities 208 1,548 (1,520) (1,382)
Cash flows from investing activities
Purchase of property, plant and equipment (151) (570) - -
Purchase of intangible fixed asset (226) - - -
Proceeds from disposal of fixed assets 1 - - -
Repayment/(advance) of loans from/to subsidiary - - (8,522) 1,762
Acquisition of subsidiary, net of cash acquired - (2,692) - (3,105)
Net cash flows used in investing activities (376) (3,262) (8,522) (1,343)
Cash flows from financing activities
Proceeds from issue of shares 6,240 3,664 6,240 3,664
Cost of shares issued (724) (224) (724) (224)
Net cash flows from financing activities 5,516 3,440 5,516 3,440
Net increase/(decrease) in cash and cash equivalents 5,348 1,726 (4,526) 715
Cash and cash equivalents at beginning of period 8,693 6,967 4,538 3,823
Cash and cash equivalents at end of period 14,041 8,693 12 4,538
Reconciliation of net cash flows from
operating activities with profit/(loss) after
taxation
Profit/(loss) after taxation attributable to members 4,633 4,266 (958) (1,281)
of the parent entity
Depreciation and amortization expense 352 550 1 1
Non-cash employee share expense 161 123 161 123
Loss on disposal of fixed assets 9 - - -
Foreign currency translation differences taken to (362) - (362) -
equity
Changes in assets and liabilities:
Decrease/(increase) in receivables 906 (2,306) (92) 66
Decrease/(increase) in prepayments (271) 126 (307) 29
(Decrease)/increase in payables (575) (3,284) 37 (320)
(Decrease)/increase in customer balance (4,645) 2,073 - -
Net cash provided by/(used in) operating activities 208 1,548 (1,520) (1,382)
1. Basis of Preparation
The financial report is a general purpose financial report, which has been
prepared in accordance with the requirements of the Corporations Act 2001 and
applicable Australian Accounting Standards. The financial report has been
prepared on an historical cost accruals basis.
On 31 March 2006, the Australian Securities and Investments Commission made an
order pursuant to subsection 340(1) of the Corporations Act 2001 ("Act")
relieving the Company from compliance with paragraph 323D(2)(b) of the Act for
the financial year beginning 1 January 2006 ("Relevant Financial Year"). The
Order facilitates the change of the Company's financial year end from 31
December to 30 June and allows a transitional financial year of six months to 30
June 2006 with each financial year thereafter being 12 months long and ending on
30 June. The transitional financial year of six months to 30 June 2006 is
referred to in the financial report as "the transitional six month reporting
period".
In December 2004 the Company adopted a "4-4-5" weekly accounting cycle, whereby
each quarter of the year is divided into three periods, consisting of two four
week periods and one five week period, with each week ending on Sunday to
coincide with the Company's sports based trading calendar. As a result, the
financial year 2005 was a 52 week period from 3 January 2005 to 1 January 2006,
and the transitional six month reporting period is the 26 week period from 2
January 2006 to 2 July 2006.
The financial report is presented in United States Dollars and all values are
rounded to the nearest thousand dollars ($'000) unless otherwise stated under
the option available to the company under ASIC Class Order 98/100. The company
is an entity to which the Class Order applies.
2. Turnover and Revenue
Consolidated Company
26 weeks 52 weeks 26 weeks 52 weeks
2 July 1 January 2 July 1 January
2006 2006 2006 2006
US$000 US$000 US$000 US$000
Turnover
Sportsbook 199,597 477,217 - -
Casino 264,894 344,201 - -
Betting turnover 464,491 821,418 - -
Poker 3,531 3,605 - -
Skill games 17 11 - -
Total turnover 468,039 825,034 - -
Gross revenue from players
Sportsbook 13,415 18,845 - -
Casino 5,055 6,900 - -
Betting gross revenue 18,470 25,745 - -
Poker 3,531 3,605 - -
Skill games 17 11 - -
Total gross revenue from players 22,018 29,361 - -
3 Other Income
Consolidated Company
26 weeks 52 weeks 26 weeks 52 weeks
2 July 1 January 2 July 1 January
2006 2006 2006 2006
US$000 US$000 US$000 US$000
Interest received 217 102 216 90
Foreign exchange (loss)/gain (36) 354 (2) 140
Total revenues from non-operating
activities 181 456 214 230
4 Operating Expenses
Consolidated Company
26 weeks 52 weeks 26 weeks 52 weeks
2 July 1 January 2 July 1 January
2006 2006 2006 2006
US$000 US$000 US$000 US$000
Wages and salaries 3,228 5,287 567 836
Professional fees 643 1,794 312 443
Communications 587 1,304 1 4
Other expenses 606 818 291 180
Offices and amenities 449 772 - 47
Bad & doubtful debts 671 441 - -
Operating lease rentals 227 378 - -
Share-based payments 161 123 - -
Net loss on disposal of plant and
equipment 9 - - -
6,581 10,917 1,171 1,510
5 Segment Information
The Group's principal revenue producing activities, wagering and gaming, are
located in a single geographic location, Antigua. Accordingly, the Group has
neither business segment nor geographical segment results to report.
6 Income Tax
Consolidated Company
26 weeks 52 weeks 26 weeks 52 weeks
2 July 1 January 2 July 1 January
2006 2006 2006 2006
US$000 US$000 US$000 US$000
The prima facie tax on profit/(loss) from ordinary
activities is reconciled
to the income tax provided in the accounts as
follows:
Profit/(loss) from ordinary activities before 4,633 4,266 (958) (1,281)
income tax
Prima facie tax on profit/(loss) from ordinary 1,390 1,280 (287) (384)
activities before income tax at 30%
Tax effect of non-assessable foreign profits (i) (1,677) (1,664) - -
(287) (384) (287) (384)
Future income tax not brought to account in (ii) 287 384 287 384
respect of tax losses
Income tax expense attributable to ordinary - - - -
activities
(i) Non-assessable foreign income relates to the profits generated by Betcorp's
100% owned subsidiaries, Tasman Gaming Inc and Sinsational Intertainment Inc in
Antigua. The foreign income is net of depreciation expense and other expenses.
(ii) As at 2 July 2006, the consolidated entity had not yet finalised the total
amount of income tax losses available to offset against future years' taxable
income.
Tax Status of Group
Dividends received by the Company from its wholly-owned overseas subsidiaries
will not give rise to future Australian income taxliabilities, based on existing
Australian tax law and the current tax status of the Company.
7 Plant and Equipment
Consolidated Company
Plant & Computer Total Plant & Computer Total
Equipment Equipment US$000 Equipment Equipment US$000
US$000 US$000 US$000 US$000
Cost
Opening balance - 3 January 2005 248 971 1,219 - 3 3
Assets acquired on acquisition 115 165 280 - - -
Additions 369 201 570 - - -
Closing balance - 1 January 2006 732 1,337 2,069 - 3 3
Accumulated depreciation
Opening balance - 3 January 2005 89 419 508 - - -
Charged in the year 120 401 521 - 1 1
Closing balance - 1 January 2006 209 820 1,029 - 1 1
Net book value as at 1 January 2006 523 517 1,040 - 2 2
Cost
Opening balance - 2 January 2006 732 1,337 2,069 - 3 3
Additions 23 128 151 - - -
Disposals (60) - (60) - - -
Closing balance - 2 July 2006 695 1,465 2,160 - 3 3
Accumulated depreciation
Opening balance - 2 January 2006 209 820 1,029 - - -
Charged in the six month period 146 172 318 - 1 1
Disposals (50) - (50) - - -
Closing balance - 2 July 2006 305 992 1,297 - 1 1
Net book value as at 2 July 2006 390 473 863 - 2 2
8 Intangible Assets
Consolidated Company
Brands and Proprietary Goodwill Total US$000
Databases Software US$000 US$000
US$000 US$000
Cost
Opening balance - 3 January 2005 4,387 - 28,290 32,677 -
Additions 1,473 95 5,032 6,600 -
Closing balance - 1 January 2006 5,860 95 33,322 39,277 -
Accumulated amortization
Opening balance - 3 January 2005
Charged in the year - 29 - 29 -
Closing balance - 1 January 2006 - 29 - 29 -
Net book value as at 1 January 5,860 66 33,322 39,248 -
Cost
Opening balance - 2 January 2006 5,860 95 33,322 39,277 -
Additions - 226 - 226 -
Closing balance - 2 July 2006 5,860 321 33,322 39,503 -
Accumulated amortization
Opening balance - 2 January 2006 - 29 - 29 -
Charged in the six month period - 34 - 34 -
Closing balance - 2 July 2006 - 63 - 63 -
Net book value as at 2 July 2006 5,860 258 33,322 39,440 -
9 Earnings Per Share
The calculation of basic earnings per share is based on the profit after
taxation attributable to members of the parent entity, and the weighted average
number of shares in issue during the period.
The calculation of diluted earnings per share is based on the profit after
taxation attributable to members of the parent entity, and the weighted average
number of shares in issue during the period, adjusted to assume the full issue
of shares options in issue, to the extent that they are dilutive.
Consolidated
26 weeks 52 weeks
2 July 1 January
US$000 US$000
Profit after taxation attributable to members of the parent entity 4,633 4,266
Number Number
Basic earnings per share
Weighted average number of shares in issue during the period 20,494,518 18,206,635
Diluted earnings per share
Weighted average number of shares in issue during the period adjusted 20,967,031 18,206,635
as above
This information is provided by RNS
The company news service from the London Stock Exchange
END
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