RNS Number:4733A
Gamingking PLC
19 July 2007
GAMINGKING PLC
PRELIMINARY FINAL RESULTS
*Turnover #5.1m
*EBITDA reaches #0.5m
*Full-year profit from operations despite interim loss
*Completion of two-year vending terminal investment programme
*Acquisition in the North-East completed within the year
*Successful new product trials in club market
Chairman's Statement
The market conditions to which the Group has been exposed during the year mirror
those experienced by the majority of the UK retail leisure sector.
Sales in the first half of the year were maintained at the previous year's
levels, but third quarter sales were lower year-on-year, as disclosed in our
February trading statement.
The Group's management attempted to address this through a restructuring of the
sales team including the addition of a national sales manager, further telesales
recruitment and an overhaul of our promotional mailing activity. Fourth quarter
sales subsequently recovered to very nearly match previous year's levels.
In addition, and following the loss announced in the first half of the year, the
Board took steps to reduce overheads where possible. The benefits of this are
evident in the second half of 2006/07 with a profit before tax in the six month
period of #69,000 despite reduced sales, against a comparative figure of #15,000
for 2005/06.
In spite of the sales shortfall, full year EBITDA exceeded #500,000 for the
first time in the Company's history (calculated as profit from operations of
#60,000 plus depreciation and amortisation of #449,000).
The effective rate of taxation in the year is 154%. This is principally due to
non tax deductible expenses and underprovisions in the prior year.
As disclosed in our interim statement, capital expenditure in the first half of
the year was #303,000; this reduced to #147,000 in the second six months. The
high level of capital spend in the last 24 months has increased the depreciation
charge in our accounts from #360,000 in 2005/06 to #428,000 in 2006/07;
providing a major contributor to the reduction in pre-tax profit for the year.
The vast majority of this spend relates to new lottery machines, in order both
to upgrade existing sites and expand into new ones, bringing expenditure on
these assets to over #700,000 in the past two years. This investment programme
has been fully funded from free cash flow over the past two years. The Board
anticipates that the requirement for capital expenditure on our existing range
of lottery machines will reduce during 2007/08, still allowing for investment in
a range of new products and markets.
As a point of interest, during the twelve months to 30 April 2007, consumer
spend through Group-owned machines was #27,900,000, contributing profits of
#5,700,000 to the non-commercial organisations in whose premises they are
placed.
We continue to exercise caution in relation to cash management. We began the
process of repaying the loan taken out in 2005, reducing the balance outstanding
by #160,000 over the course of the year. Both debtors and creditors also reduced
over the twelve month period, the reduction in debtors being due to the
introduction of improved credit control procedures coupled to some good work
from our finance team.
Acquisitions
We completed a small but strategically important acquisition during March 2007,
buying the club and wholesale supply business of Playprint Limited in the
North-East of England.
The acquisition of a geographically concentrated customer base in the North-East
allows us to consolidate this operation with that of Independent Leisure
Supplies, acquired in November 2005 and trading in the same area. The customer
bases of both companies on acquisition showed relatively little penetration of
our key lottery product lines and offered us a substantial cross-selling
opportunity which has been enthusiastically pursued by the transferring staff
from both companies.
Products and Product Development
The Group continues to develop a number of new initiatives and product concepts.
All of these have been the subject of updates in my previous reports, and I feel
that it is useful to continue this trend.
The Reel Winner
It is the Board's view that this machine has a great deal of potential. It is a
lottery machine housed within a converted retro-style fruit machine cabinet.
At the time of writing the regime under which the machine will operate,
following the implementation of the new Gambling Act on 1 September 2007, is
still unclear. The DCMS introduced a new category of machine (B3A) in June 2007
specifically to cover electronic lottery-based machines. These will be allowed
to operate only in registered members' clubs, and will be subject to gaming
machine regulations and specific stake/prize limits. We are continuing our
dialogue with the DCMS and Gambling Commission in order to ascertain exactly how
the Reel Winner fits in to the new regulatory framework.
In view of this uncertainty, we have taken a cautious approach with the scale of
our trials. Results so far have been encouraging with around 50 machines in the
field producing average revenues in excess of those normally achieved with our
traditional ticket-based lottery machines. The machine has also proven less
costly to maintain and operate.
The Board continues to monitor the trial closely, and will continue to assess
the best way forward as the statutory regulations become clearer.
Club View Network
The Club View Network project, which provides an online presence and associated
services to the registered club market, has proven difficult to introduce and
grow.
Where potential customers have been shown the concept it has generally been very
well received. However the actual process of securing a subscription and the
subsequent site setup is costly, time-consuming, and requires expensive
third-party support.
The project has produced little revenue during 2006/07, and requires significant
additional investment to complete the next phase of its development. The board
does not consider this project to be commercially viable in its current form,
but will continue to explore its potential future development.
Your "Local" Lottery
This project is designed to benefit from the opportunities under the new
Gambling Act for the sale of lottery tickets from machines in pubs. Hitherto,
legislation has required some form of human intervention in the sales process of
lottery tickets; a requirement removed with effect from 1 September 2007.
At the time of our interim statement, we were seeking potential site partners
for the trial of a bar-top dispenser operated by serving staff to trial the
concept of ticket-based lotteries in pubs. Potential problems with cash handling
and accounting were the main reasons cited for a failure to find suitable,
willing sites.
We have therefore developed a new wall-mounted automatic ticket vending machine
specifically for the pub market. It is our intention to start trials on 1
September, the earliest date possible under the new legislation, using this new
machine, and a pub-specific ticket range (including our Coronation Street
branded ticket). Lotteryking Limited will operate these lotteries in conjunction
with another of our subsidiaries, Creative Lotteries Limited, which holds an
External Lottery Manager's certificate.
We believe that the pub market, comprising over 50,000 locations in England and
Wales, offers a significant growth opportunity for the Company, for the
charities and societies which would benefit from this new fundraising stream,
and finally for the pubs themselves for whom this might prove to be a valuable
revenue source following the introduction of the smoking ban in July 2007.
It should also be noted that the new legislation does not restrict the placement
of lottery machines to pubs and licensed premises, and the Board is continuing
to assess the suitability of other potential site types.
Prospects
There are potential threats and opportunities from the new Gaming Act. Your
board is actively preparing for those opportunities and, through our dialogue
with the DCMS and the Gambling Commission, we feel we are well placed to take
positive action to best operate in the new gaming environment. We are also aware
that competition for customers in our traditional markets will continue to be
fierce.
We will monitor carefully the effects of the smoking ban in England during the
course of the new financial year. Early data from Wales does not indicate a
measurable adverse effect on our sales. However, we are mindful of reports from
Scotland (particularly from bingo operators) which suggest that attendances and
buying patterns have been significantly affected.
I believe that the changes made in the last twelve months have made the Company
stronger and more able to adapt quickly to changes in the market.
The Board will continue to push for sales growth whilst controlling costs in an
effort to improve profitability.
The Board will also work to balance the need for capital investment in new and
existing projects with the need for financial prudence and security.
Finally, the Board will work to investigate, assess and develop new business
opportunities that it believes will deliver positive future results for
shareholders.
Douglas Yates
Chairman
18 July 2007
Consolidated income statement
For the year ended 30 April 2007
2007 2006
#000 #000
----------- ----------
Revenue 5,131 5,287
Cost of sales (2,000) (2,171)
----------- ----------
Gross profit 3,131 3,116
Administrative expenses (3,071) (3,004)
----------- ----------
Profit from operations 60 112
Finance costs (61) (61)
Investment income 12 12
----------- ----------
Profit before taxation 11 63
Income tax expense (17) (12)
----------- ----------
(Loss)/profit for the year (6) 51
----------- ----------
Earnings per share (0.002)p 0.017p
Basic (loss)/earnings per share
----------- ----------
Diluted (loss)/earnings per share (0.002)p 0.017p
----------- ----------
Consolidated balance sheet
As at 30 April 2007
2007 2006
#000 #000
Assets
Non-current assets
Intangible fixed assets 1,338 1,339
Property, plant and equipment 1,241 1,223
Deferred tax assets 27 39
2,606 2,601
Current assets
Inventories 431 426
Receivables and prepayments 741 835
Cash and cash equivalents 392 613
1,564 1,874
Total assets 4,170 4,475
Liabilities
Non-current liabilities
Bank Loan 480 640
Hire purchase 4 9
484 649
Current liabilities
Bank loan 160 160
Hire purchase 5 4
Trade and other payables 898 988
------------- ------------
1,063 1,152
Total liabilities 1,547 1,801
Net assets 2,623 2,674
Equity attributable to equity holders of the parent
Share capital 2,907 2,907
Share premium 173 173
Merger reserve 1,391 1,391
Retained earnings (1,848) (1,797)
Total equity 2,623 2,674
Consolidated cash flow statement
For the year ended 30 April 2007
2007 2006
#000 #000
Operating activities
Results for the period before tax 11 63
Depreciation and amortisation 449 381
Equity settled share options (45) 22
Loss on disposal of property, plant and 12 17
equipment
Interest paid 61 61
Interest received (12) (12)
Decrease/(increase) in inventories 40 (10)
Decrease in receivables 94 22
(Decrease)/increase in trade payables and
other (97) 124
liabilities
Corporation tax paid - (33)
---------- --------
Net cash from operating activities 513 635
Investing activities
Additions to property plant and equipment (450) (343)
Interest received 12 12
Purchase of businesses (75) (913)
---------- --------
Net cash from investing activities (513) (1,244)
Financing activities
Increase/(decrease) in bank loans (160) 800
Interest paid (61) (61)
---------- --------
Net cash from financing activities (221) 739
Cash and cash equivalents at the beginning 613 483
of the period
Net (decrease)/increase in cash and cash (221) 130
equivalents
---------- --------
Cash and cash equivalents at end of the 392 613
year ---------- --------
Consolidated statement of changes in equity
For the year ended 30 April 2007
Share Share Merger Retained Total
Capital Premium Reserve Earnings Equity
#000 #000 #000 #000 #000
Balance 1 May
2005 2,661 173 1,084 (1,870) 2,048
Profit for the
year - - - 51 51
Shares issued 246 - 307 - 553
Employee share
based
compensation - - - 22 22
------- -------- ------- ------- --------
Balance at 30
April 2006 and
1 May 2006 2,907 173 1,391 (1,797) 2,674
Loss for the
year - - - (6) (6)
Employee share
based
compensation - - - (45) (45)
------- -------- ------- ------- --------
Balance at 30
April 2007 2,907 173 1,391 (1,848) 2,623
------- -------- ------- ------- --------
Presentation of financial statements
The financial statements have been prepared in accordance with International
Financial Reporting Standards (IFRS) as adopted by the EU and as developed and
published by the International Accounting Standards Board (IASB).
Profit from Operations
2007 2006
#000 #000
Profit from operations has been arrived at after charging/
(crediting):
Depreciation of property, plant and equipment 424 356
owned 4 4
hire purchase 21 21
Amortisation of intangibles 143 122
Property lease charges 81 71
Car lease rentals 7 5
Hire of plant and machinery 12 17
Loss on disposal of property, plant and equipment 16 24
Research and development costs (45) 22
Share and share option costs
Auditor's remuneration:
Audit services - audit fees to Company's auditor
--------- ---------
for audit of the Group's annual accounts 19 19
Audit of IFRS transition - 18
Other services (see below) 26 25
--------- ---------
Auditor's remuneration for other services is analysed below. 2007 2006
#000 #000
Fees payable to the Company's auditor for the audit
of Company's subsidiaries pursuant to legislation 14 13
Other services pursuant to legislation 7 7
Corporation tax services 5 5
--------- ---------
26 25
--------- ---------
Investment income 2007 2006
#000 #000
Interest on bank deposits 12 12
--------- ---------
Income tax expense 2007 2006
#000 #000
--------- ---------
UK corporation tax at 19% (2006: 19%) and total current tax - (16)
Adjustment in respect of prior periods 5 -
Deferred tax 12 28
--------- ---------
Tax on profit on ordinary activities 17 12
--------- ---------
The tax assessed for the period is different from the standard rate of
corporation tax in the UK at 19% (2006: 19%). The differences are explained as
follows:
2007 2006
#000 #000
Profit before taxation 11 63
Profit before taxation multiplied by the standard rate of 2 12
corporation tax in the UK of 19% (2006: 19%)
Effect of:
Adjustment for non-deductible expenses
--------- ---------
relating to impairment and amortisation 3 7
other non-deductible expenses 7 3
Utilisation of tax losses not previously recognised - (15)
Prior year adjustment 5 -
Other - 5
--------- ---------
Tax on profit on ordinary activities 17 12
Unrelieved tax losses of #280,099 (2006: #190,000) remain available to offset
against future taxable trading profits. In addition the Group has capital losses
of #3,107,000 (2006: #3,107,000), which can be offset against future capital
gains. A resulting deferred tax asset of #590,000 (2006: #626,430) has not been
recognised.
Earnings per share
The calculation of the basic earnings per share is based on the earnings
attributable to ordinary shareholders divided by the weighted average number of
shares in issue during the year.
The calculation of diluted earnings per share is based on the basic earnings per
share, adjusted to allow for the issue of shares, on the assumed conversion of
all dilutive options and other dilutive potential ordinary shares.
Reconciliations of the earnings and weighted average number of shares used in
the calculations are set out below. Options are not considered to have any
dilutive effect as the options are under water.
Loss 2007 Weighted Per Earnings 2006 Weighted Per
average number Share average number Share
of shares amount of shares amount
pence pence
#000 #000
Basic (loss)
/earnings
per share
Earnings
attributable
to
ordinary
shareholders (6) 290,361,210 (0.002) 51 290,361,210 0.017
Dilutive
effect of
securities
Options - 2,680,332
Diluted
(loss)/
earnings (6) 290,361,210 (0.002) 51 293,041,542 0.017
per share
The preliminary statement of results has been reviewed and agreed with the
Company's auditor, Grant Thornton UK LLP, who have indicated that they will be
giving an unqualified opinion in their report on the statutory financial
statements.
Copies of the annual report and consolidated financial statements for the year
ended 30 April 2007 will be sent to shareholders in due course. Further copies
will be available from the Company's offices at Cedar House, 56 Peregrine Road,
Hainault, Essex IG6 3SZ. They will also be available to download from the
Company's website at www.gamingking.co.uk.
For further information contact:
Sarah Jacobs Seymour Pierce 020 7107 8008
Mark White Gamingking plc 01442 255555
This information is provided by RNS
The company news service from the London Stock Exchange
END
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