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Gaming Realms PLC - Interim Results

RNS Number : 2784Y
Gaming Realms PLC
08 September 2020
 

Gaming Realms plc

 

(the "Company" or the "Group")

 

Interim Results

 

Revenue growth of 66%

High margin revenue growth resulting in significant operational leverage - adjusted EBITDA growing from £(0.1)m to £1.24m
 

 

Gaming Realms plc (AIM: GMR) is pleased to announce its interim results for the six months to 30 June 2020 (the "Period" or "H1'20").

 

The Company grew revenues 66% from £3.1m in H1'19 to £5.2m in H1'20. The Group's revenues generate high margins, and in combination with a relatively stable fixed cost base, resulted in Adjusted EBITDA growing from £(0.1)m to £1.24m. Adjusted EBITDA margin for the Period was 23.9%.

 

About Gaming Realms

 

Introduction

 

Gaming Realms is a developer and licensor of award-winning real money games. It is the owner of Slingo®, a highly popular and unique game genre which combines elements of slot, bingo and table gameplay. In a highly crowded online casino games market (with most operators having hundreds of games on their sites), it is apparent that Slingo games are able to get to the forefront of players attention, through its unique brand and format.

 

The Company's real money Slingo games are licensed by some of the biggest online gaming operators in the world, including DraftKings, Sky Betting & Gaming and GVC ("Operators"). The games are primarily distributed to these Operators, via global distribution partners such as Scientific Games and Relax Gaming ("Distributors") using the Company's proprietary Remote Game Server ("RGS") platform.

 

In addition to licensing its real money games, the Company also generates revenue from licensing the Slingo brand/IP to adjacent markets (e.g. lottery scratch cards), and from publishing its Slingo games in the social casino market.

 

The Company has an experienced team of 62 employees, based in London, New Jersey and Vancouver Island, who are focused on increasing distribution, the development of new games and the RGS.

 

Markets - large and growing

 

The Company's games are distributed globally. In H1'20, 56% of revenues were generated in the US with the balance generated in other markets. The international online casino market is a large and high growth market, having grown at a compound rate of 11% over the last five years and today is worth $17.2bn. The newly regulated US online gaming market presents a significant opportunity for the Company going forward, and is expected to grow at a compound rate of 17% from 2020 to 2025, expected to be worth $6.1bn by 2025. The Company already licenses its games in the regulated New Jersey market, which, year-on-year grew 94.7% with the Company maintaining its market share of 3.5% of total gross gaming revenues. Subject to regulatory approvals, the Company expects to be licensing its games in Pennsylvania by the start of 2021, followed by Michigan and further states thereafter as and when they regulate.

 

Route to market - strong relationships and scalable

 

The Company's strong relationships with Distributors and Operators has been key to unlocking new markets and to further penetrate existing markets. The Company's business model of primarily using Distributors to access Operators, and Operators to access end players, is highly scalable - as demonstrated by the financial performance in the Period, during which the Company has been able to grow revenues with little additional variable cost, resulting in significant operational leverage.

 

Gaming Realms also has strong relationships with consumer brand owners such as Hasbro and Endemol, where the Company has created unique Slingo games - such has Slingo Monopoly and Slingo Deal or No Deal respectively. This product innovation shows how Slingo continues to be very popular with players.

 

Growth strategy

 

The Company has clear and attainable growth opportunities:

 

·      Expanding internationally - specifically focusing on newly regulated US markets such as Pennsylvania and Michigan;

·      Adding new Distributors, Operators and IP licensees ("Customers"); and

·      Further penetrating existing Customers, primarily through continuing to extend our game portfolio.

 

 

 

Financial highlights for the Period:

 

 

H1 2020

H1 2019 *

 Movement

 

 £m

 £m

 %

 Revenue - Licensing

3.4

1.7

104%

 Revenue - Social

1.8

1.4

29%

 Revenue - Other

0.0

0.1

(97%)

 Total

5.2

3.1

66%

 

 

 

 

Adjusted EBITDA1[1]

1.24

(0.1)

 

 

 

 

 

* H1/19 excludes RMG segment classified as discontinued operations (see note 11)

 

 

·    Licensing revenue grew 104% to £3.4m (H1'19: £1.7m) due to an increase in distribution and an expanded games portfolio;

·     Social revenue increased 29% to £1.8m (H1'19: £1.4m) due to an increase in new Slingo content being produced and also improved player management and new player engagement features;

·    Revenue growth has benefitted from the effects of the COVID-19 lockdown, however, the Company has maintained similar levels of growth post Period-end, giving the Board confidence in the future performance of the Company; and

·      Adjusted EBITDA for continuing operations increased to £1.24m (H1'19: Loss of £0.1m) due to the high margin nature of Licensing and the relatively stable fixed cost base, resulting in significant operational leverage being achieved.

 

Operational highlights:  

International expansion and increased distribution:

·     Went live with five tier-1 Operators: Gamesys, Sky Betting & Gaming, 888 Casino in the UK, DraftKings in New Jersey, US, and Caliente in Mexico;

·      Filed for game content supplier licence in Pennsylvania.

 

Extending game portfolio:

·    Released four new games into the market, including Slingo Centurion in partnership with Inspired Entertainment. The Group now has 40 games in its portfolio (Dec'19: 34 games).

 

 

Post-Period end trading:

 

Financial highlights:

 

·      Licensing revenue increased 140% in the two months post Period-end compared to the same period in 2019;

·      Social revenue increased 56% in the two months post Period-end compared to the same period in 2019;

·      Cash balance of £1.9m as at 31 August 2020; and

·      The Board expects FY20 to be cash flow positive as a result of high margin growth offsetting development costs spent on new games and the RGS platform.

 

 

Operational highlights:

 

International expansion and increased distribution:

·      Live with three new Operators (total 53); including Jumpman Gaming, White Hat Gaming and MrQ;

·      Distribution deal signed with Oryx Gaming a major European games distributor; and

·      Direct integration and expanded deal in US with Rush Street Interactive.

 

Extending game portfolio:

·      Release of two new Slingo games

 

Outlook for FY20:

Gaming Realms has made considerable progress during the first half of the year in delivering on its long-term growth strategy of developing and licensing games using its proprietary Slingo IP. The Group added four new games to its Slingo Originals portfolio, taking the total number of games to 40. This momentum is expected to continue into the second half with the roll-out of additional proprietary content to take advantage of an increasing number of players globally.

The Company has strategically expanded its network of distribution partners in order to bring its Slingo Originals content to a greater international audience. Recent partnership agreements with DraftKings and Oryx Gaming have consolidated and expanded Gaming Realms' presence in the US and Europe respectively, and the business continues to increase its US footprint with planned launches in Pennsylvania and Michigan over the next 18 months. The Group will make further license applications in the US as more states move to regulate online casinos.

As Gaming Realms' investment in game development and licensing continues to yield strong growth, the Company expects trading for FY20 to be in line with market expectations. The Company enters H2'20 in a strong position and will be updating shareholders on its progress in due course.

 

Commenting on the first half performance, Michael Buckley, Executive Chairman, said:

 

"Our exceptional performance in the first half of this year is testament to the strength of the Company's strategy of developing and licensing games to market-leading brands and gaming operators using our Slingo IP, which continues to deliver high margin revenues.  Whilst our results were enhanced during the COVID-19 period of self-isolation, I am pleased to say revenues in the second half are holding onto levels achieved during the first six months.

 

"We are delighted to report that our innovative Slingo Originals content continues to gain momentum, reaching new international audiences thanks to our global network of distribution partners. We remain committed to building on this, and growing our global reach during the second half of the year by investing in our unique content and securing further strategic partnership deals. Our planned expansion into Pennsylvania and Michigan is hugely exciting and is set to significantly increase our foothold in the US, whilst reducing our dependency on the UK market.

 

"The Group is currently performing in line with market expectations and, with a number of new commercial developments in the pipeline, the Board is confident in the future performance of the business."

 

 

Enquiries

 

Gaming Realms plc

0845 123 3773

Michael Buckley, Executive Chairman

Mark Segal, CFO

 

 

Peel Hunt LLP - NOMAD and broker

 

020 7418 8900

George Sellar

Andrew Clark

Will Bell

 

 

 

Yellow Jersey

 

020 3004 9512

Charles Goodwin

Georgia Colkin

Annabel Atkins                                   

 

 

 

 

 

 

 

 

 

 

 

 

Business review

 

Overview

 

Overall Group revenues increased 66%, while total continuing expenses increased by 22% compared to the previous period. As a result, the Board is pleased to report that the Group has achieved EBITDA positivity for the Period, delivering £1.2m of adjusted EBITDA in the period compared with an adjusted EBITDA loss of £0.1m in the previous period. The high revenue growth achieved was primarily driven by the 104% growth in Licensing revenues compared with the comparative period, supplemented by the strong performance of the Social business.

 

Licensing

 

The Licensing business has continued the strong momentum built up through 2019, with revenue for the Period increasing 104% to £3.4m (H1'19: £1.7m).  This growth is driven by the 14 partners that went live through 2019 as well as a further eight partners going live in H1'20.  Four Slingo games were released to the market in H1'20 (H1'19: three games), with an additional two games in H2'20 to date and further releases planned. The £1.7m increase in Licensing revenues compared with H1'19 was achieved both organically, with a £0.8m increase in revenues generated from existing partners, and through increased distribution, with £0.9m revenues generated from integrations what went live after 30 June 2019.

 

Social

 

The Social business has seen a strong period of growth, with revenues increasing 29% to £1.8m (H1'19: £1.4m).  The business delivered £0.8m of adjusted EBITDA in H1'20 (H1'19: £0.4m). This delivery was despite marketing spend reducing to £0.03m in H1'20 compared to £0.1m in the previous period. Operating and administrative expenses remained in line with the prior period at £0.9m in H1 2020 (H1'19: £0.9m).

 

Cash

 

The Company's cash position at 30 June 2020 was £0.8m. As at 31 August 2020, the Company's cash position was £1.9m. The Company incurred a significant working capital outflow in H1'20, which reversed post Period-end. The Company is due deferred consideration of £1.5m at 31 December 2020 from the sale of its B2C real money gaming ("B2C RMG") assets last year to River. The Company has a convertible loan of £3.5m owed to Gamesys Group plc, due for repayment on 31 December 2022.

 

Discontinued operations

 

Discontinued operations in the previous period relate to the B2C RMG assets referred to above. The loss before tax for the previous period from discontinued operations was £0.8m.

 

 

 

Consolidated statement of comprehensive income

for the 6 months ended 30 June 2020

 

 

 

6M

6M

 

 

30 June 2020

30 June 2019 *

 

 

Unaudited

Unaudited

 Continuing

Note

 £

 £

 Revenue

2

                    5,180,058

                  3,122,752

 Marketing expenses

 

                     (101,408)

                   (113,220)

 Operating expenses

 

                  (1,043,235)

                   (717,162)

 Administrative expenses

 

                  (3,007,154)

                (2,815,364)

 Share-based payments

13

                       (40,075)

                              -  

 

 

 

 

 Adjusted EBITDA - continuing

2

                    1,239,067

                   (102,096)

 Restructuring expenses

4

                     (250,881)

                   (100,045)

 Loss on disposal

4

                                -  

                   (320,853)

 EBITDA - continuing

2

                       988,186

                   (522,994)

 

 

 

 

 Amortisation of intangible assets

7

                  (1,393,651)

                (1,535,449)

 Depreciation of property, plant and equipment

6

                     (108,464)

                     (89,844)

 Finance expense

3

                     (287,335)

                   (363,917)

 Finance income

3

                       108,686

                       42,016

 Loss before tax

 

                     (692,578)

                (2,470,188)

 Tax credit

 

                         62,881

                     104,835

 Loss for the financial year - continuing

 

                     (629,697)

                (2,365,353)

 Loss for the financial year - discontinued

11

                                -  

                   (829,041)

 Loss for the financial year - total

 

                     (629,697)

                (3,194,394)

 Other comprehensive income

 

 

 

 Items that will or may be reclassified to profit or loss:

 

 

 

 Exchange gain arising on translation of foreign operations

 

                       489,466

                       25,418

 Total other comprehensive income

 

                     (140,231)

                (3,168,976)

 Total comprehensive income

 

 

 

 Loss attributable to:

 

 

 

 Owners of the parent

 

                     (627,692)

                (3,120,172)

 Non-controlling interest

 

                         (2,005)

                     (60,986)

 

 

                     (629,697)

                (3,181,158)

 Total comprehensive income attributable to:

 

 

 

 Owners of the parent

 

                     (138,226)

                (3,094,754)

 Non-controlling interest

 

                         (2,005)

                     (60,986)

 

 

                     (140,231)

                (3,155,740)

 

 

 

 

 Loss per share

 

 

Pence

 Basic and diluted - continuing

5

(0.22)

(0.81)

 Basic and diluted - discontinued

5

-

(0.29)

 Basic and diluted - total

 

(0.22)

(1.10)

Consolidated statement of financial position

as at 30 June 2020

 

 

 

 

 

30 June
2020

31 December
2019

 

 

Unaudited

Audited

 

Note

 £

 £

 Non-current assets

 

 

 

 Intangible assets

7

11,958,091

11,702,553

 Other investments

 

262,936

289,511

 Property, plant and equipment

6

673,121

760,763

 Finance lease asset

 

70,522

157,166

 Other assets

 

151,725

150,885

 

 

13,116,395

13,060,878

 Current assets

 

 

 

 Trade and other receivables

8

3,010,548

1,850,863

 Deferred consideration

 

1,395,706

1,298,663

 Finance lease asset

 

159,515

126,354

 Cash and cash equivalents

9

846,793

2,626,837

 

 

5,412,562

5,902,717

 Total assets

 

18,528,957

18,963,595

 Current liabilities

 

 

 

 Trade and other payables

10

1,847,409

2,125,257

 Lease liabilities

 

295,105

256,527

 

 

2,142,514

2,381,784

 Non-current liabilities

 

 

 

 Deferred tax liability

 

421,457

457,492

 Other Creditors

14

3,216,030

3,126,673

 Derivative liabilities

14

272,000

272,000

 Lease liabilities

 

497,588

646,122

 

 

4,407,075

4,502,287

 Total liabilities

 

6,549,589

6,884,071

 Net assets

 

11,979,368

12,079,524

 Equity

 

 

 

 Share capital

12

28,442,874

28,442,874

 Share premium

 

87,198,410

87,198,410

 Merger reserve

 

(67,673,657)

(67,673,657)

 Foreign exchange reserve

 

2,095,248

1,605,782

 Retained earnings

 

(38,158,218)

(37,570,601)

 Total equity attributable to owners of the parent

 

11,904,657

12,002,808

 Non-controlling interest

 

74,711

76,716

 Total equity

 

11,979,368

12,079,524

 

 

 

 

 

 

 

 



Consolidated statement of cash flows

for the 6 months ended 30 June 2020

 

 

 

 

30 June
2020

30 June
2019

 

 

Unaudited

Unaudited

 

 Note

£

 £

 Cash flows from operating activities

 

 

 

 Loss for the period

 

(629,697)

(3,194,394)

 Adjustments for:

 

 

 

 Depreciation of property, plant and equipment

6

108,464

95,657

 Amortisation of intangible fixed assets

7

1,393,651

1,535,449

 Finance income

3, 11

(108,686)

(315,867)

 Finance expense

3

287,335

363,917

 Income tax credit

 

(62,881)

(104,835)

 Exchange differences

 

(127,423)

538

 Loss on disposal of property, plant and equipment

 

-

28,747

 Loss on disposal of assets

 

-

84,377

 Share of loss of associate

11

-

157,307

 Share based payments expense

13

40,075

-

 (Increase) / decrease in trade and other receivables

 

(1,152,422)

1,319,608

 Decrease in trade and other payables

 

(293,848)

(319,024)

 Increase in other assets

 

(840)

-

 Net cash flows used in operating activities before taxation

 

(546,272)

(348,520)

 Tax credit received in the period

 

-

39,988

 Net cash flows used in operating activities

 

(546,272)

(308,532)

 

 

 

 

 Investing activities

 

 

 

 Acquisition of property, plant and equipment

6

(18,891)

(110,678)

 Capitalised development costs

7

(1,099,406)

(1,532,978)

 Interest received

3

1

3,705

 Finance lease asset - sublease receipts

 

83,700

52,611

 Net cash used in investing activities

 

(1,034,596)

(1,587,340)

 

 

 

 

 Financing activities

 

 

 

 Receipt of deferred consideration

 

-

385,000

 IFRS 16 lease payments

 

(167,193)

(113,856)

 Interest paid

 

(116,669)

(191,309)

 Net cash (used in) / from financing activities

 

(283,862)

79,835

 Net decrease in cash and cash equivalents

 

(1,864,730)

(1,816,037)

 Cash and cash equivalents at beginning of period

 

2,608,455

1,550,140

 Exchange gain on cash and cash equivalents

 

84,686

1,992

 Cash and cash equivalents at end of period

 

828,411

(263,905)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated statement of changes in equity

for the 6 months ended 30 June 2020

 

 

 

 Share capital

 Share premium

 Merger reserve

 Foreign Exchange Reserve

 Retained earnings

 Total to equity holders of parents

 Non-controlling interest

 Total equity

 

 £

 £

 £

 £

 £

 £

 £

 £

 1 January 2019

28,442,874

87,198,410

(67,673,657)

1,911,453

(32,308,495)

17,570,585

152,324

17,722,909

 Adjustment on the initial application of IFRS 16

-

-

-

-

69,591

69,591

-

69,591

 Adjusted balance at 1 January 2019

28,442,874

87,198,410

(67,673,657)

1,911,453

(32,238,904)

17,640,176

152,324

17,792,500

 Loss for the period

-

-

-

-

(3,120,172)

(3,120,172)

(60,986)

(3,181,158)

 Other comprehensive income

-

-

-

25,418

-

25,418

-

25,418

 Total comprehensive income for the year

-

-

-

25,418

(3,120,172)

(3,094,754)

(60,986)

(3,155,740)

 Contributions by and distributions to owners

 

 

 

 

 

 

 

 

 Share-based payment on share options

-

-

-

-

-

-

-

 30 June 2019 (unaudited)

28,442,874

87,198,410

(67,673,657)

1,936,871

(35,359,076)

14,545,422

91,338

14,636,760

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 1 January 2020

28,442,874

87,198,410

(67,673,657)

1,605,782

(37,570,601)

12,002,808

76,716

12,079,524

 Loss for the period

-

-

-

-

(627,692)

(627,692)

(2,005)

(629,697)

 Other comprehensive income

-

-

-

489,466

-

489,466

-

489,466

 Total comprehensive income for the year

-

-

-

489,466

(627,692)

(138,226)

(2,005)

(140,231)

 Contributions by and distributions to owners

 

 

 

 

 

 

 

 

 Share-based payment on share options

-

-

-

-

40,075

-

40,075

 30 June 2020 (unaudited)

28,442,874

87,198,410

(67,673,657)

2,095,248

(38,158,218)

11,904,657

74,711

11,979,368

 

Notes forming part of the consolidated financial statements

For the 6 months ended 30 June 2020

 

1. Accounting policies

 

General Information

 

Gaming Realms plc ("the Company") and its subsidiaries (together "the Group").

 

The Company is admitted to trading on AIM of the London Stock Exchange. It is incorporated and domiciled in the UK. The address of its registered office is Two Valentine Place, London, SE18QH.

 

The results for the six months ended 30 June 2020 and 30 June 2019 are unaudited.

 

Basis of preparation

 

The financial information for the year ended 31 December 2019 included in these financial statements does not constitute the full statutory accounts for that year. The Annual Report and Financial Statements for 2019 have been filed with the Registrar of Companies. The Independent Auditors' Report on the Annual Report and Financial Statement for 2019 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.

 

This interim report, which has neither been audited nor reviewed by independent auditors, was approved by the board of directors on 7 September 2020. The financial information in this interim report has been prepared in accordance with the recognition and measurement requirements of International Financial Reporting Standards as adopted for use in the EU (IFRSs). The accounting policies applied by the Group in this financial information are the same as those applied by the Group in its financial statements for the year ended 31 December 2019 and which will form the basis of the 2020 financial statements.

 

The consolidated financial statements are presented in Sterling.

 

Going concern

 

The Group meets its day-to-day working capital requirements from the cash flows generated by its trading activities and its available cash resources. 

 

The Group prepares cash flow forecasts and re-forecasts regularly as part of the business planning process.  A re-forecasting process has been completed for H2 2020 to 2022 in light of current business performance and economic situation given the uncertainty arising from the COVID-19 pandemic.  These forecasts show that the Group will continue to have sufficient cash resources available to meet its liabilities as they fall due. 

 

Accordingly, these financial statements have been prepared on the basis of accounting principles applicable to a going concern, which assumes that the Group will realise its assets and discharge its liabilities in the normal course of business.

 

Changes in significant accounting policies

 

In preparing the Group financial statements for the current period, the Group has adopted the following amendments to IFRSs:

·      IAS 8 (amended):                 Accounting Policies, Changes in Accounting Estimates and Errors

·      IFRS 3 (amended):              Business Combinations

·      IFRS 7 (amended):              Financial Instruments: Disclosures

·      IFRS 16 (amended):           Leases

 

All adopted new and revised standards have not had a significant impact on the results or net assets of the Group.

 

Adjusted EBITDA

 

EBITDA is a non-GAAP company specific measure defined as loss before tax adjusted for finance income and expense, depreciation and amortisation.

 

Adjusted EBITDA excludes non-recurring material items which are outside the normal scope of the Group's ordinary activities. Adjusted EBITDA is considered to be a key performance measure by the Directors as it serves as an indicator of financial performance. The adjusting items are separately disclosed in order to enhance the reader's understanding of the Group's profitability and cash flow generation. Adjusting items include EBITDA from discontinued operations, costs arising from a fundamental restructuring of the Group's operations and relocation costs. 

Restatement of comparatives

 

The comparative results for the period ending 30 June 2019 have been restated following an update in accounting for a property lease that the Group sub-leases.  Previously a right-of-use (ROU) asset was recognised, however in line with IFRS 16 this has been reversed and a finance lease asset recognised with sub-lease receipts reducing the asset and interest income earned on the unwind over the lease term.  The impact of this restatement on the previous period income statement is a reduction in revenue of £65,612, a reduction in EBITDA of £95,816 and an increase in loss before tax of £13,237.  The restatement increased net assets at 30 June 2019 by £69,591 to £14,636,760 as shown in the statement of changes in equity, from the previously reported £14,567,169.  This item was correctly accounted for in the financial statements for the year ended 31 December 2019 so there will be no restatement required in the 2020 financial statements.

 

 

2. Segment information

 

The Board is the Group's chief operating decision-maker. Management has determined the operating segments based on the information reviewed by the Board for the purposes of allocating resources and assessing performance.

 

The Group has two continuing reportable segments.

·      Licensing - B2B brand and content licensing to partners in the US and Europe; and

·      Social publishing - provides B2C freemium games to the US and Europe.

 

The results of the discontinued segment are included in note 10.  Management do not report segmental assets and liabilities internally and as such an analysis is not reported.

 

Revenue

 

The Group has disaggregated revenue into various categories in the following table which is intended to:

·   Depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic date; and

·   Enable users to understand the relationship with revenue segment information provided below.

 

 

 Licensing

 Social
publishing

 Other

 Total

 H1 2020 continuing revenue

 £

 £

 £

 £

 Primary geographical markets

 

 

 

 UK, including Channel Islands

226,376

-

-

226,376

 USA

1,092,749

1,809,774

2,400

2,904,923

 Isle of Man

1,295,490

-

-

1,295,490

 Rest of the World

753,269

-

-

753,269

 

3,367,884

1,809,774

2,400

5,180,058

 

 

 

 

 

 Contract counterparties

 

 

 

 

 Direct to consumers (B2C)

-

1,809,774

-

1,809,774

 B2B

3,367,884

-

2,400

3,370,284

 

3,367,884

1,809,774

2,400

5,180,058

 

 

 

 

 

 Timing of transfer of goods and services

 

 

 

 Point in time

3,207,576

1,809,774

2,400

5,019,750

 Over time

160,308

-

-

160,308

 

3,367,884

1,809,774

2,400

5,180,058

 

 

 

 

 

 

 Licensing

 Social
publishing

 Other

 Total

 H1 2019 continuing revenue

 £

 £

 £

 £

 Primary geographical markets

 

 

 

 UK, including Channel Islands

28,540

-

-

28,540

 USA

756,664

1,398,767

41,287

2,196,718

 Isle of Man

601,971

-

-

601,971

 Rest of the World

267,400

-

28,123

295,523

 

1,654,575

1,398,767

69,410

3,122,752

 

 

 

 

 

 Contract counterparties

 

 

 

 

 Direct to consumers (B2C)

-

1,398,767

-

1,398,767

 B2B

1,654,575

-

69,410

1,723,985

 

1,654,575

1,398,767

69,410

3,122,752

 

 

 

 

 

 Timing of transfer of goods and services

 

 

 

 Point in time

1,477,273

1,398,767

69,410

2,945,450

 Over time

177,302

-

-

177,302

 

1,654,575

1,398,767

69,410

3,122,752

 

 

Adjusted EBITDA

 

 

 Licensing

 Social publishing

 Head Office

 Total

H1 2020

 £

 £

 £

 £

 Revenue

              3,367,884

              1,809,774

                     2,400

              5,180,058

 Marketing expense

                    (8,608)

                  (34,051)

                  (58,749)

                (101,408)

 Operating expense

                (515,894)

                (529,567)

                     2,226

             (1,043,235)

 Administrative expense

             (1,112,048)

                (413,001)

             (1,231,224)

             (2,756,273)

 Share-based payments

                           -  

                           -  

                  (40,075)

                  (40,075)

 Adjusted EBITDA - continuing

              1,731,334

                 833,155

             (1,325,422)

              1,239,067

 Restructuring expenses

 

 

 

                (250,881)

 Loss on disposal

 

 

 

                           -  

 EBITDA - continuing

 

 

 

                 988,186

 

 

 

 

 

 

 

 

 

 Licensing

 Social
publishing

 Head Office

 Total

H1 2019

 £

 £

 £

 £

 Revenue

              1,654,575

              1,398,767

                   69,410

              3,122,752

 Marketing expense

                           -  

                (104,691)

                    (8,529)

                (113,220)

 Operating expense

                (279,976)

                (436,250)

                       (936)

                (717,162)

 Administrative expense

                (646,539)

                (468,055)

             (1,279,872)

             (2,394,466)

 Share-based payments

                           -  

                           -  

                           -  

                           -  

 Adjusted EBITDA - continuing

                 728,060

                 389,771

             (1,219,927)

                (102,096)

 Restructuring expenses

 

 

 

                (100,045)

 Loss on disposal

 

 

 

                (320,853)

 EBITDA - continuing

 

 

 

                (522,994)

 

 

3. Finance income and expense

 

 

 

6M
30 June 2020

6M
30 June 2019

 

 

 £

 £

 Finance income

 

 

 

 Interest received

 

                             1

                      3,705

 Interest income on finance lease asset

 

                    11,642

                    16,278

 Interest income on unwind of deferred consideration receivable

 

                    97,043

                    22,033

 Total finance income

 

                  108,686

                    42,016

 

 

 

 

 Finance expense

 

 

 

 Bank interest paid

 

                      8,722

                    25,374

 Fair value loss on other investments

 

                    26,575

                  111,041

 Effective interest on other creditor

 

                  213,304

                  198,488

 Interest expense on lease liability

 

                    38,734

                    29,014

 Total finance expense

 

                  287,335

                  363,917

 

 

4. Adjusted EBITDA

 

EBITDA and Adjusted EBITDA are non-GAAP measures and exclude exceptional items, depreciation, and amortisation. Exceptional items are those items the Group considers to be non-recurring or material in nature that may distort an understanding of financial performance or impair comparability.

 

Adjusted EBITDA is stated before exceptional items as follows:

 

 

6M
30 June 2020

6M
30 June 2019

 

 £

 £

 Restructuring expenses

(250,881)

(100,045)

 Loss on disposal

-

(320,853)

 Adjusting items

(250,881)

(420,898)

 

 

Restructuring expenses

Restructuring costs of £0.3m (H1 2019: £0.1m) were incurred relating to redundancy, consulting and relocation costs.

 

Loss on disposal

£0.3m of expenses were incurred in the prior period associated with the B2C RMG disposal completed in July 2019.  These expenses associated with the B2C RMG disposal were subsequently included in the profit on disposal of the segment that was disclosed in the 2019 full year financial statements.  No such expenses occurred in H1 2020.

 

 

5. Loss per share

 

Basic loss per share is calculated by dividing the result attributable to ordinary shareholders by the weighted average number of shares in issue during the period.  For fully diluted loss per share, the weighted average number of ordinary shares is adjusted to assume conversion of dilutive potential ordinary shares.  The Group's potentially dilutive securities consist of share options, performance shares and a convertible bond.  As the continuing operations of the Group are loss making, none of the potentially dilutive securities are currently dilutive.

 

 

 

6M
30 June 2020

6M
30 June 2019

 

 Note

 £

 £

 Loss after tax - continuing

 

(627,692)

(2,291,131)

 Loss after tax - discontinued

10

-

(829,041)

 (Loss) / profit after tax - total

 

(627,692)

(3,120,172)

 

 

 

 

 

 

 Number

 Number

 Weighted average number of ordinary shares used in calculating basic loss per share

11

284,428,747

284,428,747

 Weighted average number of ordinary shares used in calculating dilutive loss per share

 

284,428,747

284,428,747

 

 

 

 

 

 

 Pence

 Pence

 Basic and diluted loss per share - continuing

 

(0.22)

(0.81)

 Basic and diluted loss per share - discontinued

 

-

(0.29)

 Basic and diluted loss per share - total

 

(0.22)

(1.10)

 

 

 

 

6. Property, plant and equipment

 

 

 ROU lease assets

 Leasehold improvements

 Computers and related equipment

 Office furniture and equipment

 Total

 

 £

 £

 £

 £

 £

 Cost

 

 

 

 

 

 At 1 January 2020

760,334

76,532

182,195

75,766

1,094,827

 Additions

-

-

17,588

1,303

18,891

 Exchange differences

2,745

153

2,608

796

6,302

 At 30 June 2020

763,079

76,685

202,391

77,865

1,120,020

 

 

 

 

 

 

 Accumulated deprecation

 

 

 

 

 

 At 1 January 2020

116,172

13,891

150,757

53,244

334,064

 Depreciation charge

82,173

8,723

13,593

3,975

108,464

 Exchange differences

1,098

(266)

1,092

2,447

4,371

 At 30 June 2020

199,443

22,348

165,442

59,666

446,899

 

 

 

 

 

 

 Net book value

 

 

 

 

 

 At 31 December 2019

644,162

62,641

31,438

22,522

760,763

 At 30 June 2020

563,636

54,337

36,949

18,199

673,121

 

 

7. Intangible assets

 

 

 Goodwill

 Customer database

 Software

 Development costs

 Domain names

 Intellectual Property

 Total

 

 £

 £

 £

 £

 £

 £

 £

 Cost

 

 

 

 

 

 

 

 At 1 January 2020

6,849,048

1,520,509

1,420,374

11,798,373

9,053

5,962,772

27,560,129

 Additions

-

-

-

1,099,406

-

-

1,099,406

 Exchange differences

370,764

105,230

84,803

14,169

628

414,250

989,844

 At 30 June 2020

7,219,812

1,625,739

1,505,177

12,911,948

9,681

6,377,022

29,649,379

 

 

 

 

 

 

 

 

 Accumulated amortisation and impairment

 

 

 

 

 

 At 1 January 2020

1,650,000

1,520,509

1,420,374

7,986,035

9,053

3,271,605

15,857,576

 Amortisation charge

-

-

-

1,004,210

-

389,441

1,393,651

 Exchange differences

-

105,230

84,803

12,621

628

236,779

440,061

 At 30 June 2020

1,650,000

1,625,739

1,505,177

9,002,866

9,681

3,897,825

17,691,288

 

 

 

 

 

 

 

 

 Net book value

 

 

 

 

 

 

 

 At 31 December 2019

5,199,048

-

-

3,812,338

-

2,691,167

11,702,553

 At 30 June 2020

5,569,812

-

-

3,909,082

-

2,479,197

11,958,091

 

 

 

 

 

8. Trade and other receivables

 

 

30 June
2020

31 December
2019

 

 

 £

 £

 Trade receivables

 

1,829,002

974,321

 Other receivables

 

153,286

145,855

 Tax and social security

 

107,546

123,919

 Prepayments and accrued income

 

920,714

606,768

 

 

3,010,548

1,850,863

 

All amounts shown fall due for payment within one year.

 

 

9. Cash and cash equivalents

 

 

 

30 June
2020

31 December
2019

30 June
2019

 

 

 £

 £

 £

 Cash and cash equivalents

 

846,793

2,626,837

277,510

 Cash - held for sale

 

-

-

447,961

 Restricted cash

 

(18,382)

(18,382)

(18,382)

 Bank overdraft

 

-

-

(970,994)

 Cash and cash equivalents for Statement of Cash Flows

828,411

2,608,455

(263,905)

 

Restricted cash relates to funds held in Swiss subsidiaries which are currently undergoing liquidation. The funds are restricted and are not included in the consolidated statement of cash flows.

 

 

10. Trade and other payables

 

 

 

30 June
2020

31 December
2019

 

 

 £

 £

 Trade payables

 

175,786

488,755

 Other payables

 

472,983

634,807

 Tax and social security

 

100,929

170,931

 Accruals

 

1,097,711

830,764

 

 

1,847,409

2,125,257


The carrying value of trade and other payables classified as financial liabilities measured at amortised cost approximates fair value.

 

 

11. Discontinued operations

 

At the previous period end, the Group was sufficiently progressed with active discussions concerning the remainder of the B2C real money gaming brands and real money gaming platform, that these elements were classified as held for sale as at 30 June 2019.  The sale of the real money gaming assets completed in July 2019 and details of the transaction were fully disclosed in the 2019 financial statements.

 

 

 

 

Results of discontinued operations:

 

 

 

6M
30 June 2020

6M
30 June 2019

 

 

 £

 £

 Revenue

 

                           -  

               5,762,066

 Marketing expenses

 

                           -  

                (640,772)

 Operating expenses

 

                           -  

             (4,493,143)

 Administrative expenses

 

                           -  

             (1,567,923)

 EBITDA for the period - discontinued

 

                           -  

                (939,772)

 

 

 

 

 Depreciation of property, plant and equipment

 

                           -  

                    (5,813)

 Share of loss of associate

 

                           -  

                (157,307)

 Finance income

 

                           -  

                  273,851

 Loss for the period - discontinued

 

                           -  

                (829,041)

 

 

12. Share capital

 

30 June
2020

30 June
2020

31 December
2019

31 December
2019

 Ordinary shares

 Number

 £

 Number

 £

 Ordinary shares of

284,428,747

28,442,874

284,428,747

28,442,874

 10 pence each

 

 

13. Share based payments

On 1 May 2020, certain employees of the Group were granted a total of 6,650,000 share options, which vest in three equal tranches on 3 February 2021, 3 February 2022 and 3 February 2023.  The options have an exercise price of 10 pence per share.

 

On 2 June 2020, the two Executive Directors of the Group were each granted 3,000,000 share options, which vest in three equal tranches on 3 February 2021, 3 February 2022 and 3 February 2023.  The vesting of each tranche is subject to delivery of adjusted EBITDA targets for the financial years ending 31 December 2020, 2021 and 2022.  The options have an exercise price of 10 pence per share.

 

For both grants, the fair value of each tranche is being charged to the income statement over the vesting period.  This resulted in a share-based payment charge for the period of £40,075 (H1 2019: £nil).

 

On 1 May 2020, a consultant of the Group was granted 750,000 replacement share options in lieu of waiving the rights over 5,750,000 options that had previously been granted (whilst an employee of the Group) but not exercised.  The replacement options have an exercise price of 10 pence per share and are immediately fully vested.  The fair value of the replacement options was calculated to be lower than the share options being waived, and as such no share based payment charge has been recognised in the income statement.

 

 

14. Arrangement with Gamesys Group plc (previously Jackpotjoy Group)

In December 2017 the Group entered into a complex transaction with Gamesys Group plc (previously Jackpotjoy plc) and Group companies (together 'Jackpotjoy Group').  The transaction includes a £3.5m secured convertible loan agreement alongside a 10-year framework services agreement for the supply of various real money services.  Under the framework services agreement the first £3.5m of services are provided free of charge within the first 5 years.

 

The convertible loan has a duration of 5 years and carried interest at 3-month LIBOR plus 5.5%.  It is secured over the Group's Slingo assets and business.  At any time after the first year, Gamesys Group plc may elect to convert all or part of the principal amount into ordinary shares of Gaming Realms plc at a discount of 20% to the share price prevailing at the time of conversion.  To the extent that the price per share at conversion is lower than 10p (nominal value), then the shares can be converted at nominal value with a cash payment equal to the aggregate value of the convertible loan outstanding multiplied by the shortfall on nominal value payable to Jackpotjoy Group.  Under this arrangement the maximum dilution to Gaming Realms shareholders will be approximately 11% assuming the convertible loan is converted in full.

 

The option violates the fixed-for-fixed criteria for equity classification as the number of shares is variable and as a result is classified as a liability.

 

The fair value of the conversion feature is determined each reporting date with changes recognised in profit or loss.  The initial fair value was £0.6m based on a probability assessment of conversion and future share price.  This is a level 3 valuation as defined by IFRS 13.  The fair value as at 30 June 2020 was £0.3m (31 December 2019: £0.3m) based on revised probabilities of when and if the option will be exercised.  The key inputs into the valuation model included timing of exercise by the counterparty (based on a probability assessment) and the share price.

 

The initial fair value of the host debt was calculated as £2.7m, being the present value of expected future cash outflows.  The rate used to discount future cash flows was 14.1%, being the Group's incremental borrowing rate.  The rate was calculated by reference to the Group's cost of equity in the absence of reliable alternative evidence of the Group's cost of borrowing given it is predominantly equity funded.  Expected cash flows are based on the directors' judgement that a change in control event would not occur.  Subsequently the loan is carried at amortised cost.

 

The residual £0.2m of proceeds were allocated to the obligation of provide free services.

 

 

 Fair value of debt host

 Obligation to provide free services

 Fair value of derivative Liability

 Total

 

 £

 £

 £

 £

 At 1 January 2020

2,925,673

201,000

272,000

3,398,673

 Utilisation of free services

-

(16,000)

-

(16,000)

 Effective interest

213,304

-

-

213,304

 Interest paid

(107,947)

-

-

(107,947)

 At 30 June 2020

3,031,030

185,000

272,000

3,488,030

 

 

15. Related party transactions

 

Jim Ryan is a Non-Executive Director of the Company and the CEO of Pala Interactive, which has a real-money online bingo site in New Jersey. During the period, total license fees earned by the Group were $22,592 (H1 2019: $6,507) with $7,599 due at 30 June 2020 (30 June 2019: $1,390).

 

Jim Ryan is a Non-Executive Director of Gamesys Group plc. In December 2017 the Group entered into a 10-year framework services agreement and a 5-year convertible loan agreement for £3.5m with Gamesys Group plc (previously Jackpotjoy Group) (see Note 13).

 

During the period £48,333 (H1 2019: £75,000) of consulting fees were paid to Dawnglen Finance Limited, a company controlled by Michael Buckley. No amounts were owed at 30 June 2020 (30 June 2019: £nil).

 

 

16. Events after reporting date

 

On 28 July 2020, the Group's two executive Directors were granted a total of 8,846,153 share options in replacement of their existing options for B shares, which were due to lapse on 31 July 2020.  The replacement options vest in two equal tranches on 1 August 2021 and 1 August 2022, with all options having an exercise price of 20 pence per share. 

 

[1] EBITDA is profit before interest, tax, depreciation, amortisation and impairment expenses and is a non-GAAP measure.  Adjusted EBITDA is EBITDA excluding non-recurring material items which are outside the normal scope of the Group's ordinary activities.  The Group uses EBITDA and Adjusted EBITDA to comment on its financial performance.  Adjusting items include EBITDA from discontinued operations, costs arising from a fundamental restructuring of the Group's operations and relocation costs.  See note 4 for further details. 

* Comparative numbers for the period ended 30 June 2019 have been restated.  See note 1 for further details.

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Price: 21.4

Market: AIM
Market Cap: £60.87 m
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