REG - Gaming Realms PLC - Interim Results
Gaming Realms plc
(the "Company" or the "Group")
Interim Results
Revenue growth of 50% generates adjusted EBITDA[1] of £3.1m[2], up 144%
Continued U.S. expansion post period end with content launched in Pennsylvania
Gaming Realms plc (AIM: GMR), the developer and licensor of mobile focused gaming content, is pleased to announce its interim results for the six months to 30 June 2021 (the "Period" or "H1'21").
Financial highlights:
H1 2021
H1 2020
Change
£m
£m
%
Revenue (Licensing)
5.8
3.4
+73%
Revenue (Social)
1.9
1.8
+7%
Total revenue
7.7
5.2
+50%
Adjusted EBITDA before share option and related charges
3.1
1.28
+144%
Adjusted EBITDA
2.7
1.2
+116%
Profit / (loss) before tax
0.8
(0.7)
Cash or cash equivalents
3.92
0.85
+363.3%
· Total revenue grew 50% from £5.2m in H1'20 to £7.7m in H1'21. The Group's revenues generate high margins, and in combination with a stable fixed cost base, resulted in adjusted EBITDA growing from £1.28m to £3.1m, a rise of 144% over the previous Period.
· Licensing revenue grew 73% to £5.8m (H1'20: £3.4m)
o This included content licensing revenue growing 39% to £4.1m (H1'20: £2.9m) due to an increase in distribution from an expanded games portfolio
o Brand licensing reflected a significant deal which positively impacted revenues, resulting in a 298% increase to £1.7m (H1'20: £0.4m)
· Social revenue increased 7% to £1.9m (H1'20: £1.8m) from an increase in new Slingo content, as well as improved player management and new player engagement features.
· Cash or cash equivalents grew from £0.85m to £3.92m due to strong cash conversion of operating profits.
Operational highlights:
· Granted provisional iGaming supplier license in Michigan where we went live with BetMGM with a direct- integration agreement.
· Granted Interactive Gaming Manufacture Licence in Pennsylvania.
· Launched Slingo content in the Italian regulated market with Goldbet and Sisal.
· Signed several distribution deals including with GAN.
· Signed content licensing agreement with IGT.
· Released four new games into the market, including Slingo Starburst and Slingo Lobstermania. The Group now has 48 games in its portfolio (Dec'20: 44 games, Jun'20: 40 games).
Post period-end:
· Licensing revenue increased 28% in the two months post period-end compared to the same period in 2020 (with the significant deal reflected in the first half numbers not repeating in the second half).
· Launched in Pennsylvania with BetMGM and Rush Street Interactive.
· Launched further operators in Michigan with Draftkings and Rush Street Interactive.
· Released two new Slingo games: Slingo Big Wheel and Redhot Slingo.
Outlook for FY21:
Gaming Realms made exceptional progress during the first half of the year in developing and licensing games to market-leading brands and operators globally, expanding its footprint and delivering high margin revenues.
Momentum is set to continue into the second half of the financial year, with revenues from the Group's content launches in Michigan and Pennsylvania (in June and September, respectively) expected to grow substantially in H2'21. Despite being live with just three operators to date in Michigan, early appetite for Gaming Realms' full Slingo portfolio has been promising, and the Group will be launching imminently with additional operators across all its U.S. territories to fulfil strong market demand.
Whilst the European market continues to grow and be the largest contributor to Group results, we are excited about the growth prospects of the nascent U.S. market. The Company has direct integrations and multi-State deals with the majority of the U.S. iGaming market. These include multi-State deals with BetMGM, Draftkings, Fanduel, Rush Street Interactive, Golden Nugget, Poker Stars, Barstool/PNG, Kindred, Wynn Interactive, Twinspires, Parx, Tropicana/Gamesys and Caesars Entertainment. The Company also has direct integrations with BetMGM, Draftkings, Rush Street Interactive, Fanduel, Golden Nugget, Gamesys, Twinspires, Wynn Interactive and 888, with more in the pipeline.
Following the Group's successful launch in the Italian regulated market earlier this year, Gaming Realms has evaluated further European expansion opportunities and is preparing for launches in additional regulated markets in the second half of the year.
With a strong game development pipeline, a clear strategy to continue expanding its distribution internationally and with demand from the Group's customers expected to continue, the Board expects trading for FY21 to be in line with market expectations and remains confident in the strategic outlook for the business.
Commenting on the first half performance, Michael Buckley, Executive Chairman, said:
"The Group has delivered an excellent first half both in terms of significant earnings growth and new licensing and distribution agreements. Having recently launched in Michigan and Pennsylvania, the Group is now working to capitalise on the significant opportunities in these markets. We are also looking to strengthen our position in Europe through launches in other regulated markets following the encouraging response we have seen from players in Italy for our Slingo content.
"Looking further ahead, we are about to start the process for obtaining a license in Ontario, Canada. Ontario has announced its intention to regulate iGaming and has the potential to be a bigger market for Gaming Realms than any one of the U.S. states that have regulated so far. In addition, we will also pursue further licensing opportunities within the U.S. as new States announce their intention to regulate iGaming.
"This is an exciting time for the Company and we intend to continue to deliver further value by scaling our platform and bringing innovative content to new audiences worldwide. With more material impact expected from Michigan and Pennsylvania in the second half of this year, the Board is confident in the future performance of the business."
An analyst briefing will be held virtually at 9:30am today. To attend, please email gamingrealms@yellowjerseypr.com.
[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 costs arising from a fundamental restructuring of the Group's operations and redundancy costs. See Note 4 for further details.
[2] Adjusted EBITDA before share option and related charges.
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
07747 788 221
Charles Goodwin
Annabel Atkins
Annabelle Wills
Business review
Overall Group revenues increased 50% from the previous Period, while total expenses (excluding share option and related charges) increased 19%. As a result, the Group delivered adjusted EBITDA for the Period of £2.7m (H1'20: £1.2m), while also reporting a pre-tax profit of £0.8m compared with a pre-tax loss of £0.7m for the comparative Period.
The high revenue growth from the previous Period was driven by the 73% growth in licensing revenues, supplemented by the continued modest growth in social publishing revenues.
Licensing
The licensing business continued to deliver strong growth, with revenue for the Period increasing 73% to £5.8m (H1'20: £3.4m). The 26 partners that went live through 2020 and further 11 partners going live in H1'21 helped drive this revenue growth, along with the release of four new Slingo games (H1'20: four games) to the market.
The overall £2.4m increase in licensing revenues was achieved through a mixture of a £0.5m organic increase in content license revenues from existing partners, a £0.6m increase in content license revenues from partners that went live after 30 June 2020 and a £1.3m increase in brand license revenue compared to the previous Period.
Social
The Group's social publishing business continued to deliver strong results in the Period, with revenue increasing 7% to £1.9m (H1'20: £1.8m).
Marketing costs of £0.2m (H1'20: £0.03m) were incurred in order to drive player activity and revenues.
Cash
The Company's cash position at 30 June 2021 was £3.9m, increasing £1.8m from the £2.1m reported at 31 December 2020.
The increase in cash during the period was largely driven through the £2.3m cash inflow from operating activities and £1.0m of deferred consideration received, offset by the £1.6m of development costs capitalised in the Period.
During the period, on 1 April 2021 the Group received £1.0m from River Tech plc for full and final settlement of deferred consideration receivable, certain other receivable balances and various legal proceedings and out of court disputes between the parties.
The Company has a convertible loan of £3.5m owed to Gamesys Group plc (see Note 14), due for repayment on 31 December 2022.
Consolidated statement of comprehensive income
for the 6 months ended 30 June 2021
6M
6M
30 June 2021
30 June 2020
Unaudited
Unaudited
Note
£
£
Revenue
2
7,745,982
5,180,058
Marketing expenses
(207,428)
(101,408)
Operating expenses
(1,185,859)
(1,043,235)
Administrative expenses
(3,256,425)
(3,007,154)
Share option and related charges
13
(442,571)
(40,075)
Adjusted EBITDA
2
2,678,699
1,239,067
Restructuring expenses
4
(25,000)
(250,881)
EBITDA
2
2,653,699
988,186
Amortisation of intangible assets
7
(1,461,832)
(1,393,651)
Depreciation of property, plant and equipment
6
(97,282)
(108,464)
Finance expense
3
(302,221)
(287,335)
Finance income
3
11,564
108,686
Profit / (loss) before tax
803,928
(692,578)
Tax credit
38,347
62,881
Profit / (loss) for the period
842,275
(629,697)
Other comprehensive income
Items that will or may be reclassified to profit or loss:
Exchange (loss) / gain arising on translation of foreign operations
(84,998)
489,466
Total other comprehensive income
(84,998)
489,466
Total comprehensive income
757,277
(140,231)
Profit / (loss) attributable to:
Owners of the parent
843,833
(627,692)
Non-controlling interest
(1,558)
(2,005)
842,275
(629,697)
Total comprehensive income attributable to:
Owners of the parent
758,835
(138,226)
Non-controlling interest
(1,558)
(2,005)
757,277
(140,231)
Profit / (loss) per share
Pence
Pence
Basic
5
0.29
(0.22)
Diluted
5
0.28
(0.22)
Consolidated statement of financial position
as at 30 June 2021
30 June
202131 December
2020
Unaudited
Audited
Note
£
£
Non-current assets
Intangible assets
7
11,495,250
11,137,123
Other investments
8
-
401,291
Property, plant and equipment
6
583,722
560,793
Other assets
150,387
150,528
12,229,359
12,249,735
Current assets
Trade and other receivables
9
3,015,377
2,343,739
Deferred consideration
-
972,554
Finance lease asset
64,469
140,058
Cash and cash equivalents
10
3,923,635
2,105,167
7,003,481
5,561,518
Total assets
19,232,840
17,811,253
Current liabilities
Trade and other payables
11
2,159,335
1,943,714
Lease liabilities
257,979
343,859
2,417,314
2,287,573
Non-current liabilities
Deferred tax liability
256,287
320,913
Other Creditors
14
3,406,970
3,304,870
Derivative liabilities
14
627,000
627,000
Lease liabilities
247,190
340,175
4,537,447
4,592,958
Total liabilities
6,954,761
6,880,531
Net assets
12,278,079
10,930,722
Equity
Share capital
12
28,870,262
28,664,731
Share premium
87,370,856
87,258,166
Merger reserve
(67,673,657)
(67,673,657)
Foreign exchange reserve
1,294,118
1,379,116
Retained earnings
(37,652,565)
(38,768,257)
Total equity attributable to owners of the parent
12,209,014
10,860,099
Non-controlling interest
69,065
70,623
Total equity
12,278,079
10,930,722
Consolidated statement of cash flows
for the 6 months ended 30 June 2021
30 June
202130 June
2020
Unaudited
Unaudited
Note
£
£
Cash flows from operating activities
Profit / (loss) for the period
842,275
(629,697)
Adjustments for:
Depreciation of property, plant and equipment
6
97,282
108,464
Amortisation of intangible fixed assets
7
1,461,832
1,393,651
Finance income
3
(11,564)
(108,686)
Finance expense
3
302,221
287,335
Loss on disposal of property, plant and equipment
6
578
-
Income tax credit
(38,347)
(62,881)
Exchange differences
29,803
(127,423)
Share option and related charges
13
442,571
40,075
Increase in trade and other receivables
(877,939)
(1,152,422)
Decrease in trade and other payables
14,909
(293,848)
Increase in other assets
-
(840)
Net cash flows from / (used in) operating activities
2,263,621
(546,272)
Investing activities
Acquisition of property, plant and equipment
6
(119,847)
(18,891)
Acquisition of intangible assets
(98,473)
-
Capitalised development costs
7
(1,614,370)
(1,099,406)
Proceeds from the sale of other investments
8
362,435
-
Interest received
-
1
Finance lease asset - sublease receipts
78,840
83,700
Net cash used in investing activities
(1,391,415)
(1,034,596)
Financing activities
Receipt of deferred consideration
972,554
-
IFRS 16 lease payments
(203,878)
(167,193)
Issue of share capital on exercise of options
12
318,221
-
Interest paid
(105,218)
(116,669)
Net cash from / (used in) financing activities
981,679
(283,862)
Net increase / (decrease) in cash and cash equivalents
1,853,885
(1,864,730)
Cash and cash equivalents at beginning of period
2,105,167
2,608,455
Exchange (loss) / gain on cash and cash equivalents
(35,417)
84,686
Cash and cash equivalents at end of period
3,923,635
828,411
Consolidated statement of changes in equity
for the 6 months ended 30 June 2021
Share capital
Share premium
Merger reserve
Foreign Exchange Reserve
Retained earnings
Total to equity holders of parents
Non-controlling interest
Total equity
£
£
£
£
£
£
£
£
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 period
-
-
-
489,466
(627,692)
(138,226)
(2,005)
(140,231)
Contributions by and distributions to owners
Share-based payment on share options (Note 13)
-
-
-
-
40,075
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
1 January 2021
28,664,731
87,258,166
(67,673,657)
1,379,116
(38,768,257)
10,860,099
70,623
10,930,722
Profit for the period
-
-
-
-
843,833
843,833
(1,558)
842,275
Other comprehensive income
-
-
-
(84,998)
-
(84,998)
-
(84,998)
Total comprehensive income for the period
-
-
-
(84,998)
843,833
758,835
(1,558)
757,277
Contributions by and distributions to owners
Share-based payment on share options (Note 13)
-
-
-
-
271,859
271,859
-
271,859
Exercise of options (Note 12)
205,531
112,690
-
-
-
318,221
-
318,221
30 June 2021 (unaudited)
28,870,262
87,370,856
(67,673,657)
1,294,118
(37,652,565)
12,209,014
69,065
12,278,079
Notes forming part of the consolidated financial statements
For the 6 months ended 30 June 2021
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 2021 and 30 June 2020 are unaudited.
Basis of preparation
The financial information for the year ended 31 December 2020 included in these financial statements does not constitute the full statutory accounts for that year. The Annual Report and Financial Statements for 2020 have been filed with the Registrar of Companies. The Independent Auditors' Report on the Annual Report and Financial Statement for 2020 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 10 September 2021. The financial information in this interim report has been prepared in accordance with UK adopted international accounting standards. 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 2020 and which will form the basis of the 2021 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 at least bi-annually as part of the business planning process. A re-forecasting process has been completed for H2 2021 to 2023 in light of the economic uncertainty resulting from the ongoing COVID-19 pandemic. These forecasts have been reviewed by the Directors and 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.
Adjusted EBITDA
EBITDA is a non-GAAP company specific measure defined as profit or 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 costs arising from a fundamental restructuring of the Group's operations and redundancy costs.
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 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.
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
publishingOther
Total
H1 2021 revenue
£
£
£
£
Primary geographical markets
UK, including Channel Islands
381,898
-
-
381,898
USA
1,228,086
1,930,171
-
3,158,257
Isle of Man
2,533,481
-
-
2,533,481
Rest of the World
1,672,346
-
-
1,672,346
5,815,811
1,930,171
-
7,745,982
Contract counterparties
Direct to consumers (B2C)
-
1,930,171
-
1,930,171
B2B
5,815,811
-
-
5,815,811
5,815,811
1,930,171
-
7,745,982
Timing of transfer of goods and services
Point in time
5,735,657
1,930,171
-
7,665,828
Over time
80,154
-
-
80,154
5,815,811
1,930,171
-
7,745,982
Licensing
Social
publishingOther
Total
H1 2020 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
Adjusted EBITDA
Licensing
Social publishing
Head Office
Total
H1 2021
£
£
£
£
Revenue
5,815,811
1,930,171
-
7,745,982
Marketing expense
(12,389)
(157,862)
(37,177)
(207,428)
Operating expense
(606,247)
(579,612)
-
(1,185,859)
Administrative expense
(1,741,832)
(583,265)
(906,328)
(3,231,425)
Share option and related charges
(85,401)
(4,745)
(352,425)
(442,571)
Adjusted EBITDA - continuing
3,369,942
604,687
(1,295,930)
2,678,699
Restructuring expenses
(25,000)
EBITDA - continuing
2,653,699
Licensing
Social
publishingHead 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 option and related charges
-
-
(40,075)
(40,075)
Adjusted EBITDA - continuing
1,731,334
833,155
(1,325,422)
1,239,067
Restructuring expenses
(250,881)
EBITDA - continuing
988,186
3. Finance income and expense
6M
30 June 20216M
30 June 2020
£
£
Finance income
Interest received
6,306
1
Interest income on finance lease asset
5,258
11,642
Interest income on unwind of deferred consideration receivable
-
97,043
Total finance income
11,564
108,686
Finance expense
Bank interest paid
8,743
8,722
Fair value loss on other investments
38,856
26,575
Effective interest on other creditor
228,575
213,304
Interest expense on lease liability
26,047
38,734
Total finance expense
302,221
287,335
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 20216M
30 June 2020
£
£
Restructuring expenses
(25,000)
(250,881)
Adjusting items
(25,000)
(250,881)
Restructuring expenses
Restructuring costs of £25k (H1 2020: £251k) were incurred relating to restructuring and redundancy costs.
5. Earnings per share
Basic earnings per share is calculated by dividing the result attributable to ordinary shareholders by the weighted average number of shares in issue during the period. The calculation of diluted EPS is based on the result attributable to ordinary shareholders and weighted average number of ordinary shares outstanding after adjustment for the effects of all dilutive potential ordinary shares. The Group's potentially dilutive securities consist of share options and a convertible loan (see Note 14). The convertible loan is anti-dilutive and so is ignored in calculating diluted EPS.
6M
30 June 20216M
30 June 2020
£
£
Profit / (loss) after tax attributable to the owners of the parent Company
843,833
(627,692)
Number
Number
Denominator - basic
Weighted average number of ordinary shares
288,157,560
284,428,747
Denominator - diluted
Weighted average number of ordinary shares
288,157,560
284,428,747
Weighted average number of option shares
12,332,327
-
Weighted average number of shares
300,489,887
284,428,747
Pence
Pence
Basic earnings per share
0.29
(0.22)
Diluted earnings per share
0.28
(0.22)
6. Property, plant and equipment
ROU lease assets
Leasehold improvements
Computers and related equipment
Office furniture and equipment
Total
£
£
£
£
£
Cost
At 1 January 2021
769,613
76,059
206,367
77,209
1,129,248
Additions
-
-
119,189
658
119,847
Disposals
-
-
(28,763)
-
(28,763)
Exchange differences
1,736
(63)
1,056
435
3,164
At 30 June 201
771,349
75,996
297,849
78,302
1,223,496
Accumulated deprecation and impairment
At 1 January 2021
304,667
29,717
172,932
61,139
568,455
Depreciation charge
75,105
7,968
10,221
3,988
97,282
Disposals
-
-
(28,185)
-
(28,185)
Exchange differences
1,037
(62)
717
530
2,222
At 30 June 2021
380,809
37,623
155,685
65,657
639,774
Net book value
At 31 December 2020
464,946
46,342
33,435
16,070
560,793
At 30 June 2021
390,540
38,373
142,164
12,645
583,722
7. Intangible assets
Goodwill
Customer database
Software
Development costs
Licenses
Domain names
Intellectual Property
Total
£
£
£
£
£
£
£
£
Cost
At 1 January 2021
6,697,219
1,475,650
1,384,223
14,232,892
-
8,785
5,786,179
29,584,948
Additions
-
-
76,286
1,614,370
212,515
-
-
1,903,171
Exchange differences
(59,611)
(17,612)
(14,194)
(2,371)
-
(105)
(69,333)
(163,226)
At 30 June 2021
6,637,608
1,458,038
1,446,315
15,844,891
212,515
8,680
5,716,846
31,324,893
Accumulated amortisation and impairment
At 1 January 2021
1,650,000
1,475,650
1,384,223
10,030,745
-
8,785
3,898,422
18,447,825
Amortisation charge
-
-
12,749
1,076,512
15,945
-
356,626
1,461,832
Exchange differences
-
(17,612)
(14,194)
(2,295)
-
(105)
(45,808)
(80,014)
At 30 June 2021
1,650,000
1,458,038
1,382,778
11,104,962
15,945
8,680
4,209,240
19,829,643
Net book value
At 31 December 2020
5,047,219
-
-
4,202,147
-
-
1,887,757
11,137,123
At 30 June 2021
4,987,608
-
63,537
4,739,929
196,570
-
1,507,606
11,495,250
8. Other investments
The other investment balance comprises a 6.6% interest in Ayima Group AB ("Ayima"). The shares of Ayima are quoted on AktieTorget, a Nordic stock exchange (www.aktietorget.se). The investment is remeasured each reporting period to fair value based on the quoted share price.
During the period the Group disposed of its entire shareholding in Ayima, generating cash proceeds on disposal of £0.4m bringing the investment balance to £Nil (31 December 2020: £401,291).
9. Trade and other receivables
30 June
202131 December
2020
£
£
Trade receivables
1,383,856
1,319,769
Other receivables
35,337
216,207
Tax and social security
179,507
5,288
Prepayments and accrued income
1,416,677
802,475
3,015,377
2,343,739
All amounts shown fall due for payment within one year.
10. Cash and cash equivalents
30 June
202131 December
202030 June
2020
£
£
£
Cash and cash equivalents
3,923,635
2,105,167
846,793
Restricted cash
-
(18,382)
(18,382)
Cash and cash equivalents for Statement of Cash Flows
3,923,635
2,086,785
828,411
Restricted cash in previous periods 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.
11. Trade and other payables
30 June
202131 December
2020
£
£
Trade payables
592,895
368,402
Other payables
139,605
290,543
Tax and social security
175,259
122,533
Accruals
1,251,576
1,162,236
2,159,335
1,943,714
The carrying value of trade and other payables classified as financial liabilities measured at amortised cost approximates fair value.
12. Share capital
30 June
202130 June
202131 December
202031 December
2020Ordinary shares
Number
£
Number
£
Ordinary shares of
288,702,626
28,870,262
286,647,315
28,664,731
10 pence each
The increase of 2,055,311 ordinary shares relates to the exercise of share options during the period. The total amount received by the Company for the exercise price settlement was £318,221, which has been recorded as an increase in share capital and share premium as follows:
£
Share capital
205,531
Share premium
112,690
318,221
13. Share based payments
The share option and related charges income statement expense comprises:
6M
30 June 20216M
30 June 2020
£
£
IFRS 2 share-based payment charge
271,859
40,075
Direct taxes related to share options
170,712
-
442,571
40,075
IFRS 2 (Share-based payments) requires that the fair value of equity settled transactions are calculated and systematically charged to the statement of comprehensive income over the vesting period. The total fair value that was charged to the income statement in the period in relation to equity-settled share-based payments was £271,859 (H1 2020: £40,075).
Where individual EMI thresholds are exceeded or when unapproved share options are exercised by overseas employees, the Group is subject to employer taxes payable on the taxable gain on exercise. Since these taxes are directly related to outstanding share options, the income statement charge has been included within share option and related charges. The Group uses its closing share price at the reporting date to calculate such taxes to accrue. The tax related income statement charge for the period was £170,712 (H1 2020: £Nil).
On 5 January 2021, certain employees of the Group were granted a total of 350,000 share options, which vest in three equal tranches on 1 January 2022, 1 January 2023 and 1 January 2024. The options have an exercise price of 22.4 pence per share.
14. Arrangement with Gamesys Group plc
In December 2017 the Group entered into a complex transaction with Gamesys Group plc and Group companies (together 'Gamesys 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 Gamesys Group plc. 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 2021 was £0.6m (31 December 2020: £0.6m) 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 initial 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 2021
3,155,870
149,000
627,000
3,931,870
Utilisation of free services
-
(30,000)
-
(30,000)
Effective interest
228,575
-
-
228,575
Interest paid
(96,475)
-
-
(96,475)
At 30 June 2021
3,287,970
119,000
627,000
4,033,970
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 casino and bingo site in New Jersey. During the period, total license fees earned by the Group were $24,862 (H1 2020: $22,592) with $12,668 due at 30 June 2021 (30 June 2020: $7,599).
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 (see Note 14).
During the period £75,000 (H1 2020: £48,333) of consulting fees were paid to Dawnglen Finance Limited, a company controlled by Michael Buckley. No amounts were owed at 30 June 2021 (30 June 2020: £Nil).
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