REG - Gaming Realms PLC - Annual Results 2022
03/04/2023 07:00
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RNS Number : 0366V Gaming Realms PLC 03 April 2023
03 April 2023
Gaming Realms plc
(the "Company" or the "Group")
Annual Results 2022
27% increase in Revenue and 34% increase in Adjusted EBITDA(1)
Strong start to 2023 with year-on-year revenue increase over 50%
Gaming Realms plc (AIM: GMR), the developer and licensor of mobile focused
gaming content, announces its annual results for the year ended 31 December
2022 and Q1 highlights for 2023.
Gaming Realms' continued focus on content licensing has seen further growth in
revenues and high margins. This growth has been in pre-existing markets as
well as entering new markets in the year. With the current strong pipeline of
games and operators to onboard, the Group's growth is expected to continue in
2023.
2022 Financial Highlights:
· Revenue increased by 27% to £18.7m (2021: £14.7m)
o Licensing revenue increased by 35% to £14.9m (2021: £11.1m)
o Social publishing revenue increased by 3% to £3.7m (2021: £3.6m)
· EBITDA before share option and related charges (Adjusted EBITDA)
increased 34% to £7.8m (2021: £5.8m)
· Profit before tax for the year increased 224% to £3.5m (2021:
£1.1m)
· Year-end cash balance of £2.9m (2021: £4.4m) after making a
repayment to Gamesys Group of £3.4m resulting in the Group ending the year
debt free
2022 Operational Highlights:
· Portfolio of proprietary games on the Group's remote game server
("RGS") grew to 65 (2021: 53)
· Launched in 3 newly regulated iGaming markets in North America:
Ontario, Quebec and Connecticut
· Launched in 3 further European regulated iGaming markets: Spain,
Denmark and Belgium
· Launched with 56 new partners for Slingo Originals content
including Pokerstars, Betway, Loto Quebec and Snaitech
· Signed licensing deals with Konami Gaming and Taito Corporation
· Increased unique players in licensing business by 19%
· Phase one of the migration to a more dynamically scalable
next-gen RGS platform
· Launched the first 3 games in Europe and North America for
4ThePlayer on our distribution network
2023 Highlights:
· Increased year-on-year revenue by 53% in the two months post year
end to £3.7m (2022: £2.4m)
· Launched with 13 new operators including Bet365 in the UK, OLG in
Ontario, Rush Street Interactive in Mexico and Betway in Pennsylvania
· Signed an IP deal with Tetris to release a Slingo Tetris game
internationally later in 2023
· Released 3 new Slingo games including Slingo Cleopatra and Slingo
Golden Envelope
1 EBTIDA is profit before interest, tax, depreciation, amortisation and
impairment expenses and is a non-GAAP measure. The Group uses EBITDA before
share option and related charges (Adjusted EBITDA) to comment on its financial
performance above.
Outlook:
Gaming Realms continues to deliver on its strategy of becoming a leading
supplier to the international iGaming market. In 2022, the Group launched in 6
new markets, including Connecticut and Ontario in North America and continues
to be strategically placed for new market openings in North America. Gaming
Realms is also growing in its existing markets and partners, resulting in
growth with a high margin. With 13 new partners already launched in 2023,
together with 3 new Slingo games, the Board is confident in the Group's
strategy and expectations as we look ahead at the rest of the current year.
Commenting on the Group's performance, Mark Segal, CEO, said:
"2022 was another exceptional year for the Group as we continue with our
proven strategy of expanding our Slingo portfolio with new titles and entering
new iGaming jurisdictions alongside our operating partners. This has supported
our 27% revenue growth and we have ended the year with a record profit of
£3.5m.
"Having grown our portfolio of games to 65 through 2022 and launched with 56
new partners for our Slingo Originals content, we are experiencing our games
being enjoyed on a global level.
"As we look ahead to 2023, the year is already off to an exciting start with
13 new launches implemented and new Slingo games, such as Slingo Cleopatra and
Slingo Golden Envelope, already proving popular amongst fans. With our strong
foundation built in 2022 already proving fruitful in 2023, we are excited to
continue delivering further game launches, new partner deals and expanding our
global footprint even further."
An analyst briefing will be held virtually at 9:30am today. To attend, please
email gamingrealms@yellowjerseypr.com
(mailto:gamingrealms@yellowjerseypr.com) .
Enquiries
Gaming Realms plc 0845 123 3773
Michael Buckley, Executive Chairman
Mark Segal, CEO
Geoff Green, CFO
Peel Hunt LLP - NOMAD and joint broker 020 7418 8900
George Sellar
Andrew Clark
Lalit Bose
Investec -joint broker 020 7597 5970
Bruce Garrow
Alex Wright
Ben Farrow
Yellow Jersey PR 07747 788 221
Charles Goodwin
Annabelle Wills
About Gaming Realms
Gaming Realms creates and licenses innovative games for mobile, with
operations in the UK, U.S., Canada and Malta. Through its unique IP and
brands, Gaming Realms is bringing together media, entertainment and gaming
assets in new game formats. The Gaming Realms management team includes
accomplished entrepreneurs and experienced executives from a wide range of
leading gaming and media companies.
Executive Chairman's Statement
I am delighted to report that 2022 was another year of profitable growth for
the Company, with reported EBITDA growing by 34% to £7.8m (2021: £5.8m)
before share option and related charges. The distribution of our content has
continued to expand on a global level, strengthening our position as a leading
supplier of games to the international regulated igaming market. Slingo has
also cemented its position as a category in its own right, allowing us to
partner with leading games and entertainment brands and immerse them into the
Slingo format.
North America remains Gaming Realms' largest territory for content licensing,
with revenues increasing 112% on the prior year, bolstered by launching in the
newly regulated markets of Ontario and Connecticut. This now sees us
represented in all five of the key igaming jurisdictions in the region.
Importantly, we continued to grow in New Jersey, the first state we entered
back in 2017, as well as build further market share in Michigan and
Pennsylvania. We now have contracts in place with operators in the U.S. that
represent 95% of the market.
Like North America, Europe is still seeing new countries open to the regulated
igaming market. During 2022, we launched in Spain, Denmark and Belgium through
our operating partners and are encouraged by the early success we are
experiencing. Despite the UK being one of the more mature markets, we have
continued to grow, with our new games proving very popular, whilst in Italy we
have taken further market share.
During the year we strengthened the Company's board with the appointment of
Anna Massion as a Non-Executive Director. Anna brings extensive experience as
an investor and advisor to gaming companies and has also joined the Audit and
Remuneration Committees. Since the year end, Mark Segal has become CEO (having
previously been CFO), whilst Geoff Green has joined the Board and become CFO
(having previously been Finance Director). Mark and Geoff have developed a
strong working partnership in recent years, and we look forward to this
continuing as the Company's growth continues.
It is important to highlight that the success we have achieved would not have
happened without our fantastic staff. The Gaming Realms team has continued to
demonstrate their outstanding commitment and creativity, and on behalf of the
shareholders and the Board I would like to thank everyone for their endeavours
throughout the year.
With a strong pipeline of new partnerships and games set to launch, the
outlook for 2023 is encouraging as the Company continues to deliver on its
proven strategy. It is highly likely that additional states within America
will commence the process to regulate igaming within the next two years.
This process, coupled with the development of other new markets, will lead to
increased distribution of group products. Your Board views the future of the
Company with optimism and confidence.
Michael Buckley
Executive Chairman
Chief Executive's Review
Introduction
The Group made strong progress during 2022, increasing revenues by 27% to
£18.7m (2021: £14.7m), and EBITDA before share option and related charges by
34% to £7.8m (2021: £5.8m). We invested heavily in our proprietary Remote
Game Server "RGS" platform and expanded into multiple regulated markets. We
also increased our Slingo Originals game portfolio to 65 with the addition of
12 new games, as well as a series of bespoke branded games for our partners.
This strong performance resulted in revenue growth of 35% in our licensing
business to £14.9m (2021: £11.1m) and we are continuing to see good momentum
with increased international demand for our Slingo Originals portfolio. The
combination of growing the distribution of our games via our RGS, close
control of overheads and the operational leverage of the Group led to the
licensing business achieving a 54% EBITDA margin.
Licensing business
The focus of the Group remains to deliver growth in its content licensing
business. The continued expansion of our Slingo portfolio and growth in
distribution through more operators in Europe and North America underpinned
our performance throughout 2022. Content licensing revenues grew 57% in 2022
and we increased unique player numbers in the year by 19% to 4 million (2021:
3.36 million).
During the year, our library of proprietary games increased to 65 and we went
live with 56 new partners, all of whom licensed the Company's Slingo Originals
content. This illustrates the strong demand for our gaming content and our
ability to offer something different to the rest of the market with our unique
Slingo format.
Some of the most notable games released during the period included Slingo
Shark Week with the Discovery Channel, a partnership which was later extended
through the creation of Slingo Deadliest Catch, a tribute to one of
Discovery's most successful TV productions. We also helped to capture the
excitement of the World Cup with Slingoooal, which initially went live
exclusively with its operator partners at Flutter Entertainment via Sky
Betting & Gaming Vegas in November.
Slingo Rainbow Riches, based on the popular Rainbow Riches franchise, has been
a substantial hit across our markets, and we were delighted to receive a
nomination at the SBC CasinoBeats Game Developer Awards for this game. Later
in the year, we were the proud winners of the 'Mobile Supplier of the Year'
award at the Global B2B EGR Awards.
North America
As previously announced, we made further significant inroads into the
regulated North American igaming market, adding Connecticut, Quebec and
Ontario to territories we distribute our content. In Connecticut, which has
only two operators, we entered the market with our partner DraftKings Inc.,
and our content will launch on FanDuel later this year.
With the Slingo brand already present in the Quebec lottery market, in March
we launched on Loto-Québec, on its igaming platform, whilst in April we
expanded our reach into Canada by going live in Ontario with Rush Street
Interactive, Kindred and BetMGM.
Our performance in New Jersey, Michigan and Pennsylvania continues to be
strong as we launch new exciting Slingo content and go live with new
partners. In particular we have strong growth potential in Michigan and
Pennsylvania, where we have 22 and 14 games live respectively, compared to the
59 games live in New Jersey.
Europe
At the start of the year, the Group entered the regulated Spanish market with
long-term strategic partner Gamesys (now part of Bally's Corporation) under
its Monopoly and Botamania brands and later launched with Yo Bingo (part of
Rank Group).
In the first half of the year, the Slingo games portfolio went live with
Lottomatica which is Italy's largest operator, and subsequently with Snaitech
in the second half of the year. There was further progress in the Italian
market with Slingo Davinci Diamonds going exclusively live with Sisal, one of
the country's largest betting companies, whilst in the Netherlands we launched
with partners Bingoal and Betnation. Other European expansion came in Denmark
via Betsson, an existing partner, and in Belgium through a partnership deal
with Napoleon.
In November, we successfully obtained our full gaming licence from the
National Gambling Office in Romania. With this in place, we are now looking
forward to launching more Slingo content in the country with additional
operators whilst continuing to work with our current aggregation partners.
Social
Our social business remains an important way to bring the Slingo Games to a
wider audience. Revenue from social increased by 3% to £3.7m (2021: £3.6m)
whilst EBITDA grew to £1.5m (2021: £1.2m). Importantly, our social business
continued to provide a positive cash contribution to the Group.
Post Period End and Outlook
We continue to deliver on the clear strategy set out and Gaming Realms
continues to focus on the following areas:
· International expansion - particularly in the US and European
regulated markets
· Adding new distributors, operators and licensors
· Further penetration with existing distributors and operators
driven by new games
Gaming Realms has seen this momentum continue into 2023, with excellent growth
in the year to date, with revenues 53% up in the two months post year-end
compared with the same period in 2022. Content licensing revenues have
increased 59% in the same period. We have launched 3 games so far this year,
including Slingo Cleopatra and have gone live with 13 new partners.
The Group has a strong pipeline of new opportunities in our current markets,
in particular where we have recently launched. As a result, the Board
expects to have another strong year in 2023.
Mark Segal
Chief Executive Officer
Financial Review
Overall, Gaming Realms had a very strong 2022. The Group's financial results
for the year demonstrate the continued delivery of the Group's core strategy;
scaling the licensing business through entry into new regulated jurisdictions
and enhancing the unique Slingo games portfolio.
By the end of the year, the Group became debt free following the full
repayment of the outstanding convertible loan balance to Gamesys Group (part
of Bally's Corporation).
Performance
Group revenues increased 27% to £18.7m (2021: £14.7m), principally as a
result of the continued growth in the licensing segment and in particular the
content licensing business, supported by modest growth in social publishing
revenues.
The Group generated EBITDA of £7.4m (2021: £5.1m) and £7.8m before share
option and related charges (2021: £5.8m). The £2.3m growth in EBITDA
generated compared with the prior year has seen the Group record a profit
before tax of £3.5m (2021: £1.1m), an increase of £2.4m on the prior year.
Operating expenses are largely revenue related costs including license fees,
hosting costs and platform provider fees. Total Group operating expenses
were £3.9m, a 32% increase over the £2.9m in the prior year, driven by the
growth in licensing segment revenues.
Administrative expenses increased to £6.9m (2021: £5.7m) predominantly due
to increased staff costs in the licensing segment required to deliver the
segments growth, along with other incremental business expansion costs.
Share option and related charges were £0.4m in 2022 (2021: £0.7m).
The following table sets out the split of revenue, EBITDA and profit before
tax by segment, which is discussed further below.
Licensing Social publishing Head Office Total
2022 £ £ £ £
Revenue 14,937,036 3,690,485 23,000 18,650,521
Other income - 112,147 - 112,147
Marketing expense (38,391) (17,164) (78,244) (133,799)
Operating expense (2,579,127) (1,308,520) - (3,887,647)
Administrative expense (4,176,964) (1,001,569) (1,764,925) (6,943,458)
Share option and related charges (149,753) (1,666) (200,307) (351,726)
EBITDA 7,992,801 1,473,713 (2,020,476) 7,446,038
Amortisation of intangible assets (1,996,909) (943,384) (731,086) (3,671,379)
Depreciation of property, plant and equipment (60,215) (59,822) (138,478) (258,515)
Finance expense (10,087) (11,239) (372,716) (394,042)
Finance income 26,658 - 375,000 401,658
Profit before tax 5,952,248 459,268 (2,887,756) 3,523,760
Licensing Social Head Office Total
publishing
2021 £ £ £ £
Revenue 11,100,085 3,567,616 - 14,667,701
Other income - 130,878 - 130,878
Marketing expense (20,348) (282,579) (76,303) (379,230)
Operating expense (1,645,538) (1,301,320) - (2,946,858)
Administrative expense (2,889,706) (920,178) (1,856,570) (5,666,454)
Share option and related charges (170,062) (7,441) (521,691) (699,194)
EBITDA 6,374,431 1,186,976 (2,454,564) 5,106,843
Amortisation of intangible assets (1,357,625) (987,286) (719,388) (3,064,299)
Depreciation of property, plant and equipment (26,475) (47,717) (142,642) (216,834)
Impairment of goodwill - (73,677) - (73,677)
Finance expense (7,353) (20,005) (662,577) (689,935)
Finance income 26,496 - - 26,496
Profit before tax 5,009,474 58,291 (3,979,171) 1,088,594
Licensing
Licensing segment revenues in total increased 35% to £14.9m (2021: £11.1m),
which can be broken down as follows:
· Content licensing revenue growth of 57% to £14.3m (2021: £9.1m);
and
· Brand licensing revenue falling 68% to £0.6m (2021: £2.0m).
The segment contributed £8.0m EBITDA in 2022 (2021: £6.4m).
The amortisation charge for the year increased to £2.0m (2021: £1.4m),
reflecting the increased investment in development spend in the segment in
recent years. The impact of the segments increase in EBITDA offset by the
increase in amortisation, means the segment delivered a profit before tax of
£6.0m (2021: £5.0m).
Content licensing
The core focus of the Group continues to be growing the content licensing
business by way of expanding into new regulated territories, growing our
unique Slingo games portfolio and developing deeper relationships with
existing partners to maximise value and engagement.
During the year, the Group entered a further 6 regulated markets globally. In
North America, the Group launched its content in the Canadian provinces of
Ontario following the market opening, and Quebec in the first half of 2022,
while launching in the U.S. state of Connecticut in the second half of the
year, making it the fourth U.S. state where the Group is licensed. In Europe,
the Group launched in the regulated markets of Spain, Denmark and Belgium
during the year.
In total the Group went live with a further 56 partners during 2022. Of
this, 17 of these new partners were within these newly entered regulated
markets and 39 in existing markets in Europe and North America. A further 13
partners have gone live in 2023 to date.
The Group released 12 new Slingo games to the market during 2022, including
Slingo Deadliest Catch and Slingo Da Vinci Diamonds, along with a series of
bespoke Slingo branded games for our partners. Slingo continues to prove
highly popular with our partners and players. Slingo is a unique genre of
game in the market, which is driving engagement with partners.
The Group continues to identify and partner with leading brands in the
industry that will complement the Slingo format and engage players. During
the year we released new Slingo collaborations with key partners including
Everi, Warner Discovery and IGT. A number of further agreements have been
entered into to bring new Slingo collaborations to market in 2023, including
Tetris and Money Train.
Revenues from North America continued to grow in prominence for the content
licensing business. Revenue from these markets in 2022 was £6.4m, a 112%
increase on the £3.0m in the prior year. The region now represents 45% of
total content licensing revenues (2021: 33%). We anticipate this will
increase further in 2023 with a full year of trading in Ontario, Quebec and
Connecticut, along with further penetration in existing North American
markets.
The operational leverage of the content licensing business has meant that
total segmental expenses (excluding share option and related charges)
increased by 49% to £6.8m (2021: £4.6m), a lower rate than the 57% which
content licensing revenues increased over the prior year.
Brand licensing
The fall in brand licensing revenues in 2022 compared with the prior year is
predominantly the result of a significant deal completed in the prior year.
The Group's Slingo brand is well-known by consumers, which allows us to
license this brand into adjacent markets where the right opportunities arise,
such as physical and digital lottery scratch games.
Social publishing
The Group's social publishing business reported a 3% increase in revenues to
£3.7m (2021: £3.6m), despite a 94% reduction in segmental marketing expenses
in the year to £0.02m (2021: £0.3m).
Operational costs, which are largely driven by revenues, increased by 1% from
the previous year to £1.3m (2021: £1.3m).
The 9% increase in segmental administrative expenses is due to continued
investment in the development and operational team, with the segment
continuing to have a stable underlying fixed cost base. Excluding staff
costs, segmental administrative expenses remained stable with the prior year,
increasing by 1%.
As a result, the segment delivered £1.5m EBITDA for the year, a 24% increase
on the £1.2m in 2021.
The amortisation charge related to the social publishing segment for the year
was £0.9m, a 4% reduction on the prior year (2021: £1.0m). The growth in
the segment's EBITDA has therefore seen the social publishing business deliver
profit before tax of £0.5m (2021: 0.1m).
Cashflow and Balance Sheet
The Group's cash balance decreased by £1.5m in 2022 (2021: increased by
£2.3m) to £2.9m at 31 December 2022 (2021: £4.4m).
In December 2022, the Group paid Gamesys Group £3.4m as full repayment of the
convertible loan and related charges, leaving the Group debt free. Excluding
this debt repayment, the Group would have reported a £1.9m increase in its
cash balance in 2022.
The Group capitalised £4.0m (2021: £3.4m) into intangible assets as
development costs during the year. This £0.6m increase over the prior year
represents an increase in investment in both the licensing and social
publishing segments. This investment is to both expand the Group's unique
game portfolio across both segments and develop the Group's proprietary RGS
platform with enhanced capabilities, scale and features.
Aside from the £3.4m debt repayment and £4.0m development costs capitalised
in the year discussed above, the remaining movement in cash is substantially
explained by the £6.5m (2021: £5.0m) cash inflow from operating
activities. A reconciliation between profit for the year and cash from
operating activities is provided below.
2022 2021
£ £
Cash flows from operating activities
Profit for the financial year 3,614,115 1,254,152
Adjustments for:
Depreciation of property, plant and equipment 258,515 216,834
Loss on disposal of property, plant and equipment - 2,125
Loss on disposal of intangible assets - (2,004)
Impairment of goodwill - 73,677
Amortisation of intangible fixed assets 3,671,379 3,064,299
Other income (112,147) (130,878)
Other income received during the year 121,962 117,591
Finance income (401,658) (26,496)
Finance expense 394,042 689,935
Tax credit (90,355) (165,558)
Exchange differences 54,013 22,374
Share based payment expense 438,868 466,254
Increase in trade and other receivables (1,973,278) (745,778)
Increase in trade and other payables 607,560 208,400
Decrease in other assets 11,848 -
Net cash flows from operating activities before taxation 6,594,864 5,044,927
Net tax paid in the year (45,213) (77,152)
Net cash flows from operating activities 6,549,651 4,967,775
Net assets totaled £17.9m (2021: £13.1m).
There has been a £2.1m increase in the trade and other receivables balance,
which is a result of the £2.1m increase in trade receivables. This increase
is a result of the revenue growth from the prior year along with the timing of
invoicing and cash collection around the year-end. No impairment provision
has been recorded from the Group's expected credit loss assessment on these
receivables.
Going concern
In adopting the going concern basis of preparation in the financial
statements, the Directors have performed both qualitative and quantitative
assessments of the associated risks facing the business and its ability to
meet its short and medium-term forecasts. The forecasts were subject to
stress testing to analyse the reduction in forecast cash flows required to
bring about insolvency of the Company unless capital was raised. In such
cases it is anticipated that mitigation actions, such as reduction in
overheads could be implemented to stall such an outcome.
The Directors confirm their view that they have carried out a robust
assessment of the emerging and principal risks facing the business. As a
result of the assessment performed, the Directors consider that the Group has
adequate resources to continue its normal course of operations for the
foreseeable future.
Dividend
During the year, Gaming Realms did not pay an interim or final dividend. The
Board of Directors are not proposing a final dividend for the current year as
we continue to execute our strategy and invest in the growth of the business.
Corporation and deferred taxation
The current year tax credit of £0.1m (2021: £0.2m) largely relates to the
recognition of a £0.3m deferred tax asset, £0.3m corporation tax charge in
overseas jurisdictions (2021: £0.05m) and the unwind of deferred tax of
£0.1m (2021: £0.1m) which arose on prior year business combinations.
Geoff Green
Chief Financial Officer
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2022
2022 2021 *
£ £
Revenue 18,650,521 14,667,701
Other income 112,147 130,878
Marketing expenses (133,799) (379,230)
Operating expenses (3,887,647) (2,946,858)
Administrative expenses (6,943,458) (5,666,454)
Share option and related charges (351,726) (699,194)
EBITDA 7,446,038 5,106,843
Amortisation of intangible assets (3,671,379) (3,064,299)
Depreciation of property, plant and equipment (258,515) (216,834)
Impairment of goodwill - (73,677)
Finance expense (394,042) (689,935)
Finance income 401,658 26,496
Profit before tax 3,523,760 1,088,594
Tax credit 90,355 165,558
Profit for the financial year 3,614,115 1,254,152
Other comprehensive income
Items that will or may be reclassified to profit or loss:
Exchange gain arising on translation of foreign operations 131,432 39,153
Total other comprehensive income 131,432 39,153
Total comprehensive income 3,745,547 1,293,305
Profit attributable to:
Owners of the parent 3,614,115 1,257,698
Non-controlling interest - (3,546)
3,614,115 1,254,152
Total comprehensive income attributable to:
Owners of the parent 3,745,547 1,296,851
Non-controlling interest - (3,546)
3,745,547 1,293,305
Earnings per share Pence Pence
Basic 1.24 0.44
Diluted 1.21 0.42
* Comparative numbers for the year ended 31 December 2021 have been
restated. See Note 1 for further details.
** EBITDA is a non-GAAP measure used to represent the trading performance and
results of the Group. EBITDA is defined as profit before tax adjusted for
finance income and expense, depreciation and amortisation.
Consolidated Statement of Financial Position
As at 31 December 2022
31 December 31 December
2022
2021
£ £
Non-current assets
Intangible assets 12,422,852 11,815,598
Property, plant and equipment 535,409 484,578
Deferred tax asset 287,407 -
Other assets 138,798 150,646
13,384,466 12,450,822
Current assets
Trade and other receivables 5,336,330 3,260,687
Cash and cash equivalents 2,922,775 4,412,375
8,259,105 7,673,062
Total assets 21,643,571 20,123,884
Current liabilities
Trade and other payables 3,270,319 2,241,114
Lease liabilities 217,731 172,887
Other Creditors - 3,489,278
Derivative liabilities - 744,000
3,488,050 6,647,279
Non-current liabilities
Deferred tax liability 75,592 199,876
Lease liabilities 167,680 168,227
243,272 368,103
Total liabilities 3,731,322 7,015,382
Net assets 17,912,249 13,108,502
Equity
Share capital 29,200,676 28,970,262
Share premium 87,653,774 87,370,856
Merger reserve (67,673,657) (67,673,657)
Foreign exchange reserve 1,549,701 1,418,269
Retained earnings (32,818,245) (36,977,228)
Total equity 17,912,249 13,108,502
Consolidated Statement of Cash Flows
For the year ended 31 December 2022
2022 2021
£ £
Cash flows from operating activities
Profit for the financial year 3,614,115 1,254,152
Adjustments for:
Depreciation of property, plant and equipment 258,515 216,834
Loss on disposal of property, plant and equipment - 2,125
Loss on disposal of intangible assets - (2,004)
Impairment of goodwill - 73,677
Amortisation of intangible fixed assets 3,671,379 3,064,299
Other income (112,147) (130,878)
Other income received during the year 121,962 117,591
Finance income (401,658) (26,496)
Finance expense 394,042 689,935
Tax credit (90,355) (165,558)
Exchange differences 54,013 22,374
Share based payment expense 438,868 466,254
Increase in trade and other receivables (1,973,278) (745,778)
Increase in trade and other payables 607,560 208,400
Decrease in other assets 11,848 -
Net cash flows from operating activities before taxation 6,594,864 5,044,927
Net tax paid in the year (45,213) (77,152)
Net cash flows from operating activities 6,549,651 4,967,775
Investing activities
Acquisition of property, plant and equipment (124,104) (141,546)
Acquisition of intangible assets (125,684) (323,608)
Capitalised development costs (4,009,171) (3,435,308)
Disposal of other investments - 362,436
Interest received - 145
Finance lease asset - sublease receipts - 146,505
Net cash used in investing activities (4,258,959) (3,391,376)
Financing activities
Receipt of deferred consideration - 972,554
Repayment of convertible loan and additional charges (3,375,000) -
Principal paid on lease liability (163,638) (388,494)
Issue of share capital on exercise of options 13,332 418,221
Interest paid (186,880) (215,169)
Net cash (used in) / from financing activities (3,712,186) 787,112
Net (decrease) / increase in cash and cash equivalents (1,421,494) 2,363,511
Cash and cash equivalents at beginning of year 4,412,375 2,086,785
Exchange loss on cash and cash equivalents (68,106) (37,921)
Cash and cash equivalents at end of year 2,922,775 4,412,375
Consolidated Statement of Changes in Equity
For the year ended 31 December 2022
Share capital Share premium Merger reserve Foreign Exchange Reserve Retained earnings Total to equity holders of parents Non-controlling interest Total equity
£ £ £ £ £ £ £ £
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 year - - - - 1,257,698 1,257,698 (3,546) 1,254,152
Other comprehensive income - - - 39,153 - 39,153 - 39,153
Total comprehensive income for the year - - - 39,153 1,257,698 1,296,851 (3,546) 1,293,305
Contributions by and distributions to owners
Share-based payment on share options - - - - 466,254 466,254 - 466,254
Exercise of options 305,531 112,690 - - - 418,221 - 418,221
Recycling of non-controlling interest - - - - 67,077 67,077 (67,077) -
31 December 2021 28,970,262 87,370,856 (67,673,657) 1,418,269 (36,977,228) 13,108,502 - 13,108,502
1 January 2022 28,970,262 87,370,856 (67,673,657) 1,418,269 (36,977,228) 13,108,502 - 13,108,502
Profit for the year - - - - 3,614,115 3,614,115 - 3,614,115
Other comprehensive income - - - 131,432 - 131,432 - 131,432
Total comprehensive income for the year - - - 131,432 3,614,115 3,745,547 - 3,745,547
Contributions by and distributions to owners
Share-based payment on share options - - - - 438,868 438,868 - 438,868
Exercise of options 13,332 - - - - 13,332 - 13,332
Conversion of loan 217,082 282,918 - - 106,000 606,000 - 606,000
31 December 2022 29,200,676 87,653,774 (67,673,657) 1,549,701 (32,818,245) 17,912,249 - 17,912,249
Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
1. Accounting policies
General information
Gaming Realms Plc (the "Company") and its subsidiaries (together the "Group").
The Company is admitted to trading on the Alternative Investment Market (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, SE1 8QH.
The consolidated financial statements are presented in British Pounds
Sterling.
Basis of preparation
The Group financial statements have been prepared in accordance with UK
adopted international accounting standards in conformity with the requirements
of the Companies Act 2006.
The Group financial statements have been prepared on the historical cost
basis, except where certain assets or liabilities are held at amortised cost
or at fair value as described in the accounting policies below.
Restatement of comparatives
Management have reviewed the classification of certain items included the
comparative statement of comprehensive income for the year ended 31 December
2021 and made the following restatements:
· Management believes the presentation of hosting costs as an
operating expense rather than an administrative expense more accurately
reflects the function of the expense. Therefore £744,539 of hosting costs
incurred in the comparative year have been reclassified from administrative
expenses to operating expenses. This reclassification has no impact on
reported EBITDA, profit before tax or net assets for the comparative year.
· The Group receives a research and development tax credit in the
Canadian province of British Columbia, in respect of its social segment
development activities performed there. In the comparative year, the
research and development tax credit of £130,878 was presented within the tax
credit in the consolidated statement of comprehensive income, which has been
reclassified and presented as other income. This restatement increases the
comparative years EBITDA from £4,975,965 as previously reported, to
£5,106,843, and increases profit before tax from £957,716 as previously
reported to £1,088,594. There is no change in profit for the year or net
assets as a result of this reclassification.
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. The Directors have reviewed
forecast cash flows for the period to December 2025 and consider that the
Group will have sufficient cash resources available to meet its liabilities as
they fall due for at least the forthcoming 12 months from the date of the
approval of the financial statements.
Given the various macro-economic uncertainties such as inflation, recession
fears and the war in Ukraine, these cash flow forecasts have been subject to
short- and medium-term stress testing, scenario modelling and sensitivity
analysis through to June 2024, which the Directors consider sufficiently
robust. Scenarios considered include but are not limited to; failure to
expand into planned new regulated jurisdictions during the forecast period and
a significant reduction in trading cash flows compared to Group forecasts.
The Directors note that in an extreme scenario, the Group also has the option
to rationalise its cost base including cuts to discretionary capital,
marketing and overhead expenditure. The Directors consider that the required
level of change to the Group's forecast cash flows to give a rise to a
material risk over going concern are sufficiently remote.
Accordingly, these financial statements have been prepared on the basis of
accounting principles applicable to a going concern, which assumes that the
Group and the Company will realise its assets and discharge its liabilities in
the normal course of business. Management has carried out an assessment of
the going concern assumption and has concluded that the Group and the Company
will generate sufficient cash and cash equivalents to continue operating for
the next 12 months.
Adoption of new and revised standards
The following amendments are effective for the year beginning 1 January 2022:
· Onerous Contracts - Cost of Fulfilling a Contract (Amendments to
IAS 37);
· Property, Plant and Equipment: Proceeds before Intended Use
(Amendments to IAS 16);
· Annual Improvements to IFRS Standards 2018-2020 (Amendments to
IFRS 1, IFRS 9, IFRS 16 and IAS 41); and
· References to Conceptual Framework (Amendments to IFRS 3).
These amendments did not have a material impact on the Group.
There are a number of standards, amendments to standards, and interpretations
which have been issued by the IASB that are effective in future accounting
periods that the Group has decided not to adopt early.
The following amendments are effective for the period beginning 1 January
2023:
· Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS
Practice Statement 2);
· Definition of Accounting Estimates (Amendments to IAS 8); and
· Deferred Tax Related to Assets and Liabilities arising from a
Single Transaction (Amendments to IAS 12).
The following amendments are effective for the period beginning 1 January
2024:
· IFRS 16 Leases (Amendment - Liability in a Sale and Leaseback);
· IAS 1 Presentation of Financial Statements (Amendment -
Classification of Liabilities as Current or Non-current); and
· IAS 1 Presentation of Financial Statements (Amendment - Non-current
Liabilities with Covenants).
The Group is currently assessing the impact of these new accounting standards
and amendments. The Group does not expect any of the standards or amendments
issued by the IASB, but not yet effective, to have a material impact on the
Group.
Business combinations
On acquisition, the assets, liabilities and contingent liabilities of a
subsidiary are measured at their fair values at the date of acquisition.
Any excess of the cost of acquisition over the fair values of the
identifiable net assets acquired, including separately identifiable intangible
assets, is recognised as goodwill. Any discount on acquisition, i.e. where the
cost of acquisition is below the fair value of the identifiable net assets
acquired, is credited to the Statement of Comprehensive Income in the period
of acquisition.
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 2 reportable operating segments:
· Licensing - brand and content licensing to partners in Europe and
the US
· Social Publishing - providing freemium games to the US
Licensing Social publishing Head Office Total
2022 £ £ £ £
Revenue 14,937,036 3,690,485 23,000 18,650,521
Other income - 112,147 - 112,147
Marketing expense (38,391) (17,164) (78,244) (133,799)
Operating expense (2,579,127) (1,308,520) - (3,887,647)
Administrative expense (4,176,964) (1,001,569) (1,764,925) (6,943,458)
Share option and related charges (149,753) (1,666) (200,307) (351,726)
EBITDA 7,992,801 1,473,713 (2,020,476) 7,446,038
Amortisation of intangible assets (1,996,909) (943,384) (731,086) (3,671,379)
Depreciation of property, plant and equipment (60,215) (59,822) (138,478) (258,515)
Finance expense (10,087) (11,239) (372,716) (394,042)
Finance income 26,658 - 375,000 401,658
Profit before tax 5,952,248 459,268 (2,887,756) 3,523,760
Licensing Social Head Office Total
publishing
2021 £ £ £ £
Revenue 11,100,085 3,567,616 - 14,667,701
Other income - 130,878 - 130,878
Marketing expense (20,348) (282,579) (76,303) (379,230)
Operating expense (1,645,538) (1,301,320) - (2,946,858)
Administrative expense (2,889,706) (920,178) (1,856,570) (5,666,454)
Share option and related charges (170,062) (7,441) (521,691) (699,194)
EBITDA 6,374,431 1,186,976 (2,454,564) 5,106,843
Amortisation of intangible assets (1,357,625) (987,286) (719,388) (3,064,299)
Depreciation of property, plant and equipment (26,475) (47,717) (142,642) (216,834)
Impairment of goodwill - (73,677) - (73,677)
Finance expense (7,353) (20,005) (662,577) (689,935)
Finance income 26,496 - - 26,496
Profit before tax 5,009,474 58,291 (3,979,171) 1,088,594
3. finance income and expense
2022 2021
£ £
Finance income
Interest received - 145
Net release of derivative liability on non-conversion of loan 375,000 -
Interest income on unwind of deferred income 26,658 19,087
Interest income on unwind of finance lease asset - 7,264
Total finance income 401,658 26,496
Finance expense
Bank interest paid 20,445 20,238
Fair value loss on other investments - 38,855
Fair value movement on derivative liability 112,000 117,000
Effective interest on other creditor 237,157 468,339
Interest expense on lease liability 24,440 45,503
Total finance expense 394,042 689,935
4. taxation
2022 2021
£ £
Current tax
Current tax (charge) / credit (312,922) 38,310
Adjustment for current tax of prior periods (8,414) 4,952
Total current tax (321,336) 43,262
Deferred tax
Recognition of deferred tax asset 287,407 -
Unwind of deferred tax 124,284 122,296
Total deferred tax credit 411,691 122,296
Total tax credit 90,355 165,558
The reasons for the difference between the actual tax credit for the period
and the standard rate of corporation tax in the UK applied to profits for the
year are as follows:
2022 2021
£ £
Profit before tax for the year 3,523,760 1,088,594
Expected tax at effective rate of corporation tax in the UK of 19.0% (2021: 669,514 206,833
19.0%)
Expenses not deductible for tax purposes 141,812 274,425
Income not chargeable for tax purposes (71,278) (24,867)
Effects of overseas taxation (93,850) (38,310)
Adjustment for tax in respect of prior periods 8,414 (4,952)
Research and development tax credit (131,100) -
Movement in deferred tax not previously recognised (326,460) (578,687)
Recognition of deferred tax asset (287,407) -
(90,355) (165,558)
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 year. The calculation of diluted EPS is based on the result attributable
to ordinary shareholders and weighted average number of ordinary shares
outstanding after adjusting for the effects of all dilutive potential ordinary
shares. The Group's potentially dilutive securities consist of share options
and a convertible loan. The convertible loan was anti-dilutive in both the
current and prior years and so was ignored in calculating diluted EPS.
2022 2021
£ £
Profit after tax attributable to the owners of the parent Company 3,614,115 1,257,698
Number Number
Denominator - basic
Weighted average number of ordinary shares 291,655,659 288,496,688
Denominator - diluted
Weighted average number of ordinary shares 291,655,659 288,496,688
Weighted average number of option shares 7,057,892 13,140,665
Weighted average number of shares 298,713,551 301,637,353
Pence Pence
Basic earnings per share 1.24 0.44
Diluted earnings per share 1.21 0.42
6. 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 3,435,308 247,322 - - 3,758,916
Disposals (73,677) - (212,215) (198,043) - - - (483,935)
Exchange differences 50,382 14,886 14,122 - - 89 58,568 138,047
At 31 December 2021 6,673,924 1,490,536 1,262,416 17,470,157 247,322 8,874 5,844,747 32,997,976
Additions - - 54,229 4,009,171 71,455 - - 4,134,855
Disposals - - - - - - - -
Exchange differences 125,326 - - 14,086 694 - - 140,106
At 31 December 2022 6,799,250 1,490,536 1,316,645 21,493,414 319,471 8,874 5,844,747 37,272,937
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 - - 31,978 2,269,464 43,469 - 719,388 3,064,299
Impairment 73,677 - - - - - - 73,677
Disposals (73,677) - (212,215) (200,047) - - - (485,939)
Exchange differences - 14,886 14,122 2,227 - 89 51,192 82,516
At 31 December 2021 1,650,000 1,490,536 1,218,108 12,102,389 43,469 8,874 4,669,002 21,182,378
Amortisation charge - - 73,177 2,781,155 85,961 - 731,086 3,671,379
Disposals - - - - - - - -
Exchange differences - - - (3,672) - - - (3,672)
At 31 December 2022 1,650,000 1,490,536 1,291,285 14,879,872 129,430 8,874 5,400,088 24,850,085
Net book value
At 31 December 2021 5,023,924 - 44,308 5,367,768 203,853 - 1,175,745 11,815,598
At 31 December 2022 5,149,250 - 25,360 6,613,542 190,041 - 444,659 12,422,852
7. 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
included 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 were
provided free-of-charge within the first 5 years.
The convertible loan had a duration of 5 years and carried interest at 3-month
LIBOR plus 5.5%, which was later updated to a fixed 5.75% following the
cessation of LIBOR on 31 December 2021. It was secured over the Group's Slingo
assets and business. At any time after the first year, Gamesys Group plc could
have elected 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 was lower than 10p (nominal value), then the shares could have been
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 would have been approximately 11%, assuming the
convertible loan is converted in full.
The option violated 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 was determined at 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 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 cashflows was 14.1%, being the Group's incremental borrowing
rate. This 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 cashflows are based on
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 to provide free services.
On 23 February 2022, Bally's Corporation (owner of Gamesys Group) exercised
their option to convert £500,000 of the £3,500,000 convertible loan into
Gaming Realms plc ordinary shares. The issue of 2,170,817 new ordinary
shares to satisfy the conversion resulted in an increase in share capital of
£217,082 and share premium of £282,918. As a result of the conversion, a
£106,000 reclassification from the derivative liability into retained
earnings was made, being 14.29% (the portion of the total loan converted) of
the derivative liability held at the time of conversion.
On 9 December 2022, the Group paid Gamesys Group a sum of £3,375,000 as full
repayment of the remaining £3,000,000 principal loan balance plus related
charges.
Prior to repayment, the fair value of the conversion feature was assessed to
be £750,000 (31 December 2021: £744,000) based on revised probabilities of
when and if the option would be exercised, with the £112,000 increase
recorded as a finance expense. The key inputs into the valuation model
included timing of exercise by the counterparty (based on a probability
assessment) and the share price. Following repayment of the loan, the
derivative liability balance held of £750,000, less £375,000 of repayment
charges included in the above £3,375,000 final payment was released to the
income statement as finance income.
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 - (89,000) - (89,000)
Effective interest 468,339 - - 468,339
Interest paid (194,931) - - (194,931)
Change in fair value - - 117,000 117,000
At 31 December 2021 3,429,278 60,000 744,000 4,233,278
At 1 January 2022 3,429,278 60,000 744,000 4,233,278
Utilisation of free services - (60,000) - (60,000)
Effective interest 237,157 - - 237,157
Interest paid (166,435) - - (166,435)
Partial conversion of loan (500,000) - (106,000) (606,000)
Change in fair value - - 112,000 112,000
Repayment of loan (3,000,000) - (750,000) (3,750,000)
At 31 December 2022 - - - -
8. Share capital
Ordinary shares
2022 2022 2021 2021
Number £ Number £
Ordinary shares of 292,006,775 29,200,676 289,702,626 28,970,262
10 pence each
The increase of 2,304,149 ordinary shares relates to (i) the exercise of share
options during the year, and (ii) the partial conversion of the convertible
loan. The changes in share capital and share premium as a result of these
events is shown below.
Share capital Share premium
£ £
At 1 January 2021 28,664,731 87,258,166
Exercise of share options 305,531 112,690
At 31 December 2021 28,970,262 87,370,856
Exercise of share options 13,332 -
Conversion of loan 217,082 282,918
At 31 December 2022 29,200,676 87,653,774
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