REG - Webis Holdings PLC - Annual Financial Report and Notice of AGM <Origin Href="QuoteRef">WEBH.L</Origin>

Webis HoldingsAnnouncement

20/11/2014 08:00

RNS Number : 5078X
Webis Holdings PLC
20 November 2014
FOR IMMEDIATE RELEASE
20 November 2014
WEBIS HOLDINGS PLC
("Webis" or "the Group")
Annual Report and Accounts for the year ended 31 May 2014
Notice of AGM
Webis Holdings plc, the global gaming group, today announces its audited results and the publication of its 2014 Annual Report and Accounts ("Accounts") for the year ended 31 May 2014, extracts from which are set out below.
The Accounts are expected to be posted to shareholders on or around 26 November 2014 together with the Notice of Annual General Meeting ("AGM") and will be available from that date on the Group's website www.webisholdingsplc.com and at the Group's Registered Office: Viking House, Nelson Street, Douglas, Isle of Man IM1 2AH.
The AGM will be held at The Claremont Hotel, 18/19 Loch Promenade, Douglas, Isle of Man, on 19 December 2014 at 11 am. 
Operating Highlights
 Turnover has increased by 4.2% to US$275.85 million (2013: US$264.68 million)
 Gross profit has increased by 2.1% to US$8.71 million (2013: US$8.53 million)
 Total comprehensive income has increased to US$0.46 million (2013: profit of US$0.28 million)
 Basic earnings per share have increased to 0.13 cents (2013: 0.07 cents)
 Total assets have increased by 27.4% to US$13.40 million (2013: US$10.52 million)
Commenting on the results, Denham Eke, Non-executive Chairman of Webis Holdings plc, said: "The Group has achieved a Total Comprehensive Profit for the full financial year ended 31 May 2014. WatchandWager.com, the Group's pool-wagering and racetrack operation has made some excellent strategic progress, particularly with increasing the availability of premium global wagering content for our customers. The Group's Sportsbook operation, betinternet.com (IOM) Limited has remained resilient against some strong regulatory headwinds that are impacting the online gambling industry as a whole." 
ENDS
For further information:
Webis Holdings plc
Tel: 01624 652590
Garry Knowles, Managing Director

Beaumont Cornish Limited
Tel: 020 7628 3396
Roland Cornish / Felicity Geidt

Britton Financial PR
Tel: 07957 140416
Tim Blackstone
Chairman's Statement
Shareholders should note that the Board has elected to change the Company's reporting currency from Sterling to US Dollars so as to more accurately reflect the overall performance of the Group, which has the majority of its assets held, and transactions conducted, in US Dollars.
Introduction
I am pleased to report that Webis Holdings plc ("Webis" or "the Group") has achieved a Total Comprehensive Profit for the full financial year ended 31 May 2014. 
WatchandWager.com ("WatchandWager"), the Group's pool-wagering and racetrack operation has made some excellent strategic progress, particularly with increasing the availability of premium global wagering content for our customers. 
The Group's sportsbook operation, betinternet.com (IOM) Limited ("betinternet" or "Sportsbook") has remained resilient against some strong regulatory headwinds that are impacting the online gambling industry as a whole. 
Year End Results Review
Group turnover for the year ended 31 May 2014 was $275.85 million (2013: $264.68 million). Gross Profit increased by 2.1% to $8.71 million (2013: $8.53 million). Overall gross margin was 3.2% (2013: 3.2%).
Operating expenses increased by 9% over the previous year to $8.55 million (2013: $7.83 million). The majority of the increase in expenses was attributable to the implementation of our growth strategy for WatchandWager in the US.
Shareholder equity has increased to $5.17 million (2013: $4.75 million) with total cash at $8.40 million (2013: $7.79 million), which includes a ring-fenced amount of $4.74 million (2013: $4.02 million) held as protection against our player liability as required under Isle of Man gambling legislation.
Pool-wagering turnover increased to $67.59 million (2013: $52.89 million), with a loss before tax of $0.17 million (2013: profit of $0.02 million). Racetrack Operations achieved a turnover of $51.45 million (2013: $59.52 million) with a profit before tax of $0.13 million (2013: loss of $0.002m).
Our Sportsbook turnover increased to $156.81 million (2013: $152.18 million) achieving a profit before tax of $0.27 million (2013: profit of $0.38 million). 
WatchandWager
WatchandWager, experienced a 24% growth in turnover for the full year, boosted by new player activity into the Hong Kong Jockey Club and Swedish ATG racetrack pools. Both of these outlets provide us with a competitive advantage over other international operators and are part of our growth strategy to secure further global licences and agreements. We have now established a highly competitive level of global racing content that we are able to offer to our customers through our multiple wagering channels. 
Following these successes, the Board has agreed to further investment in our pool-wagering division, concentrating on recruiting additional resource to manage the growing scope of our US-based operations. This activity will be focused to specifically make further improvements to the entire watchandwager.com wagering platform. The Board believes that this additional investment expense will translate into enhanced turnover and margin derived from the operation in the near term.
We experienced some delays in the full roll-out of our primary website watchandwager.com and mobile application, in an effort to ensure it adequately caters for the needs of our US customer base. As a result performance was below expectations in this sector over the full year. In addition, redirecting the majority of our transactions through our US licences has also impacted our cost base with increased levels of duty, licensing and compliance costs incurred in the US. The Board views this increased expenditure as part of the cost of operating legitimately in the US market and anticipates that as our turnover grows, we will see the percentage of these costs level off against revenue. 

Cal Expo, our Sacramento-based harness racetrack operation, adjusted its meeting schedules to achieve the best return for all stakeholders and, by keeping a very close control of the costs, helped to bring profitability to this part of the Group, despite a reduction in turnover for the full racing season. The racetrack remains a key part of our strategy and has continued to offer meaningful leverage in developing the pool-wagering and wider business, with WatchandWager and partner racetrack groups continuing to be actively involved in discussions on legislative change within online gaming in California. The number of parties who have conflicting interests in the opening up of the gaming market in this state may mean however, that any legislative changes are likely to take some time to materialise.
betinternet
betinternet saw overall turnover continue at a similar level to the previous year. Fixed Odds turnover achieved good growth due to the popularity of In Play, whereas Casino and Games activity reduced as the changing government perceptions towards online gaming in Singapore, one of our main Asian markets, meant we were obliged to curtail some of our casino and gaming activity in February. This was one of the external challenges in the second half which resulted in a lower overall full-year margin than had been anticipated. Also, a reduction in card authorisations from Singapore and some unfavourable football results in the latter part of the European football season also had an impact on the overall gross margin achieved for the full year, which ended at $4.25 million, although this remained ahead of the previous year (2013: $4.01 million).
For the full year, the Sportsbook fixed-odds margin showed a good level of consistency, remaining similar to that achieved last year at 3.74% (2013: 3.75%). In Play betting accounted for 73% (2013: 57%) of all fixed odds turnover on single bets, highlighting the shifting preference of our customers towards our engaging live betting product.
As we grew more comfortable with our price modelling and technologies for In Play Tennis, we increased our exposure to client activity on this product during the second half, which resulted in an uplift in the overall levels of turnover and margin. We further increased our In Play offering to include Baseball, Rugby and Volleyball and focused the majority of our internal development work on this growing area. 
Post Year, Strategy and Regulatory Developments
WatchandWager has now established full access to all of the major US racetrack pools, following our agreement with the New York Racing Association in June. This contract signing was the trigger for a further increase in a variety of targeted marketing activity for the watchandwager.com website. 

WatchandWager has renewed its California Horse Racing Board racing licence for Cal Expo and our third season of racing restarted in early October. Following consultation with US media groups, Cal Expo has switched from a Friday and Saturday schedule to race on Saturday and Sunday evenings. WatchandWager is also increasing the prize money incentive scheme for this season. These initiatives are designed to promote strong horse numbers throughout the season and encourage greater exposure of our races on television.
Results during the football World Cup tournament in June and July in Brazil were generally favourable for betinternet which achieved an encouraging margin. Overall results during the early part of the year have also been favourable. In Play Tennis has continued to be our biggest growth area, with significant increases in activity during the Wimbledon and US Open championships.
The regulatory environment in which our Sportsbook operates continues to change around us, with many governments taking the opportunity to review their existing gambling legislation, particularly as it relates to online activities. In many cases, the primary reason for the introduction of new laws is to offer protection for customers, but invariably this legislation increases contribution levels through additional licence fees and increased duty payments. In many cases this has the unintended effect of restricting legal competition. As there is little global standardisation of legislation, the overall cost of entering newly regulated markets can be high, making the business case difficult to justify in many jurisdictions, with these costs likely to impact the smaller, niche operators disproportionately.
As an example, the Singapore Remote Gambling Bill 2014 was passed by the Singapore Parliament on 7 October 2014. This Bill imposes severe restrictions on the companies that are able to legally provide online gambling services within this jurisdiction. We expect the effects of this Bill to impact during the first half of 2015. Therefore, in compliance with Group policy, we will withdraw betinternet from any activity in the Singapore market. This withdrawal will have a material impact on the profitability of this part of our business, despite concerted efforts to reduce our reliance on this region.
The Board is currently undertaking a comprehensive review of the opportunities available to the Sportsbook and its continued viability. In the interim, the Board has agreed that betinternet will focus only on regulated gaming markets, including customer activity from UK residents. In this connection, Webis made an application for a UK gambling licence, specifically for Sportsbook activities, under the transitional arrangements for those operators holding an existing Isle of Man Gambling licence. I am pleased to report that Webis has been granted a 'continuation' licence by the UK Gambling Commission which took effect from the start of the new legislation on 1 November 2014. This will allow us the opportunity to be granted a full UK licence in due course.

Pending the outcome of the internal review, the Board considers that the Group's current activities are correctly aligned to ensure the best prospects for future growth. 
I would like to thank all of our staff, our customers and our shareholders for their continued support throughout the year.
Denham Eke
Non-executive Chairman
Consolidated Statement of Comprehensive Income
For the year ended 31 May 2014

Note
2014
US$000
Restated
(see Note 1.1)
2013
US$000
Turnover
2
275,847
264,678
Cost of sales

(266,962) 
(255,963)
Betting duty paid

(178)
(181)
Gross profit

8,707
8,534
Operating costs

(8,554)
(7,832)
Other gains / (losses) - net

351
(462)
Operating profit

504
240
Finance income
3
12
18
Finance costs
3
(3)
(32)
Finance income / (costs) - net

9
(14)
Profit before income tax

513
226
Income tax expense
4
-
-
Profit for the year

513
226








Other comprehensive income:



Items that may be subsequently reclassified to profit or loss:



Currency translation differences on translation of foreign subsidiaries

(58)
54
Other comprehensive income for the year

(58)
54
Total comprehensive income for the year

455
280




Basic and diluted earnings per share for profit attributable to the equity holders of the Company during the year (cents)
5
0.13
0.07
 
Consolidated Statement of Financial Position
As at 31 May 2014

Note
31.05.14
US$000
Restated
(see Note 1.1)
31.05.13
US$000
Restated
(see Note 1.1)
28.05.12 US$000
Non-current assets




Intangible assets
6
489
463
489
Property, equipment and motor vehicles
7
183
146
50
Investments

-
-
- 
Bonds and deposits
9
704
206
- 
Total non-current assets 

1,376
815
539
Current assets




Bonds and deposits
9
1,298
-
- 
Trade and other receivables

2,325
1,915
997
Cash and cash equivalents
8
8,402
7,790
4,301
Total current assets 

12,025
9,705
5,298
Total assets

13,401
10,520
5,837





Equity




Called up share capital

6,334
6,334
3,690
Share premium account

16,978
16,978
16,110
Share option reserve

156
187
187
Foreign currency translation reserve

(4)
54
-
Retained losses

(18,295)
(18,808)
(19,034)
Total equity

5,169
4,745
953





Non-current liabilities




Bank loans

-
15
- 
Total non-current liabilities

-
15
- 
Current liabilities




Trade and other payables

8,215
5,737
4,884
Bank loans

17
23
- 
Total current liabilities

8,232
5,760
4,884
Total liabilities

8,232
5,775
4,884
Total equity and liabilities

13,401
10,520
5,837
Consolidated Statement of Changes in Equity
For the year ended 31 May 2014

Called up share capital US$000
Share premium
US$000
Share option reserve
US$000
Foreign currency translation reserve US$000
Retained earnings
US$000
Total equity
US$000
Balance as at 27 May 2012 (Restated - see Note 1.1)
3,690
16,110
187
-
(19,034)
953
Total comprehensive income for the period:






Profit for the period
-
-
-
-
226
226
Other comprehensive income
-
-
-
54
-
54
Transactions with owners:






Arising on shares issued in the period
2,644
868
-
-
-
3,512
Balance as at 31 May 2013 (Restated - see Note 1.1)
6,334
16,978
187
54
(18,808)
4,745 
Total comprehensive income for the year:






Profit for the year
-
-
-
-
513
513
Other comprehensive income
-
-
-
(58)
-
(58)
Transactions with owners:






Share-based payment credit
-
-
(31)
-
-
(31)
Balance as at 31 May 2014
6,334
16,978
156
(4)
(18,295)
5,169
 
Consolidated Statement of Cash Flows
For the year ended 31 May 2014

2014
US$000
Restated
(see Note 1.1)
2013
US$000
Cash flows from operating activities


Profit before income tax
513
226
Adjustments for:


- Depreciation of property, equipment and motor vehicles
71
42
- Amortisation of intangible assets
135
163
- Finance (income) / costs - net
(9)
14
- Foreign exchange (gains) / losses on revaluation 
(478)
333
- Share-based payment credit
(31)
-
Changes in working capital:


- Increase in receivables
(410)
(918)
- Increase in payables
2,478
2,667
Cash flows from operations
2,269
2,527
Finance income
12
18
Bonds and deposits placed in the course of operations
(1,796)
(206)
Net cash generated from operating activities
485
2,339
Cash flows from investing activities


Purchase of intangible assets
(120)
(155)
Purchase of property, equipment and motor vehicles
(99)
(140)
Disposal of property, equipment and motor vehicles
3
-
Net cash used in investing activities
(216)
(295)
Cash flows from financing activities


Interest paid
(3)
(32)
Loans (repaid) / received
(21)
38
Loans received from related party
-
267
Issue of equity shares
-
1,302
Net cash (used in) / generated from financing activities
(24)
1,575
Net increase in cash and cash equivalents
245
3,619
Cash and cash equivalents at beginning of year
7,790
4,301
Exchange gains / (losses) on cash and cash equivalents 
367
(130)
Cash and cash equivalents at end of year
8,402
7,790 
 
Notes to the Financial Statements
For the year ended 31 May 2014
1 Reporting entity
Webis Holdings plc is a company domiciled in the Isle of Man. The address of the Company's registered office is Viking House, Nelson Street, Douglas, Isle of Man, IM1 2AH.
The Group's consolidated financial statements as at and for the year ended 31 May 2014 consolidate those of the Company and its subsidiaries (together referred to as "the Group").
The announcement does not constitute the Group's statutory financial statements. It is an extract from the financial statements for the year ended 31 May 2014 which have not yet been filed.
1.1 Basis of Preparation
(a) Statement of compliance
The financial information included in this announcement has been extracted from the Group's consolidated financial statements prepared in accordance with International Financial Reporting Standards ("IFRSs") and its interpretations as adopted by the European Union.
(b) Basis of measurement and functional/presentational currency
The Group consolidated financial statements are prepared under the historical cost convention except where assets and liabilities are required to be stated at their fair value. Following the development of the US-based pari-mutuel and racetrack operations, the Group's US operations have expanded and become more significant to the results of the Group. The dominant functional currency of the operating subsidiaries is the US Dollar. This is not only driven by US domiciled businesses but also by businesses outside the US, which have a US Dollar functional currency. The Group's revenues, cash flows and economic returns are now principally denominated in US Dollars. Webis Holdings plc has changed the currency in which it presents its consolidated and Parent Company Financial Statements from Sterling to US Dollars, as this will give a more meaningful view of the Group's and Company's financial performance and position.
(c) Use of estimates and judgement
The preparation of the Group financial statements in conformity with IFRS as adopted by the EU requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Although these estimates are based on management's best knowledge and experience of current events and expected economic conditions, actual results may differ from these estimates.
The directors believe the models and assumptions used to calculate the fair value of the share-based payments are the most appropriate for the Group.
2 Segmental Analysis


2014 
US$000
2013 
US$000
Turnover



Sportsbook
Asia Pacific
112,045
120,937

Europe
23,379
11,372

UK & Ireland
15,874
17,002

Rest of the World
5,507
2,870
Pari-mutuel and Racetrack Operations
United States
88,852
86,038

Asia Pacific
17,010
10,074

Caribbean
10,330
15,539

UK & Ireland
2,386
626

Europe
464
220






275,847
264,678
Total comprehensive income



Sportsbook

209
437
Pari-mutuel and Racetrack Operations

(39)
15
Group

285
(172)


455
280
Net assets



Sportsbook

(578)
(787)
Pari-mutuel and Racetrack Operations

2,980
3,019
Group

2,767
2,513


5,169
4,745
 
3  Finance income / (costs) - net

2014 
US$000
2013 
US$000
Bank interest receivable
12
18
Finance income
12
18



Bank interest payable
(3)
(2)
Loan interest payable
-
(30)
Finance costs
(3)
(32)
Finance income / (costs) - net
9
(14)
 
4 Income tax expense

2014 
US$000
2013 
US$000
Profits before tax
513
226
Tax charge at IOM standard rate (0%)
-
-
Adjusted for:


Tax credit for US tax losses (at 15%)
(95)
(30)
Add back deferred tax losses not recognised
95
30
Tax charge for the year
-
-
5  Earnings per ordinary share
The calculation of the basic earnings per share is based on the earnings attributable to ordinary shareholders divided by the weighted average number of shares in issue during the year.
The calculation of diluted earnings per share is based on the basic earnings per share, adjusted to allow for the issue of shares, on the assumed conversion of all dilutive share options.
An adjustment for the dilutive effect of share options and convertible debt in the previous period has not been reflected in the calculation of the diluted loss per share, as the effect would have been anti-dilutive.

2014 
US$000
2013 
US$000
Profit for the year
513
226

No.
No.
Weighted average number of ordinary shares in issue
393,338,310
330,148,762
Diluted number of ordinary shares
407,338,310
344,148,762
Basic and diluted earnings per share
0.13
0.07
6 Intangible assets

Goodwill
Software & Development
Total

US$000
US$000
US$000
Cost



Balance at 31 May 2013
169
4,357
4,526
Additions during the year
-
120
120
Currency translation differences
17
24
41
Balance at 31 May 2014
186
4,501
4,687
Amortisation and Impairment



At 31 May 2013
-
4,063
4,063
Amortisation for the year
-
135
135
At 31 May 2014
-
4,198
4,198
Net book value



At 31 May 2014
186
303
489
At 31 May 2013
169
294
463
The goodwill relates to the acquisition of the pari-mutuel business which is both a cash generating unit and a reportable segment, including goodwill arising on the acquisition in 2010 of WatchandWager.com LLC, a US registered entity licensed for pari-mutuel wagering in North Dakota. 
The Group tests intangible assets annually for impairment, or more frequently if there are indications that the intangible assets may be impaired. The recoverable amount of goodwill on both pari-mutuel business units has been determined based on a value in use calculation using cash flow projections based on financial budgets approved by the Directors. 
The key assumptions on which the directors have based their three year discounted cash flow analysis are a pre-tax discount rate of 15% and growth rate in pari-mutuel business of 2%. The assumption of growth rate in pari-mutuel business has been based on the historic performance of the business as well as forecast performance based on the Board's plan to invest further in this business. In respect of the value in use calculations, cash flows have been considered for both the conservative and the full forecast potential of future cash flows with no impact to the valuation of goodwill. 
7 Property, equipment and motor vehicles
Group 
Computer 
Equipment 
US$000
Fixtures, 
Fittings & Track Equipment 
US$000
Motor Vehicles
US$000
Total 
US$000
Cost




At 31 May 2013
2,022
458
34
2,514
Additions
70
25
4
99
Disposals
-
(3)
-
(3)
Currency translation differences
8
2
2
12
At 31 May 2014
2,100
482
40
2,622
Depreciation




At 31 May 2013
1,920
437
11
2,368
Charge for the year
48
12
12
72
Disposals
-
(1)
-
(1)
At 31 May 2014
1,968
448
23
2,439
Net book value




At 31 May 2014
132
34
17
183
At 31 May 2013
102
21
23
146
 
8 Cash and cash equivalents

2014 
US$000
2013 
US$000
Cash and cash equivalents - company funds
3,657
3,770
Cash and cash equivalents - protected player funds
4,745
4,020
Total cash and cash equivalents
8,402
7,790
The Group holds funds for operational requirements, shown as "company funds" and on behalf of its Isle of Man regulated customers, shown as "protected player funds".
Protected player funds are held in fully protected client accounts within an Isle of Man regulated bank.
9 Bonds and deposits
 

2014 
US$000
2013 
US$000
Bonds and deposits which expire within one year
1,298
-
Bonds and deposits which expire within one to two years
-
-
Bonds and deposits which expire within two to five years
704
206

2,002
206
A rent deposit of $200,000 was paid to California Exposition & State Fair and is for a term of 5 years (2013: $200,000). $500,000 has been paid as a bond in relation to WatchandWager's Californian ADW licence (2013: $Nil). Rent and security deposits of $3,678 have been paid in relation to office deposits and security and are expected to be in place for at least a minimum of two years (2013: $Nil). A retainer account of $1,289,792 is held with the Hong Kong Jockey Club. A sales tax deposit of $5,850 was paid to the State Board of Equalization and was refunded in June 2014 (2013: $5,850). An annually renewable insurance bond of $2,000 is also in place.
10 Approval of financial statements
The financial statements were approved by the Board on 19 November 2014.
The Group's nominated advisor and broker is:
Beaumont Cornish Limited, 2nd Floor, Bowman House, 29 Wilson Street, London EC2M 2SJ

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