REG - Webis Holdings PLC - Interim Results for the period to 30 November 2014 <Origin Href="QuoteRef">WEBH.L</Origin>

Webis HoldingsAnnouncement

24/02/2015 07:00

RNS Number : 6542F
Webis Holdings PLC
24 February 2015
FOR IMMEDIATE RELEASE
24 February 2015
WEBIS HOLDINGS PLC
("Webis" or the "Group")
Interim results for the period ended 30 November 2014
Webis Holdings plc, the global gaming and racetrack operations group, today announces its interim results for the period ended 30 November 2014, extracts from which are set out below.
The Accounts are expected to be available from 24 February 2015 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.
Operating Highlights
 Turnover has increased by 14.6% to US$142.5 million (2013: US$124.4 million)
 Gross profit has increased by 12.2% to US$4.6 million (2013: US$4.1 million)
 Further two year agreement to provide access to the Hong Kong Jockey Club pari-mutuel pools
 Third successive season of harness racing at Cal Expo gives increased leverage in the wider gambling sector
Commenting on the results, Denham Eke, Non-executive Chairman of Webis Holdings plc, said: The Group continues to report strong revenue growth when compared to the same period in the previous financial year. However, our United States operations in particular have continued to see an increasing cost base, and this, combined with a tightening of our gross margin, together with an adverse foreign exchange valuation loss of US$0.22 million and some volatility within our high-roller activity, combine to result in a Total Comprehensive Loss of US$0.30 million (2013: profit of US$0.46 million).
The Board remains confident that we are continuing to make good progress as a Group, despite the relatively short-term challenges that we are experiencing, particularly with regards to the increased cost of operating in regulated markets. There are still many opportunities and a lot to be achieved in this sector and our efforts thus far in the US give us a solid framework upon which to build."
ENDS
For further information:
Webis Holdings plc
Tel: 01624 652590
Garry Knowles, Managing Director
Beaumont Cornish Limited
Tel: 020 7628 3396
Roland Cornish
Britton Financial PR
Tim Blackstone
Tel: 07957 140416
Chairman's Statement
Introduction
I am pleased to announce the Interim results for Webis Holdings plc ("Webis" or the "Group" or the "Company") for the period ended 30 November 2014. Both divisions, being our sportsbook ("betinternet" or "Sportsbook") which includes: casino, games and poker operations, betinternet.com (IOM) Limited and betinternet.com NV; and our pari-mutuel and racetrack operations contained within WatchandWager.com Limited ("WatchandWager"), have continued to achieve top-line growth when compared to the same period in the previous financial year. However, our United States operations in particular have continued to see an increasing cost base, and this, combined with a tightening of our gross margin, together with an adverse foreign exchange valuation loss of US$0.22 million and some volatility within our high-roller activity, combine to result in a Total Comprehensive Loss of US$0.30 million (2013: profit of US$0.46 million).
Half Year Results Review
Group turnover increased by 14.6% to US$142.5 million (2013: US$124.4 million) and Group gross profit increased by 12.2% to US$4.6 million (2013: US$4.1 million).
Operating expenses increased to US$4.6 million (2013: US$3.8 million) reflecting our continuing investment in website enhancements and customer acquisition for the watchandwager.com website. As I mentioned in my statement in last year's Annual Report, we are experiencing higher levels of duty, licencing and compliance costs as a result of operating in a fully licenced and hence legitimate manner together with the investment expense of further establishing our operations within the US market. Thus whilst we have seen an increase in turnover and gross margin within this division of the Group, these additional costs are yet to normalise against income.
The Total Comprehensive Loss for the Group was US$0.30 million (2013: profit of US$0.46 million) which includes the adverse foreign exchange valuation of US$0.22 million which I refer to above.
In respect of the Statement of Financial Position, our Net Assets have decreased to US$4.9 million (2013: US$5.2 million).
Cash generated from operations was US$0.01 million (2013: US$1.2 million).
WatchandWager
WatchandWager ("WAW") grew its Advanced Deposit Wagering ("ADW") turnover by 1.2% to US$37.8 million (2013: US$33.8 million) during the period primarily due to an increase in high-roller wagering into international jurisdictions.The previously announced award of a two year contract with the Hong Kong Jockey Club ("HKJC"), which restarted its racing season in early September, has been a key factor in this growth. Although activity in Hong Kong returns a low margin, it is nonetheless a fundamental component of our move to supply the very best in global racing content to our players.
Wagering activity through the WatchandWager.com website and mobile product showed lower growth than we had hoped as we scaled back part of our marketing activity where the return achieved was below our expectations. We plan to continue with more focussed marketing activity concentrating on player acquisition and we are in the process of recruiting to fill a key senior position to oversee this initiative.
Operational costs have continued to rise, many of which are turnover related. In particular, fees paid for duty, mandatory charitable contributions and racetrack contributions have all increased, as have the costs for licencing and compliance.
During the period, in addition to securing the HKJC contract, WAW also successfully renewed its North Dakota Racing Commission multi-jurisdictional licence for 2015, and its California Horse Racing Board ADW license for a further two year period.
In October, WAW also re-commenced harness racing at the Cal Expo racetrack in Sacramento for the third successive season. Our position as the operator of this 'bricks and mortar' facility continues to provide us with meaningful leverage in the wider gambling sector both within and outside of the US. Expected one-off costs relating to preparing the racetrack for the upcoming meeting have resulted in racetrack operations reporting a small loss during the period, although we expect this part of our business to be achieving a moderate profit for the full season.
betinternet
The sportsbook achieved an improved Net Profit during the period as turnover showed good growth and the percentage margin achieved increased. We again saw increased momentum through our In Play product, particularly on Tennis where we offer unique industry pricing on all ATP and WTA tournaments. Activity during the Grand Slam tournaments was particularly encouraging.
Despite an improved trading performance, as I reported in my last Chairman's Statement, the impact of country-by-country regulation on betinternet's operation has been significant. We withdrew from the Singapore market in early February when their Remote Gambling Act took effect making internet gaming illegal. Our sportsbook had proven very popular with Singapore customers since our very early days of operation, so it is disappointing that this market has been permanently closed to outside legitimate, licenced operators in preference to the option of a formally regulated and taxed environment, as has largely happened in other jurisdictions.
We were granted a 'Continuation' licence by the UK Gambling Commission ahead of the commencement of new legislation on 1st November and this has enabled us to continue to accept bets from UK resident customers.
Summary and Outlook
For WAW, early trading in the second half of the year, has shown similar trends with further increases in turnover from high-roller betting. These increases are despite WAW electing to terminate wagering into the Swedish racing pools, because of unrealistic pricing formulas stipulated by the pool operators.
WAW has further reviewed its operational set-up within the United States. One of the results of this review is that we have recently opened an operations office in Lexington, Kentucky and we expect to fulfil the roles of sales, marketing, customer service, financial control and compliance from this location in the future. Central to the success of this satellite office is the recruitment of a Chief Operating Officer to manage the Lexington team and we expect this position to be filled within the next two months.
WAW continues to monitor developments in both the US racetrack and gaming market, and the progress on federal and state online gaming legislation insofar as it may impact our current or future operations. WAW is currently analysing a number of business opportunities within the US, with an aim to further extend its operations and to take advantage of any developments in legislation. The Board was also pleased to note the recent publication of a further draft of the proposed online Poker bill in California, sponsored by Assemblyman Jones-Sawyer, which would specifically allow for racetracks to apply for an online poker licence. Although the Board recognises that there is likely to be further extensive changes before the bill progresses, we will continue to closely monitor its progress in Sacramento. We view the continued operation of our racetrack operation at Cal Expo as integral to any opportunity for the company in this area.
betinternet traded in line with the Board's expectations until its forced withdrawal from the Singapore market, with the percentage trading margin achieved continuing at a consistent level. Because of the changing circumstances regarding global regulation and as previously reported, the Board continue to review opportunities available to the Sportsbook. We have recently made some good progress in this review and I expect that the Board will be able to report a resolution in due course. Part of this review is assessing the appropriateness of a full UK licence, given the highly competitive nature of this market and the impact of the high duty rate on the likelihood of achieving a net profit in this jurisdiction.
The Board remains confident that we are continuing to make good progress as a Group, despite the relatively short-term challenges that we are experiencing, particularly with regards to the increased cost of operating in regulated markets. There are still many opportunities and a lot to be achieved in this sector and our efforts thus far in the US give us a solid framework upon which to build.
Denham Eke
Non-executive Chairman
Condensed Consolidated Statement of Comprehensive Income
For the period ended 30 November 2014
Note
Period to
30 November
2014
(unaudited)
US$000
Restated
(refer Note 1)
Period to
30 November
2013
(unaudited)
US$000
Turnover
2
142,500
124,435
Cost of sales
(137,783)
(120,274)
Betting duty paid
(114)
(80)
Gross profit
4,603
4,081
Operating costs
(4,591)
(3,801)
Operating profit
12
280
Other (losses)/gains - net
(273)
230
Finance income
3
10
6
Finance costs
3
(48)
(55)
(Loss)/profit before income tax
(299)
461
Income tax expense
4
-
-
(Loss)/profit for the period
(299)
461
Other comprehensive income:
Items that may be subsequently reclassified to profit or loss:
Currency translation differences on translation of foreign subsidiaries
11
(41)
Other comprehensive income for the period
11
(41)
Total comprehensive (loss)/income for the period
(288)
420
Basic and diluted (loss)/earnings per share for (loss)/profit attributable to the equity holders of the Company during the period (US cents)
5
(0.08)
0.12
Condensed Consolidated Statement of Financial Position
As at 30 November 2014
Note
Period to
30 November
2014
(unaudited)
US$000
Year to
31 May
2014
(audited)
US$000
Non-current assets
Intangible assets - goodwill
6
178
186
Intangible assets - other
278
303
Property, equipment and motor vehicles
136
183
Bonds and deposits
203
704
Total non-current assets
795
1,376
Current assets
Bonds and deposits
1,396
1,298
Receivables and prepayments
1,134
2,325
Cash and cash equivalents
7
8,092
8,402
Total current assets
10,622
12,025
Total assets
11,417
13,401
Equity
Called up share capital
6,334
6,334
Share premium account
16,978
16,978
Share option reserve
156
156
Foreign currency translation reserve
7
(4)
Retained losses
(18,594)
(18,295)
Total equity
4,881
5,169
Current liabilities
Trade and other payables
6,530
8,215
Bank loans
6
17
Total current liabilities
6,536
8,232
Total liabilities
6,536
8,232
Total equity and liabilities
11,417
13,401
Condensed Consolidated Statement of Changes in Equity
For the period ended 30 November 2014
Ordinary
share
capital
US$000
Share
premium
US$000
Share
option
reserve
US$000
Foreign
currency
translation
reserve
US$000
Retained
losses
US$000
Total
equity
US$000
Balance as at 31 May 2013 (audited)
6,334
16,978
187
54
(18,808)
4,745
Total comprehensive income for the period:
Profit for the period
-
-
-
-
461
461
Other comprehensive income
-
-
-
(41)
-
(41)
Transactions with owners:
Share-based payment expense
-
-
-
-
-
-
Balance as at 30 November 2013 (unaudited) - (Restated - refer Note 1)
6,334
16,978
187
13
(18,347)
5,165
Balance as at 31 May 2014 (audited)
6,334
16,978
156
(4)
(18,295)
5,169
Total comprehensive income for the period:
Loss for the period
-
-
-
-
(299)
(299)
Other comprehensive income
-
-
-
11
-
11
Transactions with owners:
Share-based payment expense
-
-
-
-
-
-
Balance as at 30 November 2014 (unaudited)
6,334
16,978
156
7
(18,594)
4,881
Condensed Consolidated Statement of Cash Flows
For the period ended 30 November 2014
Period to
30 November
2014
(unaudited)
US$000
Restated
(refer Note 1)
Period to
30 November
2013
(unaudited)
US$000
Cash flows from operating activities
(Loss)/profit before income tax
(299)
461
Adjustments for:
- Depreciation of property, equipment and motor vehicles
47
30
- Amortisation of intangible assets
78
71
- Finance costs - net
38
49
- Foreign exchange losses/(gains) on revaluation
230
(297)
Changes in working capital:
- Decrease in receivables
1,191
301
- (Decrease)/increase in payables
(1,685)
1,218
Cash flows from operations
(400)
1,833
Finance income
10
6
Bonds and deposits placed in the course of operations
403
(595)
Net cash generated from operating activities
13
1,244
Cash flows from investing activities
Purchase of intangible assets
(60)
(38)
Purchase of property, equipment and motor vehicles
(3)
(42)
Disposal of property, equipment and motor vehicles
-
3
Net cash used in investing activities
(63)
(77)
Cash flows from financing activities
Interest and charges paid
(48)
(55)
Loans repaid
(11)
(10)
Net cash used in financing activities
(59)
(65)
Net (decrease)/increase in cash and cash equivalents
(109)
1,102
Cash and cash equivalents at beginning of period
8,402
7,790
Exchange (losses)/gains on cash and cash equivalents
(201)
222
Cash and cash equivalents at end of period
8,092
9,114
Notes to the Condensed Consolidated Interim Financial Statements
For the period ended 30 November 2014
1 Significant accounting policies
The accounting policies applied by the Group in these consolidated interim financial statements are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 31 May 2014.
Change in functional and presentational currency
As detailed in the Group's 2014 Annual Report, the Group changed its functional and presentational currency from Sterling to US Dollars with effect from 1 June 2013.
A change in presentational currency is a change in accounting policy which is accounted for retrospectively. Financial information reported in Sterling in the Group's 2013 Interim Report has been restated into US Dollars using the procedures outlined below:
a) assets and liabilities denominated in non-US Dollar currencies were translated into US dollars at closing rates of exchange. Non-US Dollar trading results were translated into US Dollars at average monthly rates of exchange. Differences resulting from the retranslation of the opening net assets and the results for the year of non-US trading subsidiaries have been taken to the foreign currency translation reserve; and
b) share capital, share premium and share option reserve were translated at the historic rates prevailing at the dates of transactions.
The closing rates for each reporting period included in this report are as follows:
Exchange rates
November 2014
May 2014
November 2013
US$/ - period/year end
1.6052
1.6778
1.6168
2 Segmental Analysis
Period to
30 November
2014
(unaudited)
US$000
Period to
30 November
2013
(unaudited)
US$000
Turnover
Sportsbook  Asia Pacific
59,567
64,100
 Europe
20,095
7,997
 UK & Ireland
10,369
5,993
 Rest of the World
3,539
2,480
Pari-mutuel and Racetrack Operations United States
36,274
23,971
 Caribbean
4,969
6,238
 UK & Ireland
4,925
1,640
 Asia Pacific
1,073
11,542
Europe
1,689
474
142,500
124,435
Total comprehensive income
Sportsbook
394
241
Pari-mutuel and Racetrack Operations
(563)
25
Group
(119)
154
(288)
420
Period to
30 November
2014
(unaudited)
$000
Year to
31 May
2014
(audited)
$000
Net assets/(liabilities)
Sportsbook
(184)
(578)
Pari-mutuel and Racetrack Operations
2,417
2,980
Group
2,648
2,767
4,881
5,169
3 Net finance costs
Period to
30 November
2014
(unaudited)
US$000
Period to
30 November
2013
(unaudited)
US$000
Bank interest receivable
10
6
Finance income
10
6
Bank interest payable
(1)
(2)
Loan interest payable
-
-
Bank charges payable
(47)
(53)
Finance costs
(48)
(55)
Net finance costs
(38)
(49)
4 Income tax expense

Period to
30 November
2014
(unaudited)
US$000
Period to
30 November
2013
(unaudited)
US$000
(Losses)/profits before tax
(299)
461
Tax charge at IOM standard rate (0%)
-
-
Adjusted for:


Tax credit for US tax losses (at 15%)
(84)
(56)
Add back deferred tax losses not recognised
84
56
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 period.
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 in the current or prior period has not been reflected in the calculation of the diluted loss per share, as the effect would have been anti-dilutive.
Period to
30 November
2014
(unaudited)
US$000
Period to
30 November
2013
(unaudited)
US$000
(Loss)/profit for the period
(299)
461
No.
No.
Weighted average number of ordinary shares in issue
393,338,310
393,338,310
Diluted number of ordinary shares
407,338,310
407,338,310
Basic and diluted (loss)/earnings per share (US cents)
(0.08)
0.12
6 Intangible Assets - goodwill
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 licenced for pari-mutuel wagering in North Dakota.
The Group tests intangible assets annually for impairment, or more frequently if there are indicators 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. As at the balance sheet date the carrying value of the goodwill was not considered to be impaired.
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 Cash and cash equivalents

30 November
2014
(unaudited)
US$000
31 May
2014
(audited)
US$000
Cash and cash equivalents - Group funds
3,483
3,657
Cash and cash equivalents - protected player funds
4,609
4,745
Total cash and cash equivalents
8,092
8,402
The Group holds funds for operational requirements, shown as "Group 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.
8 Related party transactions
Identity of related parties
The Group has a related party relationship with its subsidiaries, and with its directors and executive officers, with Burnbrae Ltd (common director and significant shareholder) and with Conister Bank Ltd (common director and shareholder).
Transactions with and between subsidiaries
Transactions with and between the subsidiaries in the Group which have been eliminated on consolidation are considered to be related party transactions.
Transactions with entities with significant influence over the Group
Rental and service charges of US$29,386 (30 November 2013: US$25,444) and directors' fees of US$16,649 (30 November 2013: US$15,650) were charged in the period by Burnbrae Ltd of which Denham Eke is a common director. A loan of US$6,082 was owed to Conister Bank Ltd at the period end (31 May 2014: US$16,952).
Transactions with other related parties
Cash deposits totalling US$Nil (31 May 2014: US$5,697,311) were held with Conister Bank Ltd at the period end.
9 Post Balance Sheet Event
On 16 February 2015 the Isle of Man High Court of Justice approved the cancellation of the Share Premium Account in accordance with the special resolution passed at the Annual General Meeting of the Group held on 19 December 2014.
10  Approval of interim statements
The interim statements were approved by the Board on 23 February 2015. The interim report is expected to be available for shareholders on 25 February 2015 and will be available from that date on the Group's website www.webisholdingsplc.com.
The Group's nominated adviser and broker is Beaumont Cornish Limited, 2nd Floor, Bowman House, 29 Wilson Street, London EC2M 2SJ.


Webis Holdings plc
Viking House, Nelson Street
Douglas, Isle of Man
IM1 2AH, British Isles
Tel: +44 (0) 1624 652590
Email: ir@webisholdingsplc.com
Website: www.webisholdingsplc.com

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