Audited Results for the Year Ended 31 July 2007
Sportingbet Plc, the online sports betting and gaming group, announces its
audited results for the year ended 31 July 2007.
In order to aid comparison, financial and operational information is stated
excluding the US-facing businesses that were sold/closed in October 2006
resulting in Sportingbet's complete exit from that market. Commentary on the
results for the Group for the year ended 31 July 2007, including the
discontinued US-facing operations, are included at the end of this announcement.
Financial Highlights - Year ended 31 July 2007 - Continuing Business only
* Gross margin up 13.3% to #120.8m (2006: #106.6m)
* Operating profit* up 76.2% to #7.4m (2006: #4.2m)
* Diluted earnings per share* of 2.0p (2006: 0.2p)
(* Stated before exceptional items of #26.8m, goodwill amortisation of #3.0m and
share option charge of #9.9m)
Business Highlights - Year ended 31 July 2007
* Strong growth in core European sports betting operations with gross win
up 48%
* Acquisition of Turkish marketing partner and further investment in
Italian operation
* Successful migration of Paradise Poker players to the Boss Media
platform
* Forced disposal of US-facing sports and casino operations and closure of
US-facing poker operations following the passing of the Unlawful Internet
Gambling Enforcement Act
* Significant Group restructuring and reorganisation post Unlawful
Internet Gambling Enforcement Act
* Reorganisation of European operations including transfer of all customer
operations personnel to Dublin and all licensable operations to the Channel
Islands
Commenting on today's announcement, Andrew McIver, Group Chief Executive Officer
said:
"Given the enormity of the change and restructuring that has taken place at
Sportingbet, I am pleased to report a strong increase in gross win in the
continuing business and especially pleased with the growth in our core European
sports betting business of 48%.
To lose 75+% of our business following the US legislation but still record an
operating profit for the year is, in my opinion, a highly creditable
achievement.
As we move into the current financial year, trading across the Group is
significantly ahead of prior year and in line with management expectations for
the period.
Much has been achieved during the year and this is a reflection of the
determination, loyalty and hard work of our employees and I would like to thank
them all. I very much look forward to working with them in the coming twelve
months."
This financial review examines the Continuing Operations only, which comprise
the Group's European focused sports, casino and Paradise branded poker business
and the Australian sports business. In order to aid comparison, the financial
and operational information is stated excluding the discontinued businesses.
Commentary on the full Group results for the year ended 31 July 2007 is included
at the end of this announcement.
Year ended 31 July 2007 - Continuing Operations
Turnover for the year ended 31 July 2007 was #1,097.8m (2006: 890.1m), earning
gross profit of #120.8m (2006: 106.6m) at 11.0% of turnover (2006: 12.0%).
Sports betting turnover in Europe was #599.8m (2006: #473.6m), earning a gross
profit of #49.7m (2006: #30.0m). Australian sports betting turnover was #439.3m
(2006: #346.6m), earning a gross profit of #12.4m (2006: #12.9m).
Turnover and margin for the year are stated after a deduction for customer
bonuses of #7.9m (2006: #7.5m). The European and Australian sports gross
profit as reported was 8.3% and 2.8% of turnover respectively (2006: 6.9% and
3.7%). Without the bonus deduction the equivalent numbers would have been 9.0%
and 2.9% (2006: 7.5% and 3.8%).
Poker, now all branded as Paradise Poker, achieved gross profit of #27.8m (2006:
#30.0m). It was impacted by much reduced liquidity and the disruption of the
migration of Paradise Poker players to the Boss Media Network. Casino and
gaming contributed gross profit of #30.8m (2006: #30.2m), a marginal
performance, year-on-year, ahead of the major upgrade now being rolled out.
Costs (excluding exceptional items, share option charge and goodwill
amortisation) during the year were #113.4m (2006: #102.4m). Whilst costs
accounted for 93.8% of Gross margin (2006: 96.1%), a number of the major
initiatives undertaken by the Group during the year are aimed at driving
further efficiencies within the business impacting on the 2007/08 financial
year and beyond.
Continuing business operating profit (before exceptional items, share option
charge and goodwill amortisation) for the year was #7.4m (2006: #4.2m).
Continuing business loss before tax after exceptional charges of #26.8m (2006:
#nil), share option charges of #9.9m (2006: #4.8m), goodwill amortisation of
#3.0m (2006: #5.6m charge) and net interest receivable of #2.5m (2006: #3.0m
payable) was #29.8m (2006: #9.2m).
As at 31 July 2007, the Group had #37.0m of cash and liquid resources on its
balance sheet, of which #12.9m related to customer liabilities. Gross
financial liabilities amounted to #5.4m (2006: #47.5m) which comprised a bank
loan of #5.3m (2006: #nil), secured on certain residential properties acquired
to house staff recently transferred to the Channel Islands, and deferred
consideration of #0.1m due to the vendors of the shareholding in Sportingbet
Italia.
REVIEW OF OPERATIONS: Year ended 31 July 2007
Sportingbet Group
The year started with the passing of the Unlawful Internet Gambling Enforcement
Act ("UIGEA") of 2006 by US Congress on 29 September. This led to the Board
concluding that a disposal of the Group's US-facing sports betting and casino
operations together with the closure of its US-facing poker operations was
inevitable and in the best interest of all its stakeholders.
As a result, on 12 October 2006, Sportingbet sold its US-facing sports betting
and casino business for a cash consideration of $1 and discharged excess
liabilities amounting to approximately #2.2m. Sportingbet retained the Paradise
Poker business, but denied access to US residents.
Subsequently, the Group has reorganised and restructured its operations in order
to realign the cost base to its remaining markets. The sale and closure of the
US-facing operations divested the Group of over 450 employees, saving
significant potential severance and closure costs. Following this sale and
subsequent reorganisations, the Group employed approximately 370 people (2006:
920) at year end.
Following the loss of the US-facing operations, the Board moved swiftly to
stabilise the business and significant achievements have been attained since:
In February 2007, Sportingbet entered into a new three year casino and poker
contract to use Boss Media software to power both its casino and poker
offerings. Whilst retaining the Paradise Poker brand, all Paradise Poker players
were migrated onto the Boss Media network. This action will provide some cost
savings for the Group through reduced IT spend but, crucially, it will increase
the liquidity for Paradise Poker players by being part of this larger network.
The migration was completed on 24 May 2007.
The Group has undertaken a major reorganisation of its operations during the
year. Firstly, in order to generate operating efficiencies and with the aim of
providing first rate customer services across all Sportingbet products, all
non-Australian customer operations personnel were brought together into a
single, dedicated customer operations centre in Dublin in March 2007.
Secondly, in light of the considerable uncertainty with regard to the precise
operational requirements of the UK Gambling Act 2005, the Board concluded, in
March 2007, that it would transfer all licensable activities to the Channel
Islands, under a licence granted by the Alderney Gambling Control Commission.
This process was completed during early September 2007. Following the
reorganisation, the Group retains a physical operational presence in the UK,
Antigua, Channel Islands, Ireland, Italy and Australia.
During the year, further investment was made in two of our key markets in order
to take control of them and to improve operating margin. In February the Group
purchased the business and assets of its Turkish marketing partner for an
initial consideration of #3.6m and deferred consideration of up to 35.3m shares,
wholly dependent on the performance of the Turkish business over the next two
years. The Group also purchased a further 40% shareholding in Sportingbet Italia
S.p.A. for an aggregate consideration of Euro4.25m (#2.9m). This took the Group's
total holding to 90%.
Following the year end, the Group has purchased the remaining 10% stake in
Sportingbet Italia through previously entered into option arrangements. The
consideration payable amounts to Euro1.0m (#0.7m) in shares and completion is
expected in December.
Europe
The number of customers who bet on the region's sports betting websites during
the year rose by 14.3% to 436,779 (2006: 382,160).
The number of sports bets placed by these customers increased by 30.6% to 46.1m
(2006: 35.3m) at a rate of 106 bets per active customer per year (2006: 92
bets), and the average sports bet size was #13.10 (2006: #13.80). The sports
margin percentage after betting tax was 9.0% (2006: 7.5%) despite poor margin
performance in Q4 of only 4.7% (2006: 6.1%).
Given the degree of operational changes being made across the business during
the year, significant effort was concentrated on existing customers rather than
pure recruitment. In aggregate, yield per sports active customer increased by
31.6% from #95 to #125 in part as a result of increased margin, but also from
the number of bets made per customer; a function of the enhanced in-running
betting product which has been rolled out across the portfolio.
The number of bets placed by the Group's casino customers rose by 10.5% to
142.6m (2006: 129.1m) at an average bet size of #5.06 (2006: #5.54). The casino
margin percentage was 3.3% (2006: 3.2%).
During the year Poker generated rake of #29.0m (2006: #31.5m). Non-US poker
earnings were significantly impacted, year on year, by the loss of liquidity
provided by US-resident players. In order to address this issue, all poker
players were migrated to the Boss Media Network in May 2007, combining all
Sportingbet's poker players on one network.
Australia
The number of customers who bet with the region's sports betting business
increased by 30.2% to 23,094 (2006: 17,732). The number of sports bets placed by
these customers rose by 65.2% to 7.6m (2006: 4.6m) at a rate of 327 bets per
customer (2006: 259 bets). The average sports bet size was lower at AUS$136
(2006: AUS$181), reflecting the increased activity on the more leisure-oriented
internet platform. During the year, the proportion of bets taken over the
internet rose to 82.3% (2006: 77.3%).
The margin, after betting taxes, was disappointing at 2.9% (2006: 3.8%),
partially impacted by both sports results and additional taxes from the Racing
Victoria Limited levy versus the 2006 comparator.
PRINCIPAL RISKS AND UNCERTAINTIES
Much uncertainty remains regarding regulation across the industry. However, the
Board continues to believe that a properly regulated market remains the most
appropriate structure for any gambling industry. Group services are provided
only from jurisdictions that are licensed and regulated. To facilitate this, the
Group is licensed in the UK, Alderney, Antigua, Italy and Australia.
Currently considerable confusion exists both within various governments and
internationally as to the best way of dealing with this industry, if at all.
There is little sign that market distortions, which now exist across various
markets, show signs of being sensibly resolved. Diverse government policies
ranging from the provision of licenses and proper regulation to blatant
protectionism of monopoly provided services are now in place.
Given the inherent uncertainty, as part of the Group's ongoing risk assessment
process, it continues to monitor legal and regulatory developments in
jurisdictions where it operates or where customers have been or continue to
access services. The Group considers the potential impact on its business, and
continues to take appropriate advice in this respect. There remains much
uncertainty as to what, or where, regulatory actions, if any, may occur and any
impact such actions may or may not have on the Group.
REGULATORY DEVELOPMENTS
In terms of the overall position, there is still no global consensus as to which
countries' laws apply where, and in particular whether they can extend beyond
their own national borders. Therefore, the Group's services continue to be
provided only from jurisdictions that are licensed and regulated and as such
explicitly legal. To facilitate this, the Group is licensed in the UK, Alderney,
Italy, Antigua and Australia.
Major issues of note in the last 12 months include:
(a) the implementation of the 2005 Gambling Act in the UK;
(b) an apparent move towards liberalisation in some Asian jurisdictions;
(c) a positive French Supreme Court decision;
(d) an extension to the current licensing regime in Italy;
(e) the threat of prohibitive legislation in Germany; and
(f) the passing of anti-online gambling legislation in Turkey.
United Kingdom
The Group transferred all of its UK based licensable activities to the Channel
Islands prior to the 1 September 2007 implementation date of the 2005 Gambling
Act.
Whilst the Act will not impact significantly upon the Company since its
relocation of licensable activities offshore, the Group is still covered by the
Act when it comes to advertising in the UK.
However, whatever liberalisations of advertising eventually emerge can be fully
exploited by the company since Alderney was announced to be on the White List in
June 2007 (the White List is a list of those countries that the UK has deemed to
have a regulatory environment that satisfies the UK's own requirements). On the
positive side, too, the British Gambling Prevalence Survey 2007 indicated that
in the UK there has been a slight decrease in problem gambling in the UK since
1999 (with the exception of the National Lottery). This was not a surprise to
the Group as many companies in the fixed odds gambling sector follow similar
policies to Sportingbet in applying 'know your customer' practices to exclude
underage attempts to gamble and to eradicate problem gambling as far as it is
possible. However, any negative results from this survey would possibly have led
to pressure on the DCMS to curtail the advertising permitted in the UK, or
marketing to UK customers.
United States
The draft implementation guidelines for the Unlawful Internet Gambling
Enforcement Act ('UIGEA') have now been released, albeit outside of the 270 day
time window. This is juxtaposed with the proactive approach of the World Trade
Organisation in censoring the US for its restrictive practices in the gambling
sector. The US is now under pressure to reopen its market to foreign gambling
operators, or agree substantial compensation for not doing so. Currently it
appears such compensation would most likely take the form of various relaxations
of trade rules between the US and countries that had industries impacted by the
UIGEA. It is unlikely to be satisfied by cash payments to those countries and
very unlikely to be satisfied by cash payment to the companies involved.
For the avoidance of doubt, the Group ceased taking bets from US resident
customers and made a total exit from the US market prior to the enactment of the
UIGEA on 13 October 2006. Whilst the Board notes political developments in the
US with regard to certain proposed legislative reforms (the so-called Franks
Bill), it confirms that it is taking no part in any reported initiatives to
overturn, challenge or amend US legislation nor support new legislation.
Although we are aware that others in the industry have approached the United
States Department of Justice, the Company has nothing material to report at this
time.
Asia
There have been a number of initiatives announced by the European operators in
relation to opening of supplies into certain Asian markets, which may suggest a
relaxation by some central governments, certainly in relation to P2P games,
including mahjong and poker. However, such a relaxation of attitude is far from
certain and the laws in many Asian countries are currently prohibitive. The
Group currently has no operations or activities in Asia.
Europe
In Europe, the market currently appears to be moving cautiously towards a
liberalisation of supply. There are two key factors. Firstly, the European
Commission has been applying pressure to EU Member States that do not comply
with the free market requirements on them in the gambling field. In some
circumstances Commission pressure has been reinforced by domestic court rulings
that have questioned the legality of the state monopolies. Through the use of
'infringement proceedings' against states in contravention of EC law, the
Commission has asked a number of states to explain or even amend their laws
restricting the free movement of gambling services. If member states fail to
comply, they will potentially be subject to legal action from the Commission.
Secondly, the prospect of tax and licensing revenues has also encouraged a
softening of approach Sportingbet Plc towards liberalisation. Examples of this
would include the extension of the existing licensing regime in Italy and the
availability now of regional licences in Spain.
The negative developments of last year, such as the arrests of the bwin co-chief
executives, have not been repeated. Indeed, it is symptomatic of the change in
prevailing Member State attitude that the French authorities, who initiated the
arrests, spent mid September discussing the liberalisation of its gambling
regime with the European Commission. The French position was also affected by a
positive court decision in the Zeturf case in which the French Supreme Court
broadly found that the French authorities could not preclude online gambling
supplies from a licensed Maltese entity, where French citizens were targeted.
However, it very much remains to be seen if deregulatory legislation will be
introduced in France and exactly what form that it may take.
As exemplified by the arrests of the bwin co-chief executives, companies in the
online gambling sector may face action from individual EU Member States despite
the fact that the legislation of such Member State may contravene EU principles
and/or the Member State itself may be subject to an EU Commission initiated
online gambling infringement proceeding. The European Commission is beginning to
show that it can be a force for change, but any change comes about slowly at
best. Until this change occurs the EU is far from a safe haven for companies
with licenses issued by one or other Member State. It will also be interesting
to see what is the approach of the EU authorities if the prohibitive draft State
Treaty in Germany is adopted.
Turkey
Anti-online gambling legislation was introduced in Turkey in February 2007 to
underpin the State monopoly. The legislation did not however make it an offence
for an individual customer to place a bet online. It made it illegal for an
unauthorised operator to offer bets to those citizens.
The Group has no physical operations or activities in Turkey. However, the Group
does accept bets from Turkish citizens. The operations and servers that
facilitate this are based in the Group's licensed and regulated locations and as
such comply with the requirements of those locations. It remains unclear whether
any judgement obtained in Turkey pursuant to the legislation introduced in
February 2007 could be enforced outside of Turkey.
This piece of Turkish legislation contrasts with the approaches of the UK,
Italy, Australia and many other licensing jurisdictions and fails to recognise
the legitimacy of those countries' views towards regulating gambling on the
internet. Indeed, Turkey may be obliged to overturn its protectionist,
anti-online gambling laws as part of the required amendments to domestic
legislation for its accession to the European Union, though the timing
accompanying any such change is very uncertain.
Australia
There have been no significant regulatory developments in Australia since the
last report.
MANAGEMENT
As previously announced, Andrew McIver, former Group Finance Director, succeeded
Nigel Payne as Group Chief Executive on 19 October 2007. Nigel Payne remains a
Non-Executive Director and has been appointed Chairman of the Audit Committee.
As previously announced, Mr Peter Dicks resigned as Chairman on 14 September
2006. Sean O'Connor took up the role of Acting Chairman from that date. Mark
Blandford and Robert Holt resigned as Executive and Non-Executive Director
respectively on 31 January 2007.
THE NEW FINANCIAL YEAR
The year to 31 July 2007 has clearly been one of retrenchment and stabilisation
to put what remained of the business, post the withdrawal from the US, on a
solid footing. Much has been achieved although inevitably there will still be
actions to be addressed in the new financial year. However, with the bulk of
this work completed, the Group is now in a position to start focusing on its
core objective.
Much of our attention will be to better execute the Group's current offerings.
During the coming year the website will be re-engineered to make it more focused
on customer involvement, in order to improve funded recruitment and reduce
attrition. Product will be improved, particularly in poker and casino, and
enhancements made to the sports betting offering. Marketing will have a 'root
and branch' review and more emphasis will be placed on affiliates and better
serving of our most important customers.
Secondary objectives include geographic diversification. The Group will continue
to invest in countries in which it is under-represented with a view to growing
these businesses. The Group will also consider embryonic business development in
new geographies although this inevitably will involve some degree of
experimentation. Some will work and some will fail. Finally the Group will
continue to consider targeted acquisitions where commercially logical and value
enhancing.
Capital expenditure will focus on shared wallet functionality and improving the
casino and poker user experience. The investment in, and implementation of,
these initiatives during the year will benefit the later half of the year and
more fully the following and subsequent years.
TRADING OUTLOOK
As we move into the current financial year, trading across the Group is
significantly ahead of prior year and in line with management expectations for
the period.
In Europe, sports turnover is up 7% year on year in August and 23% in September.
In addition, poker rake shows renewed signs of growth following the seasonal
summer slowdown, with significant month on month growth in average daily rake
since the start of the new year.
In Australia the business continues to perform well, despite an outbreak of
Equine Influenza which, to date, has had little impact on trends within the
region.
On 16 October 2007 the Group purchased the remaining 10% stake in Sportingbet
Italia S.p.A through existing option arrangements. The consideration payable
amounts to Euro1m in Sportingbet shares and completion is expected in December.
In August and September 2007, the Group transferred all those activities that
fell under the jurisdiction of the UK Gambling Act to the Channel Islands under
a Licence issued by the Alderney Gambling Control Commission. These activities
include European operational management, European finance, marketing and
trading.
11. Contingent liabilities:
From time to time the Group is subject to legal claims and actions. The Group
takes legal advice as to the likelihood of success of the claims and actions and
no provision or disclosure is made where the Directors feel, based on that
advice, that action is unlikely to result in a material loss or a sufficiently
reliable estimate of the potential obligation cannot be made.
As part of the ongoing operational risk assessment process adopted by the
Company and the Group, there is continued monitoring of the legal and regulatory
developments and their potential impact on the business. Appropriate advice
continues to be taken in respect of these developments.
As noted within the regulatory developments section, there have been certain
adverse regulatory developments within Turkey and parts of Europe. In addition,
the Group as a whole has been impacted by the enactment of the Unlawful Internet
Gambling Enforcement Act in the US, in October 2006. Although the Group has
ceased taking bets from US resident customers potentially there remains a
residual risk associated with the Group's historic US transactions.
There is uncertainty as to what actions, if any, may occur from the above noted
events, and any impact such action may have on the Group. However, the Board
does not consider it probable that a material liability or a material impairment
in the carrying value of assets will arise as a result of any potential action.
12. Going concern:
The Directors have considered the implications of the potential impact of
regulatory uncertainties. The Directors have reviewed the cash flow projections
for the Group in light of these uncertainties and have considered the financial
resources available to the Group. Accordingly, the Directors have a reasonable
expectation that the Group and Company have adequate resources to continue
operations for the foreseeable future. For this reason, they continue to adopt
the going concern basis in preparing the financial statements.
13.
The financial information set out in this announcement does not constitute the
Company's statutory accounts for the years ending 31 July 2007 or 31 July 2006.
Statutory accounts for 2006 have been delivered to the Registrar of Companies.
Accounts for the year ended 31 July 2007 will be delivered to the Registrar of
Companies following the Company's Annual General Meeting. The auditors have
reported on those accounts; their report was unqualified and did not contain
statements under the Companies Act 1985, s 237(2) or (3). The report for the
year ended 31 July 2006 contains the following statement:
"Emphasis of matter - post year end disposal and closure of US-facing
operations.
In forming our opinion on the financial statements, which is not qualified, we
have considered the adequacy of the disclosures made in the financial statements
concerning the implications of changes in United States legislation relating to
online gaming. As a result of this new legislation, on 12 October 2006, the
Group sold its US-facing sports betting and casino operations. The Group has
also ceased taking deposits from US resident customers for its Paradise Poker
business. The Group's business has been significantly reduced and the carrying
values of the Company's investments and the Group's assets employed in its
US-facing operations have been significantly impaired."
Sportingbet Plc
Audited Notes Continued
Year Ended 31 July 2007
13. (continued)
The report for the year ended 31 July 2007 contains the following statement:
"Emphasis of matter - regulatory uncertainty.
In forming our opinion on the financial statements, which is not qualified, we
have considered the adequacy of, and draw attention to the disclosures made in
the notes regarding the implications of, and uncertainties arising from,
regulatory developments concerning on-line gambling and related activities in
the United States, Turkey and parts of Europe. There is uncertainty as to the
impact such regulatory developments may have on the Group. The notes to the
financial statements include a statement that the Board does not consider it
probable that a material liability or impairment in the carrying value of assets
will arise as a result of any potential action."
Appendix 1
EXPLANATION OF TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS ("IFRS")
Basis of Preparation
The Group's consolidated financial statements have been prepared in accordance
with the Companies Act 1985 and United Kingdom Accounting Standards ("UK
GAAP"). UK GAAP differs in certain respects from IFRS. The Group has adopted
IFRS for its year ending 31 July 2008 and has an opening IFRS balance sheet for
its transitional year at 1 August 2006. Illustrated below are the material
areas where it is expected that IFRS would impact on the Group results had it
been adopted for the year ended 31 July 2007. This financial information has
been prepared in accordance with IFRS endorsed as at 31 July 2007, in terms of
content but not layout. As IFRS is subject to ongoing review and endorsement by
the European Commission or possible amendment by the International Accounting
Standards Board, possible future changes could result in an adjustment to the
financial information and disclosure included in this document prior to the
issue of financial statements under IFRS. A transitional statement will be
issued in due course.
An explanation of how the transition from UK GAAP to IFRS would affect the
Group's financial position and financial performance is set out in the
following tables and notes that accompany the tables:
Appendix 1
Sportingbet Plc
Notes Under IFRS
Year Ended 31 July 2007
1. IAS 32 'Financial Instruments: Disclosures and Presentation' and IAS 39
'Financial Instruments: Recognition and Measurement'.
The application of IAS 39 for betting transactions has concluded that such
transactions should be treated as financial instruments. Consequently under IFRS
the gains and losses arising on betting activities should be reported as revenue
measured at the fair value of the consideration received or receivable from
customers, net of certain customer bonuses.
Revenue will represent gains and losses, being the amounts staked less total
payouts, from betting activity in the period. Open betting positions should be
carried at fair market value and gains and losses arising on these positions
should be recognised in revenue. Under UK GAAP, the Group reports the total
amounts staked by customers on betting activities as revenue, net of certain
customer bonuses, and makes no adjustment for the open bet position which is
included as a client liability until the sporting event has taken place. The
Group will account for the fair market value of open bets when IFRS are adopted.
The Group does not anticipate that this will have a material impact.
2. The Group has chosen to elect for the first time adoption exemption for
IFRS 3 and account for business combinations under IFRS 3 only for those
acquisitions which occur after the date of transition (which is 1 August 2006).
Goodwill will be recognised at fair value at the date of transition. Under IFRS
3 goodwill acquired in a business combination is not amortised. Instead goodwill
is tested annually for impairment.
3. Under IAS 35 the Group must separately identify computer software as an
intangible fixed asset as opposed to a tangible asset under UK GAAP.
FINANCIAL RESULTS: Year ended 31 July 2007
Year ended 31 July 2007
Turnover for the year ended 31 July 2007 was #1,324.9m (2006: #2,063.5m),
earning a gross profit of #154.1m (2006: #303.3m) at 11.6% of turnover (2006:
14.7%). Sports betting turnover was #1,241.0m (2006: #1,869.8m), earning a gross
profit of #70.2m (2006: #109.6m) at a gross margin percentage of 5.7% (2006:
5.9%). Casino and gaming, poker and fee income contributed a further #37.5m,
#44.5m and #1.9m respectively to both turnover and gross margin (2006: #65.8m,
#117.2m and #10.7m). Of the #154.1m of gross margin generated, #105.2m (2006:
#89.6m) was generated by customers residing in Europe, #33.3m (2006: #196.7m) by
US-based customers and #15.6m (2006: #17.0m) by the rest of the world.
Turnover and margin for the period are stated after a deduction for customer
bonuses of #10.4m (2006: #19.6m). The sports gross margin percentage as reported
was 5.7% (2006: 5.9%). Without the bonus deduction, sports margin percentage was
6.1% (2006: 6.4%).
Operating costs (excluding exceptional items, goodwill amortisation and share
option charges) in the year of #134.0m (2006: #200.3m) represented 87.0% (2006:
66.0%) of gross profit. Costs comprised marketing #61.4m (2006: #80.7m), banking
fees #19.2m (2006: #42.5m), information technology #10.9m (2006: #19.1m),
employee costs #25.0m (2006: #33.6m), other administration costs #10.2m (2006:
#19.1m) and depreciation #7.3m (2006: #5.3m).
Operating profit (before exceptional items, goodwill amortisation and share
option charge) for the year was #20.1m (2006: #103.0m), representing a margin of
13.0% (2006: 34.0%) of gross profit.
Loss before tax was #311.6m (2006: #71.2m profit), after including share option
charge of #8.2m (2006: #6.7m), goodwill amortisation of #6.6m (2006: #22.1m),
net interest receivable of #2.5m (2006: #3.0m payable), and exceptional items of
#319.2m (2006: #nil).
Significant exceptional items were incurred during the year totalling #319.2m
(2006: nil). The loss on cessation of the US-facing sports and casino operations
resulted in a charge of #108.9m and related reorganisation charge of #14.2m. The
blocking of US players from the Paradise Poker business resulted in an
impairment charge to goodwill of #178.1m. A further impairment charge, fixed
asset write off and related costs of #14.2m was taken following the migration of
Paradise Poker players onto the Boss Media network. These impairment charges
write the Paradise Poker related goodwill down to #3.7m. Further exceptional
charges of #7.4m were incurred during the year in relation to the move of
certain European operations to Dublin and the Channel Islands. In addition,
following the merger of the Sportingodds and Sportingbet brands in the UK
market, an impairment charge of #3.6m has been taken against the goodwill of the
Sportingodds business. Of the total of #319.2m, #20.0m is cash related
expenditure.
Finance costs comprised interest receivable on the Group's cash balances of
#1.9m (2006: #1.8m), interest payable on bank loans #0.1m (2006: #1.7m), #0.2m
(2006: #1.0m) relating to the amortisation of bank fees, and non-cash interest
receivable of #0.9m (2006: #2.1m payable) arising from the discounting of future
earnout liabilities back to current values in accordance with FRS 7.
Basic earnings per share before exceptional items, share option charge and
amortisation of goodwill was 5.1p (2006: 24.9p). Diluted earnings per share
before exceptional items, share option charge and amortisation of goodwill was
4.7p (2006: 23.8p).
During the year ended 31 July 2007, the Group generated cash from operating
activities of #0.3m (2006: #118.8m). As at 31 July 2007, the Group had #37.0m
(2006: #97.2m) of cash and liquid resources on its balance sheet, of which
#12.9m (2006: #38.6m) represented customer deposits.
Gross financial liabilities amounted to #5.4m (2006: #47.5m). This comprised a
bank loan of #5.3m (2006: #47.5m) and #0.1m due to the vendors of the
shareholding in Sportingbet Italia.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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Sportingbet posts full-year loss after U.S. online gaming ban
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Originally Posted by bigboydan
