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PROBABILITY PLC: Interim Results to 30 September 2012


Probability plc


                         (`Probability' or `the Company')
          Interim Results for the six months ended 30 September 2012           
                         Further strong revenue growth                         

Probability, the AIM-quoted mobile gambling specialist, announces its unaudited
interim results for the six months ended 30 September 2012.

This has been a period of strong growth across all areas of the business,
building upon the Company's early mover advantage in mobile gambling as a
direct-to-consumer operator and as a leading content provider to other
regulated operators.

Following the acquisition of Playyoo SA during the period, Probability has
entered into the regulated mobile gambling market in Italy with a comprehensive
B2B offering. This comes at the very moment that Slots, the most popular form
of gambling in that country, have been legalised for online and mobile play
following a regulatory change on 3 December 2012.

Financial Highlights for period from 1 April 2012 to 30 September 2012
(unaudited)

  * Net gaming revenue ("NGR") increased 38% to £4.53m (H1 FY2012: £3.27m).
      * Cash deposits by customers was up 44% compared to the 6 month period ended
    30 September 2011. August 2012 was the best month ever for customer
    deposits.
      * Unaudited pre-tax loss for period of £658,000 (after expensing marketing
    investments of £1.87m in the period and the direct costs and amortisation
    associated with the acquisition and operation of Playyoo in the period of
    approximately £275,000). (H1 FY2012: loss £88,000)
      * Cash and cash equivalents at the end of the period were £685,000 following
    intensive marketing investments towards the end of the period. (H1 FY2012:
    £2.23m).
    Operational Highlights

  * Acquisition of Playyoo, accelerating entry into the Italian regulated
    gambling market.
      * Doubled client base for white label offering, which now has 29 brands live,
    half of these recruited in the last six months. Deposits from White Label
    players were 45% higher in the period than in the same period last year.
      * Continued strong growth in B2B. During the period the Company entered into
    a new B2B agreement with 888 Holdings to integrate Probability's mobile
    gambling games into 888's Dragonfish B2B platform. This is now live in a
    trial phase with selected Dragonfish customers.
      * LadyLuck's iPhone app accepted into the Apple App Store for the UK,
    frequently ranking in the top three downloads in its categories and now
    with over 56,000 downloads since being listed in June 2012.
    Additional financial information

The adjusted EBITDA loss of £287,000 for the core UK business, after removing
costs related to Playyoo and share option charges, is in line with management
expectations for the actual marketing spend in the period.

Marketing investments expensed for the second quarter from 1 July 2012 to 30
September 2012 were approximately £760,000. The benefits of this investment 
are
expected only from H2 onwards but the cost is fully expensed in the unaudited
pre-tax loss for the first half.

Marketing investments made in the period have performed in line with management
expectations. However, the Company reduced marketing spend for a short period
during the Olympics. Trading was not negatively affected by the Games, with
August deposits from players the highest ever for a single month.

Trading Update (post 30 September 2012).

Trading since 30 September has been positive and in line with management
expectations.

The Company achieved a significant milestone during November when it was
awarded a gambling licence in Italy. We are planning to introduce a white label
offering in the Italian market to complement our existing B2B service in the
UK, at the earliest opportunity.

Since the end of September we have also entered into a brand licensing and
white label agreement with Glu Mobile (NASDAQ: GLUU), a leading developer of
`freemium' mobile games. The Company is developing mobile gambling games based
upon titles and characters licensed from Glu. In the first wave will be
"Contract Killer Slots", "Samurai vs. Zombies: Slots" and "Deer Hunter Reloaded
Slots", based on popular Glu titles, some of which have been downloaded by tens
of millions of trigger happy, deer sniping, zombie slicing, iPhone users.

In the core UK consumer business, particularly with the Lady Luck's and Moobile
brands, customer lifetime values are continuing to improve.

We have successfully scaled up our marketing investments whilst retaining
strong discipline over the value of those investments. We are also seeing good
value from investments in mobile advertising, including on Facebook's newly
revamped mobile offering. These give us great confidence in the scalability of
the model.

Our B2B business in the UK is performing particularly strongly. Our games are
performing particularly well for Paddy Power and William Hill. Integration into
Ladbrokes continues.

In Italy, contracts with SNAI, Cogetech and NeoMobile are now delivering early
revenues. All the major Playyoo customers have now agreed to offer the
Company's mobile slots products as soon as these become available; regulations
allowing slots came into force on December 3 2012. The Company is in the
process of having a number of its slots games certified and expects this
process to take no more than a few weeks.

Outlook for the full year

The Company expects to build upon the momentum delivered during the first half
and we would expect to deliver full year NGR within the range £9.0m to £10.0m
for the core business (UK B2C, B2B and White Label), depending upon the
decisions we take regarding investment in marketing, and upon the success of
new game launches we have planned for early in 2013. If we decide to invest in
enhanced marketing expenditure, and pursue an NGR at the top end of this range,
the full benefit of this expenditure will not be received until the next
financial year, so the profitability of the core business this year will be
impacted to the extent of the additional marketing. However, should we decide
not to invest in enhanced marketing, we expect the core business to deliver a
profit for the full year broadly in line with our previous expectations.

. We will continue to maintain a disciplined approach in respect of our
decisions regarding marketing expenditure which will be driven by our target
rate of return. The payback period in respect of marketing investment remains
stable at around five to six months, and the returns which we are achieving a
year after a campaign are in excess of 135%.

Revenues from Playyoo have now started to come through, but it is too early to
establish a firm medium term forecast for this business, particularly ahead of
the introduction of mobile slots into the market.

Commentary

Probability Chief Executive Officer, Charles Cohen, said:

"We remain determined to capitalise on our first mover advantage in mobile
gambling and we believe this market is now at a tipping point.

"Over half the adult population in the UK now has a smartphone, up from 30% in
2011. In our prime demographic of 18-29 year olds, 75% have one. In Italy, it's
49%. (Source: Google Mobile Planet http://bit.ly/PBTYchart1)

"The transition of mobile gambling from an early-adopter niche to mass
marketability is a fact, not an aspiration. The ongoing success of our TV
advertising and Facebook promotions attest to this.

"Our ability to grow will no longer be constrained by the size of the market or
the limited scope of regulation in our main markets.

"We have the proven technology, the expertise, the regulatory status, the
talent and the resources to take a sizable portion of what will clearly be a
major part of the global gambling business over the next few years.

"We are rapidly building Probability to be both big and profitable, a balanced
and truly international leader in regulated gambling markets."

ENDS

For further information, please contact:

Probability plc       Charles Cohen, Chief Executive      +44(0) 20 7092 8801 
                      Officer                                                 

Numis Securities Ltd Richard Thomas, Nominated Adviser +44(0) 20 7260 1000

Square1 Consulting David Bick, Public Relations +44(0) 20 7929 5599 Ltd

Consolidated Statement of Comprehensive Income


                                                                               
                                       Half year      Half year      Year ended
                                    30 September   30 September        31 March
                                            2012           2011            2012
                                                                               

£'000 £'000 £'000


                                                                               
                                     (unaudited)    (unaudited)       (audited)

Continuing operations

Net gaming revenue 4,526 3,271 7,175

Operating expenses (546) (430) (920)

Administrative expenses (4,639) (2,944) (6,826)

Other administrative expenses (4,441) (2,944) (6,826)

Costs of acquisition (123) - -

Amortisation of intangible (75) - - assets

Operating loss (659) (103) (571)

Finance income 1 15 26

Loss before tax (658) (88) (545)

Taxation - - -

Loss after tax (658) (88) (545)

Loss per share (pence)

Basic Note 3 (2.24p) (0.33p) (2.02p)

Diluted Note 3 (2.24p) (0.33p) (2.02p)


                                                                               


Consolidated Statement of Financial Position                                    
                                                                                

As at As at As at

30 30 31 March

September September

2012 2011 2012

£'000 £'000 £'000

(unaudited) (unaudited) (audited)

Assets

Non-current assets

Property, plant and equipment 241 296 272

Intangible fixed assets 2,860 - -

Current assets

Trade and other receivables 1,625 804 1,098

Cash and cash equivalents 685 2,230 1,846

Total assets 5,411 3,330 3,216

Non-current liabilities

Deferred taxation 475 - -

Contingent consideration Note 4 638 - -

Current liabilities

Trade and other payables 573 465 748

Provisions 238 238 238

Total liabilities 1,924 703 986

Total net assets 3,487 2,627 2,230

Capital and reserves attributable to equity

holders of the parent

Share capital 293 269 269

Share premium 7,430 7,430 7,430

Merger Reserve 1,844 - -

Reverse acquisition reserve 1,380 1,380 1,380

Retained deficit (7,460) (6,452) (6,849)

Total equity attributable to

equity holders of the parent 3,487 2,627 2,230


                                                                                



Consolidated Statement of Cash Flows                                           
                                                                               
                                          Half Year    Half Year     Year Ended
                                       30 September 30 September       31 March
                                               2012         2011           2012
                                                                               

£'000 £'000 £'000


                                                                               
                                        (unaudited)  (unaudited)      (audited)

Cash flow from operating activities

Loss before tax (658) (88) (545)

Adjustments for:

Depreciation 50 35 84

Amortisation of intangible assets 75 - -

Share based payments 47 24 84

Finance income (1) (15) (26)

(Increase)/decrease in trade and other (527) (168) (462) receivables

(Decrease)/increase in trade and other (175) (237) 46 payables

Cash used in operations (1,189) (449) (819)

Cash flow from investing activities

Capital expenditure (12) (184) (209)

Finance income 1 15 26

Cash consideration for acquisition of (43) - - Playyoo SA

Cash and cash equivalent acquired 82 - -

Net cash generated from/(used in) 28 (169) (183) investing activities

Cash flows from financing activities - - -

Net cash generated from financing - - - activities

Net increase/(decrease) in cash and (1,161) (618) (1,002) cash equivalents

Cash and cash equivalents at the 1,846 2,848 2,848 beginning of the period

Cash and cash equivalents at the end of 685 2,230 1,846 the period

Consolidated Statement of Changes in Equity - unaudited


                          Share     Share  Merger     Reverse  Retained   Total
                        capital   premium reserve acquisition  earnings        
                                                      reserve                  
                                                                               

£'000 £'000 £'000 £'000 £'000 £'000

Balance at 31 March 269 7,430 - 1,380 (6,849) 2,230 2012

Loss and total - - - (658) (658) comprehensive income for the period

Ordinary share issue 24 - 1,779 - - 1,803

Share based payments- - - 65 - 47 112 credit to equity

Balance at 30 293 7,430 1,844 1,380 (7,460) 3,487 September 2012

Balance at 31 March 269 7,430 - 1,380 (6,388) 2,691 2011

Loss and total - - - (88) (88) comprehensive income for the period

Share based payments- - - - - 24 24 credit to equity

Balance at 30 269 7,430 1,380 (6,452) 2,627 September 2011

Balance at 1 April 269 7,430 - 1,380 (6,388) 2,691 2011

Loss and total - - - - (545) (545) comprehensive income for the period

Share based payments- - - - - 84 84 credit to equity

Balance at 31 March 269 7,430 1,380 (6,849) 2,230 2012

General information

Probability is a public limited company incorporated in the United Kingdom under the Companies Act (Registration No. 5830059). The Company's registered address is Staple Court, 11 Staple Inn Buildings, London, WC1V 7QH. The company's ordinary shares are traded on the Alternative Investment Market (`AiM'). Copies of this report will be available to shareholders on the Company's website. Further copies of the report may be obtained from the above address or on the Investor Relations section of the Company's website at www.probabilityplc.com

Note 1 Basis of accounting

Basis of preparation

These interim results has been prepared using the recognition and measurement principles of International Accounting Standards, International Financial Reporting Standards and Interpretations adopted for use in the European Union (collectively Adopted IFRSs). The accounting policies adopted in these interim results have been consistently applied to all periods presented and are consistent with the policies used in the preparation of the statutory accounts for the year ended 31 March 2012.

The comparative financial information for the year ended 31 March 2012 included within these interim results does not constitute the full statutory accounts for that year. The Annual Report and Financial Statements for 2012 have been filed with the Registrar of Companies. The Independent Auditors' Report on that Annual Report and Financial Statements for 2012 was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

The financial information for the half years ended 30 September 2012 and 30 September 2011 is unaudited.

Note 2 Net gaming revenue

Net gaming revenue derives from mobile phone gambling operations and is defined as the difference between the amounts of bets placed by the players less amounts won by players. It is stated after deduction of certain bonuses, jackpots and prizes granted to players.

Revenue is recognised to the extent that its probable economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is recognised in the accounting periods in which the transactions occur.

Commission that is derived from the Group's "white label" and "B2B" operations (third party entities that use the Group's platform) is included within net gaming revenue.

Note 3 Earnings/(Loss) per share

The basic earnings per ordinary share has been calculated using the loss for the financial period of

£658,000 (30 September 2011 - loss of £88,000 and 31 March 2012 - loss of £ 545,000) and weighted average number of ordinary shares of 29,344,170 (30September 2011- 26,916,000 and 31 March 2012- 26,936,088).

As the Group made losses in other periods the loss per share has not been diluted for those periods.

Note 4 Acquisition of Playyoo SA ("Playyoo")

Terms of the Acquisition

The Company announced on 19 July 2012 the acquisition of the entire share capital of Playyoo, a private company registered and headquartered in Lugano, Switzerland for an initial consideration of approximately £1.8m (based on the closing price of 75p of the ordinary Shares on 17 July 2012), satisfied by the issue of 2,404,415 Ordinary Shares (the "New Shares") in the Company with nominal value of £24,000 and the excess over nominal of £1,779,000 taken to merger reserve. A further 1,700,000 Ordinary Shares may be issued depending on the performance of Playyoo during the 2013 calendar year, and is recognised as contingent consideration of £638,000

If the earn-out is achieved in full, the maximum number of shares that will be issued by the Company in respect of the acquisition is 4,104,415, which equates to a maximum total consideration worth approximately £3.0m at the closing share price of 75 pence per share as at 17 July 2012.

The New Shares were admitted to AIM, with trading commencing on 20 July 2012. The New Shares rank pari passu in all respects with the existing Ordinary Shares of the Company.

With the proximity of the date of the acquisition to the date of the authorisation of these unaudited interim results, a detailed assessment of the fair value of the consideration and identifiable net assets had not been completed.

The provisional identifiable net assets, including intagible assets, results in goodwill on acquisition of 2,460,000.

Appointment of a new Director

Rocco Pellegrinelli, who has served as a non-executive Director of Playyoo since founding the company in 2008, has joined the Board of Probability as a non-executive Director.

Note 5 Business combinations

For business combinations cost comprises the fair value of assets given, liabilities assumed and equity instruments issued, plus the amount of any non-controlling interests in the acquiree plus, if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree. Contingent consideration is included in cost at its acquisition date fair value and, in the case of contingent consideration classified as a financial liability, remeasured subsequently through profit or loss. Direct costs of acquisition are recognised immediately as an expense.

Goodwill is capitalised as an intangible asset with any impairment in carrying value being charged to the consolidated statement of comprehensive income. Where the fair value of identifiable assets, liabilities and contingent liabilities exceed the fair value of consideration paid, the excess is credited in full to the consolidated statement of comprehensive income on the acquisition date. Other intangible assets identified are amortised over their useful economic lives.

END

-0- Dec/06/2012 07:00 GMT

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