EXHIBIT 99.1
FOR IMMEDIATE RELEASE 27 APRIL 2006
WORLD GAMING PLC
(TIDM:WGP)
RESULTS FOR THE THREE MONTHS ENDED 31 MARCH 2006
The Board of World Gaming plc (the "Company"), whose subsidiary companies (the
"Group") operates internet gaming sites and licenses software offering a
comprehensive suite of internet gaming products and services to operators, is
pleased to announce the Group's first quarter results for the three months ended
31 March 2006.
HIGHLIGHTS - THREE MONTHS ENDED 31 MARCH 2006
o Operating profit before goodwill amortisation for the quarter of $6.1m
compared to $0.8m for the first quarter of 2005.
o Growth in proforma gross profit of 40.1% to $10.5m.
o 19,360 new customers added in the quarter representing a 29% increase
in new customers compared to the first quarter of 2005*.
o Two new licensees signed in the quarter.
o Pre-tax profit before goodwill amortisation for the quarter of $5.4m
compared to $0.8m for the first quarter of 2005.
o Strong cross-sell with 32.7% of sports bettors expanding their play to
casino gaming and poker products in the quarter.
WORLD GAMING PLC CEO, DANIEL MORAN SAID: "The first quarter of 2006 has
demonstrated the value of our recently acquired SPORTSBETTING.COM brand, through
both strength in key performance indicators and the significant earnings
enhancement that this acquisition has delivered for shareholders. The Group,
while continuing its integration of SPORTSBETTING.COM, continues to seek further
acquisition opportunities both strategic in terms of geography or product and
scalable as complementary to its existing strong operating business."
* Assuming that the SPORTSBETTING.COM business had been owned throughout 2005
for comparative purposes.
--ENDS--
ENQUIRIES:
WORLD GAMING PLC TEL: +1 888 883 0833
Daniel Moran, Chief Executive
David Naismith, Chief Financial Officer
BISHOPSGATE COMMUNICATIONS LIMITED TEL: 020 7430 1600
Maxine Barnes
Scott Robertson
DANIEL STEWART & COMPANY PLC TEL: 020 7374 6789
Ruari McGirr
The Company's Ordinary Shares have not been and will not be registered under the
U.S. Securities Act of 1933 (the "Securities Act") and may not be offered or
sold in the United States or to a U.S. person (as such term is defined in
Regulations S under the Securities Act) absent registration or an applicable
exemption from registration under the Securities Act.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
The Company makes certain forward-looking statements in this document,
including, the attached statement of the Company's Chief Executive, within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. The Private Securities
Litigation Reform Act of 1995 provides a safe harbor for forward-looking
statements. To comply with the terms of the safe harbor, The Company notes that
a variety of factors could cause the Company's actual results and experience to
differ substantially from the anticipated results or other expectations
expressed in its forward-looking statements. When words and expressions such as:
"believes," "expects," "anticipates," "estimates," "plans," "intends,"
"objectives," "goals," "aims," "projects," "forecasts," "possible," "seeks,"
"may," "could," "should," "might," "likely," "enable" or similar words or
expressions are used in this document, as well as statements containing phrases
such as "in the Company's view," "there can be no assurance," "although no
assurance can be given" or "there is no way to anticipate with certainty,"
forward-looking statements are being made. These forward-looking statements
speak as of the date of this document.
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The forward-looking statements are not guarantees of future performance and
involve risks and uncertainties. These risks and uncertainties may affect the
operation, performance, development and results of the Company's business and
could cause future outcomes to differ materially from those set forth in the
Company's forward-looking statements. These statements are based on management's
current beliefs as to the outcome and timing of future events, and actual
results may differ materially from those projected or implied in the forward
looking statements. Further, some forward-looking statements are based upon
assumptions of future events that may not prove to be accurate. The
forward-looking statements involve risks and uncertainties including, without
limitation, the risks and uncertainties referred to in the Company's filings
with the Securities and Exchange Commission, including its most recent Form
20-F.
The Company undertakes no obligation to publicly update or revise any
forward-looking statements as a result of future developments, events and
conditions. New risk factors emerge from time to time and it is not possible for
us to predict all such risk factors, nor can the Company assess the impact of
all such risk factors on its business or the extent to which any factor, or
combination of factors, may cause actual results to differ significantly from
those forecast in any forward-looking statements. Given these risks and
uncertainties, investors should not overly rely or attach undue weight to the
Company's forward-looking statements as an indication of its actual future
results.
FULL STATEMENT ATTACHED
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CHIEF EXECUTIVE'S STATEMENT
INTRODUCTION
The first quarter of 2006 has demonstrated the strength of the SPORTSBETTING.COM
brand through robust growth and strong margins in the Group's first full quarter
of control.
Underpinning the strong growth in gross margin in the quarter was a continuation
of robust key performance indicators across the customer database. In addition,
sports margins exceeded management's expectations throughout the first quarter
of 2006.
In March 2006, the Group agreed with and paid the final consideration in respect
of the acquisition of the SPORTSBETTING.COM business and there remain no further
payments due to the vendors in respect of this transaction.
As at the end of the first quarter, the Group had paid down $6.0m of its $40m
Barclays loan facility and continued to maintain an unutilised $5m revolving
facility.
During the quarter, the Group signed two new licensees that are expected to
launch in the second quarter of 2006.
The Group enters the second quarter of 2006 well placed to strengthen its
organic revenue growth in both its newly acquired Operating division and its
continuing licensing offerings.
Currency amounts set forth in this Statement are in U.S. dollars.
-4-
FINANCIAL RESULTS
THREE MONTHS ENDING 31 MARCH 2006
Turnover for the quarter ended 31 March increased by $74.7m to $77.3m compared
to $2.6m for the same period last year. The increase in turnover is wholly
attributable to the Sportsbetting Transaction effective 1 October 2005 at which
time the Group acquired all of the business and assets of its then largest
licensee whose leading brand is SPORTSBETTING.COM (hereinafter referred to the
"Operating division").
The Group's two key revenue streams are:
1. Royalties and fees which includes royalties charged to the Group's
continuing licensees plus hosting fees charged to Sportingbet plc
("Sportingbet") for hosting services provided from its wholly-owned
hosting infrastructure; and
2. Operations, representing revenue derived from its wholly-owned internet
gaming sites.
Turnover from operations, representing gross sports and horse racing wagers and
net casino and poker win was $76.0m before netting of customer bonuses of $0.5m
for the quarter ended 31 March 2006, compared to $nil for the same period in
2005. For comparative purposes, the proforma growth in turnover in the Operating
division was 34.3% or $19.4m from $56.6m before netting of customer bonuses of
$0.4m for the quarter ended 31 March 2005.
Turnover from new and continuing licensees on a like-for-like basis grew by
$0.4m to $1.1m representing a 57.1% growth in licensing revenue. Overall
turnover from royalties and fee income decreased by 30.7% or $0.8m to $1.8m for
the quarter ended 31 March 2006, compared to $2.6m for the same period last
year. The reduction is attributable to no longer receiving software royalties
from the SPORTSBETTING.COM business as a result of the acquisition.
Gross profit increased $9.5m to $11.4m for the quarter ended 31 March 2006
compared to $1.9m for the same quarter last year.
On a proforma basis gross profit from the Operating division grew 40.1% to
$10.5m after deducting $0.6m of customer bonuses and jackpot transfers in the
quarter. For comparative purposes, the proforma gross profit contribution from
the Operating division for the quarter ended 31 March 2005 was $7.5m after
deducting $0.5m in customer bonuses and jackpot transfers.
The total gross margin percentage for the quarter ended 31 March 2006 was 14.8%
compared to 71.1% for the same period last year. The decrease resulted from the
significant change in revenue mix as a result of the acquisition of
SPORTSBETTING.COM.
-5-
On a proforma basis the gross margin percentage for the Operating division for
the quarter ended 31 March 2006 was 13.6% compared to 12.9% for the quarter
ended 31 March 2005. The increase is attributable to strong win margins on
sports throughout the quarter and the contribution of net poker rake in 2006 of
$1.0m (2005: $nil).
Operating expenses before goodwill amortisation increased by $4.2m to $5.3m
during the quarter ended 31 March 2006 compared to $1.1m for the same period
last year. The increase is wholly attributable to Operating division costs not
included in the comparative period. Costs associated with operations, primarily
consisting of transaction processing, customer service and marketing,
contributed $4.0m to total operating expenses in the first quarter of 2006.
Operating profit before goodwill amortisation and exceptional items for the
quarter ended 31 March 2006 increased by $5.3m to $6.1m compared to $0.8m for
the comparative period in 2005. The increase is attributable to the contribution
from the Operating division as well as increase in like-for-like royalty and fee
revenue.
Goodwill amortisation for the quarter ended 31 March 2006 was $0.9m compared to
$nil for the comparative period in 2005. Finance costs, representing net
interest and loan cost amortisation, was $0.7m for the quarter ended 31 March
2006 compared to $nil for the comparative period in 2005.
Profit after tax for the quarter ended 31 March 2006 increased $3.7m to $4.5m
from $0.8m for the quarter ended 31 March 2005.
Basic earnings per share before goodwill amortisation per participating ordinary
share for the quarter ended 31 March 2006 was 10.2 cents (8.6 cents after
goodwill amortisation) compared to 3.0 cents (3.0 cents after goodwill
amortisation and exceptional items) for the same quarter in 2005. Participating
ordinary shares include those shares that have voting and economic rights and
exclude those shares held by Sportingbet in accordance with the transaction
effective 1 October 2004.
On a fully diluted basis earnings per share before goodwill amortisation per
participating ordinary share for the quarter ended 31 March 2006 was 9.1 cents
(7.6 cents after goodwill amortisation) compared to 2.0 cents (2.0 cents after
goodwill amortisation) for the same quarter in 2005.
At the end of the first quarter of 2006, the Group paid down $6.0m of its $40.0m
loan facilities. The Group's $5m revolving credit facility remains unutilised. A
further $13m is scheduled to be repaid throughout 2006.
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REVIEW OF OPERATIONS
OPERATING DIVISION (SPORTSBETTING.COM)
The Operating division added 19,360 new customers in the first quarter of 2006
compared to 14,978 new customers for the first quarter of 2005, a 29% increase
in new customers than the comparative quarter of 2005. Of these new customers
49% were converted to new active betting customers compared to 47% for the first
quarter of 2005.
Active customer acquisition costs were $76 for the quarter compared to $79 in
2005. The Group has successfully integrated the majority of the marketing
function of the SPORTSBETTING.COM acquisition while maintaining highly efficient
customer acquisition costs. The Board believes that the strength of the
SPORTSBETTING.COM brand together with maintaining its established marketing
relationships will continue to drive its efficient customer acquisition costs.
The average loss per active customer was $326 for the quarter compared to $333
for the same quarter of 2005. The average life of a customer as at 31 March 2006
was approximately 483 days or 16.1 months compared to 456 days or 15.2 months as
at 31 March 2005. The average lifetime value of a customer at 31 March 2006 on a
rolling twelve month basis was approximately $1,394.
Sports margins including horse racing in the first quarter of 2006 were 9.3%
(2005: 9.1%) representing strong win margins on sports.
Gaming margins in the first quarter of 2006 were 2.0% (2005: 2.2%).
SPORTSBETTING.COM's poker product, launched only in the middle of 2005, yielded
revenue before commissions of $1.5m (2005: $nil) for the quarter. Continued
growth in poker has been derived primarily from cross-selling the sports betting
product.
The Operating division continued to deliver strong cross-sell from sports
betting players with an average 32.7% (2005: 32.0%) in the quarter of players
placing a sports wager going on to place a bet on a gaming product or poker.
This yielded $2.8m (2005: $2.6m) of gaming revenue and $0.7m (2005: $nil) of
poker revenue for the Group in the quarter. The cross-sell of products within
the database is enhanced by the Group's single player account status across all
products.
In March 2006, the Group launched a 3-card poker product to further enhance its
casino offering.
LICENSING DIVISION
During the quarter, the Group added two new licensees. Both are expected to go
live in the second quarter of 2006.
-7-
Growth in the European white-label site launched in the fourth quarter of 2005
has been encouraging. The Group continues to monitor further licensing and
white-label opportunities.
Consistent with the Board's strategy, the Group expects to continue to sign an
average of one quality licensee per quarter, thus further leveraging its highly
scalable software and infrastructure resources.
REGULATORY DEVELOPMENTS
Over the past few years, authorities in certain jurisdictions, such as the
United States, have taken indirect steps to restrict online gaming by seeking to
prevent or deter banks, payment processors, media providers and other suppliers
from transacting with and providing services to online gaming operators, even
though many of these online gaming operators are legally licensed in the
jurisdiction in which they operate. The application or enforcement (or threat of
enforcement) of restrictive laws or regulations, or a change in sentiment by
regulatory authorities or the enactment of new legislation prohibiting or
restricting online gaming or services used by online gaming businesses or the
taking of certain indirect steps, may severely and adversely impact the business
and financial position of online gaming companies such as the Company's.
Presently, there are two pieces of proposed legislation being considered in the
US House of Representatives (one introduced by Congressman Leach and the other
by Congressman Goodlatte), with the likelihood of a third being introduced in
the US Senate by US Senator Kyl, as an amendment to other proposed legislation
presently being considered or, in the future, as proposed stand-alone
legislation. Each of these bills will need, in the ordinary course, to be passed
by both Houses of Congress, probably before October 2006 when the 109th Congress
is expected to adjourn, ahead of the mid-term 2006 elections. In addition, the
proposed bills offer "carve-outs" to certain US domestic groups that undertake
US domestic gaming activities and the insertion of such carve-outs by special
interests in the past undoubtedly had an impact on the failure of such
legislation in the past. Obviously, we will continue to monitor developments
closely.
In November 2004, the World Trade Organisation ("WTO") held that the US was in
violation of its commitments under international trade laws by not allowing
operators of Internet Gaming services licensed in Antigua and Barbuda to access
US markets. The decision was appealed and the WTO ruled that the US had shown
that its laws prohibiting gambling are "necessary to protect public morals or
maintain public order" but had failed to demonstrate, in light of its laws in
respect of on-line gambling on horseracing, that such prohibitions are applied
equally to both foreign and domestic providers of on-line gambling services for
horseracing. Consequently, the WTO recommended that the US bring its laws into
conformity with its obligations under international trade rules. Pursuant to the
report of the arbitrator circulated in August 2005, the US was given until 3
April 2006 to clarify its policies on Internet gambling and the purported
extraterritorial application of its laws. This date has now passed and the US
has not taken action to change the US domestic laws that the WTO panel
identified as in violation of the US's GATS commitments. It remains to be seen
what effect, if any, will result from this inaction on Internet Gambling policy
in the US.
-8-
TRADING OUTLOOK
The first three weeks of the second quarter of 2006 have continued to
demonstrate growth in all key performance indicators broadly in-line with the
first quarter. Margins, while remaining strong, have returned to levels within
management's expectations after a very strong first quarter.
In accordance with expectations and industry seasonality, trading volumes
experienced by the Group are generally lower in the second quarter. During the
second quarter and the beginning of the third quarter, the Group will
concentrate efforts on planned hardware and infrastructure upgrades to secure
the ability to handle expected growth in trading volumes through the second half
of 2006.
The Company expects to report its results for the second quarter and first half
ended 30 June 2006 on 25 July 2006.
DANIEL MORAN
CHIEF EXECUTIVE
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WORLD GAMING PLC
UNAUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNT
THREE MONTHS ENDED 31 MARCH 2006 AND 2005
(CURRENCY AMOUNTS IN U.S. DOLLARS)
3 MONTHS 3 months
31 MARCH 31 March
2006 2005
Note $'000 $'000
-------------------------------
TURNOVER .................................... 2 77,263 2,635
Cost of sales ............................... (65,851) (761)
---------------------
GROSS PROFIT ................................ 11,412 1,874
- --------------------------------------------------------------------------------
Goodwill amortisation ....................... (882) -
Other administration expenses ............... (5,346) (1,084)
- --------------------------------------------------------------------------------
Total administration expenses ............... (6,228) (1,084)
- --------------------------------------------------------------------------------
OPERATING PROFIT BEFORE GOODWILL AMORTISATION 6,066 790
Goodwill amortisation ....................... (882) -
- --------------------------------------------------------------------------------
OPERATING PROFIT BEFORE FINANCE COSTS AND
EXTRAORDINARY ITEMS ......................... 5,184 790
Finance costs ............................... 5 (692) 46
---------------------
Profit before tax ........................... 4,492 836
---------------------
Taxation .................................... - -
---------------------
PROFIT FOR THE FINANCIAL PERIOD ............. 4,492 836
=====================
EARNINGS PER ORDINARY SHARE (CENTS) 3
Basic ................................ 8.6 3.0
Diluted .............................. 7.6 2.0
EARNINGS PER SHARE ADJUSTED (CENTS) 3
Basic ................................ 10.2 3.0
Diluted .............................. 9.1 2.0
-10-
WORLD GAMING PLC
CONSOLIDATED BALANCE SHEETS
AS AT 31 MARCH 2006 AND 31 DECEMBER 2005
(CURRENCY AMOUNTS IN U.S. DOLLARS)
31 March 31 December
2006 2005
(unaudited)
Note $'000 $'000
--------------------------------
FIXED ASSETS
Intangible assets - goodwill ................. 84,927 85,662
Tangible assets .............................. 1,279 1,231
------------------------
86,206 86,893
CURRENT ASSETS
Debtors ...................................... 9,115 9,601
Prepayments and accrued income ............... 843 989
Consideration recoverable .................... - 3,481
Cash at bank and in hand ..................... 6,305 7,605
------------------------
16,263 21,676
CREDITORS: Amounts falling due within one year
Bank loans ................................... 12,508 14,711
Other creditors and accruals ................. 5 8,695 9,659
Deferred consideration ....................... - 3,600
------------------------
21,203 27,970
------------------------
NET CURRENT (LIABILITIES)/ASSETS ............. (4,940) (6,294)
------------------------
TOTAL ASSETS LESS CURRENT LIABILITIES ........ 81,266 80,599
CREDITORS: Amounts falling due after more than
one year
Bank loans ................................... 5 20,484 24,396
PROVISION FOR LIABILITIES AND CHARGES ........ - -
------------------------
NET ASSETS ................................... 60,782 56,203
========================
CAPITAL AND RESERVES
Called up share capital ...................... 212 197
Share premium account ........................ 36,313 27,793
Shares to be issued .......................... - 8,440
Deferred compensation reserve ................ 567 567
Merger reserve ............................... 23,528 23,528
Profit and loss account ...................... 162 (4,322)
------------------------
SHAREHOLDERS' FUNDS .......................... 60,782 56,203
========================
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WORLD GAMING PLC
UNAUDITED CONSOLIDATED CASH FLOW STATEMENT
THREE MONTHS TO 31 MARCH 2006 AND 2005
(CURRENCY AMOUNTS IN U.S. DOLLARS)
3 months ended 3 months ended
31 March 31 March
2006 2005
$'000 $'000
--------------------------------
Net cash inflow from operating activities ..... 6,124 1,413
Returns on investment and servicing of finance (569) 46
Acquisitions .................................. (685) -
Capital expenditure ........................... (262) (95)
Consideration received - Sportingbet .......... - 3,000
--------------------------------
CASH INFLOW/(OUTFLOW) BEFORE FINANCING ........ 4,608 4,364
Financing ..................................... (6,045) 82
Issue of shares ............................... 137 -
--------------------------------
Net (DECREASE)/INCREASE IN CASH IN THE PERIOD . (1,300) 4,446
================================
RECONCILIATION OF NET CASHFLOW TO MOVEMENT IN
NET FUNDS
(Decrease)/Increase in cash in the period ..... (1,300) 4,446
Cash (inflow)/outflow from (increase)/decrease
in debt ...................................... 6,045 14
--------------------------------
MOVEMENT IN NET FUNDS RESULTING FROM CASH
FLOWS IN PERIOD .............................. 4,745 4,460
--------------------------------
Currency translation differences .............. (8) (13)
Non-cash movements ............................ - -
--------------------------------
Movement in net funds in period ............... 4,737 4,447
--------------------------------
--------------------------------
Net funds/(debt) at start of period ........... (31,502) 7,930
--------------------------------
NET (DEBT)/FUNDS AT END OF PERIOD ............. (26,765) 12,377
================================
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1. CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
3 MONTHS 3 months
31 MARCH 31 March
2006 2005
$'000 $'000
----------------------
Profit for the financial period ................... 4,492 836
Currency translation difference on foreign currency
net investment .................................... (8) (13)
----------------------
Total recognised gains relating to the year ....... 4,484 823
======================
2. ANALYSIS OF TURNOVER
3 MONTHS 3 months
31 MARCH 31 March
2006 2005
$'000 $'000
----------------------
Analysis of revenue by activity:
Sports betting & racing ........................... 70,907 -
Casino and gaming ................................. 3,556 -
Poker rake ........................................ 1,548 -
Customer bonuses .................................. (459) -
Royalty and fee income ............................ 1,711 2,635
----------------------
77,263 2,635
======================
Turnover represents the amount staked in respect of bets placed on sporting and
horse racing events and net win in respect of bets placed on casino games and
rake for poker games that have concluded in the period. Turnover from royalty
and fee income represents royalties charged to licensees of the Group's software
and fees charged for usage of the Group's infrastructure.
-13-
3. EARNINGS PER SHARE
The calculation of basic earnings per share for the quarter is based on the
profit after tax at 31 March 2006 of $4.5m (2005: $0.8m) and on the weighted
average number of ordinary shares in issue of 52,469,189 (2005: 32,741,868).
The calculation of diluted earnings per share for the quarter is based on the
profit after tax at 31 March 2006 of $4.5m (2005: $0.8m) and on the weighted
average number of ordinary shares in issue adjusted to assume the exercise of
options over shares and the dilutive effect of shares to be issued in respect of
the acquisition in the period of 59,084,434 (2005: 38,896,406).
Adjusted basic and diluted earnings per share before goodwill and exceptional
items for the quarter excludes amortisation of goodwill of $0.9m (2005: $nil).
Earnings per share excludes shares with no voting or economic rights in respect
of the 13,506,204 shares held by Sportingbet PLC and its affiliates that have
been set aside as a result of the Transaction with Sportingbet PLC and may be
repurchased by the Company for an aggregate $1 when the Company has retained
earnings to do so.
4. BASIS OF PREPARATION
There have been no material changes to the accounting policies of the Group as
set out in 31 December 2004 consolidated financial statements.
5. FINANCE COSTS
3 MONTHS 3 months
31 MARCH 31 March
2006 2005
$'000 $'000
----------------------
Interest receivable ............................... 128 46
Interest payable .................................. (697) -
Amortisation of loan agreement fees ............... (123) -
----------------------
(692) 46
======================
Deferred finance costs of $963,983 as at 31 March 2006, netted against the loan
balances outstanding at 31 March 2006 are being amortised over the period of the
loan agreement.
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