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TIDMGON
RNS Number : 3460W
Galleon Holdings PLC
30 January 2012
Galleon Holdings plc
("Galleon" or the "Group")
Preliminary results for the full year ended 30 September 2011
Galleon Holdings plc (AIM: GON), the AIM quoted media company that publishes digital online and mobile content in China and develops and produces global multiplatform entertainment, is pleased to announce its results for the full year ended 30(th) September 2010.
Highlights:
Loss Before Taxation of GBP2.9m (2010: GBP20.2m)
Adjusted Loss Before Taxation* of GBP3.1m (2010: GBP11.6m)
Restructured Group to focus on revenue generating and growth opportunities
Launch of second exclusive online game
Established online platform with more than 9 million registered users
*Adjusted Loss Before Taxation is before charges/(credits) for the impairment of goodwill and share option expense of (GBP0.2m)
Enquiries:
Galleon Holdings plc
Hayden Eastwood, Chief Financial
Officer +44 20 8987 0011
Nominated Adviser
Cairn Financial Advisers LLP
James Caithie / Avi Robinson +44 20 7148 7900
CHAIRMAN'S STATEMENT
This financial year has been a transitional one of restructuring the Group to focus on revenue generating activities and growth opportunities, particularly in China. In doing so, we have invested heavily in our Digital Operations in China to provide a platform for growth. This is reflected in the adjusted loss before tax of GBP3.1m* for the year. As part of the restructuring we have significantly reduced our ongoing overhead in other areas and focussed on the marketing of our online portals and the quality of online games offered on these portals.
Entertainment - Digital
We grew monthly revenue from our Digital Operations to more than GBP850k during the financial year. Our digital operations provide both mobile and online distribution to consumers in a growing market. China has more than 500m internet users, more than any other country in the world, with this number expected to increase to 600m this year. The online games market in China grew 32% in 2011 with total revenue increasing to US$6.8b. Strategically, we have focussed our efforts to take advantage of this growth market.
We continued the transition of the Group's Digital operations in China away from low margin mobile activities to higher margin activities, in particular online. In December we launched our very first exclusive game 'Saga Of Heroes' on our online portal wowan365.com. We also launched a new portal, wan71.com, to widen our customer base in China. The focus during the year has been on developing our online platform for growth with a number of new games planned to launch in 2012.
Our strategy is to continue to provide players with quality games which they can initially play for free with further involvement requiring micro-transactional payments. To drive traffic to our sites we use local marketing partners as well as operate a number of non- exclusive games, which are games available on many sites. Customer loyalty is further enhanced by the operation of exclusive games which are only available on our sites initially and for which we own the rights exclusively in China, and in some cases other territories. We work closely with third party developers to ensure that the exclusive games we operate are of the highest quality and in line with consumer demand.
Our first exclusive game, Saga of Heroes, which launched in December last year has been opened up to third party sites and continues to do well. This month we officially launched a second exclusive game, 'Revenge of the Titans', a wholly owned online web game. It is our intention to launch a further three exclusive games by the end of June this year. The feedback on the games we have launched to date has been very positive and with this portfolio of games we expect to see a significant increase in revenues during the year and improving margins as the games mature in market. There has been some slippage in delivery dates of new games to date and this has impacted on profitability in the short term but we feel that our decision to focus on growing our platform and delivering quality games will leave us better placed to capitalise on the growth opportunities in the sector. Registered users on our existing portals now exceed 9m and with an increased number of exclusive games forecast to be operated this year we expect to significantly increase revenue and profits from our Digital Operations in China.
In addition to wholly owning the rights to 'Revenge of the Titans' we have licensed the rights to exploit games within our current portfolio of exclusive games in various territories outside of China. Taking advantage of our established platform and infrastructure, we will launch new portals outside China. We have launched a new portal in Europe (yipeegame.com) and intend to launch new portals in Taiwan and other territories during the year as new games are brought to market.
In line with the stated strategy, our low margin mobile service provision revenues have been reduced significantly. While the penetration of smart phones into the market remains low we are encouraged by recent data in the sector where Mobile Games revenues in China grew strongly to RMB 1.7 billion Yuan last year, an increase of 86% compared to 2010 due to the expansion of online games, smart phones, iPads and other mobile devices. We are well placed to take advantage of this growth going forward and continue to transition the business to take account of these changes in the market.
Product - Croco Worldwide
Croco's revenues for the year increased by 14% year on year. More importantly, Croco has developed relationships with new customers during the year, providing further opportunities for growth in the future. We have also recently opened an office in Shanghai to explore opportunities in the Chinese market which could be significant. Croco deliver's innovation for some of the world's largest FMCG companies and by growing its customer base we will be well placed to grow our revenues further. This growth will require financing as the size of the orders are expected to be substantial but the opportunity is significant for the Company.
Entertainment - Other
Many of our entertainment properties are seeing opportunities continue to present themselves. The rights to Super Soccer Star were licensed to Indonesia and the series was aired in Indonesia over the summer of 2011 on MNC TV. We have also licensed the TV rights to Skunk Fu to the most popular Children's Channel in China which is a significant opportunity for the property. Whilst we have taken the view to write off our remaining Intellectual Property this year due to uncertainty of future revenues (GBP393,000), we are hopeful that further value will be realised from our formats with discussions continuing with various partners.
Outlook
Galleon's strategy of changing its operational emphasis to its Digital operations in China is a focussed approach to achieving sustainable revenue growth this year and going forward. Our Digital Operations in China underpin our future growth in what are exciting times in this market sector in China. Having established a platform for growth and a pipeline of quality content, we are positive about the outlook of the Group. We believe that the growth opportunities both in the sector and from the increased number of exclusive games we intend to operate will see a significant increase in revenues and a return to profitability during the year.
David Wong
Executive Chairman
*Adjusted profit/loss is before charges for the impairment of goodwill and share option expense
consolidated statement of COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 SEPTEMBER 2011
Year Year
ended 30 ended 30
September September
2011 2010
Note GBP'000 GBP'000
Revenue 2 10,887 14,661
Cost of sales (9,814) (12,102)
Gross profit 1,073 2,559
Administrative expenses (3,908) (22,869)
Administrative expenses
Depreciation and amortisation (405) (996)
Provision against loans and receivables - (2,167)
Impairment of assets (393) (15,807)
Other administrative expenses (3,110) (3,899)
---------------------------------------- ---- ---------- ----------
Loss from operations (2,835) (20,310)
Finance income 4 148
Finance costs (53) (2)
Loss before taxation 2 (2,884) (20,164)
Taxation 3 336 241
Loss for the financial year (2,548) (19,923)
Non-controlling interest 119 -
Loss for the financial year
attributable to the equity holders
of the Company (2,429) (19,923)
========== ==========
Other comprehensive income
Foreign Exchange 565 152
Total comprehensive expenditure
for the period
attributable to the equity holders
of the Company (1,864) (19,771)
========== ==========
Loss per share attributable to the
equity holders of the Company
- Basic 4 (1.5p) (12.1p)
========== ==========
- Diluted 4 (1.5p) (12.1p)
========== ==========
All of the activities of the group are classed as continuing.
consolidated statement of financial position At 30 SEPTEMBER 2011
30 September 30 September
2011 2010
GBP'000 GBP'000
ASSETS
Non-current assets
Property, plant and equipment 374 253
Goodwill 3,079 2,922
Intangible assets 131 515
3,584 3,690
============ ============
Current assets
Inventories 797 548
Trade and other receivables 3,270 2,639
Cash and cash equivalents 665 2,850
4,732 6,037
Total assets 8,316 9,727
============ ============
LIABILITIES
Current liabilities
Trade and other payables 2,089 1,952
Borrowings 950 -
Corporation tax 98 437
3,137 2,389
Total liabilities 3,137 2,389
============ ============
EQUITY
Share capital 1,674 1,674
Reserves 3,624 5,664
Equity interests attributable
to equity holders of the company 5,298 7,338
Non-controlling interests
in equity (119) -
Total equity 5,179 7,338
Total equity and total liabilities 8,316 9,727
============ ============
The financial statements were approved by the Board of Directors on 30 January 2012.
Hayden Eastwood
Director
consolidated Statement of CASH FLOWS FOR THE YEAR ENDED 30 SEPTEMBER 2011
Notes Year ended Year ended
30 September 30 September
2011 2010
GBP'000 GBP'000
Operating activities
Loss for the year (2,548) (19,923)
Taxation (336) (241)
Finance income 49 (146)
Loss on sale of property, plant
and equipment 26 53
Depreciation of property, plant
and equipment 184 193
Impairment of goodwill - 8,390
Impairment of intangible assets 393 6,534
Amortisation of intangible assets 221 803
Impairment of available for sale
financial asset - 883
Impairment of loan advanced to
supplier - 2,167
Debtors written off 37 -
(Increase) / decrease in inventories (229) 535
(Increase) / decrease in trade
and other receivables (310) 4,054
Increase / (decrease) in trade
and other payables 71 (2,370)
Share based payments (175) 208
(2,617) 1,140
Taxation paid (8) (210)
Interest received (49) 27
Net cash (outflow) / inflow from
operating activities (2,674) 957
Investing activities
Purchase of property, plant and
equipment (312) (141)
Purchase of intangible assets (220) (1,989)
Purchase of subsidiary undertakings - (58)
Purchase of available for sale
financial assets - (317)
Net cash outflow from investing
activities (532) (2,505)
Financing activities
Receipts from borrowings 950 -
Net cash inflow from financing
activities 950 -
Movement in cash and cash equivalents (2,256) (1,548)
Cash and cash equivalents brought
forward 2,850 4,514
Exchange differences on cash and
cash equivalents 71 (116)
Cash and cash equivalents carried
forward 665 2,850
============= =============
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 SEPTEMBER 2011
Capital Foreign Total Non-controlling
Share Shares redemption Other exchange attributable interest
capital to be reserve reserves reserve to owners
Share issued *Retained of the Total
premium earnings Company equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000s GBP'000 GBP'000
At 1 October
2009 1,400 22,207 4,018 9,601 210 1,772 (12,625) 26,583 - 26,583
Issue of share
capital 274 4,065 - - - - - 4,339 - 4,339
Cost of issue
of share
capital - (3) - - - - - (3) - (3)
Deferred
consideration - - (4,018) - - - - (4,018) - (4,018)
Share based
payments - - - - - - 208 208 208
------- --------- ------- ---------- -------- ----------- ------------ ------------ --------------- ----------
Transactions
with owners 274 4,062 (4,018) - - - 208 526 526
Loss for the
year - - - - - - (19,923) (19,923) - (19,923)
Foreign
exchange - - - - - 152 - 152 - 152
Total
comprehensive
income for
the year - - - - - 152 (19,923) (19,771) - (19,771)
At 30
September
2010 1,674 26,269 - 9,601 210 1,924 (32,340) 7,338 - 7,338
Share based
payments - - - - - - (176) (176) - (176)
Transactions
with owners - - - - - - (176) (176) - (176)
Loss for the
year - - - - - - (2,429) (2,429) (119) (2,548)
Foreign
exchange - - - - - 565 - 565 - 565
Total
comprehensive
income for
the year - - - - - 565 (2,605) (2,040) (119) (2,159)
At 30
September
2011 1,674 26,269 - 9,601 210 2,489 (34,945) 5,298 (119) 5,179
======= ========= ======= ========== ======== =========== ============ ============ =============== ==========
*Retained earnings include a share based payment reserve of GBP356,000 at 30 September 2011 (2010: GBP532,000).
NOTES FOR THE YEAR ENDED 30 SEPTEMBER 2011
1 Basis of preparation
The Group financial statements have been prepared under the historical cost convention and in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS). The Company's shares are listed on the AIM market of the London Stock Exchange.
The principal accounting policies of the Group, which have been applied consistently, are set out in the annual report and financial statements.
Going concern
The directors have prepared cash flow forecasts for the period ending 31 January 2013 which are aligned to the Group's revised strategy. The forecasts take account of the revenues from both existing and new online games in the entertainment business and the expected level of orders within the product business from both existing and new customers. The forecasts also take account of cost reduction measures that have been implemented throughout the business.
The cash flow position of the Group is particularly sensitive to the success of the on line games and the receipt and timing of product orders, which themselves typically have a significant individual working capital requirement owing to their up-front cash needs. As a result of these factors, the cash flow forecasts have been sensitised to allow for the inherent uncertainties within these two segments, which now represent the bulk of the Group's on-going trading activities.
To provide a degree of flexibility and additional headroom to the Group's cash requirement, the Directors have received letters of support from David Wong and Mojito Holdings Inc. stating that, subject to appropriate due diligence procedures, they will make a total of GBP1m available to fund the ongoing development and expansion of the on line games business. Furthermore, the Company has extended the term of its loan facility with Imagination Holdings which provides a facility of up to GBP1m to fund the working capital requirement of the Product business.
Both the base forecast and the sensitised forecasts, taking into account the availability of the facilities described above, demonstrate that the Group expects to have sufficient cash resources and funding available to it to enable it to continue as a going concern for a period of at least 12 months from the date the financial statements are signed.
2 SEGmental analysis
An operating segment is a distinguishable component of the Group that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the Group's chief operating decision maker to make decisions about the allocation of resources and assessment of performance and about which discrete financial information is available.
Year ended 30 September Product Entertainment Entertainment Unallocated Eliminated Total
2011 Digital Other
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue
From external customers 3,221 7,600 66 - - 10,887
From other segments 6 - 189 - (195) -
Segment revenues 3,227 7,600 255 - (195) 10,887
Loss before taxation (275) (1,360) (730) (519) - (2,884)
======== ============== ============== ============ ============ =========
Year ended 30 September Product Entertainment Entertainment Unallocated Eliminated Total
2010 Digital Other
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue
From external customers 2,826 11,148 687 - - 14,661
From other segments 8 - 249 - (257) -
Segment revenues 2,834 11,148 936 - (257) 14,661
Loss before taxation (170) (1,518) (17,763) (713) - (20,164)
======== ============== ============== ============ ============ =========
As at 30 September Product Entertainment Entertainment Unallocated Eliminated Total
2011 Digital Other
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Assets 1,850 4,618 1,848 - - 8,316
Liabilities (1,218) (739) (1,180) - - (3,137)
Net Assets 632 3,879 668 - - 5,179
======== ============== ============== ============ ============ =======
As at 30 September Product Entertainment Entertainment Unallocated Eliminated Total
2010 Digital Other
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Assets 1,242 7,356 1,129 - - 9,727
Liabilities (279) (1,454) (656) - - (2,389)
Net Assets 963 5,902 473 - - 7,338
======== ============== ============== ============ ============ =======
As at 30 September Product Entertainment Entertainment Unallocated Eliminated Total
2011 Digital Other
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Capital expenditure 2 473 57 - - 532
Amortisation/depreciation/impairment 31 653 114 - - 798
======== ============== ============== ============ ============ =======
As at 30 September Product Entertainment Entertainment Unallocated Eliminated Total
2010 Digital Other
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Capital expenditure 7 58 2,122 - - 2,187
Amortisation/depreciation/impairment 62 6,978 8,880 - - 15,920
======== ============== ============== ============ ============ =======
The Group's revenue from external customers and its geographic allocation of non-current assets may be summarised as follows. Revenues have been identified to locations by reference to the customer's geographical location. Assets are allocated based on their physical location.
30 September 2011 30 September 2010
Revenues Assets Revenues Assets
GBP000 GBP000 GBP000 GBP000
United Kingdom 32 3,798 35 2,274
China 7,600 4,517 11,389 7,204
Rest of World 3,255 1 3,237 249
------------- --------- ------------ ---------
Total 10,887 8,316 14,661 9,727
============= ========= ============ =========
The Group's largest four customers contributed GBP2,549,000 (23%), GBP2,140,000 (20%), GBP2,066,000 (19%) and GBP1,229,000 (11%) respectively to the Group's revenue (2010: the Group's largest three customers contributed GBP7,037,000 (48%), GBP2,932,000 (20%) and GBP2,345,000 (16%) respectively to Group revenue). No other customers contributed more than 10%. Revenue from the first, second and fourth largest customers are reported within the Entertainment Digital segment, revenue from the third largest customer is reported within the Product segment.
3 Taxation
2011 2010
GBP'000 GBP'000
United Kingdom corporation tax at 27% (2010:
28%) - (37)
Adjustment in respect of prior year 2 -
Overseas taxation (338) 97
Total current taxation (336) 60
Deferred taxation
Origination of temporary differences - (301)
Adjustments in respect of prior years - -
Taxation credit for the year (336) (241)
======= =======
The tax assessed for the year differs from the standard rate of Corporation Tax in the UK as explained below:
2011 2010
GBP'000 GBP'000
Loss before tax (2,884) (20,164)
--------- ----------
Loss before tax multiplied by standard rate
of Corporation Tax in the
UK of 27% (2010: 28%) (779) (5,646)
Effect of:
Expenses not deductible for tax purposes (45) 3,475
Income not taxable for tax purposes - (61)
Movement in unrecognised deferred tax assets
(loss recognition) 361 1,868
Accelerated capital allowances 3 -
Adjustment in respect of prior years 2 -
Differences between UK and overseas tax rates 41 (22)
Overseas losses not recognised 81 145
Tax credit for the year (336) (241)
========= ==========
4 Loss per share
Basic and diluted loss per share have been calculated in accordance with IAS 33, which requires that earnings should be based on the net profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares in issue during the period.
The calculation of the basic loss per share is based on the loss 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 loss per share, adjusted to allow for the issue of shares on the assumed conversion of all dilutive options.
The calculation of the basic loss per share is shown below.
2011 2010
GBP'000 GBP'000
Loss after tax (2,548) (19,923)
-------- ---------
Weighted average number of shares (No in 000's) 167,426 163,981
Loss per share (in pence) (1.5p) (12.1p)
-------- ---------
The diluted loss per share is 1.5p (2010 - 12.5p) as any amendment to the weighted average number of shares as a result of including the conversion of share options is anti-dilutive.
5 related party transactions
During the year the Company had loan facilities totaling GBP2 million with Imagination Holdings Limited ("Imagination"). The facilities were for a period of nine months from 2nd June 2011 with the first GBP1m repayable within the first 5 months. An interest rate of 2% is calculated on the outstanding balance each month on a pro rata basis and is payable monthly. An arrangement fee of GBP50,000 was paid to Imagination for the facilities and has been expensed during the year. The loan is secured against Croco Worldwide Limited and Croco Worldwide (Asia) Limited's trade receivables. At the year-end, a total of GBP950,000 has been advanced, of which GBP400,000 was advanced under a separate facility provided by AIB Bank (CI) Limited but secured by Imagination. The terms attracting to each tranche of loan are identical. Imagination has a 12.8% interest in the issued share capital of the Company and is a charitable trust registered in the Isle of Man. David Wong and Pritesh Desai are Directors of Imagination but they do not have any beneficial interest in the trust.
6 publication of non-statutory accounts
The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in section 434 of the Companies Act 2006.
The consolidated statement of financial position at 30 September 2011 and the consolidated statement of comprehensive income, consolidated statement of changes in equity, consolidated statement of cash flows and associated notes for the year then ended have been extracted from the Group's 2011 statutory financial statements upon which the auditor's opinion is unqualified and does not include any statement under Section 498 of the Companies Act 2006.
The accounts for the year ended 30 September 2011 will be posted to shareholders and laid before the company at the Annual General Meeting the date of which will be advised shortly. Copies will also be available on the Company's website (www.galleonplc.com) in accordance with AIM Rule 26.
This information is provided by RNS
The company news service from the London Stock Exchange
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