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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Gamingking | LSE:GGK | London | Ordinary Share | GB0005350524 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.775 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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RNS Number : 4982C
Gamingking PLC
02 September 2008
Gamingking plc
Preliminary Results for the year ended
30 April 2008
Welcome to the 2008 annual results, my fourth as your Chairman.
The top line figure shows group revenue down by 2% to £5.03m (2007: £5.13m). However, this relatively small reduction masks some
significant changes in the product mix when compared to the previous year.
Our bottom line figure shows greater variation, with a reported loss before tax of £342,000 (2007: profit of £11,000). A third of this
loss was incurred during the first half of the year, and the second half loss can be entirely attributed to a combination of one-off
restructuring and project startup costs, together with the effects of the smoking ban.
I will go into more detail regarding our financial performance during the year in the financial summary which follows.
The year under report provided a number of challenges and was dominated by two key events: the smoking ban and the implementation of the
2005 Gambling Act.
The former contributed towards a particularly challenging trading environment in our traditional market, the registered member's club.
The ban's effect on the leisure industry has received significant media coverage since July 2007 (and in Wales it was earlier). Attendances
in bingo clubs, pubs and other licensed premises have reduced, and this has had an effect on those companies, such as Gamingking, which
provide goods and services to the leisure industry. I will expand on this theme, and its effect on our sales, later in my report.
The latter event, the 1 September 2007 implementation of the Gambling Act, provided a new outlet for our largest product line of lottery
ticket vending terminals. The new legislation removed the prohibition of such terminals outside of registered member's clubs. Accordingly,
and as reported in our interim statement in November 2007, we began trials of lottery ticket vending terminals in pubs and other licensed
premises as soon as the new legislation allowed. Again, more on this later.
The uncertain and volatile market in which we operate led us to review our overheads, and in October 2007 we began a consultation
process with our staff to consolidate our operations into fewer locations both to increase efficiency and reduce overall cost. This process
continued until March 2008.
All of the above has influenced your Board's assessment of the future prospects for the Company and we considered it important that we
seek to be part of a larger operation with greater access to resources. Over recent months we have been in negotiations with regard to a
proposed transaction, which would comprise a reverse takeover of Gamingking plc by a significant industry player. The details of this
transaction are contained in a separate document circulated to all shareholders today and which is also available on our website
www.gamingking.co.uk.
Financial Summary
The market conditions to which the Group has been exposed during the year mirrored those experienced by the majority of the UK retail
leisure sector. The period from 1 July onwards was particularly affected by the influence of the smoking ban on our core market, the
registered member's club in England.
Whilst sales of lottery tickets and associated fundraising products to this market were in line with the prior year during the first six
months under report, the second half of the year showed a decline of some 5% to £2.46m (2007 £2.60m).
This reduction was mitigated by the additional sales from Creative Lotteries, discussed below in Your "Local" Lottery, of £56,000 in the
second half of the year (2007: £nil).
The increase in overheads, contributing to the majority of the operating loss for the year, was attributable to one-off costs on
consolidation of operations of £227k, and with costs associated with the setup, launch and early trading of Your "Local" Lottery in pubs
totalling £161k.
Capital expenditure in the year totalled £395,000 (2007: £450,000) of which £239,000 (2007: £15,000) was attributable to the Reel Winner
and Your "Local" Lottery projects. In total therefore, over 60% of the capital expenditure during the year was directed towards new projects
and markets for the group.
During the year we continued to repay the bank loan taken out in 2005, reducing the balance by a further £160,000 to £480,000 at the
year end (2007: reduction of £160,000, balance £640,000). Interest charges on the loan reduced to £50,000 as a consequence (2007: £61,000).
Consolidation of Operations
As reported in our interim statement, we began the process of consolidating our production, warehousing and distribution of goods for
resale into one location in the first half of the year. This process was completed by Christmas 2007, and should offer cost and operational
benefits in the future. We are already experiencing some of the benefits. We also brought the assembly process for our lottery terminals in
house, giving us improvements in production timescale and flexibility. Although the UK is not traditionally seen as a low-cost production
location, our terminals are produced in short runs to proprietary designs using components from various sources and do not lend themselves
to an offshore mass-manufacturing approach.
In addition, and following the reduction in core market sales levels during the third quarter, we started a process of consolidating the
support and administrative functions of the company into fewer locations. Following consultations with affected staff, this resulted in the
closure of our Hemel Hempstead office and the transfer of all processes carried out there to our Hainault facility. This process was
completed in March 2008.
The processes above resulted in a charge to the income statement of £227,000 in the year, the main items being the provision for rent on
the Hemel Hempstead property and staff redundancy and relocation costs.
All staff termination costs have been fully provided for during the year. Where property sublets have been agreed at less than cost, the
full loss on the remaining term of the lease has been recognised in the year. Where a sublet has not yet been agreed, a judgement has been
made as to the likely cost of termination or sublet and this has been recognised in the current year's accounts.
The board will continue to monitor trading levels within the group over the coming months, and if necessary we will act to further
reduce our overheads where possible and prudent in a manner consistent with maintaining operational efficiency.
Projects & Product Development
The Group continues to develop a number of new initiatives and product concepts. All of these have been the subject of updates in my
previous reports, and I feel that it is useful to continue this trend.
Your "Local" Lottery
The introduction of the Gambling Act with effect from 1 September 2007 allowed the placement of lottery ticket vending terminals in
locations other than registered member's clubs. The lotteries sold through these terminals generate funds for charities and are regulated by
the Gambling Commission.
We commenced trials in licensed premises as soon as the legislation allowed, using a number of locations in both managed and tenanted
pubs around the country and also in bingo halls and licensed betting offices. We installed and operated 100 terminals up to Christmas 2007,
increasing this figure to 140 sites in the third quarter of the financial year.
At a Group level, the project has generated a loss of £105,000 during the year, and has required £163,000 of capital expenditure. The
board believes that this investment was essential to explore a significant new market.
We continue to experiment with prize levels, site type and terminal design whilst working to analyse the potential for this new market.
The project has generated significant interest from national pub companies, and we are working to refine the offering in order to maximise
Group income through increased sales and margin, and to reduce operating costs where possible.
It is worth noting, however, that a national roll-out of the project would require significant capital investment, the scale of which is
above that possible using the current Group's trading generated cashflow. The board remains of the opinion that Gamingking's expertise in
the areas of ticket vending technology and lottery management means it is well-placed to take advantage of any opportunity in this new
market, and that any new entrants to the market would begin at a significant competitive disadvantage.
The Reel Winner
We have continued our trials of the Reel Winner project, generating annual income of £35,000 (2007: £nil) over the period, and requiring
capital expenditure of £76,000 (2007: £15,000) during the year.
Whilst we have complied with the legislation introduced by the Department for Culture Media and Sport (DCMS) to classify the terminals
as gaming machines, the decision by HM Revenue and Customs (HMRC) to subject the profits to VAT, and to charge Amusement Machine Licence
Duty (AMLD) on each terminal sited, has proven more difficult to deal with. HMRC's position has been that, although the classification of
B3A machine was introduced by the DCMS specifically to help raise funds for registered member's clubs, the aims and powers of social and
taxation legislation are independent.
We continue to believe that there is a market for a reel-based lottery terminal within registered member's clubs. The trial continues
with games developed to conform to specifications which allow the terminal to operate free of AMLD whilst giving the player similar levels
of payout in percentage terms: site share is also maintained under the new model.
Prospects
The current macroeconomic climate provides significant uncertainties with regard to our current markets. In my interim report, the board
promised to work to investigate, assess and develop new business opportunities that we believe will deliver positive future results for
shareholders.
To this end, the board has been in negotiations with a company over a transaction which, if agreed by shareholders, would comprise a
reverse takeover of Gamingking plc (see separate announcement). Orb Holdings, the parent company of Sceptre Leisure Limited and Regal
Machine Sales Limited, is a significant market player in the amusement machine operating industry in the UK. The full details of the
proposition are contained in a separate document circulated to shareholders, but the outcome would be an enlarged entity, of which
Gamingking's current share capital would comprise a 15% share.
The board believes that the transaction offers a number of benefits; Orb's core market is in pubs, the target for expansion of our
"Local" lottery offering. Gamingking's core market is registered member's clubs, an area into which Orb has so far made limited inroads.
There are also synergy benefits in terms of operational cost savings through combining the two entities.
The combined and enlarged group would be able to provide the capital necessary to grow our current projects. Its size would also be more
deserving of an AIM listing, the benefits of which are limited to a company of Gamingking's current size in the present financial climate.
It is for these reasons that your board recommends the support of the motions to be voted on at our General Meeting.
Whilst we have worked hard this year to align the cost base with current trading levels, there is security in scale and a combined group
structure should offer operational, trading and financial benefits in the future.
Finally, I would like to thank the Group's staff for their continued professionalism in the face of the changes undergone during the
year under review. The Board remains grateful for their support, and looks forward to their contribution during the coming months.
DOUGLAS YATES
Chairman
2 September 2008
Gamingking Plc Today: +44 (0) 207 457 2020
Guy van Zwanenberg
Seymour Pierce Limited +44 (0) 207 107 8000
Sarah Jacobs /
Christopher Wren
College Hill Associates +44 (0) 207 457 2020
Matthew Smallwood /
Justine Warren
Consolidated Income Statement
For the year ended 30 April 2008
2008 2007
£000 £000
Revenue 5,029 5,131
Cost of sales (2,037) (2,000)
Gross profit 2,992 3,131
Administrative expenses (3,293) (3,071)
(Loss) / profit from operations (301) 60
Finance costs (50) (61)
Finance income 9 12
(Loss) / profit before taxation (342) 11
Income tax credit / (expense) 61 (17)
Loss for the year (281) (6)
Loss per share
Basic loss per share (0.097)p (0.002)p
Diluted loss per share (0.097)p (0.002)p
Consolidated Balance Sheet
As at 30 April 2008
2008 2007
£000 £000
Assets
2008 2007
£000 £000
Assets
Non-current assets
Intangible assets 1,289 1,338
Property, plant and equipment 1,240 1,241
Deferred tax assets 83 27
2,612 2,606
Current assets
Inventories 396 431
Receivables and prepayments 718 741
Cash and cash equivalents 174 392
1,288 1,564
Total assets 3,900 4,170
Liabilities
Non-current liabilities
Bank Loan 260 480
Hire purchase - 4
260 484
Current liabilities
Bank loan 220 160
Hire purchase 4 5
Trade and other payables 1,074 898
1,298 1,063
Total liabilities 1,558 1,547
Net assets 2,342 2,623
Equity attributable to equity holders of the parent
Share capital 2,907 2,907
Share premium 173 173
Merger reserve 1,391 1,391
Retained earnings (2,129) (1,848)
Total equity 2,342 2,623
Consolidated Cash Flow Statement
For the year ended 30 April 2008
2008 2007
£000 £000
Operating activities
Results for the period before tax (342) 11
Depreciation and amortisation 405 449
Impairment of intangible assets (goodwill) 26 -
Equity settled share options - (45)
Loss on disposal of property, plant and equipment 13 12
Interest paid 50 61
Interest received (9) (12)
Decrease in inventories 35 40
Decrease in receivables 23 94
Increase/ (decrease) in trade payables and other liabilities 171 (97)
Corporation tax paid 6 -
Net cash from operating activities 378 519
Investing activities
Additions to property plant and equipment (395) (450)
Interest received 9 12
Purchase of businesses - (75)
Net cash from investing activities (386) (513)
Financing activities
Decrease in bank loans (160) (160)
Interest paid (50) (61)
Net cash from financing activities (210) (221)
Cash and cash equivalents at the beginning of the period 392 392
Net decrease in cash and cash equivalents (218) (221)
Cash and cash equivalents at end of the year 174 392
This format represents the indirect method of determining operating cash flow.
This format represents the indirect method of determining operating cash flow.
Consolidated Statement of Changes in Equity
For the year ended 30 April 2008
Share Capital £000 Share Premium Merger Reserve Retained Earning Total Equity
£000 £000 £000 £000
Balance 1 May 2006 2,907 173 1,391 (1,797) 2,674
Share Capital £000 Share Premium Merger Reserve Retained Earning Total Equity
£000 £000 £000 £000
Balance 1 May 2006 2,907 173 1,391 (1,797) 2,674
Loss for the year - - - (6) (6)
Employee share based - - - (45) (45)
compensation
Total recognised income and - - - (51) (51)
expense for the year
Balance at 30 April 2007 and 1 2,907 173 1,391 (1,848) 2,623
May 2007
Loss and total recognised - - - (281) (281)
income and expense for the
year
Balance at 30 April 2008 2,907 173 1,391 (2,129) 2,342
Notes to the Company's financial statements
For the year ended 30 April 2008
1 Presentation of financial statements
The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU
and as developed and published by the International Accounting Standards Board (IASB).
2. Income tax expense
2008 2007
£000 £000
UKcorporation tax at 20% (2007: 19%) and total current tax 1 -
Adjustment in respect of prior periods (6) 5
Deferred tax (56) 12
Tax on (loss) / profit on ordinary activities (61) 17
The tax assessed for the period is different from the standard rate of corporation tax in the UK at 20% (2007: 19%). The differences are
explained as follows:
2008 2007
£000 £000
(Loss) / profit before taxation (342) 11
(Loss) / profit before taxation multiplied by the (68) 2
standard rate of corporation tax in the UK of 20%
(2007: 19%)
Effect of:
Adjustment for non-deductible expenses
- relating to impairment and amortisation (2) 3
- other non-deductible expenses 14 7
Utilisation of tax losses not previously recognised 6 -
Prior year adjustment (6) 5
Other - (55) -
Tax on (loss) / profit on ordinary activities (61) 17
Unrelieved tax losses of £174,000 (2007: £280,000) remain available to offset against future taxable trading profits. In addition the
Group has capital losses of £3,107,000 (2007: £3,107,000), which can be offset against future capital gains. A resulting deferred tax asset
of £650,000 (2007: £590,000) has not been recognised.
3 Earnings per share
The calculation of the basic earnings per share is based on the earnings attributable to ordinary shareholders divided by the weighted
average number of shares in issue during the year.
The calculation of diluted earnings per share is based on the basic earnings per share, adjusted to allow for the issue of shares, on
the assumed conversion of all dilutive options and other dilutive potential ordinary shares.
Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below. Options are not
considered to have any dilutive effect as the options are under water.
2008 Weighted 2007 Weighted
average number of average number of
shares shares
Per Share amount Per Share
amount
pence
pence
Loss Loss
£000 £000
Basic loss per share
Earnings attributable to
ordinary shareholders (281) 290,697,869 (0.097) (6) 290,361,210
(0.002)
Dilutive effect of securities
Options - -
Diluted loss per share (281) 290,697,869 (0.097) (6) 290,361,210
(0.002)
4. Financial information
The financial information set out above does not constitute the Company's statutory accounts for the twelve months ended 30 April 2008 or
the twelve months ended 30 April 2007, but is derived from those accounts. Statutory accounts for the twelve months ended 30 April 2007 have
been delivered to the Registrar of Companies and those for the twelve months ended 30 April 2008 will be delivered following the Company's
annual general meeting. The auditors have reported on those accounts; their reports were unqualified, did not include references to any
matters to which the auditors drew attention by way of emphasis without qualifying their reports and did not contain statements under the
Companies Act 1985, s 237(2) or (3).
When published, the Group's Annual Report and Accounts will be sent to shareholders and will be made available to the public at the Group's
registered office: Cedar House, Peregrine Road, Hainault, Essex, IG6 3FZ.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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