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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Jpj Group Plc | LSE:JPJ | London | Ordinary Share | GB00BZ14BX56 | ORD GBP0.10 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 725.00 | 717.00 | 727.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From May 2019 to May 2024
TIDMJPJ TIDMJPJ
RNS Number : 3875W
Jackpotjoy PLC
14 November 2017
Jackpotjoy plc
Results for the Three Months and Nine Months Ended 30 September 2017
Q3 revenue up 14% year on year
Remain confident in meeting upper end of expectations
LONDON, 14 November 2017 - Jackpotjoy plc (LSE: JPJ), the largest online bingo-led operator in the world, today announces the results of the Jackpotjoy group (the "Group") for the three and nine months ended 30 September 2017.
Financial summary
Hot Features
Premium
Three months ended Three months ended Reported Nine months ended Nine months ended Reported
30 Sept 2017 30 Sept 2016 Change 30 Sept 2017 30 Sept 2016 Change
(GBPm) (GBPm) % (GBPm) (GBPm) %
-------------------- ------------------- ------------------- --------- ------------------ ------------------ ---------
Gaming revenue 75.4 66.4 14 222.0 194.0 14
Net loss (as
reported under
IFRS) (7.7) (18.6) 59 (27.7) (28.4) 2
Adjusted EBITDA[1] 26.7 25.6 4 85.9 77.1 11
Adjusted net
income1 18.3 21.2 (14) 60.9 63.7 (4)
Operating cash
flows 32.6 18.3 78 78.2 63.3 24
Financial highlights for the third quarter
-- Strong financial performance:
o Gaming revenue rose 14%, supported by 12% growth in the Jackpotjoy segment and 28% growth at Vera&John
o Adjusted EBITDA1 increased 4%, reflecting planned increase in marketing costs
o Adjusted net income1 decreased 14% year on year due to higher interest costs related to additional debt acquired to pay the earn-out
-- Ongoing good cash generation and net debt reduction:
o Operating cash flow growth of 78% year on year, including a working capital inflow
o 44p of operating cash flow per share[2]
o Adjusted EBITDA(1) to cash conversion of over 100%
o Adjusted net debt[3] reduced by GBP23.4 million; adjusted net leverage ratio[4] of 3.35x reduced from 3.60x at 30 June 2017
-- No change to full year 2017 outlook, management confident of meeting recently increased market consensus
Operational highlights for the third quarter
-- Continued improvement in core KPIs[5] year on year
o Average Active Customers(5) grew to 251,186 in LTM to 30 September 2017, an increase of 13% year on year
o Average Real Money Gaming Revenue per month5 grew to GBP22.6 million, an increase of 16% year on year
o Monthly Real Money Gaming Revenue per Average Active Customer(5) of GBP90, an increase of 2% year on year
Business segments highlights for the third quarter
-- Jackpotjoy (69% of Group revenue) - Positive quarterly performance across all brands with total revenue growth of 12%; Adjusted EBITDA1 growth of 3% impacted by launch of new TV advertising in September; Starspins and Botemania brands (23% of segment revenues) continued to perform particularly strongly
-- Vera&John (24% of Group revenue) - Revenue growth of 28% and Adjusted EBITDA1 growth of 40%; on a constant currency basis, revenue increased by 21%
-- Mandalay (7% of Group revenue) - Revenue decline of 8% and an Adjusted EBITDA(1) increase of 36% due to lower marketing spend
Financial highlights for the nine months of the year
-- Strong financial performance:
o Gaming revenue growth of 14% year on year
o Adjusted EBITDA1 increased 11% year on year
o Adjusted net income1 decreased 4% year on year
Outlook
The strong trading momentum seen over the first six months of the year continued into Q3 and into the early stages of Q4. As previously flagged, there will be an impact on profitability from Q4 onwards from the introduction of the UK point of consumption ("POC") tax on bonuses. Likewise, and also as previously highlighted, marketing spend is weighted towards the second half of the financial year. Management, however, remains confident in meeting the upper end of market expectations for FY17.
Neil Goulden, Executive Chairman, commented:
"The third quarter has seen a continuation in the strong underlying momentum that we saw during the first six months of 2017, with gaming revenue up 14% and Adjusted EBITDA1 up 4%. There continues to be solid customer growth across the Group, with our Vera&John business segment performing particularly well, with constant currency revenue growth of 21% in the quarter.
I am very proud of the new integrated advertising campaign for our Jackpotjoy brand, which launched in the UK in mid-September. Television personality, Paddy McGuinness, succeeded Barbara Windsor as the new brand ambassador and early signs indicate that the campaign is helping to reinforce our market leadership position in online bingo in the UK.
Finally, in October, the Group announced that Andrew McIver will be stepping down from his role as Chief Executive Officer, having successfully overseen the listing on the London Stock Exchange earlier this year. In my new role as Executive Chairman, I will be responsible for leading the development and execution of long term strategy, while Simon Wykes has joined us as Group Managing Director to provide additional operational expertise.
Andy will step down as a Director on 31 December 2017 and will remain with the Company until 31 January 2018 to ensure a smooth transition of duties to the new members of the executive team. On behalf of the Board of Directors I would like to thank him for his work in helping establish the Group as a UK plc and I wish him well in the future.
Against a positive operational backdrop and given the new management structure in place, I have full confidence that Jackpotjoy plc will continue to go from strength to strength and generate attractive returns for our shareholders."
Conference call
A conference call for analysts and investors will be held today at 1.00pm GMT / 8.00am ET. To participate, interested parties are asked to dial +44 (0) 20 3003 2666 or +1 800 608-0547, or for US shareholders +1 866 966-5335, 10 minutes prior to the scheduled start of the call using the reference "Jackpotjoy" when prompted. A replay of the conference call will be available for 30 days by dialling +44 (0) 20 8196 1998 or +1 888 889-0604 and using reference 7636835#. A transcript will also be made available on Jackpotjoy plc's website at www.jackpotjoyplc.com/investors.
Enquiries
Jackpotjoy plc jholden@jackpotjoyplc.com
Jason Holden +44 (0) 207 016 9866
Director of Investor Relations +44 (0) 7812 142118
Jackpotjoy Group amanda.brewer@jackpotjoygroup.com
Amanda Brewer +1 416 720 8150
Vice President of Corporate Communications
Media Enquires
Finsbury jackpotjoy@finsbury.com
+44 (0) 207 251 3801
James Leviton, Andy Parnis
Note Regarding Non-IFRS Measures
The following non-IFRS measures are used in this release because management believes that they provide additional useful information regarding ongoing operating and financial performance. Readers are cautioned that the definitions are not recognised measures under IFRS, do not have standardised meanings prescribed by IFRS, and should not be considered in isolation or construed to be alternatives to revenues and net income (loss) and comprehensive income (loss) for the period determined in accordance with IFRS or as indicators of performance, liquidity or cash flows. The Group's method of calculating these measures may differ from the method used by other entities. Accordingly, the Group's measures may not be comparable to similarly titled measures used by other entities or in other jurisdictions.
Adjusted EBITDA, as defined by the Group, is income before interest expense (net of interest income), income taxes, amortisation and depreciation, share-based compensation, independent committee related expenses, severance costs, (gain)/loss on cross currency swap, fair value adjustments on contingent consideration, transaction related costs, foreign exchange, and gain on sale of intangible assets. Management believes that Adjusted EBITDA is another important indicator of the issuer's ability to generate liquidity to service outstanding debt and fund acquisition earn-out payments and uses this metric for such purpose. The exclusion of share-based compensation eliminates non-cash items and the exclusion of independent committee related expenses, severance costs, (gain)/loss on cross currency swap, fair value adjustments on contingent consideration, transaction related costs, foreign exchange, and gain on sale of intangible assets eliminates items which management believes are non-operational and non-routine.
Adjusted net income, as defined by the Group, means net income plus or minus items of note that management may reasonably quantify and believes will provide the reader with a better understanding of the Group's underlying business performance. Adjusted net income is calculated by adjusting net income for accretion, amortisation of acquisition related purchase price intangibles and non-compete clauses, share-based compensation, independent committee related expenses, severance costs, (gain)/loss on cross currency swap, fair value adjustments on contingent consideration, transaction related costs, foreign exchange, and gain on sale of intangible assets. The exclusion of accretion and share-based compensation eliminates the non-cash impact and the exclusion of amortisation of acquisition related purchase price intangibles and non-compete clauses, independent committee related expenses, severance costs, (gain)/loss on cross currency swap, fair value adjustments on contingent consideration, transaction related costs, foreign exchange, and gain on sale of intangible assets eliminates items which management believes are non-operational and non-routine. Adjusted net income is considered by some investors and analysts for the purpose of assisting in valuing a company.
Cautionary Note Regarding Forward-Looking Information
This release contains certain information and statements that may constitute "forward-looking information" (including future-oriented financial information and financial outlooks) within the meaning of applicable securities laws. Often, but not always, forward-looking information can be identified by the use of words such as "plans", "expects", "estimates", "projects", "predicts", "targets", "seeks", "intends", "anticipates", "believes" or "is confident of" or the negative of such words or other variations of or synonyms for such words, or state that certain actions, events or results "may", "could", "would", "should", "might" or "will" be taken, occur or be achieved. Forward-looking information involves known and unknown risks, uncertainties and other factors which may cause actual results, performance, achievements or developments to be materially different from those anticipated by the Group and expressed or implied by the forward-looking statements. Forward-looking information contained in this release includes, but is not limited to, statements with respect to the Group's future financial performance (including with respect to 2017 trading, POC tax, and our ability to pay down debt and earn-outs from future internally generated cash), the future prospects of the Group's business and operations, the Group's growth opportunities and the execution of its growth strategies. Certain of these statements relating to the Company's anticipated revenue growth and/or meeting the upper end of market expectations for FY 2017 and other similar statements may constitute a financial outlook within the meaning of Canadian securities laws. These statements reflect the Group's current expectations related to future events or its future results, performance, achievements or developments, and future trends affecting the Group. All such statements, other than statements of historical fact, are forward-looking information. Such forward-looking information is based on a number of assumptions which may prove to be incorrect, including, but not limited to, the ability of the Group to secure, maintain and comply with all required licenses, permits and certifications to carry out business in the jurisdictions in which it currently operates or intends to operate; governmental and regulatory actions, including the introduction of new laws or changes in laws (or the interpretation thereof) related to online gaming; general business, economic and market conditions (including market growth rates and the withdrawal of the UK from the European Union); the Group operating in foreign jurisdictions, the competitive environment; the expected growth of the online gaming market and potential new market opportunities; anticipated and unanticipated costs; the protection of the Group's intellectual property rights; the Group's ability to successfully integrate and realise the benefits of its completed acquisitions; the amount of expected earn-out payments required to be made; the Group's continued relationship with the Gamesys group and other third parties; the Group's ability to service its debt obligations; and the ability of the Group to obtain additional financing, if, as and when required. Such statements could also be materially affected by risks relating to the lack of available and qualified personnel or management; stock market volatility; taxation policies; competition; foreign operations; the Group's limited operating history; and the Group's ability to access sufficient capital from internal or external sources. The foregoing risk factors are not intended to represent a complete list of factors that could affect the Group. Additional risk factors are discussed in Jackpotjoy plc's annual information form dated 29 March 2017. Although Jackpotjoy plc has attempted to identify important factors that could cause actual results, performance, achievements or developments to differ materially from those described in forward-looking statements, there may be other factors that cause actual results, performance, achievements or developments not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results, performance, achievement or developments are likely to differ, and may differ materially, from those expressed in or implied by the forward-looking information contained in this release. Accordingly, readers should not place undue reliance on forward-looking information. While subsequent events and developments may cause the Group's expectations, estimates and views to change, Jackpotjoy plc does not undertake or assume any obligation to update or revise any forward-looking information, except as required by applicable securities laws. The forward-looking information contained in this release should not be relied upon as representing the Group's expectations, estimates and views as of any date subsequent to the date of this release. The forward-looking information contained in this release is expressly qualified by this cautionary statement. Investors should not place undue reliance on forward-looking statements as the plans, intentions or expectations upon which they are based might not occur.
Any future-oriented financial information or financial outlooks in this release are based on certain assumptions regarding expected growth, results of operations, performance, and business prospects and opportunities. While Jackpotjoy plc considers these assumptions to be reasonable, based on information currently available, they may prove to be incorrect. These risks, uncertainties and other factors include, but are not limited to: credit, market, currency, operational, liquidity and funding risks, including changes in economic conditions, and interest rates or tax rates.
Financial Review
Revenue
The Group's revenues during the three months ended 30 September 2017 consisted of:
-- GBP52.2 million in revenue earned from Jackpotjoy's operational activities. -- GBP18.4 million in revenue earned from Vera&John's operational activities. -- GBP4.9 million in revenue earned from Mandalay's operational activities.
The Group's revenues during the three months ended 30 September 2016 consisted of:
-- GBP46.7 million in revenue earned from Jackpotjoy's operational activities. -- GBP14.4 million in revenue earned from Vera&John's operational activities. -- GBP5.3 million in revenue earned from Mandalay's operational activities.
The increase in revenue for the three months ended 30 September 2017 in comparison with the three months ended 30 September 2016 relates primarily to organic growth of the Vera&John and Jackpotjoy segments, where revenue increased by 28% and 12%, respectively.
Costs and expenses
Three month period ended Three month period ended
30 September 2017 30 September 2016
(GBP000's) (GBP000's)
------------------------- -------------------------
Expenses:
Distribution costs 36,448 31,518
Administrative costs 29,068 24,689
Transaction related costs 1,361 10,414
Severance costs - -
------------------------- -------------------------
66,877 66,621
------------------------- -------------------------
Distribution costs
Three month period ended Three month period ended
30 September 2017 30 September 2016
(GBP000's) (GBP000's)
------------------------- -------------------------
Selling and marketing 12,591 10,796
Licensing fees 11,771 10,510
Gaming taxes 8,742 7,334
Processing fees 3,344 2,878
------------------------- -------------------------
36,448 31,518
------------------------- -------------------------
Selling and marketing expenses consist of payments made to affiliates and general marketing expenses related to each brand. Licensing fees consist of the fees for the Mandalay and Jackpotjoy segments to operate on their respective platforms and game suppliers' fees paid by the Vera&John and Jackpotjoy segments. Gaming taxes largely consist of POC tax, which is a 15% tax on Real Money Gaming Revenue5 introduced in the UK in December 2014. Processing fees consist of costs associated with using payment providers and include payment service provider transaction and handling costs, as well as deposit and withdrawal fees. With the exception of selling and marketing expenses, distribution costs tend to be variable in relation to revenue.
The increase in distribution costs for the three months ended 30 September 2017 compared to the same period in 2016 is mainly due to the higher revenues achieved.
Administrative costs
Three month period ended Three month period ended
30 September 2017 30 September 2016
(GBP000's) (GBP000's)
------------------------- -------------------------
Compensation and benefits 9,631 7,840
Professional fees 670 476
General and administrative 2,276 1,920
Amortisation and depreciation 16,491 14,453
------------------------- -------------------------
29,068 24,689
------------------------- -------------------------
Compensation and benefits costs consist of salaries, wages, bonuses, directors' fees, benefits and share-based compensation expense. The increase in costs for the three months ended 30 September 2017 compared to the same period in 2016, relates to staff additions, operational bonus accruals, and salary increases in various business units.
Professional fees consist mainly of legal, accounting and audit fees. The variance in professional fees for the three months ended 30 September 2017 compared to the same period in 2016 relates to increases in consulting and legal costs associated with the Group's growth and dual listings on both the London Stock Exchange and the Toronto Stock Exchange.
General and administrative expenses consist of items, such as rent and occupancy, travel and accommodation, insurance, listing fees, technology and development costs, and other office overhead charges. The increase in these expenses for the three months ended 30 September 2017 compared to the same period in the prior year can be attributed mostly to higher travel costs incurred in the current period.
Amortisation and depreciation consists of amortisation of the Group's intangible assets and depreciation of the Group's tangible assets over their useful lives. The increase in amortisation and depreciation for the three months ended 30 September 2017 is due to intangible and tangible asset additions since Q1 2016, particularly the non-compete clauses (as defined below).
Transaction related costs
Transaction related costs consist of legal, professional, due diligence, and special committee fees; other direct costs/fees associated with transactions and acquisitions contemplated or completed; costs associated with the UK strategic review undertaken by the Intertain board of directors; implementing Intertain's UK-centred strategic initiatives; and costs related to corporate structure optimisation.
Business unit results
Jackpotjoy
Q3 2017 Q3 2016 Variance Variance %
GBP(millions) GBP(millions) GBP(millions)
--------------- --------------- --------------- -----------
Revenue 52.2 46.7 5.5 12%
--------------- --------------- --------------- -----------
Distribution costs 24.8 20.3 4.5 22%
Administration costs 4.2 3.9 0.3 8%
Adjusted EBITDA1 23.2 22.5 0.7 3%
--------------- --------------- --------------- -----------
Revenue for the Jackpotjoy segment increased quarter over quarter due to organic growth in all real money brands. Jackpotjoy UK brand revenue accounted for 65% of the Jackpotjoy segment's revenue for the three months ended 30 September 2017. While there has been steady growth at Jackpotjoy UK and Jackpotjoy Sweden brands, the sharp increase in revenue is due to the substantial growth and progression of the Starspins and Botemania brands. Collectively, they accounted for 23% of the segment's revenue, for the three months ended 30 September 2017.
Selling and marketing costs increased as expected compared to Q3 2016 and prior quarters as a substantial Jackpotjoy UK television campaign was launched in September 2017. In the three months ended 30 September 2017, compared to the same period in 2016, selling and marketing costs increased by 53%.
Vera&John
Q3 2017 Q3 2016 Variance
GBP(millions) GBP(millions) GBP(millions) Variance %
--------------- --------------- --------------- -----------
Revenue 18.4 14.4 4.0 28%
--------------- --------------- --------------- -----------
Distribution costs 9.1 7.5 1.6 21%
Administration costs 4.4 3.4 1.0 29%
Adjusted EBITDA(1) 4.9 3.5 1.4 40%
--------------- --------------- --------------- -----------
Revenue for the Vera&John segment in Q3 2017 increased by 28% compared to Q3 2016 due to organic growth (including new jurisdictions) and GBP to EUR exchange rate movement. On a constant currency basis, revenue increased by 21% from Q3 2016. Distribution costs also increased by 21% in Q3 2017 compared to Q3 2016, as game suppliers and payment providers' costs moved proportionally with revenue. Selling and marketing costs increased by 17%.
Increases in administration costs for the three months ended 30 September 2017 compared to the same period in 2016, were mainly driven by increases in personnel costs as the segment continues to grow.
Mandalay
Q3 2017 Q3 2016 Variance Variance %
GBP(millions) GBP(millions) GBP(millions)
--------------- --------------- --------------- -----------
Revenue 4.9 5.3 (0.4) (8%)
--------------- --------------- --------------- -----------
Distribution costs 2.6 3.7 (1.1) (30%)
Administration costs 0.4 0.2 0.2 100%
--------------- --------------- --------------- -----------
Adjusted EBITDA(1) 1.9 1.4 0.5 36%
--------------- --------------- --------------- -----------
Revenue for the Mandalay segment for the three months ended 30 September 2017 was 8% lower compared to the prior period in 2016 but due to lower marketing spend, the Adjusted EBITDA1 was 36% higher. Operational margins and deposit hold have been improving since the segment focused on changing promotional spend in Q1 2017. The segment continues to focus on developing a long term strategy to best maximise future growth.
Unallocated Corporate Costs
Unallocated corporate costs increased from GBP1.8 million to GBP3.2 million in the three months ended 30 September 2017 compared to the three months ended 30 September 2016. The variance mainly relates to a GBP1.0 million increase in compensation due to the addition of new staff and operational bonuses, a GBP0.3 million increase in general and administrative overhead costs associated with increased headcount and higher travel costs, as well as a GBP0.2 million increase in professional fees.
Key performance indicators
Average Active Customers is a key performance indicator used by management to assess real money customer acquisition and real money customer retention efforts of each of the Group's brands. The Group defines Average Active Customers as being real money customers who have placed at least one bet in a given month ("Average Active Customers"). "Average Active Customers per Month" is the Average Active Customers per month, averaged over a twelve-month period. While this measure is not recognised by IFRS, management believes that it is a meaningful indicator of the Group's ability to acquire and retain customers.
Real Money Gaming Revenue and Average Real Money Gaming Revenue per month are key performance indicators used by management to assess revenue earned from real money gaming operations of the business. The Group defines Real Money Gaming Revenue ("Real Money Gaming Revenue") as revenue less revenue earned from the Revenue Guarantee, affiliate websites and social gaming. The Group defines Average Real Money Gaming Revenue per month ("Average Real Money Gaming Revenue per month") as Real Money Gaming Revenue per month, averaged over a twelve-month period. While these measures are not recognised by IFRS, management believes that they are meaningful indicators of the Group's real money gaming operational results.
Monthly Real Money Gaming Revenue per Average Active Customer is a key performance indicator used by management to assess the Group's ability to generate Real Money Gaming Revenue on a per customer basis. The Group defines Monthly Real Money Gaming Revenue per Average Active Customer ("Monthly Real Money Gaming Revenue per Average Active Customer") as being Average Real Money Gaming Revenue per month divided by Average Active Customers per Month. While this measure is not recognised by IFRS, management believes that it is a meaningful indicator of the Group's ability to generate Real Money Gaming Revenue.
Twelve months ended Twelve months ended
30 September 2017 30 September 2016 Variance Variance %
-------------------- -------------------- --------- -----------
Average Active Customers per month (#) 251,186 222,082 29,104 13%
Total Real Money Gaming Revenue (GBP000's) (1) 271,508 233,514 37,994 16%
Average Real Money Gaming Revenue per month
(GBP000's) 22,626 19,460 3,166 16%
-------------------- -------------------- --------- -----------
Monthly Real Money Gaming Revenue per Average
Active Customer (GBP) 90 88 2 2%
-------------------- -------------------- --------- -----------
(1) Total Real Money Gaming Revenue for the twelve months ended 30 September 2017 consists of total revenue less other income earned from the Revenue Guarantee and Platform Migration Revenue of GBPnil (30 September 2016 - GBP3.6 million) and revenue earned from affiliate websites and social gaming revenue of GBP23.5 million (30 September 2016 - GBP24.1 million).
Monthly Real Money Gaming Revenue per Average Active Customer5 is consistent year over year which is in line with the Group's overall customer acquisition and retention strategy.
Independent review report to Jackpotjoy plc
Introduction
We have been engaged by the company to review the condensed set of financial statements in the interim financial report for the three and nine months ended 30 September 2017 which comprise the Interim Condensed Consolidated Statement of Comprehensive Income, Interim Condensed Consolidated Balance Sheet, Interim Condensed Consolidated Statement of Changes in Equity, Interim Condensed Consolidated Statement of Cash Flows and the related notes.
We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
Directors' responsibilities
The interim financial report for the three and nine months ended 30 September 2017 is the responsibility of and has been approved by the directors.
As disclosed in note 2, the annual financial statements of the group are prepared in accordance with International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board and International Financial Reporting Standards (IFRSs) as adopted by the European Union. The condensed set of financial statements included in this interim financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as issued by the International Accounting Standards Board and International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the interim financial report based on our review.
Our report has been prepared in accordance with the terms of our engagement and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" as issued by the International Auditing and Assurance Standards Board and International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity", issued by the Financial Reporting Council for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing or International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the interim financial report for the three and nine months ended 30 September 2017 is not prepared, in all material respects, in accordance with International Accounting Standard 34, as issued by the International Accounting Standards Board and International Accounting Standard 34, as adopted by the European Union.
BDO LLP
Chartered Accountants
London
United Kingdom
14 November 2017
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Three months ended 30 Three months ended 30 Nine months ended 30 Nine months ended 30
September 2017 September 2016 September 2017 September 2016
(GBP000's) (GBP000's) (GBP000's) (GBP000's)
---------------------- ------------------------------- --------------------------- ---------------------------- -------------------------
Revenue and other
income
Gaming revenue 75,423 66,368 221,992 193,952
Other income earned
from revenue
guarantee - - - 1,181
Other income earned
from platform
migration - - - 925
------------------------------- --------------------------- ---------------------------- -------------------------
Total revenue and
other income(4) 75,423 66,368 221,992 196,058
------------------------------- --------------------------- ---------------------------- -------------------------
Costs and expenses
Distribution
costs(4,5) 36,448 31,518 101,994 93,669
Administrative
costs(5) 29,068 24,689 81,945 70,050
Severance costs(4) - - - 5,695
Transaction related
costs(4) 1,361 10,414 2,676 16,578
Foreign exchange
loss(4) 4,607 591 11,506 3,106
------------------------------- --------------------------- ---------------------------- -------------------------
Total costs and
expenses 71,484 67,212 198,121 189,098
------------------------------- --------------------------- ---------------------------- -------------------------
Gain on sale of - - (1,002) -
intangible assets
------------------------------- --------------------------- ---------------------------- -------------------------
Fair value
adjustments on
contingent
consideration(15) 1,663 14,549 16,364 33,499
(Gain)/loss on cross
currency swap(10) - (5,693) 3,534 (23,954)
Interest income(6) (41) (63) (136) (119)
Interest expense(6) 9,648 9,173 32,366 25,938
------------------------------- --------------------------- ---------------------------- -------------------------
Financing expenses 11,270 17,966 52,128 35,364
------------------------------- --------------------------- ---------------------------- -------------------------
Net loss for the
period before taxes (7,331) (18,810) (27,255) (28,404)
------------------------------- --------------------------- ---------------------------- -------------------------
Current tax
provision/(recovery) 447 (118) 806 276
Deferred tax recovery (109) (113) (319) (295)
------------------------------- --------------------------- ---------------------------- -------------------------
Net loss for the
period
attributable to
owners of the parent (7,669) (18,579) (27,742) (28,385)
------------------------------- --------------------------- ---------------------------- -------------------------
Other comprehensive
income/(loss): Items
that will or may be
reclassified to
profit or loss
in subsequent periods
Foreign currency
translation
gain/(loss) 10,150 (1,223) 28,793 (7,886)
Unrealised loss on
cross currency hedge
reserve(10) (2,892) - (7,737) -
------------------------------- --------------------------- ---------------------------- -------------------------
Total comprehensive
loss for the period
attributable to
owners of the parent (411) (19,802) (6,686) (36,271)
=============================== =========================== ============================ =========================
Net loss for the
period per share
Basic(7) GBP(0.10) GBP(0.26) GBP(0.38) GBP(0.40)
Diluted(7) GBP(0.10) GBP(0.26) GBP(0.38) GBP(0.40)
=============================== =========================== ============================ =========================
See accompanying
notes
UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
As at As at
30 September 2017 31 December 2016
ASSETS (GBP000's) (GBP000's)
------------------------------------------- --------------------------------
Current assets
Cash(8) 39,208 68,485
Restricted cash(8) 189 253
Customer deposits 8,736 8,573
Trade and other receivables(9) 15,625 16,763
Current portion of cross currency
swap(10,15) - 38,171
Taxes receivable 9,619 6,832
------------------------------------------- --------------------------------
Total current assets 73,377 139,077
------------------------------------------- --------------------------------
Tangible assets 1,368 852
Intangible assets(11) 308,619 352,473
Goodwill(11) 296,334 296,352
Other long-term receivables 2,169 2,624
------------------------------------------- --------------------------------
Total non-current assets 608,490 652,301
------------------------------------------- --------------------------------
Total assets 681,867 791,378
=========================================== ================================
LIABILITIES AND EQUITY
Current liabilities
Accounts payable and accrued
liabilities(12) 12,363 8,992
Current portion of cross currency swap 756 -
payable (10,15)
Other short-term payables(13) 12,163 15,321
Interest payable 547 633
Payable to customers 8,736 8,573
Current portion of long-term debt(14) 24,583 26,695
Current portion of contingent
consideration(15) 41,073 86,903
Provision for taxes 7,056 7,743
------------------------------------------- --------------------------------
Total current liabilities 107,277 154,860
------------------------------------------- --------------------------------
Contingent consideration(15) 6,480 33,284
Other long-term payables(16) 9,852 14,505
Cross currency swap payable(10,15) 6,709 -
Deferred tax liability 1,280 1,897
Convertible debentures(17) 255 3,266
Long-term debt(14) 312,634 344,098
------------------------------------------- --------------------------------
Total non-current liabilities 337,210 397,050
------------------------------------------- --------------------------------
Total liabilities 444,487 551,910
------------------------------------------- --------------------------------
Equity
Retained earnings (198,374) (170,737)
Share capital(17) 7,405 7,298
Other reserves 428,349 402,907
------------------------------------------- --------------------------------
Total equity 237,380 239,468
------------------------------------------- --------------------------------
Total liabilities and equity 681,867 791,378
=========================================== ================================
See accompanying notes
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS
OF CHANGES IN EQUITY
Cross
Share-Based Currency Retained
Share Share Merger Redeemable Payment Translation Hedge (Deficit)/
Capital Premium Reserve Shares Reserve Reserve Reserve Earnings Total
(GBP000's) (GBP000's) (GBP000's) (GBP000's) (GBP000's) (GBP000's) (GBP000's) (GBP000's) (GBP000's)
----------- ----------- ----------- ---------------- ------------ --------------- ----------- ------------- ---------------------
Balance 1
January 2016 7,051 406,002 (15,521) - 6,779 14,816 - (130,094) 289,033
----------- ----------- ----------- ---------------- ------------ --------------- ----------- ------------- ---------------------
Comprehensive
loss for the
period:
Net loss for
the period - - - - - - - (28,385) (28,385)
Other
comprehensive
loss - - - - - (7,886) - - (7,886)
----------- ----------- ----------- ---------------- ------------ --------------- ----------- ------------- ---------------------
Total
comprehensive
loss for the
period: - - - - - (7,886) - (28,385) (36,271)
Contributions
by and
distributions
to shareholders:
Conversion
of
debentures(17) 128 3,689 - - - - - - 3,817
Exercise of
common share
warrants(17) 4 187 - - - - - - 191
Exercise of
options(17) 55 1,140 - - (349) - - 349 1,195
Share-based
compensation(17) - - - - 1,503 - - - 1,503
----------- ----------- ----------- ---------------- ------------ --------------- ----------- ------------- ---------------------
Total
contributions
by and
distributions
to shareholders 187 5,016 - - 1,154 - - 349 6,706
Balance at
30 September
2016 7,238 411,018 (15,521) - 7,933 6,930 - (158,130) 259,468
----------- ----------- ----------- ---------------- ------------ --------------- ----------- ------------- ---------------------
Balance at
1 January
2017 7,298 413,293 (15,521) 50 8,598 (3,513) - (170,737) 239,468
----------- ----------- ----------- ---------------- ------------ --------------- ----------- ------------- ---------------------
Comprehensive
income (loss)
for the period:
Net loss for
the period - - - - - - - (27,742) (27,742)
Other
comprehensive
income (loss) - - - - - 28,793 (7,737) - 21,056
----------- ----------- ----------- ---------------- ------------ --------------- ----------- ------------- ---------------------
Total
comprehensive
income (loss)
for the period - - - - - 28,793 (7,737) (27,742) (6,686)
Contributions
by and
distributions
to shareholders:
Conversion
of
debentures(17) 92 2,986 - - - - - - 3,078
Exercise of
options(17) 15 357 - - (105) - - 105 372
Cancellation
of redeemable
shares - - - (50) - - - - (50)
Share-based
compensation(17) - - - - 1,198 - - - 1,198
----------- ----------- ----------- ---------------- ------------ --------------- ----------- ------------- ---------------------
Total
contributions
by and
distributions
to shareholders 107 3,343 - (50) 1,093 - - 105 4,598
Balance at
30 September
2017 7,405 416,636 (15,521) - 9,691 25,280 (7,737) (198,374) 237,380
----------- ----------- ----------- ---------------- ------------ --------------- ----------- ------------- ---------------------
See accompanying
notes
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended 30 Three months ended 30 Nine months ended 30 Nine months ended 30
September 2017 September 2016 September 2017 September 2016
(GBP000's) (GBP000's) (GBP000's) (GBP000's)
------------------------------- --------------------------- ----------------------------- -------------------------
Operating activities
Net loss for the
period (7,669) (18,579) (27,742) (28,385)
Add (deduct) items
not involving cash
Amortisation and
depreciation 16,491 14,453 46,651 41,559
Share-based
compensation
expense(17) 320 957 1,198 1,503
Current tax
provision/(recovery) 447 (118) 806 276
Deferred tax recovery (109) (113) (319) (295)
Interest expense,
net(6) 9,607 9,110 32,230 25,819
Gain on sale of - - (1,002) -
intangible assets
Fair value
adjustments on
contingent
consideration(15) 1,663 14,549 16,364 33,499
Realised/unrealised
(gain)/loss on cross
currency swap(10) - (5,693) 3,534 (23,954)
Foreign exchange loss 4,607 591 11,506 3,106
------------------------------- --------------------------- ----------------------------- -------------------------
25,357 15,157 83,226 53,128
Change in non-cash
operating items
Trade and other
receivables 1,311 169 786 4,556
Other long-term
receivables 84 (363) 536 (416)
Accounts payable and
accrued liabilities 2,766 614 922 (414)
Other short-term
payables 384 857 (3,158) 10,824
------------------------------- --------------------------- ----------------------------- -------------------------
Cash provided by
operating activities 29,902 16,434 82,312 67,678
------------------------------- --------------------------- ----------------------------- -------------------------
Income taxes paid - - (6,899) (6,296)
Incomes taxes
received 2,656 1,872 2,758 1,872
------------------------------- --------------------------- ----------------------------- -------------------------
Total cash provided
by operating
activities 32,558 18,306 78,171 63,254
------------------------------- --------------------------- ----------------------------- -------------------------
Financing activities
Restriction of cash
balances (229) - (54) -
Proceeds from
exercise of warrants - - - 191
Proceeds from
exercise of options - 1,093 372 1,192
Proceeds from cross - - 34,373 -
currency swap
settlement(10)
Repayment of
non-compete
liability (2,000) - (3,333) -
Interest repayment (7,903) (3,228) (23,112) (11,685)
Payment of contingent
consideration(15) - - (94,218) (6,308)
Principal payments
made on long-term
debt(14) (5,965) (4,369) (18,771) (18,225)
------------------------------- --------------------------- ----------------------------- -------------------------
Total cash used in
financing activities (16,097) (6,504) (104,743) (34,835)
------------------------------- --------------------------- ----------------------------- -------------------------
Investing activities
Purchase of tangible
assets (88) (500) (851) (597)
Purchase of
intangible assets (822) (374) (2,084) (1,109)
Proceeds from sale of - - 1,002 -
intangible assets
------------------------------- --------------------------- ----------------------------- -------------------------
Total cash used in
investing activities (910) (874) (1,933) (1,706)
------------------------------- --------------------------- ----------------------------- -------------------------
Net
increase/(decrease)
in cash during the
period 15,551 10,928 (28,505) 26,713
Cash, beginning of
period 23,963 51,569 68,485 31,762
Exchange (loss)/gain
on cash and cash
equivalents (306) (1,641) (772) 2,381
------------------------------- --------------------------- ----------------------------- -------------------------
Cash, end of period 39,208 60,856 39,208 60,856
=============================== =========================== ============================= =========================
See accompanying notes
SUPPLEMENTARY NOTES FOR THREE AND NINE MONTHSED 30 SEPTEMBER 2017
1. Corporate Information
Jackpotjoy plc is an online gaming holding company and the parent company of The Intertain Group Limited ("Intertain"). Jackpotjoy plc was incorporated pursuant to the Companies Act 2006 (England and Wales) on 29 July 2016. Jackpotjoy plc's registered office is located at 35 Great St. Helen's, London, United Kingdom. Jackpotjoy plc became the parent company of Intertain on 25 January 2017, following a plan of arrangement transaction involving a one-for-one share exchange of all and the then outstanding common shares of Intertain shares for, at each shareholder's election, ordinary shares of Jackpotjoy plc or exchangeable shares of Intertain. Unless the context requires otherwise, use of "Group" in these accompanying notes means Jackpotjoy plc and its subsidiaries, as applicable.
The Group currently offers bingo, casino and other games to its customers using the Jackpotjoy, Starspins, Botemania, Vera&John, Costa Bingo, InterCasino, and other brands. The Jackpotjoy, Starspins, and Botemania brands operate off proprietary software owned by the Gamesys group, the Group's B2B software and support provider. The Vera&John and InterCasino brands operate off proprietary software owned by the Group. The Mandalay segment's bingo offerings operate off the Dragonfish platform, a software service provided by the 888 group. Additionally, the Group receives fees for marketing services provided by its affiliate portal business.
These Unaudited Interim Condensed Consolidated Financial Statements were authorised for issue by the Board of Directors of Jackpotjoy plc (the "Board of Directors") on 14 November 2017.
2. Basis of Preparation
Basis of presentation
These Unaudited Interim Condensed Consolidated Financial Statements have been prepared by management on a going concern basis, are presented in compliance with International Accounting Standard ("IAS") 34 - Interim Financial Reporting, and have been prepared on a basis consistent with the accounting policies and methods used and disclosed in Intertain's consolidated financial statements for the year ended 31 December 2016 (the "Annual Financial Statements"). Certain information and disclosures normally included in the Annual Financial Statements prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union, which also complies with IFRS as issued by the International Accounting Standards Board, have been omitted or condensed.
These Unaudited Interim Condensed Consolidated Financial Statements should be read in conjunction with the Annual Financial Statements. All defined terms used herein are consistent with those terms as defined in the Annual Financial Statements.
These Unaudited Interim Condensed Consolidated Financial Statements have been prepared under the historical cost convention, other than for the measurement at fair value of the Group's cross currency swap and contingent consideration.
Following Jackpotjoy plc becoming the parent company of the group (as detailed in note 1), these Unaudited Interim Condensed Consolidated Financial Statements have been prepared under the merger method of accounting as a continuation of the Intertain business. This method is commonly applied in such situations as the accounting for such transactions is not prescribed by IFRS 3 - Business Combinations or other applicable IFRS, which instead prompts IFRS-reporting entities to look to alternative generally accepted accounting principles for guidance. The result of the application is to present the Unaudited Interim Condensed Consolidated Financial Statements as if Jackpotjoy plc has always been the parent company and owned all of the subsidiaries, and the comparatives have also been prepared on that basis. The adoption of the merger method of accounting had no impact on reported earnings per share.
The comparative financial information for the year ended 31 December 2016 in these Unaudited Interim Condensed Consolidated Financial Statements does not constitute statutory accounts for that year. The auditors' report on the statutory accounts for the period ended 31 December 2016 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under sections 498(2) or 498(3) of the Companies Act 2006.
As at 30 September 2017, the Group has consolidated current assets and current liabilities of GBP73.4 million and GBP107.3 million, respectively, giving rise to a net current liability of GBP33.9 million. Cash generated through future operating activities is sufficient to cover the net current liability.
Basis of consolidation
Jackpotjoy plc's Unaudited Interim Condensed Consolidated Financial Statements consolidate the parent company and all of its subsidiaries. The parent controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. All transactions and balances between companies are eliminated on consolidation.
Subsidiaries are fully consolidated from the date of acquisition, being the date on which Jackpotjoy plc obtains control, and continue to be consolidated until the date that such control ceases.
Intercompany transactions, balances, income and expenses on transactions between Jackpotjoy plc's subsidiaries are eliminated. Profit and losses resulting from intercompany transactions that are recognised in assets are also eliminated.
3. Summary of Significant Accounting Policies
For a description of the Group's significant accounting policies, critical accounting estimates and assumptions, and related information see note 3 to the Annual Financial Statements. Other than what is described below, there have been no changes to the Group's significant accounting policies or critical accounting estimates and assumptions during the nine months ended 30 September 2017.
Change in presentation currency
Effective from 1 January 2017, the Group changed its presentation currency from Canadian dollars ("CAD" or "$") to pounds sterling ("GBP" or "GBP"). Comparative information has been restated in pounds sterling in accordance with the guidance defined in IAS 21 - The Effects of Changes in Foreign Exchange Rates. The Q3 2016 Unaudited Interim Condensed Consolidated Financial Statements have been retranslated from Canadian dollars to pounds sterling using the procedures outlined below:
-- income and expenses were translated into pounds sterling at average quarterly rates of exchange ($:GBP - 0.5840). Differences resulting from the retranslation on the opening net assets and the results for the year have been taken to reserves;
-- share capital and other reserves were translated at historic rates prevailing at the dates of transactions;
-- quarterly average exchange rates were used to convert changes in items not involving cash and cash provided by/(used in) operating activities, financing activities, and investing activities. Spot rates were used to convert cash balances, beginning of period and cash balances, end of period.
As a result of this change, no retranslation movement will be recorded in the Statements of Comprehensive Income for subsidiaries whose functional currency is GBP.
Hedge accounting
Effective from 31 March 2017, the Group has elected to use hedge accounting for the purposes of recognising realised and unrealised gains and losses associated with the New Currency Swap (as defined in note 10), in accordance with guidance provided in IAS 39 - Financial Instruments: Recognition and Measurement.
IAS 39 permits hedge accounting under certain circumstances provided that the hedging relationship is:
-- formally designated and documented, including the entity's risk management objective and strategy for undertaking the hedge, identification of the hedging instrument, the hedged item, the nature of the risk being hedged, and how the entity will assess the hedging instrument's effectiveness;
-- expected to be highly effective in achieving offsetting changes in fair value or cash flows attributable to the hedged risk as designated and documented, and effectiveness can be reliably measured; and
-- assessed on an ongoing basis and determined to have been highly effective.
Based on the Group's analysis of the requirements outlined above, it was concluded that the New Currency Swap meets all the necessary criteria and qualifies for use of hedge accounting.
4. Segment Information
The following tables present selected financial results for each segment and the unallocated corporate costs:
Three months ended 30 September 2017:
Unallocated Corporate
Jackpotjoy Vera&John Mandalay Costs Total
(GBP000's) (GBP000's) (GBP000's) (GBP000's) (GBP000's)
-------------- ---------------- ------------- ----------------------- ------------
Total revenue 52,193 18,355 4,875 - 75,423
-------------- ---------------- ------------- ----------------------- ------------
Distribution costs 24,747 9,094 2,587 20 36,448
Amortisation and
depreciation 12,243 2,550 1,604 94 16,491
Compensation,
professional, and
general and
administrative
expenses 4,240 4,385 411 3,541 12,577
Transaction related
costs - - - 1,361 1,361
Foreign exchange 172 130 17 4,288 4,607
Financing, net - (40) 1 11,309 11,270
-------------- ---------------- ------------- ----------------------- ------------
Income/(loss) for the
period before taxes 10,791 2,236 255 (20,613) (7,331)
-------------- ---------------- ------------- ----------------------- ------------
Taxes - 338 - - 338
-------------- ---------------- ------------- ----------------------- ------------
Net income/(loss) for
the period 10,791 1,898 255 (20,613) (7,669)
-------------- ---------------- ------------- ----------------------- ------------
Net income/(loss) for
the period 10,791 1,898 255 (20,613) (7,669)
Interest
(income)/expense, net - (40) 1 9,646 9,607
Taxes - 338 - - 338
Amortisation and
depreciation 12,243 2,550 1,604 94 16,491
-------------- ---------------- ------------- ----------------------- --------------
EBITDA 23,034 4,746 1,860 (10,873) 18,767
-------------- ---------------- ------------- ----------------------- --------------
Share-based
compensation - - - 320 320
Transaction related
costs - - - 1,361 1,361
Fair value adjustment
on contingent
consideration - - - 1,663 1,663
Foreign exchange 172 130 17 4,288 4,607
-------------- ---------------- ------------- ----------------------- --------------
Adjusted EBITDA 23,206 4,876 1,877 (3,241) 26,718
-------------- ---------------- ------------- ----------------------- --------------
Net income/(loss) for
the period 10,791 1,898 255 (20,613) (7,669)
Share-based
compensation - - - 320 320
Transaction related
costs - - - 1,361 1,361
Fair value adjustment
on contingent
consideration - - - 1,663 1,663
Foreign exchange 172 130 17 4,288 4,607
Amortisation of
acquisition related
purchase price
intangibles and
non-compete clauses 12,243 2,190 1,588 - 16,021
Accretion - - - 2,000 2,000
-------------- ---------------- ------------- ----------------------- --------------
Adjusted net
income/(loss) 23,206 4,218 1,860 (10,981) 18,303
-------------- ---------------- ------------- ----------------------- --------------
Nine months ended 30 September 2017:
Unallocated Corporate
Jackpotjoy Vera&John Mandalay Costs Total
(GBP000's) (GBP000's) (GBP000's) (GBP000's) (GBP000's)
-------------- --------------- ------------- ----------------------- ------------
Total revenue 155,191 51,458 15,343 - 221,992
-------------- --------------- ------------- ----------------------- ------------
Distribution costs 68,541 25,020 8,355 78 101,994
Amortisation and
depreciation 34,177 7,383 4,805 286 46,651
Compensation,
professional, and
general and
administrative
expenses 12,566 12,069 961 9,698 35,294
Transaction related
costs - - - 2,676 2,676
Foreign exchange 76 608 26 10,796 11,506
Gain on sale of
intangible assets - (1,002) - - (1,002)
Financing, net - (127) 3 52,252 52,128
-------------- --------------- ------------- ----------------------- ------------
Income/(loss) for the
period before taxes 39,831 7,507 1,193 (75,786) (27,255)
-------------- --------------- ------------- ----------------------- ------------
Taxes - 487 - - 487
-------------- --------------- ------------- ----------------------- ------------
Net income/(loss) for
the period 39,831 7,020 1,193 (75,786) (27,742)
-------------- --------------- ------------- ----------------------- ------------
Net income/(loss) for
the period 39,831 7,020 1,193 (75,786) (27,742)
Interest
(income)/expense, net - (127) 3 32,354 32,230
Taxes - 487 - - 487
Amortisation and
depreciation 34,177 7,383 4,805 286 46,651
-------------- --------------- ------------- ----------------------- --------------
EBITDA 74,008 14,763 6,001 (43,146) 51,626
-------------- --------------- ------------- ----------------------- --------------
Share-based
compensation - - - 1,198 1,198
Fair value adjustment
on contingent
consideration - - - 16,364 16,364
Loss on cross currency
swap - - - 3,534 3,534
Transaction related
costs - - - 2,676 2,676
Gain on sale of
intangible assets - (1,002) - - (1,002)
Foreign exchange 76 608 26 10,796 11,506
-------------- --------------- ------------- ----------------------- --------------
Adjusted EBITDA 74,084 14,369 6,027 (8,578) 85,902
-------------- --------------- ------------- ----------------------- --------------
Net income/(loss) for
the period 39,831 7,020 1,193 (75,786) (27,742)
Share-based
compensation - - - 1,198 1,198
Fair value adjustment
on contingent
consideration - - - 16,364 16,364
Loss on cross currency
swap - - - 3,534 3,534
Transaction related
costs - - - 2,676 2,676
Gain on sale of
intangible assets - (1,002) - - (1,002)
Foreign exchange 76 608 26 10,796 11,506
Amortisation of
acquisition related
purchase price
intangibles and
non-compete clauses 34,177 6,402 4,774 - 45,353
Accretion - - - 9,051 9,051
-------------- --------------- ------------- ----------------------- --------------
Adjusted net
income/(loss) 74,084 13,028 5,993 (32,167) 60,938
-------------- --------------- ------------- ----------------------- --------------
Three months ended 30 September 2016:
Unallocated Corporate
Jackpotjoy Vera&John Mandalay Costs Total
(GBP000's) (GBP000's) (GBP000's) (GBP000's) (GBP000's)
-------------- ----------------- ------------- ------------------------- -------------
Total revenue and other
income 46,658 14,422 5,288 - 66,368
-------------- ----------------- ------------- ------------------------- -------------
Distribution costs 20,315 7,470 3,659 74 31,518
Amortisation and
depreciation 10,428 2,438 1,585 2 14,453
Compensation,
professional, and
general and
administrative expenses 3,876 3,424 264 2,672 10,236
Transaction related costs - 200 - 10,214 10,414
Foreign exchange 55 343 (34) 227 591
Financing, net - (5) 2 17,969 17,966
-------------- ----------------- ------------- ------------------------- -------------
Income/(loss) for the
period before taxes 11,984 552 (188) (31,158) (18,810)
-------------- ----------------- ------------- ------------------------- -------------
Taxes - (231) - - (231)
-------------- ----------------- ------------- ------------------------- -------------
Net income/(loss) for the
period 11,984 783 (188) (31,158) (18,579)
-------------- ----------------- ------------- ------------------------- -------------
Net income/(loss) for the
period 11,984 783 (188) (31,158) (18,579)
Interest (income)/expense,
net - (5) 2 9,113 9,110
Taxes - (231) - - (231)
Amortisation and
depreciation 10,428 2,438 1,585 2 14,453
-------------- ----------------- ------------- ------------------------ -------------
EBITDA 22,412 2,985 1,399 (22,043) 4,753
-------------- ----------------- ------------- ------------------------ -------------
Share-based compensation - - - 957 957
Fair value adjustment on
contingent consideration - - - 14,549 14,549
Gain on cross currency
swap - - - (5,693) (5,693)
Transaction related costs - 200 - 10,214 10,414
Foreign exchange 55 343 (34) 227 591
-------------- ----------------- ------------- ------------------------ -------------
Adjusted EBITDA 22,467 3,528 1,365 (1,789) 25,571
-------------- ----------------- ------------- ------------------------ -------------
Net income/(loss) for the period 11,984 783 (188) (31,158) (18,579)
Share-based compensation - - - 957 957
Fair value adjustment on
contingent consideration - - - 14,549 14,549
Gain on cross currency swap - - - (5,693) (5,693)
Transaction related costs - 200 - 10,214 10,414
Foreign exchange 55 343 (34) 227 591
Amortisation of acquisition
related
purchase price intangibles 10,428 2,275 1,585 - 14,288
Accretion - - - 4,650 4,650
-------------- -------------- ------------- --------------------- ------------
Adjusted net income/(loss) 22,467 3,601 1,363 (6,254) 21,177
-------------- -------------- ------------- --------------------- ------------
Nine months ended 30 September 2016:
Unallocated Corporate
Jackpotjoy Vera&John Mandalay Costs Total
(GBP000's) (GBP000's) (GBP000's) (GBP000's) (GBP000's)
--------------- -------------- ------------- ------------------------ ------------
Total revenue and other
income 135,645 43,857 16,556 - 196,058
--------------- -------------- ------------- ------------------------ ------------
Distribution costs 61,242 21,427 10,773 227 93,669
Amortisation and
depreciation 30,912 6,308 4,328 11 41,559
Compensation,
professional, and
general and
administrative
expenses 11,505 8,618 825 7,543 28,491
Severance costs - - - 5,695 5,695
Transaction related
costs - 642 - 15,936 16,578
Foreign exchange (278) 636 (102) 2,850 3,106
Financing, net - (48) 5 35,407 35,364
--------------- -------------- ------------- ------------------------ ------------
Income/(loss) for the
period before taxes 32,264 6,274 727 (67,669) (28,404)
--------------- -------------- ------------- ------------------------ ------------
Taxes - (19) - - (19)
--------------- -------------- ------------- ------------------------ ------------
Net income/(loss) for
the period 32,264 6,293 727 (67,669) (28,385)
--------------- -------------- ------------- ------------------------ ------------
Net income/(loss) for the period 32,264 6,293 727 (67,669) (28,385)
Interest (income)/expense, net - (48) 5 25,862 25,819
Taxes - (19) - - (19)
Amortisation and depreciation 30,912 6,308 4,328 11 41,559
-------- -------- ------- ---------- ----------
EBITDA 63,176 12,534 5,060 (41,796) 38,974
-------- -------- ------- ---------- ----------
Share-based compensation - - - 1,503 1,503
Severance costs - - - 5,695 5,695
Independent Committee related expenses - - - 1,693 1,693
Fair value adjustment on contingent consideration - - - 33,499 33,499
Gain on cross currency swap - - - (23,954) (23,954)
Transaction related costs - 642 - 15,936 16,578
Foreign exchange (278) 636 (102) 2,850 3,106
Adjusted EBITDA 62,898 13,812 4,958 (4,574) 77,094
-------- -------- ------- ---------- ----------
Net income/(loss) for the period 32,264 6,293 727 (67,669) (28,385)
Share-based compensation - - - 1,503 1,503
Severance costs - - - 5,695 5,695
Independent Committee related expenses - - - 1,693 1,693
Fair value adjustment on contingent consideration - - - 33,499 33,499
Gain on cross currency swap - - - (23,954) (23,954)
Transaction related costs - 642 - 15,936 16,578
Foreign exchange (278) 636 (102) 2,850 3,106
Amortisation of acquisition related purchase price intangibles 30,912 5,925 4,328 - 41,165
Accretion - - - 12,845 12,845
------- ------- ------ --------- ---------
Adjusted net income/(loss) 62,898 13,496 4,953 (17,602) 63,745
------- ------- ------ --------- ---------
The following table presents net assets per segment and unallocated corporate costs as at 30 September 2017:
Jackpotjoy Vera&John Mandalay Unallocated Corporate Costs Total
(GBP000's) (GBP000's) (GBP000's) (GBP000's) (GBP000's)
------------ ------------ ------------ ---------------------------- ------------
Current assets 13,171 34,800 6,747 18,659 73,377
Goodwill 224,348 55,374 16,612 - 296,334
Long-term assets 265,222 33,414 13,425 95 312,156
Total assets 502,741 123,588 36,784 18,754 681,867
Current liabilities 6,360 17,896 1,824 81,197 107,277
Long-term liabilities - 1,280 - 335,930 337,210
------------ ------------ ------------ ---------------------------- ------------
Total liabilities 6,360 19,176 1,824 417,127 444,487
------------ ------------ ------------ ---------------------------- ------------
Net assets 496,381 104,412 34,960 (398,373) 237,380
------------ ------------ ------------ ---------------------------- ------------
The following table presents net assets per segment and unallocated corporate costs as at
31 December 2016:
Jackpotjoy Vera&John Mandalay Unallocated Corporate Costs Total
(GBP000's) (GBP000's) (GBP000's) (GBP000's) (GBP000's)
------------ ------------ ------------ ---------------------------- ------------
Current assets 15,033 38,870 6,509 78,665 139,077
Goodwill 224,348 55,392 16,612 - 296,352
Long-term assets 277,702 38,163 18,020 22,064 355,949
Total assets 517,083 132,425 41,141 100,729 791,378
Current liabilities 5,790 16,711 1,483 130,876 154,860
Long-term liabilities - 1,897 - 395,153 397,050
------------ ------------ ------------ ---------------------------- ------------
Total liabilities 5,790 18,608 1,483 526,029 551,910
Net assets 511,293 113,817 39,658 (425,300) 239,468
------------ ------------ ------------ ---------------------------- ------------
During the nine months ended 30 September 2017 and 2016, substantially all of the revenue earned by the Group was in Europe. Non-current assets by geographical location as at 30 September 2017 were as follows: Europe GBP88.8 million (31 December 2016 - GBP93.6 million) and the Americas GBP519.7 million (31 December 2016 - GBP558.7 million).
5. Costs and Expenses
Three Months Nine Months Ended Nine Months Ended
Ended 30 September 2017 30 September 2016
Three Months Ended 30 September (GBP000's) (GBP000's)
30 September 2017 2016
(GBP000's) (GBP000's)
----------------------- -------------- ------------------------ -------------------
Distribution costs:
Selling and marketing 12,591 10,796 33,040 32,362
Licensing fees 11,771 10,510 34,683 31,148
Gaming taxes 8,742 7,334 25,203 21,498
Processing fees 3,344 2,878 9,068 8,661
36,448 31,518 101,994 93,669
----------------------- -------------- ------------------------ -------------------
Administrative costs:
Compensation and benefits 9,631 7,840 25,722 20,641
Professional fees 670 476 2,675 3,294
General and administrative 2,276 1,920 6,897 4,556
Tangible asset depreciation 119 51 303 105
Intangible asset amortisation 16,372 14,402 46,348 41,454
29,068 24,689 81,945 70,050
----------------------- -------------- ------------------------ -------------------
6. Interest Income/Expense
Three Months Ended Three Months Nine Months Ended Nine Months Ended
30 September 2017 Ended 30 September 2017 30 September 2016
(GBP000's) 30 September (GBP000's) (GBP000's)
2016
(GBP000's)
------------------- -------------- ------------------- -------------------
Interest earned on cash held during
the period 41 63 136 119
------------------- -------------- ------------------- -------------------
Total interest income 41 63 136 119
------------------- -------------- ------------------- -------------------
Interest paid and accrued on long-term
debt 7,645 4,400 23,309 12,743
Accretion of discount recognised on
contingent consideration 752 4,049 5,220 11,197
Interest paid and accrued on
convertible debentures 3 123 43 350
Interest accretion recognised on
convertible debentures 5 106 35 290
Interest accretion recognised on
long-term debt 774 495 2,334 1,358
Interest accretion recognised on other
long-term liabilities 469 - 1,425 -
Total interest expense 9,648 9,173 32,366 25,938
------------------- -------------- ------------------- -------------------
7. Earnings per Share
The following table presents the calculation of basic and diluted earnings per share:
Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended
30 September 2017 30 September 2016 30 September 2017 30 September 2016
(GBP000's) (GBP000's) (GBP000's) (GBP000's)
------------------- ------------------- ------------------- -------------------
Numerator:
Net loss - basic (7,669) (18,579) (27,742) (28,385)
Net loss - diluted(1) (7,669) (18,579) (27,742) (28,385)
------------------- ------------------- ------------------- -------------------
Denominator:
Weighted average number of shares
outstanding - basic 73,988 70,865 73,801 70,666
------------------- ------------------- ------------------- -------------------
Instruments, which are
anti-dilutive:
Weighted average effect of
dilutive share options 434 801 412 833
Weighted average effect of
convertible debentures(2) 87 2,629 294 2,759
Net loss per share(3,4)
------------------- ------------------- ------------------- -------------------
Basic GBP(0.10) GBP(0.26) GBP(0.38) GBP(0.40)
Diluted(1) GBP(0.10) GBP(0.26) GBP(0.38) GBP(0.40)
------------------- ------------------- ------------------- -------------------
(1) In the case of a net loss, the effect of share options potentially exercisable on diluted loss per share will be anti-dilutive; therefore, basic and diluted net loss per share will be the same.
(2) An assumed conversion of convertible debentures had an anti-dilutive effect on loss per share for the three and nine months ended 30 September 2017 and 30 September 2016.
(3) Basic loss per share is calculated by dividing the net loss attributable to common shareholders by the weighted average number of shares outstanding during the year.
(4) Diluted loss per share is calculated by dividing the net loss attributable to ordinary shareholders by the weighted average number of shares outstanding during the period and adjusted for the number of potentially dilutive share options and contingently issuable instruments.
8. Cash and Restricted Cash
30 September 2017 31 December 2016
(GBP000's) (GBP000's)
------------------ -----------------
Cash 38,994 33,558
Segregated cash* 214 34,927
------------------ -----------------
Cash and cash equivalents 39,208 68,485
Restricted cash - other 189 253
------------------ -----------------
Total cash balances 39,397 68,738
------------------ -----------------
* This balance consists of cash on deposit with payment service providers, as well as segregated funds held in accordance with the terms of the Jackpotjoy earn-out payment, where the Group was required to segregate 90% of its excess cash flow, less mandatory repayments of the Group's long-term debt and earn-out payments, in a non-operational bank account. Since the Group made a final earn-out payment of GBP94.2 million for the non-Spanish assets of the Jackpotjoy segment on 21 June 2017, no cash was required to be segregated for this purpose at 30 September 2017 (GBP34.7 million as at 31 December 2016). Segregated cash does not qualify as restricted cash and, as such, it is included in cash.
9. Trade and Other Receivables
Receivables consist of the following items:
30 September 2017 (GBP000's) 31 December 2016
(GBP000's)
----------------------------- -----------------
Due from the Gamesys group 6,289 9,242
Due from the 888 group 2,650 1,625
Affiliate revenue receivable 2,178 1,766
Short-term loans receivable 659 572
Swap-related receivable - 1,948
Prepaid expenses 3,548 967
Other 301 643
-----------------------------
15,625 16,763
----------------------------- -----------------
10. Cross Currency Swap
On 23 November 2015, the Group entered into a cross currency swap agreement (the "Currency Swap") in order to minimise the Group's exposure to exchange rate fluctuations between GBP and the US dollar ("USD") as cash generated from the Group's operations is largely in GBP, while a portion of the principal and interest payments on the Group's credit facilities are in USD. Under the Currency Swap, 90% of the Group's USD term loan interest and principal payments were swapped into GBP. The Group paid a fixed 7.81% interest in place of floating USD interest payments of LIBOR plus 6.5% (LIBOR floor of 1%). The interest and principal payments were made at a GBP/USD foreign exchange rate of 1.5135 on a USD notional amount of $293,962,500.
On 28 March 2017, the Group terminated the Currency Swap and realised total proceeds of approximately USD 42.6 million (GBP34.4 million) and subsequently entered into a new cross currency swap agreement (the "New Currency Swap"). Under the New Currency Swap, 50% of the Group's term loan interest and principal payments will be swapped into GBP. The Group will pay a fixed 7.4% interest in place of floating USD interest payments of LIBOR plus 6.5% (LIBOR floor of 1%). The interest and principal payments will be made at a GBP/USD foreign exchange rate of 1.2584 on a USD notional amount of $136,768,333. The New Currency Swap expires on 30 September 2019. The agreement was entered into at no cost to the Group.
The fair value of the New Currency Swap liability as at 30 September 2017 is GBP7.5 million
(31 December 2016 - asset of GBP38.2 million).
Jackpotjoy plc has elected to use hedge accounting for the purposes of recognising realised and unrealised gains and losses associated with the New Currency Swap.
11. Intangible Assets and Goodwill
As at 30 September 2017
Gaming Customer Partnership Non-Compete
Licenses Relationships Software Brand Agreements Clauses Goodwill Total
(GBP000's) (GBP000's) (GBP000's) (GBP000's) (GBP000's) (GBP000's) (GBP000's) (GBP000's)
------------ ------------- ---------- ---------- ----------- ------------ ---------- ----------
Cost
Balance,
1 January
2017 94 340,927 21,670 70,054 12,900 20,434 317,829 783,908
Additions - - 1,989 - - - - 1,989
Translation (1) 292 592 (110) - - (1,715) (942)
----------
Balance,
30 September
2017 93 341,219 24,251 69,944 12,900 20,434 316,114 784,955
------------ ------------- ---------- ---------- ----------- ------------ ---------- ----------
Accumulated
amortisation
Balance,
1 January
2017 34 96,811 7,414 6,523 2,824 - 21,477 135,083
Amortisation 11 33,801 3,576 2,628 1,225 5,107 - 46,348
Translation 6 51 241 (30) - - (1,697) (1,429)
----------
Balance,
30 September
2017 51 130,663 11,231 9,121 4,049 5,107 19,780 180,002
------------ ------------- ---------- ---------- ----------- ------------ ---------- ----------
Carrying
value
Balance,
30 September
2017 42 210,556 13,020 60,823 8,851 15,327 296,334 604,953
------------ ------------- ---------- ---------- ----------- ------------ ---------- ----------
As at 31 December 2016
Gaming Customer Revenue Partnership Non-Compete
Licenses Relationships Software Guarantee Brand Agreements Clauses Goodwill Total
(GBP000's) (GBP000's) (GBP000's) (GBP000's) (GBP000's) (GBP000's) (GBP000's) (GBP000's) (GBP000's)
---------- ------------- ---------- ---------- ---------- ----------- ------------ ---------- ----------
Cost
Balance,
1 January
2016 76 337,502 17,175 4,010 68,284 12,900 - 306,295 746,242
Additions - - 1,836 - - - 20,434 - 22,270
Translation 18 3,425 2,659 783 1,770 - - 11,534 20,189
Expiry - - - (4,793) - - - - (4,793)
----------
Balance,
31 December
2016 94 340,927 21,670 - 70,054 12,900 20,434 317,829 783,908
---------- ------------- ---------- ---------- ---------- ----------- ------------ ---------- ----------
Accumulated
amortisation
Balance,
1 January
2016 23 47,956 3,279 - 2,681 1,558 - 17,969 73,466
Amortisation 9 47,405 3,683 - 3,466 1,232 - - 55,795
Translation 2 1,450 452 - 376 34 - 3,508 5,822
----------
Balance,
31 December
2016 34 96,811 7,414 - 6,523 2,824 - 21,477 135,083
---------- ------------- ---------- ---------- ---------- ----------- ------------ ---------- ----------
Carrying
value
---------- ------------- ---------- ---------- ---------- ----------- ------------ ---------- ----------
Balance,
31 December
2016 60 244,116 14,256 - 63,531 10,076 20,434 296,352 648,825
---------- ------------- ---------- ---------- ---------- ----------- ------------ ---------- ----------
12. Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consist of the following items:
30 September 2017 31 December 2016
(GBP000's) (GBP000's)
------------------ -----------------
Affiliate/marketing expenses payable 5,112 3,058
Payable to game suppliers 1,512 950
Compensation payable 2,949 2,989
Loyalty program payable 252 260
Professional fees 730 349
Gaming tax payable 416 526
Other 1,392 860
------------------ -----------------
12,363 8,992
------------------ -----------------
13. Other Short-Term Payables
Other short-term payables consist of:
30 September 2017 31 December 2016
(GBP000's) (GBP000's)
------------------ -----------------
Transaction related payables 3,496 9,321
Current portion of other long-term payables (Note 16) 8,667 6,000
------------------ -----------------
12,163 15,321
------------------ -----------------
14. Credit Facilities
Below is the breakdown of the First Lien Facilities and the Second Lien Facility:
Incremental First Lien
Term Loan Facility Second Lien Facility Total
(GBP000's) (GBP000's) (GBP000's) (GBP000's)
----------------- --------------------------- --------------------- -----------------
Balance, 1 January 2016 207,158 - - 207,158
Principal - 70,000 90,000 160,000
Repayment (26,906) - - (26,906)
Debt financing costs - (2,482) (6,792) (9,274)
Accretion(1) 1,868 16 35 1,919
Foreign exchange
translation 37,896 - - 37,896
----------------- --------------------------- --------------------- -----------------
Balance, 31 December 2016 220,016 67,534 83,243 370,793
----------------- --------------------------- --------------------- -----------------
Repayment (18,771) - - (18,771)
Accretion(1) 1,424 290 620 2,334
Foreign exchange
translation (17,139) - - (17,139)
----------------- --------------------------- --------------------- -----------------
Balance, 30 September 2017 185,530 67,824 83,863 337,217
----------------- --------------------------- --------------------- -----------------
Current portion 24,583 - - 24,583
----------------- --------------------------- --------------------- -----------------
Non-current portion 160,947 67,824 83,863 312,634
----------------- --------------------------- --------------------- -----------------
(1) Effective interest rates are as follows: Term Loan - 8.69%, Incremental First Lien Facility - 8.32%, Second Lien Facility - 11.75%.
15. Financial Instruments
The principal financial instruments used by the Group are summarised below:
Financial assets
Loans and receivables
30 September 2017 31 December 2016
(GBP000's) (GBP000's)
------------------ -----------------
Cash and restricted cash 39,397 68,738
Trade and other receivables 15,625 16,763
Other long-term receivables 2,169 2,624
Customer deposits 8,736 8,573
------------------ -----------------
65,927 96,698
------------------ -----------------
Financial liabilities
Financial liabilities at amortised cost
30 September 2017 31 December 2016
(GBP000's) (GBP000's)
--------------------- -------------------
Accounts payable and accrued liabilities 12,363 8,992
Other long-term payables 9,852 14,505
Other short-term payables 12,163 15,321
Interest payable 547 633
Payable to customers 8,736 8,573
Convertible debentures 255 3,266
Long-term debt 337,217 370,793
--------------------- -------------------
381,133 422,083
--------------------- -------------------
The carrying values of the financial instruments noted above, with the exception of convertible debentures, approximate their fair values. The convertible debentures' fair value as at 30 September 2017 amounted to GBP0.5 million. Fair value was determined based on a quoted market price in an active market.
Other financial instruments
Financial instruments recognised at fair value through profit or loss - assets
(liabilities)
30 September 2017 31 December 2016
(GBP000's) (GBP000's)
-------------------------------------------- --------------------------------------------
Cross currency swap (7,465) 38,171
Contingent consideration (47,553) (120,187)
-------------------------------------------- --------------------------------------------
(55,018) (82,016)
-------------------------------------------- --------------------------------------------
Fair value hierarchy
The hierarchy of the Group's financial instruments carried at fair value is as follows:
Level 2 Level 3
------------------------------------- -------------------------------------
30 September 2017 31 December 2016 30 September 2017 31 December 2016
(GBP000's) (GBP000's) (GBP000's) (GBP000's)
------------------ ----------------- ------------------ -----------------
Cross currency swap (7,465) 38,171 - -
Contingent consideration - - (47,553) (120,187)
------------------ ----------------- ------------------ -----------------
The cross currency swap balance represents the fair value of cash inflows/(outflows) under the Currency Swap or the New Currency Swap, as applicable.
Contingent consideration represents the fair value of the cash outflows under earn-out agreements that would result from the performance of acquired businesses. The key inputs into the fair value estimation of these liabilities include the forecast performance of the underlying businesses, the probability of achieving forecasted results and the discount rate applied in deriving a present value from those forecasts. Significant increase (decrease) in the business' performance would result in a higher (lower) fair value of the contingent consideration, while significant increase (decrease) in the discount rate would result in a lower (higher) fair value of the contingent consideration. Additionally, as earn-out periods draw closer to their completion, the range of probability factors will decrease.
A discounted cash flow valuation model was used to determine the value of the contingent consideration. The model considers the present value of the expected payments, discounted using a risk-adjusted discount rate of 7%. The expected payments are determined by considering the possible scenarios of forecast EBITDA, the amount to be paid under each scenario and the probability of each scenario.
Without probability and discount factors, the fair value of the contingent consideration would be approximately 25% higher (GBP12.1 million), than its value at 30 September 2017, increasing the current portion of the contingent consideration, which is composed of the Botemania earn-out payment and the first Jackpotjoy milestone payment, by GBP8.6 million and increasing the long-term contingent consideration, which is composed of the final Jackpotjoy milestone payments due in 2019 and 2020, by GBP3.5 million. This assumes that the financial performance of the Jackpotjoy operating segment remains in line with management's expectations.
On 21 June 2017, Jackpotjoy plc made a final earn-out payment in the amount of GBP94.2 million for the non-Spanish assets within its Jackpotjoy segment.
As at 30 September 2017, the contingent consideration balance related to the earn-out payment remaining on the Spanish assets included in the Jackpotjoy segment and milestone payments related to the Jackpotjoy segment.
The movement in Level 3 financial instruments is detailed below:
(GBP000's)
-----------
Contingent consideration, 1 January 2016 209,625
Addition -
Fair value adjustments 49,382
Payments (156,308)
Accretion of discount 15,545
Foreign exchange translation 1,943
Contingent consideration, 31 December 2016 120,187
Fair value adjustments 16,364
Payments (94,218)
Accretion of discount 5,220
-----------
Contingent consideration, 30 September 2017 47,553
-----------
Current portion 41,073
-------
Non-current portion 6,480
-------
16. Other Long-Term Payables
The Group is required to pay the Gamesys group GBP24.0 million in equal monthly instalments in arrears over the period from April 2017 to April 2020, for additional non-compete clauses that came into effect in April 2017 and that expire in March 2019. The Group has included GBP8.7 million of this payable in current liabilities (note 13), with the discounted value of the remaining balance, being GBP9.9 million, included in other long-term payables. During the nine months ended 30 September 2017, the Group has paid a total of GBP3.3 million in relation to the additional non-compete clauses.
17. Share Capital
As at 30 September 2017, Jackpotjoy plc's issued share capital consisted of 74,052,431 ordinary shares, each with a nominal value of GBP0.10. Jackpotjoy plc does not hold any shares in treasury and there are no shares in Jackpotjoy plc's issued share capital that do not represent capital.
The share capital movements presented below for periods prior to the date of completion of the plan of arrangement discussed in note 1 are presented as if each common share of The Intertain Group Limited had the same nominal value as the ordinary shares of Jackpotjoy plc. The number of Jackpotjoy plc ordinary shares in issue at the date of the plan of arrangement was 73,718,942.
Ordinary shares
------------------------
(GBP000's) #
----------- -----------
Balance, 1 January 2016 7,051 70,511,493
Conversion of convertible debentures, net of costs 185 1,853,667
Exercise of options 58 577,492
Exercise of warrants 4 40,625
Balance, 31 December 2016 7,298 72,983,277
----------- -----------
Conversion of convertible debentures, net of costs 92 916,498
Exercise of options 15 152,656
Balance, 30 September 2017 7,405 74,052,431
----------- -----------
Ordinary shares
Other than for reasons set out below, during the nine months ended 30 September 2017, Jackpotjoy plc did not issue any additional ordinary shares.
Convertible debentures
During the nine months ended 30 September 2017 (and prior to completion of the plan of arrangement), debentures at an undiscounted value of GBP2.3 million were converted into 628,333 common shares of Intertain. Additionally, during the nine months ended 30 September 2017 (and following the completion of the plan of arrangement), debentures at an undiscounted value of GBP1.0 million were converted into 288,165 ordinary shares of Jackpotjoy plc.
Share options
The share option plan (the "Share Option Plan") was approved by the Board of Directors on
5 September 2016. Upon completion of the plan of arrangement, all options over common shares of Intertain under Intertain's stock option plan were automatically exchanged for options of equivalent value over ordinary shares of Jackpotjoy plc on equivalent terms and subject to the same vesting conditions under Intertain's share option plan. The strike price of each grant has been converted from Canadian dollars to pound sterling at the foreign exchange rate of 0.606, being the exchange rate at the date of the plan of arrangement. Following the grant of the replacement options, no further options were, or will be, granted under the Share Option Plan.
During the nine months ended 30 September 2017, nil stock options were granted, 152,656 stock options were exercised, 13,000 stock options were forfeited, and nil stock options expired.
During the three and nine months ended 30 September 2017, the Group recorded GBP0.3 million and GBP1.2 million, respectively (2016 - GBP1.0 million and GBP1.5 million, respectively) in share-based compensation expense with a corresponding increase in share-based payment reserve.
Long-term incentive plan
On 24 May 2017, Jackpotjoy plc granted awards over ordinary shares under the Group's long-term incentive plan ("LTIP") for key management personnel. The awards (i) will vest on the date on which the Board of Directors determines the extent to which the performance condition (as described below) has been satisfied, and (ii) are subject to a holding period of two years beginning on the vesting date, following the end of which they will be released so that the shares can be acquired.
The performance condition as it applies to 50% of each award is based on the Group's total shareholder return compared with the total shareholder return of the companies constituting the Financial Times Stock Exchange 250 index (excluding investment trusts and financial services companies) over three years commencing on 25 January 2017 ("TSR Tranche"). The performance condition as it applies to the remaining 50% of the award is based on the Group's earnings per share ("EPS") in the last financial year of that performance period ("EPS Tranche") and vests as to 25% if final year EPS is 133.5 pence, between 25% and 100% (on a straight-line basis) if final year EPS is more than 133.5 pence but less than 160 pence, and 100% if final year EPS is 160 pence or more.
Each award under the LTIP is equity-settled and LTIP compensation expense is based on the award's estimated fair value. The fair value has been estimated using the Black-Scholes model for the EPS Tranche and the Monte Carlo model for the TSR Tranche.
During the three and nine months ended 30 September 2017, the Group recorded GBP0.1 million (2016 - GBPnil) in LTIP compensation expense with a corresponding increase in share-based payment reserve.
18. Contingent Liabilities
Indirect taxation
Jackpotjoy plc companies may be subject to indirect taxation on transactions that have been treated as exempt supplies of gambling, or on supplies that have been zero rated where legislation provides that the services are received or used and enjoyed in the country where the service provider is located. Revenues earned from customers located in any particular jurisdiction may give rise to further taxes in that jurisdiction. If such taxes are levied, either on the basis of current law or the current practice of any tax authority, or by reason of a change in the law or practice, then this may have a material adverse effect on the amount of tax payable by the Group or on its financial position. Where it is considered probable that a previously identified contingent liability will give rise to an actual outflow of funds, then a provision is made in respect of the relevant jurisdiction and period impacted. Where the likelihood of a liability arising is considered remote, or the possible contingency is not material to the financial position of the Group, the contingency is not recognised as a liability at the balance sheet date. As at 30 September 2017, the Group had recognised GBPnil liability (31 December 2016 - GBPnil) related to potential contingent indirect taxation liabilities.
[1] This release contains non-IFRS financial measures, which are noted where used. For additional details, including with respect to the reconciliations from these non-IFRS financial measures, please refer to the information under the heading "Note Regarding Non-IFRS Measures" on page 4 of this release and Note 4 - Segment Information of the unaudited interim condensed consolidated financial statements on pages 19 through 23 of this release.
[2] Per share figures are calculated on a diluted weighted average basis using the IFRS treasury method.
[3] Adjusted net debt consists of existing term loan, convertible debentures, incremental bond issuance, non-compete clause payout, contingent consideration liability and the fair value of the currency swap less non-restricted cash.
[4] Adjusted net leverage ratio consists of existing term loan, convertible debentures, incremental bond issuance, non-compete clause payout, contingent consideration liability and the fair value of the currency swap less non-restricted cash divided by LTM to 30 September 2017 Adjusted EBITDA of GBP111.0 million.
[5] For additional details, please refer to the information under the heading "Key performance indicators" on pages 9 and 10 of this release.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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