Probability Share Discussion Threads

[investmentguru] 25/7/2008 11:11

RNS Number : 7590Z
Probability plc
24 July 2008

Probability plc / Index: AIM / Epic: PBTY / Sector: Gaming

24 July 2008

Probability plc ('the Company')

Final Results

Transformational year - cash generative ahead

Probability plc, the AIM quoted mobile phone gambling specialist, announces its audited results for the year ended 31 March 2008.

Financial Highlights

* 152% increase in net gaming revenues to £3.16m (2007: £1.25m)

* Gross operating margin increased to 75% (2007: 46%)*

* Full year operating loss reduced by 70% to £1.17m, in line with management expectations (2007: £3.88m)

* Cash generative going forward, following maiden quarterly operating profit in third quarter

* Raised £1.69m net of expenses through placing to IPGL Ltd in February 2008 for investment in accelerated growth

* Net cash and equivalents at 31 March 2008: £2.5m

* Loss per share reduced by 71% to 7.07p per share (2007: equivalent loss per share 24.37p)

Operational Highlights

* Doubled customer base, adding over 160,000 new players to flagship "LadyLuck's" mobile Casino, Bingo and Slots service - a new customer is now added every minute

* Established direct distribution through agreements with Orange, Three and Vodafone

* Exclusive deal to pre-install a link to LadyLuck's on 2m new Three network handsets during 2008

* White label contracts with News Corporation ("The Sun" and "News Of The World" mobile Casino and Bingo), Rank Group plc ("Blue Square" and "Mecca") providing incremental revenues

* Successful introduction of VIP service to LadyLuck's, already attracting customers with lifetime values in excess of £25,000 each so far. First significant VIP customer win in January 2008 when a player won £211,000 playing Blackjack on his mobile phone

* Developed first real-money gambling game for iPhone

* Licensing deal with Paramount Pictures to exclusively produce mobile gambling games based on classic movies, King Creole, Grease and The Italian Job

* Continued game development with 20 real-money gambling games now available to customers, supported on around 5,000 different types of mobile phone

* Successful renewal of GamCare social responsibility certification

Charles Cohen, Chief Executive Officer, said, "2007 was a transformational year for Probability. We started loss making and finished profitable, well capitalised, with improved margins and significant momentum to carry us into what we confidently expect to be our first fully profitable financial year.

As today's results show, the business delivered a 152% increase in net gaming revenues whilst keeping overheads in check and, on schedule, began making profits on a monthly basis during the second half. We also doubled our customer base through a focussed strategy of direct acquisition on mobile and partnerships with network operators.

The operating loss of £1.17m, stated under IFRS, is in line with management expectations. We consider the underlying operational performance of the business to have been within the range of market expectations, although headline reporting has been impacted by the conversion to IFRS - for example, revenue recognition has moved from gross wagers to net win, in line with normal practice - and by discretionary items including a full write down of intangible assets due to restructuring earlier in the year.

Most importantly we have shown beyond any doubt this year the viability of the mobile gambling business model. Consumers are happy to spend money gambling on their mobile phones. They can be acquired economically with the right marketing and relationships, and they are available to us in increasingly large numbers. Mobile gambling is set to be a mass market, popular form of entertainment and Probability is at the forefront. Best of all, most of these customers are not existing on-line gamblers, but completely new to the sector. We believe that we have the right formula to attract the broadest range of these customers to our service.

As we recently indicated in our first quarterly KPI statement for the new financial year, we continue to grow our revenues even in these difficult economic times and, with our rate of customer acquisition increasing, we have every reason to be confident of a very successful and profitable year ahead."

[rolo7] 16/7/2008 19:43

back to seasonal stuff also euro 2008 and wimbledon could have affected game play a bit in june. these revenue/turnover figures cheered me up.
2004 2005 2006 2007 2008
£593 63,246 833,459 11,941,800 ?? (net gaming income in 07/08 =3.2million)

[the analyst] 16/7/2008 17:35

I guess that as gross revenue increases, the volatility of net revenue will drop, making the company easier to value. If the numbers in Q1 were due to some big winners, it is surprising they didn't mention that in the last update. The gaming companies are usually quite quick to point that sort of thing out to investors.

[apeters1] 16/7/2008 17:32

To be honest I think net revenue for a gaming business is always going to fluctuate when there are winners -that's probably what was behind the smaller than usual increase, esp. given the fast addition of new players.
The shares have dropped off today on small volumes - sadly this is the case across the small cap sector - for me it means opportunities to buy. I haven't seen a research note, but I've been told the broker has given PBTY a 110p target.

[the analyst] 16/7/2008 17:31

Hopefully you seasonal theory holds true, rolo7. As you say, revenue is really essential to getting to grips with the numbers. Results will be interesting and should help shed some light on the current situation.

[rolo7] 16/7/2008 17:09

analyst you make a good point about slower trading throught Q1, my guess is its lighter outsider later in may/june hence start of april was good/seasonal thing. Maybe someone had a big win again like the 200k win in feb thats would explain why growth slowed. We really need to show turnover figures.
A massive tree shake someone sold a few thousand shares 1st trade of the day and get 42p for them but price doesnt drop any more after more sells later. results tommorrow?

[the analyst] 16/7/2008 12:35

That's quite some drop today, I wonder if there is a big sell going through?

Got me interested in buying again, so have just looking back at past KPI statements. On 22nd April they said that 'Trading in the three weeks since the end of the quarter has been very strong.'

Given the figures at that time, if they were saying that first three weeks of the quarter were 'very strong', you would expect that to mean a continued 25%+ rise in revenue for that period. So, when did this very strong growth turn into very weak growth such that the overall growth for the quarter dropped to 7.5%? Is there a possibility that the growth turned to negative growth towards the end of the quarter?

My worry, from looking at the figures, is that there may have been a sudden downturn in June. I'm interested in buying, but I'm waiting for the next KPIs as there seems to be something not quite right about the sudden drop, given that trading was reportedly so strong at the beginning of the quarter

[techinvestforum] 15/7/2008 20:09

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[loryd] 10/7/2008 11:49

Net revenue in qtr 1 2007-2008 was only up 9% from the previous qtr (ag 7.5% this time), so the seasonal argument makes sense. Players were up 14% last year against 22.2% this year(though they say 19% so maybe they've adjusted them, I don't know). The shares didn't get hammered which might suggest that things were in line.

I'm fairly new to the stock and won't claim any great insights other than they don't have debt or acquisition fever which is a comfort. There is huge potential in the market and they have a good start though it will get competitive. The rest is down to luck and judgement, but unless growth tails off quickly the price doesn't look too bad even if all Aim stocks are vulnerable to small retail selling.

[rolo7] 09/7/2008 18:51

Kpi numbers a little dissapointing today I feel apart from the number of users which is exceptional! In terms of good news look at the cash balance increase from 2.8m end q4 07 to 3 milion end q1 08. So at least pbty is generating cash even for a £12million market cap. The three mobile link deal was annouced in the middle of Q1 so new users would not have had much time add cash to there accounts. In Q4 results pbty stated results in 2008/09 could be above expectations if growth continues which it had in Q1. Bad news it looks like these new paramount games are being delayed to Q2 unlike perviously stated being out in Q1. With Q1 being march-june its must be a seasonal thing as its lighter outdoors later also I feel competition with the N. Wii being more avaiable now in shops.
Analyst: the games are quite fun but could getting boring after a while try them

as for the placing money mainly used on advertisment, I have seen tv adverts on the dave tv channel some weekends.

[the analyst] 09/7/2008 18:18

Maybe. It could just be that people have stopped spending, though. I guess we will get a bit more info about current trading in the results later this month.

A lot of the future growth seems dependent on them getting some better games out in time for the launch of the 3G phones with NPT links pre--installed and for that marketing effort to be well-received.

Did we ever find out exactly what the money raised recently was actually for? that is, other than the vague statement we had before:

"The net proceeds of the placing will be used to provide working capital for the
Company to accelerate the growth of its proprietary mobile gambling services"

[wjccghcc] 09/7/2008 18:00

I suspect it might be a seasonal thing for the post-christmas quarter.

[the analyst] 09/7/2008 12:48

KPIs were released today. Recent growth was not quite as rapid as I was expecting. Net gaming revenues up 7.5% in the quarter. The rate is down from 25% growth last time around. At least it still growth, rather than decline, though

Just to compare the percentage growth rates with the last four quarters:quite significantly

Q1 2008: 7.5%
Q4 2007: 25%
Q3 2007: 38%
Q2 2007: 34%

Given that the customer acquisition rates are still high, my guess is that people are playing in a transient fashion. Perhaps at the moment the games are just not good enough or entertaining enough to make players want to come back to them again and again?

[investmentguru] 02/7/2008 21:07

Results were out on the 3rd of July last year, so any day now....

[rolo7] 24/6/2008 14:29

massive tree shake today mms are taking the mickey results should be out early july. so much potential here as already stated in last kpi.

[andymarks] 12/6/2008 11:37

There is an interview of Charles Cohen of Probability on Trading Places on www.sharecrazy.com. Enjoy it.

[investmentguru] 03/6/2008 21:22

I think the really big gains in this share could be in the next 1-3 year period, when mobile gaming takes off in a big way. Probability's market cap is so small that it could increase by a factor of 10 and only be valued at £100m. Potentially very exciting.

IG

[rolo7] 03/6/2008 15:40

cheers IG i brought 1.6k today glad I am not the only one that thinks this could rise considering it has already put out a statement that trading has a possiblity of being greater than expectiation.

[investmentguru] 03/6/2008 13:19

Bought 7k today - great long term punt.

IG

[rolo7] 03/6/2008 12:43

surprised pbty isnt being much talked about, there was tv adverts on the dave freeview channel over the weekend to get even more users and www.ladylucks.co.uk website has a new look lately.

[rambutan2] 19/5/2008 12:39

also, it was ABN who picked up that 1.96m trade the other day, which takes them straight to being a 9% holder. (and note that according to my screen they bought them at 67p)

[rambutan2] 19/5/2008 12:34

in the Indy today...

Film deal is just the job for mobile games firm

It cannot be terribly easy working with a giant of the movie industry like Paramount. But when an opportunity emerges for an AIM-listed company like Probability, with a market capitalisation of about £11m, they really cannot turn it down, no matter how testing. Probability is a mobile phone gaming group, with a range of slot machine, bingo and other games played over customers' cellular phones. The recent past has been tricky, given the problems faced by online gambling groups in the US. Legislation that in effect ended UK operators' presence there came into force a week after the company's initial listing. But now it has landed agreements with Orange, part of France Telecom, andThe Sun newspaper, and last month Michael Spencer, chief executive of Icap, invested £1.7m in the group. Last week it signed the deal with Paramount, for a three-year licence to brand mobile slot machine games with three ofthe filmmaker's mostfamous releases; Grease, The Italian Job and Elvis's King Creole, the first content being available to the public next month.It is hard to get thechief executive, Charles Cohen, to give details of the deal; Paramount is sensitive about allowing the finer points of their agreements to see the light of day. But after a tricky start to life as a listed group, Probability is getting closer to the jackpot.

[doowle] 17/5/2008 13:43

10 bets a second is basically about 20-30 people playing.

[rolo7] 15/5/2008 15:07

myoure1 the trading statement seems great to me taking bets nearly 10 a second at times and they even stated that trading would be above expectation for this year as they had a great three week in april, maybe the sunny weather we had have affected game play. A big tree shake I think, I hope 50p holds as support level, deal with paramount looks interesting. I bet the market wasnt happy with the big player win of 200K and that why ipgl brought shares to cover this.

[myoure1] 15/5/2008 09:02

Anyone got any ideas why we are seeing such large sells going through? The RNS on 13th seemed to be good news, what do people know that I don't?