TIDMGMR
RNS Number : 6483W
Gaming Realms PLC
27 April 2021
Gaming Realms plc
(the "Company" or the "Group")
Annual Results 2020
Transformational year with strong momentum continuing into 2021
underpinned by growing U.S. footprint
Revenue grows by 66% and Licensing strategy delivers adjusted
EBITDA 1 profit GBP3.3m 2
Gaming Realms plc (AIM: GMR), the developer and licensor of
mobile focused gaming content, announces its annual results for the
year ended 31 December 2020 and Q1 highlights for 2021.
Gaming Realms' licensing strategy enabled the Group to deliver
profitable growth during FY20, as it distributed its extensive
games portfolio to an increasing number of operators in key global
markets.
2020 Financial Highlights:
-- Revenue increased by 66% to GBP11.4m (2019: GBP6.9m) for the year
o Licensing revenue increased 81% to GBP7.5m (2019: GBP4.1m)
o Social publishing revenue increased 41% to GBP3.9m (2019:
GBP2.8m)
-- Adjusted EBITDA before share option and related charges of GBP3.3m (2019: loss of GBP0.2m)
-- Adjusted EBITDA from continuing operations of GBP2.9m (2019: loss of GBP0.3m)
o Licensing segment generated GBP3.7m adjusted EBITDA (2019:
GBP1.4m)
o Social publishing segment generated GBP1.4m adjusted EBITDA
(2019: GBP0.8m)
o Head office costs reduced to GBP2.2m (2019: GBP2.4m) through
ongoing cost control
-- Loss for the year significantly reduced to GBP1.5m (2019: GBP5.4m)
2020 Operational Highlights:
-- Portfolio grew to 44 proprietary games on the Group's Remote Game Server ("RGS") (2019: 34)
-- Launched with 26 new partners for Slingo Originals content,
including 888casino.com, DraftKings, Paddy Power Betfair and Sky
Betting & Gaming
-- Signed licensing deals with NetEnt, Playtech, Inspired
Entertainment and King Show Games to build new innovative Slingo
games
-- Unique players in licensing business increased by 140%
-- Submitted licence applications in order to enter the
Pennsylvania and Michigan iGaming markets
-- Prepared for launch in the Italian market
Q1 2021 Highlights:
-- Licensing revenues increased 60% in Q1 2021 to GBP2.1m (Q1 2020: GBP1.3m)
-- Entered the Italian gaming market with Goldbet and Sisal Group
-- Obtained provisional supplier licence in Michigan and expect to launch imminently
-- Signed multi-State deals with BetMGM, Golden Nugget and
Betfair/Fanduel, as well as two distribution deals with GAN for the
U.S. and European market
1 EBITDA is profit before interest, tax, amortisation and
impairment expenses and is a non-GAAP measure. The Group uses
EBITDA and adjusted EBITDA to comment on its financial performance.
Adjusted EBITDA is EBITDA excluding non-recurring material items
which are outside the normal scope of the Group's ordinary
activities. Adjusting items include costs arising from a
fundamental restructuring of the Group's operations, management
restructuring costs, relocation costs, impairment of financial
assets and sales proceeds on business asset disposals.
2 Adjusted EBITDA before share option and related charges.
Outlook
The strong momentum seen in FY20 has continued into 2021, with
the Group continuing to focus on expanding internationally,
securing additional partnerships and creating new games to drive
growth. Gaming Realms successfully launched its Slingo content in
the Italian regulated market, and will launch in Michigan, its
second U.S. State in May. The Company expects to be granted a
supplier licence in Pennsylvania and launch in the first half of
the year. With 9 new partners secured to date in 2021, together
with the recent launch of Slingo Starburst in collaboration with
NetEnt, the Board has every confidence in the strategy being
pursued and in the Group's prospects for the year ahead. The
Company is trading marginally ahead of Board expectations.
Commenting on the results, Michael Buckley, Executive Chairman,
said:
"The Group made excellent progress in FY20, producing a maiden
adjusted EBITDA profit of GBP3.3m and increasing revenue by 66%.
This underscores the success of the Company's strategy to focus on
its core licensing business segment, as well as its social
publishing division.
"By securing 26 new licensing and distribution partners
throughout the year, of which many were Tier 1 operators, and
adding 10 new games to our hugely popular Slingo portfolio, we
successfully increased the number of unique players playing our
games by 140% and saw increased international demand for our
content.
"We remain committed to the expansion of our global footprint,
particularly in the U.S. and European regulated markets, through
increasing and strengthening our network of distributors, operators
and licensors. With further planned launches in the USA, Denmark,
Spain, Canada and Portugal, and a strong pipeline of new and
exciting branded Slingo games, the Board is confident in the future
prospects of the business and looks forward to keeping its
shareholders updated on progress."
Enquiries
Gaming Realms plc 0845 123 3773
Michael Buckley, Executive
Chairman
Mark Segal, CFO
Peel Hunt LLP - NOMAD and broker 020 7418 8900
George Sellar
Andrew Clark
Will Bell
Yellow Jersey 020 3004 9512
Charles Goodwin
Annabel Atkins
About Gaming Realms
Gaming Realms creates and licenses innovative games for mobile,
with operations in the UK, U.S. and Canada. Through its unique IP
and brands, Gaming Realms is bringing together media, entertainment
and gaming assets in new game formats. The Gaming Realms management
team includes accomplished entrepreneurs and experienced executives
from a wide range of leading gaming and media companies.
Executive Chairman's Statement
The Group made excellent progress during the year, increasing
revenues by 66% to GBP11.4m (2019: GBP6.9m) and producing a maiden
adjusted EBITDA profit before share option and related charges of
GBP3.3m (2019: loss of GBP0.2m). This underscores the success of
the revised strategy we set out at the beginning of 2020 to focus
on our core licensing business segment, as well as delivering
growth in our social publishing division.
Our focus on content licensing resulted in 81% revenue growth in
our licensing business to GBP7.5m (2019: GBP4.1m). We are seeing
strong momentum within this business, with increased international
demand for our Slingo Originals portfolio. With growing
distribution via our proprietary Remote Game Server ("RGS"), we
have been able to increase our EBITDA margin within the licensing
segment to 50% (2019: 34%), resulting in EBITDA of GBP3.7m (2019:
GBP1.4m).
Licensing business highlights:
-- Increased our library of proprietary games by 10 to 44 games at year-end.
-- Went live with 26 new partners during the year, all of which
have licensed our Slingo Originals content.
-- Went live with a number of "Tier 1" partners through our
Scientific Games distribution channel.
-- Increased our unique players in the year by 140% to 2.28m (2019: 0.95m)
-- Signed deals with NetEnt, King Show Games and Inspired
Entertainment for new branded Slingo games.
-- Maintained in excess of a 3.5% market share of sales in New
Jersey, USA, from online slot products throughout the year. During
2020, the New Jersey online casino market grew by 102%.
We grew our social publishing business in the year, reversing
the trends of previous years. Revenues grew 41% to GBP3.9m (2019:
GBP2.8m), the result of both publishing our Slingo Originals
portfolio, as well as the development of new tournament and
promotional features on the platform. With increasing margins,
EBITDA has grown to GBP1.4m (2019: GBP0.8m). As a result, the
division produced a cash contribution to the Group.
2020 was a challenging year with the difficulties imposed by
COVID-19 restrictions. The highly pleasing financial results and
groundwork for the future years would not have been achieved
without management and staff showing excellent dedication and
adaptability in the challenging circumstances. I should like to
thank them all for their efforts which are reflected in these
Financial Statements.
Outlook for 2021
We are continuing our focus on the following areas:
-- International expansion - particularly in the US and European regulated markets
-- Adding new distributors, operators and licensors
-- Further penetration with existing distributors and operators driven by new games
The Group has made encouraging progress so far in 2021,
obtaining a supplier licence in Michigan and expecting to be live
imminently. We are committing a lot of resources to growing the
U.S. iGaming market and expect to obtain a supplier license and go
live in Pennsylvania in the first half of the year. As a result, we
are well prepared to take advantage of the growth of iGaming within
the U.S., and have signed several multi-State deals and direct
integration agreements with the largest operators, including Rush
Street Interactive, DraftKings and BetMGM. We have also signed a
distribution agreement with GAN for the U.S. and European markets.
In January of this year, we had a successful launch in the Italian
regulated market and are encouraged by early trading. We have
further launches planned in the regulated markets of Denmark,
Spain, Canada and Portugal.
We have also recently launched Slingo Starburst, through our
licencing agreement with NetEnt, which has proven extremely popular
with our players and partners internationally. It has been our most
successful launch to date in both unique player numbers and revenue
generated in its first month.
With regards to this year's trading, I am pleased to inform
shareholders that our licensing revenues for the first quarter of
this year are 60% ahead of the same period in 2020, and we are
operating slightly ahead of Board expectations. With these early
results, and the imminent launches in both Michigan and
Pennsylvania, the Board has every confidence in the strategy being
pursued and its expectations for this year and beyond.
COVID-19
Our top priority in response to the pandemic has been the health
and welfare of our employees and partners as mentioned above. Our
team has demonstrated incredible commitment and focus to maintain
complete business continuity and we will continue to support them
as we move to a more flexible model post COVID-19.
Michael Buckley
Executive Chairman
Financial Review
Overview
In 2020 the Group was able to focus on successfully executing
its core strategy of scaling the licensing business.
For the year, the Group delivered adjusted EBITDA on a
continuing basis of GBP2.9m (2019: GBP0.3m adjusted EBTIDA loss).
This has resulted in a significant reduction in the pre-tax loss of
GBP1.6m compared with the previous year (2019: GBP4.7m loss from
continuing operations).
In the prior year, the Group completed its disposal of the real
money B2C assets and realised a GBP0.8m profit on disposal. The B2C
RMG segment is presented as a discontinued operation in the
comparative 2019 results. There were no such asset disposals during
2020.
The table below sets out the split of revenue and adjusted
EBITDA on a continuing and discontinued operations basis:
Continuing operations Discontinued
---------------------- ----------------------------------------------------
Social Total Real money Total
Licensing Publishing Head office continuing gaming 2020
2020 GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
---------------------- ---------- ------------ ------------ ------------ ------------- ---------
Revenue 7,515 3,886 2 11,403 - 11,403
Marketing expense (18) (243) (94) (355) - (355)
Operating expense (1,071) (1,161) - (2,232) - (2,232)
Administrative
expense (2,610) (1,090) (1,804) (5,504) - (5,504)
Share option
and related charges (71) (7) (294) (372) - (372)
---------------------- ---------- ------------ ------------ ------------ ------------- ---------
Adjusted EBITDA 3,745 1,385 (2,190) 2,940 - 2,940
---------------------- ---------- ------------ ------------ ------------ ------------- ---------
Discontinued
Continuing operations operations
---------------------- ----------------------------------------------------
Social Total Real money Total
Licensing Publishing Head office continuing gaming 2019
2019 GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
---------------------- ---------- ------------ ------------ ------------ ------------- ---------
Revenue 4,147 2,758 106 7,011 6,002 13,013
Marketing expense - (130) (82) (212) (706) (918)
Operating expense (773) (855) 1 (1,627) (4,908) (6,535)
Administrative
expense (1,970) (1,001) (2,446) (5,417) (1,965) (7,382)
Share option
and related charges - - (10) (10) - (10)
---------------------- ---------- ------------ ------------ ------------ ------------- ---------
Adjusted EBITDA 1,404 772 (2,431) (255) (1,577) (1,832)
---------------------- ---------- ------------ ------------ ------------ ------------- ---------
Continuing operations
Year-on-year continuing revenue increased 66% to GBP11.4m
(GBP2019: GBP6.9m) due to the strong performance of both the
licensing and social publishing segments in the year.
Continuing operations generated adjusted EBITDA of GBP2.9m
(2019: GBP0.3m loss) and GBP3.3m before share option and related
charges (2019: GBP0.2m loss).
EBITDA generated from continuing operations was GBP2.0m (2019:
GBP0.8m loss) including restructuring costs of GBP0.5m (2019:
GBP0.3m) and impairment of assets of GBP0.4m (2019: GBP0.2m).
Operating expenses for the year increased to GBP2.2m (2019:
GBP1.5m) principally as a result of costs directly associated with
the revenue growth in both the licensing and social publishing
segments.
Adjusted administrative expenses increased slightly to GBP5.5m
(2019: GBP5.4m) due to increased staff costs in the licensing
segment in order to drive the revenue growth, offset by head office
cost savings compared to 2019.
Licensing
Licensing segment revenues increased 81% to GBP7.5m (2019:
GBP4.1m) due to the successful implementation of the Group's
strategy of growing both the games content and distribution to an
increased number of operators in Europe and the US.
During 2020, the Group went live with an additional 26 partners
in Europe, New Jersey and Latin America. After the year-end, the
Group went live with a further 9 new operators, including Sisal and
Goldbet in Italy, which represents a new regulated market for the
Group.
10 new Slingo games were launched to the market during 2020,
including Slingo Fluffy Favorites and Slingo Reel King.
Revenues from the U.S. market continue to be a focus for the
segment, and in 2020 increased to GBP2.4m (2019: GBP1.7m),
representing 32% of total licensing revenues (2019: 40%). This
market is expected to gain further prominence for the Group given
the recently announced successful license application in Michigan
and pending application in Pennsylvania.
Social publishing
The Group's social publishing business delivered strong growth
in 2020, with revenues increasing to GBP3.9m (2019: 2.8m). With
continued cost controls in place, this resulted in the segment
delivering GBP1.4m adjusted EBITDA for the year (2019:
GBP0.8m).
Marketing expenses of GBP0.2m were incurred (2019: GBP0.1m) in
order to drive player activity and revenues.
Discontinued operations
Discontinued operations in the prior year relate only to B2C
RMG.
In July 2019 the Group concluded its transaction with River Tech
plc ("River"), which finalised the Group's strategy of withdrawing
from the UK real money B2C market to focus on game development and
licensing activities. The Group recorded a profit on disposal of
these assets of GBP0.8m in the prior year.
The Group recorded a loss after tax from discontinued operations
of GBP0.8m in the prior year, comprising GBP0.7m profit on disposal
of assets, GBP0.2m share of loss of associate prior to disposal,
and incurred trading losses until disposal of GBP1.3m.
Cashflow, Balance Sheet and Going Concern
Net cash decreased by GBP0.5m in 2020 (2019: increased by
GBP1.0m) to GBP2.1m at 31 December 2020 (2019: GBP2.6m). The
current year reduction in net cash was largely driven through the
GBP2.4m of development costs capitalised in the year (2019:
GBP2.7m) offset by the GBP2.0m cash inflow from operating
activities (2019: GBP1.5m outflow).
After the year-end, on 1 April 2021 the Group received GBP1.0m
from River for full and final settlement of the deferred
consideration receivable, certain other receivable balances, and
various legal proceedings and out of court disputes between the
parties.
Net assets totaled GBP10.9m (2019: GBP12.1m).
The prolonged COVID-19 pandemic has brought significant
uncertainty to global markets and economies, including the real
money gambling sector. The Directors have performed qualitative and
quantitative assessments of the associated risks facing the
business and its ability to meet its short and medium-term
forecasts. The forecasts were subject to stress testing to analyse
the reduction in forecast revenues required to bring about
insolvency of the Company unless capital was raised. In such cases
it is anticipated that mitigation actions, such as reduction in
overheads could be implemented to stall such an outcome.
The Directors confirm their view that they have carried out a
robust assessment of the emerging and principal risks facing the
business. As a result of the assessment performed, the Directors
consider that the Group has adequate resources to continue its
normal course of operations for the foreseeable future.
Dividend
During the year, Gaming Realms did not pay an interim or final
dividend. The Board of Directors are not proposing a final dividend
for the current year.
Corporation and deferred taxation
The Group received GBP0.05m (2019: GBP0.1m) in research and
development credits in Canada. A current year tax charge of GBP0.1m
(2019: GBP0.1m) principally relates to taxation in overseas
jurisdictions in which the Group operates. The Group also
recognised an unwind of deferred tax of GBP0.1m (2019: GBP0.1m)
which arose on prior year business combinations.
Mark Segal
Chief Financial Officer
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2020
2020 2019
Continuing GBP GBP
----------------------------------------- ------------------------------------ ----------------------------------
Revenue 11,403,486 6,882,741
Marketing expenses (355,394) (212,473)
Operating expenses (2,232,032) (1,498,294)
Administrative expenses (5,971,970) (5,743,747)
Impairment of financial asset (449,422) (200,000)
Share option and related charges (372,344) (9,972)
Adjusted EBITDA - continuing 2,939,522 (255,116)
Impairment of financial asset (449,422) (200,000)
Restructuring expenses (467,776) (326,629)
EBITDA - continuing 2,022,324 (781,745)
------------------------------------
Amortisation of intangible assets (2,817,043) (2,982,845)
Depreciation of property, plant
and equipment (216,323) (204,714)
Impairment of property, plant (22,876) -
and equipment
Finance expense (882,032) (842,518)
Finance income 333,664 146,661
------------------------------------------ ------------------------------------ ----------------------------------
Loss before tax (1,582,286) (4,665,161)
Tax credit 48,229 31,335
------------------------------------------ ------------------------------------ ----------------------------------
Loss for the financial year
- continuing (1,534,057) (4,633,826)
Loss for the financial year
- discontinued - (783,451)
------------------------------------------ ------------------------------------ ----------------------------------
Loss for the financial year
- total (1,534,057) (5,417,277)
------------------------------------------ ------------------------------------ ----------------------------------
Other comprehensive income
Items that will or may be reclassified
to profit or loss:
Exchange loss arising on translation
of foreign operations (226,666) (305,671)
------------------------------------------ ------------------------------------ ----------------------------------
Total other comprehensive income (226,666) (305,671)
------------------------------------------ ------------------------------------ ----------------------------------
Total comprehensive income (1,760,723) (5,722,948)
------------------------------------------ ------------------------------------ ----------------------------------
Loss attributable to:
Owners of the parent (1,527,964) (5,341,669)
Non-controlling interest (6,093) (75,608)
------------------------------------ ----------------------------------
(1,534,057) (5,417,277)
----------------------------------------- ------------------------------------ ----------------------------------
Total comprehensive income attributable
to:
Owners of the parent (1,754,630) (5,647,340)
Non-controlling interest (6,093) (75,608)
------------------------------------------ ------------------------------------ ----------------------------------
(1,760,723) (5,722,948)
----------------------------------------- ------------------------------------ ----------------------------------
Loss per share Pence Pence
Basic and diluted - continuing (0.54) (1.60)
Basic and diluted - discontinued - (0.28)
------------------------------------------ ------------------------------------ ----------------------------------
Basic and diluted - total (0.54) (1.88)
------------------------------------------ ------------------------------------ ----------------------------------
Consolidated Statement of Financial Position
As at 31 December 2020
31 December 31 December
2020 2019
GBP GBP
-------------------------------- ------------- -------------
Non-current assets
Intangible assets 11,137,123 11,702,553
Other investments 401,291 289,511
Property, plant and equipment 560,793 760,763
Finance lease asset - 157,166
Other assets 150,528 150,885
--------------------------------- ------------- -------------
12,249,735 13,060,878
-------------------------------- ------------- -------------
Current assets
Trade and other receivables 2,343,739 1,850,863
Deferred consideration 972,554 1,298,663
Finance lease asset 140,058 126,354
Cash and cash equivalents 2,105,167 2,626,837
--------------------------------- ------------- -------------
5,561,518 5,902,717
Total assets 17,811,253 18,963,595
--------------------------------- ------------- -------------
Current liabilities
Trade and other payables 1,943,714 2,125,257
Lease liabilities 343,859 256,527
--------------------------------- ------------- -------------
2,287,573 2,381,784
-------------------------------- ------------- -------------
Non-current liabilities
Deferred tax liability 320,913 457,492
Other Creditors 3,304,870 3,126,673
Derivative liabilities 627,000 272,000
Lease liabilities 340,175 646,122
--------------------------------- ------------- -------------
4,592,958 4,502,287
-------------------------------- ------------- -------------
Total liabilities 6,880,531 6,884,071
--------------------------------- ------------- -------------
Net assets 10,930,722 12,079,524
--------------------------------- ------------- -------------
Equity
Share capital 28,664,731 28,442,874
Share premium 87,258,166 87,198,410
Merger reserve (67,673,657) (67,673,657)
Foreign exchange reserve 1,379,116 1,605,782
Retained earnings (38,768,257) (37,570,601)
--------------------------------- ------------- -------------
Total equity attributable to
owners of the parent 10,860,099 12,002,808
--------------------------------- ------------- -------------
Non-controlling interest 70,623 76,716
--------------------------------- ------------- -------------
Total equity 10,930,722 12,079,524
--------------------------------- ------------- -------------
Consolidated Statement of Cash Flows
For the year ended 31 December 2020
2020 2019
GBP GBP
--------------------------------------------- ------------ ------------
Cash flows from operating activities
Loss for the financial year (1,534,057) (5,417,277)
Adjustments for:
Depreciation of property, plant and
equipment 216,323 211,055
Impairment of property, plant and 22,876 -
equipment
Amortisation of intangible fixed assets 2,817,043 2,982,845
Impairment 449,422 200,000
Finance income (333,664) (420,512)
Finance expense 882,032 842,518
Income tax credit (48,229) (31,335)
Exchange differences (54,940) 41,336
(Profit) / loss on disposal of property,
plant and equipment (1,000) 28,081
Profit on disposal of assets - (683,323)
Share of loss of associate - 157,307
Share based payment expense 330,308 9,972
(Increase) / decrease in trade and
other receivables (463,237) 1,330,674
Decrease in trade and other payables (233,543) (803,124)
Increase in other assets - (18,308)
Net cash flows from / (used in) operating
activities before taxation 2,049,334 (1,570,091)
---------------------------------------------- ------------ ------------
Net tax (paid) / received in the year (33,717) 73,424
---------------------------------------------- ------------ ------------
Net cash flows from / (used in) operating
activities 2,015,617 (1,496,667)
---------------------------------------------- ------------ ------------
Investing activities
Acquisition of property, plant and
equipment (30,143) (106,583)
Capitalised development costs (2,440,559) (2,680,289)
Proceeds from disposal of assets,
net of cash disposed of - 6,135,529
Costs related to asset disposal - (765,867)
Proceeds from disposal of property, 1,000 -
plant and equipment
Interest received 47 3,705
Finance lease asset - sublease receipts 163,324 120,507
---------------------------------------------- ------------ ------------
Net cash (used in) / from investing
activities (2,306,331) 2,707,002
---------------------------------------------- ------------ ------------
Financing activities
Receipt of deferred consideration - 385,000
Principal paid on lease liability (300,086) (252,376)
Issue of share capital on exercise 281,613 -
of options
Interest paid (225,516) (322,772)
---------------------------------------------- ------------ ------------
Net cash used in financing activities (243,989) (190,148)
---------------------------------------------- ------------ ------------
Net (decrease) / increase in cash
and cash equivalents (534,703) 1,020,187
Cash and cash equivalents at beginning
of year 2,608,455 1,550,141
Exchange gain on cash and cash equivalents 13,033 38,127
---------------------------------------------- ------------ ------------
Cash and cash equivalents at end of
year 2,086,785 2,608,455
---------------------------------------------- ------------ ------------
Consolidated Statement of Changes in Equity
For the year ended 31 December 2020
Total
Foreign to equity
Share Share Merger Exchange Retained holders Non-controlling Total
capital premium reserve Reserve earnings of parents interest equity
GBP GBP GBP GBP GBP GBP GBP GBP
---------------- ----------- ----------- ------------- ---------- ------------- ------------ ----------------- ------------
1 January 2019 28,442,874 87,198,410 (67,673,657) 1,911,453 (32,238,904) 17,640,176 152,324 17,792,500
---------------- ----------- ----------- ------------- ---------- ------------- ------------ ----------------- ------------
Loss for the
year - - - - (5,341,669) (5,341,669) (75,608) (5,417,277)
Other
comprehensive
income - - - (305,671) - (305,671) - (305,671)
---------------- ----------- ----------- ------------- ---------- ------------- ------------ ----------------- ------------
Total
comprehensive
income
for the year - - - (305,671) (5,341,669) (5,647,340) (75,608) (5,722,948)
---------------- ----------- ----------- ------------- ---------- ------------- ------------ ----------------- ------------
Contributions
by and
distributions
to owners
Share-based
payment on
share
options - - - - 9,972 9,972 - 9,972
31 December
2019 28,442,874 87,198,410 (67,673,657) 1,605,782 (37,570,601) 12,002,808 76,716 12,079,524
---------------- ----------- ----------- ------------- ---------- ------------- ------------ ----------------- ------------
1 January 2020 28,442,874 87,198,410 (67,673,657) 1,605,782 (37,570,601) 12,002,808 76,716 12,079,524
---------------- ----------- ----------- ------------- ---------- ------------- ------------ ----------------- ------------
Loss for the
year - - - - (1,527,964) (1,527,964) (6,093) (1,534,057)
Other
comprehensive
income - - - (226,666) - (226,666) - (226,666)
---------------- ----------- ----------- ------------- ---------- ------------- ------------ ----------------- ------------
Total
comprehensive
income
for the year - - - (226,666) (1,527,964) (1,754,630) (6,093) (1,760,723)
---------------- ----------- ----------- ------------- ---------- ------------- ------------ ----------------- ------------
Contributions
by and
distributions
to owners
Share-based
payment on
share
options - - - - 330,308 330,308 - 330,308
Exercise of
options 221,857 59,756 - - - 281,613 - 281,613
31 December
2020 28,664,731 87,258,166 (67,673,657) 1,379,116 (38,768,257) 10,860,099 70,623 10,930,722
---------------- ----------- ----------- ------------- ---------- ------------- ------------ ----------------- ------------
Notes to the Consolidated Financial Statements
For the year ended 31 December 2020
1. Accounting policies
General information
Gaming Realms Plc (the "Company") and its subsidiaries (together
the "Group").
The Company is admitted to trading on the Alternative Investment
Market (AIM) of the London Stock Exchange. It is incorporated and
domiciled in the UK. The address of its registered office is Two
Valentine Place, London, SE1 8QH.
The consolidated financial statements are presented in British
Pounds Sterling.
Basis of preparation
The Group financial statements have been prepared in accordance
with international accounting standards in conformity with the
requirements of the Companies Act 2006 and on a basis consistent
with those policies set out in our audited financial statements for
the year ended 31 December 2019.
The financial information set out in this document does not
constitute the Group's statutory accounts for the year ended 31
December 2020 or 31 December 2019.
Statutory accounts for the year ended 31 December 2019 have been
filed with the Registrar of Companies and those for the year ended
31 December 2020 will be delivered to the Registrar in due course;
both have been reported on by independent auditors. The independent
auditor's report for the year ended 31 December 2020 is
unmodified.
The independent auditor's reports on the Annual Report and
Accounts for the year ended 31 December 2020 and 31 December 2019
were unqualified and did not contain a statement under 498(2) or
498(3) of the Companies Act 2006.
Basis of consolidation
The Group financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(subsidiaries). Control is achieved when the Company is exposed, or
has rights, to variable returns from its involvement with the
investee and has the ability to affect those returns through its
power over the investee.
The results of subsidiaries acquired or disposed of during the
period are included in the Consolidated Statement of Comprehensive
Income from the effective date of acquisition up to the effective
date of disposal. Where necessary, adjustments are made to the
financial statements of subsidiaries to bring the accounting
policies used in line with those used by the Group.
All intra-Group transactions, balances, income and expenses are
eliminated on consolidation.
Going concern
The Group meets its day-to-day working capital requirements from
the cash flows generated by its trading activities and its
available cash resources.
The Group prepares cash flow forecasts and re-forecasts at least
bi-annually as part of the business planning process. The Directors
have reviewed forecast cash flows for the period to December 2023
and consider that the Group will have sufficient cash resources
available to meet its liabilities as they fall due for at least the
forthcoming 12 months from the date of the approval of the
financial statements. Given the economic uncertainty resulting from
the ongoing COVID-19 pandemic, these cash flow forecasts have been
subject to short- and medium-term stress testing, scenario
modelling and sensitivity analysis through to June 2022, which the
Directors consider sufficiently robust. Scenarios considered
include but are not limited to; failure to expand into new US
states during the forecast period, non-receipt of deferred
consideration due to the Group at the year-end and a significant
reduction in trading cash flows compared to Group forecasts. The
Directors note that in an extreme scenario, the Group also has the
option to rationalise its cost base including cuts to discretionary
capital, marketing and overhead expenditure. The Directors consider
that the required level of change to the Group's forecast cash
flows to give a rise to a material risk over going concern are
sufficiently remote.
Subsequent to the year-end, on 1 April 2021 the Group received
GBP1.0m from River in respect of the deferred consideration
receivable, certain other receivable balances and full and final
settlement of all legal proceedings and out of court disputes
between the parties. The Directors note that aside from ongoing
lease liabilities, the Group has no debt contractually repayable
before 31 December 2022.
Accordingly, these financial statements have been prepared on
the basis of accounting principles applicable to a going concern,
which assumes that the Group and the Company will realise its
assets and discharge its liabilities in the normal course of
business. Management has carried out an assessment of the going
concern assumption and has concluded that the Group and the Company
will generate sufficient cash and cash equivalents to continue
operating for the next 12 months.
Adoption of new and revised standards
New standards that have been adopted by the Group for the year
ended 31 December 2020, but have not had a significant impact on
the Group are:
-- Definition of a Business (Amendments to IFRS 3);
-- Interest Rate Benchmark Reform - IBOR 'phase 2' (Amendments
to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16);
-- COVID-19-Related Rent Concessions (Amendments to IFRS 16);
-- IAS 1 Presentation of Financial Statements and IAS 8
Accounting Policies, Changes in Accounting Estimates and Errors
(Amendment - Disclosure Initiative - Definition of Material);
and
-- Revisions to the Conceptual Framework for Financial Reporting.
There are a number of standards, amendments to standards, and
interpretations which have been issued by the IASB that are
effective in future accounting periods that the Group has decided
not to adopt early.
The following amendments are effective for the period beginning
1 January 2022:
-- Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37);
-- Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16);
-- Annual Improvements to IFRS Standards 2018-2020 (Amendments
to IFRS 1, IFRS 9, IFRS 16 and IAS 41); and
-- References to Conceptual Framework (Amendments to IFRS 3).
The Group is currently assessing the impact of these new
accounting standards and amendments.
Business combinations
On acquisition, the assets, liabilities and contingent
liabilities of a subsidiary are measured at their fair values at
the date of acquisition. Any excess of the cost of acquisition over
the fair values of the identifiable net assets acquired, including
separately identifiable intangible assets, is recognised as
goodwill. Any discount on acquisition, i.e. where the cost of
acquisition is below the fair value of the identifiable net assets
acquired, is credited to the Statement of Comprehensive Income in
the period of acquisition.
2. Adjusted EBITDA
EBITDA and adjusted EBITDA are non-GAAP measures and exclude
exceptional items, depreciation, and amortisation. Exceptional
items are those items the Group considers to be non-recurring or
material in nature that may distort an understanding of financial
performance or impair comparability.
Adjusted EBITDA is stated before exceptional items as
follows:
2020 2019
GBP GBP
Impairment of
financial asset (449,422) (200,000)
Restructuring
costs (467,776) (326,629)
Adjusting items (917,198) (526,629)
--------------------- ---------- ----------
Restructuring costs
Restructuring costs of GBP0.5m in 2020 relate to a management
restructure during the year, following the change in focus to the
licensing business. Restructuring costs of GBP0.3m in 2019 related
to redundancy and relocation costs.
Impairment of financial asset
In accordance with IFRS 9, management have performed an expected
credit loss review over its deferred consideration and trade and
other receivable balances. As a result of this review, an
impairment provision of GBP449,422 (2019: GBP200,000) has been
recorded in the income statement. The current year provision is
split between deferred consideration (GBP527,446) and other
receivables (credit of GBP78,024).
3. Segment information
The Board is the Group's chief operating decision-maker.
Management has determined the operating segments based on the
information reviewed by the Board for the purposes of allocating
resources and assessing performance.
The Group has 2 continuing reportable operating segments:
-- Licensing - brand and content licensing to partners in Europe and the US
-- Social Publishing - providing freemium games to the US
Management do not report segmental assets and liabilities
internally and as such an analysis is not reported.
Social
Licensing publishing Head Office Total
2020 GBP GBP GBP GBP
--------------------- --------------------------- ---------------------------- ------------------------------ --------------------------
Revenue 7,515,114 3,885,971 2,401 11,403,486
Marketing expense (18,528) (242,667) (94,199) (355,394)
Operating expense (1,070,766) (1,161,266) - (2,232,032)
Administrative
expense (2,610,275) (1,090,014) (1,803,905) (5,504,194)
Share option and
related
charges (70,764) (6,906) (294,674) (372,344)
--------------------- --------------------------- ---------------------------- ------------------------------ --------------------------
Adjusted EBITDA -
continuing 3,744,781 1,385,118 (2,190,377) 2,939,522
--------------------- --------------------------- ---------------------------- ------------------------------ --------------------------
Impairment of
financial
asset (449,422)
Restructuring
expenses (467,776)
-------------------- --------------------------- ---------------------------- ------------------------------ ----------------------------
EBITDA - continuing 2,022,324
--------------------- --------------------------- ---------------------------- ------------------------------ --------------------------
Amortisation of
intangible
assets (2,817,043)
Depreciation of
property,
plant and
equipment (216,323)
Impairment of
property,
plant and
equipment (22,876)
Finance expense (882,032)
Finance income 333,664
-------------------- --------------------------- ---------------------------- ------------------------------ ----------------------------
Loss before tax -
continuing (1,582,286)
-------------------- --------------------------- ---------------------------- ------------------------------ ----------------------------
Social
Licensing publishing Head Office Total
2019 GBP GBP GBP GBP
-------------------- ------------------------------ ------------------------------ ----------------------------- ----------------------------
Revenue 4,146,857 2,758,475 106,164 7,011,496
Marketing expense - (130,505) (81,968) (212,473)
Operating expense (772,827) (854,984) 762 (1,627,049)
Administrative
expense (1,970,455) (1,001,103) (2,445,560) (5,417,118)
Share option and
related
charges - - (9,972) (9,972)
-------------------- ------------------------------ ------------------------------ ----------------------------- ----------------------------
Adjusted EBITDA -
continuing 1,403,575 771,883 (2,430,574) (255,116)
-------------------- ------------------------------ ------------------------------ ----------------------------- ----------------------------
Impairment of
financial
asset (200,000)
Restructuring
expenses (326,629)
------------------- ------------------------------ ------------------------------ ----------------------------- ------------------------------
EBITDA -
continuing (781,745)
-------------------- ------------------------------ ------------------------------ ----------------------------- ----------------------------
Amortisation of
intangible
assets (2,982,845)
Depreciation of
property,
plant and
equipment (204,714)
Finance expense (842,518)
Finance income 146,661
------------------- ------------------------------ ------------------------------ ----------------------------- ------------------------------
Loss before tax -
continuing (4,665,161)
------------------- ------------------------------ ------------------------------ ----------------------------- ------------------------------
Segmental revenue includes GBPnil (2019 : GBP128,755) of
inter-segment Licensing revenue. This is shown as an Operating
Expense under the real money gaming discontinued operations and
eliminates on consolidation.
4. finance income and expense
2020 2019
GBP GBP
--------------------------------------- ------------------------------- -------------------------------
Finance income
Interest received 47 3,705
Fair value gain on other investments 111,780 -
Interest income on unwind of
finance lease asset 20,500 30,625
Interest income on unwind of
deferred consideration receivable 201,337 112,331
---------------------------------------- ------------------------------- -------------------------------
Total finance income 333,664 146,661
---------------------------------------- ------------------------------- -------------------------------
Finance expense
Bank interest paid 18,663 45,931
Fair value loss on other investments - 245,619
Fair value movement on derivative
liability 355,000 72,000
Effective interest on other
creditor 437,050 406,912
Interest expense on lease liability 71,319 72,056
---------------------------------------- ------------------------------- -------------------------------
Total finance expense 882,032 842,518
---------------------------------------- ------------------------------- -------------------------------
5. tax credit
2020 2019
GBP GBP
Current tax
Current tax expense (93,997) (62,784)
Adjustment for current tax of prior periods (34,232) (134,631)
R&D tax credit for the year 46,127 97,007
Total current tax (82,102) (100,408)
---------------------------------------------- --------- ----------
Deferred tax
Unwind of deferred tax 130,331 131,743
---------------------------------------------- --------- ----------
Total deferred tax credit 130,331 131,743
Total tax credit 48,229 31,335
---------------------------------------------- --------- ----------
The reasons for the difference between the actual tax credit for
the period and the standard rate of corporation tax in the UK
applied to profits for the year are as follows:
2020 2019
GBP GBP
------------------------------------------------ ------------ ------------
Loss before tax for the year - continuing (1,582,286) (4,665,161)
Loss before tax for the year - discontinued - (783,451)
------------------------------------------------ ------------ ------------
Loss before tax for the year (1,582,286) (5,448,612)
------------------------------------------------ ------------ ------------
Expected tax at effective rate of corporation
tax in the UK of 19.0% (2019: 19.0%) (300,634) (1,035,236)
Expenses not deductible for tax purposes 3,369 36,755
Income not chargeable for tax purposes - (129,831)
Effects of overseas taxation 93,997 62,785
Adjustment for under-provision in prior
years 34,233 134,631
Research and development tax credit (46,127) (97,007)
Timing difference 12,745 29,959
Tax losses for which no deferred tax
assets have been recognised 284,519 1,098,352
Unwind of deferred taxes recognised on
business acquisitions (130,331) (131,743)
------------------------------------------------ ------------ ------------
(48,229) (31,335)
------------------------------------------------ ------------ ------------
6. Profit/(Loss) per share
Basic profit/(loss) per share is calculated by dividing the
result attributable to ordinary shareholders by the weighted
average number of shares in issue during the year. For fully
diluted loss per share, the weighted average number of ordinary
shares in issue is adjusted to assume conversion of dilutive
potential ordinary shares. The Group's potentially dilutive
securities consist of share options, performance shares and a
convertible bond. As the continuing operations of the Group are
loss-making, none of the potentially dilutive securities are
currently dilutive.
2020 2019
GBP GBP
--------------------------------------- ------------ ------------
Loss after tax - continuing (1,527,964) (4,558,218)
Loss after tax - discontinued - (783,451)
---------------------------------------- ------------ ------------
Loss after tax - total (1,527,964) (5,341,669)
---------------------------------------- ------------ ------------
Number Number
--------------------------------------- ------------ ------------
Weighted average number of ordinary
shares used in calculating basic
loss per share 285,165,652 284,428,747
---------------------------------------- ------------ ------------
Weighted average number of ordinary
shares used in calculating dilutive
loss per share 285,165,652 284,428,747
---------------------------------------- ------------ ------------
Pence Pence
--------------------------------------- ------------ ------------
Basic and diluted loss per share
- continuing (0.54) (1.60)
Basic and diluted loss per share
- discontinued - (0.28)
---------------------------------------- ------------ ------------
Basic and diluted loss per share
- total (0.54) (1.88)
---------------------------------------- ------------ ------------
7. Intangible assets
Customer Development Domain Intellectual
Goodwill database Software costs names Property Total
GBP GBP GBP GBP GBP GBP GBP
---------- ----------- ---------- ------------- --------- -------------- -----------
Cost
At 1 January
2019 7,056,768 1,582,190 1,488,600 9,708,137 29,418 6,194,372 26,059,485
Additions - - - 2,680,289 - - 2,680,289
Disposals - - - (144,766) (20,000) - (164,766)
Reclassified
as held for sale - - - (437,023) - - (437,023)
Exchange differences (207,720) (61,681) (68,226) (8,264) (365) (231,600) (577,856)
----------------------- ---------- ----------- ---------- ------------- --------- -------------- -----------
At 31 December
2019 6,849,048 1,520,509 1,420,374 11,798,373 9,053 5,962,772 27,560,129
----------------------- ---------- ----------- ---------- ------------- --------- -------------- -----------
Additions - - - 2,440,559 - - 2,440,559
Disposals - - - - - - -
Exchange differences (151,829) (44,859) (36,151) (6,040) (268) (176,593) (415,740)
At 31 December
2020 6,697,219 1,475,650 1,384,223 14,232,892 8,785 5,786,179 29,584,948
----------------------- ---------- ----------- ---------- ------------- --------- -------------- -----------
Accumulated amortisation and
impairment
At 1 January
2019 1,650,000 1,582,190 1,407,255 5,923,789 29,418 2,618,210 13,210,862
Amortisation
charge - - 79,731 2,128,156 - 774,958 2,982,845
Disposals - - - (60,389) (20,000) - (80,389)
Exchange differences - (61,681) (66,612) (5,521) (365) (121,563) (255,742)
----------------------- ---------- ----------- ---------- ------------- --------- -------------- -----------
At 31 December
2019 1,650,000 1,520,509 1,420,374 7,986,035 9,053 3,271,605 15,857,576
----------------------- ---------- ----------- ---------- ------------- --------- -------------- -----------
Amortisation
charge - - - 2,050,390 - 766,653 2,817,043
Disposals - - - - - - -
Exchange differences - (44,859) (36,151) (5,680) (268) (139,836) (226,794)
At 31 December
2020 1,650,000 1,475,650 1,384,223 10,030,745 8,785 3,898,422 18,447,825
----------------------- ---------- ----------- ---------- ------------- --------- -------------- -----------
Net book value
At 31 December
2019 5,199,048 - - 3,812,338 - 2,691,167 11,702,553
----------------------- ---------- ----------- ---------- ------------- --------- -------------- -----------
At 31 December
2020 5,047,219 - - 4,202,147 - 1,887,757 11,137,123
----------------------- ---------- ----------- ---------- ------------- --------- -------------- -----------
8. Deferred consideration
Affiliate
Marketing RMG* Total RMG*
Continuing Continuing Continuing Discontinued Total
GBP GBP GBP GBP GBP
------------------------- ----------- ----------- ----------- ------------- ------------
At 1 January 2019 385,000 280,690 665,690 3,623,425 4,289,115
Deferred consideration
received in the
year (385,000) - (385,000) - (385,000)
Interest recognised
as finance income
on b/fwd balance - 22,034 22,034 273,851 295,885
Eliminated on
2019 RMG disposal - (302,724) (302,724) (3,897,276) (4,200,000)
Deferred consideration
on 2019 RMG disposal - 1,208,366 1,208,366 - 1,208,366
Interest recognised
as finance income
on 2019 disposal - 90,297 90,297 - 90,297
At 31 December
2019 - 1,298,663 1,298,663 - 1,298,663
-------------------------- ----------- ----------- ----------- ------------- ------------
At 1 January 2020 - 1,298,663 1,298,663 - 1,298,663
Interest recognised
as finance income
on 2019 disposal - 201,337 201,337 - 201,337
Impairment recognised - (527,446) (527,446) - (527,446)
At 31 December
2020 - 972,554 972,554 - 972,554
-------------------------- ----------- ----------- ----------- ------------- ------------
* RMG refers to Real Money Gaming which is classified as
discontinued.
9. Arrangement with GAMESYS GROUP PLC
In December 2017 the Group entered into a complex transaction
with Gamesys Group plc and group companies (together "Gamesys
Group"). The transaction includes a GBP3.5m secured convertible
loan agreement alongside a 10-year framework services agreement for
the supply of various real money services. Under the framework
services agreement the first GBP3.5m of services are provided
free-of-charge within the first 5 years.
The convertible loan has a duration of 5 years and carries
interest at 3-month LIBOR plus 5.5%. It is secured over the Group's
Slingo assets and business. At any time after the first year,
Gamesys Group plc may elect to convert all or part of the principal
amount into ordinary shares of Gaming Realms plc at a discount of
20% to the share price prevailing at the time of conversion. To the
extent that the price per share at conversion is lower than 10p
(nominal value), then the shares can be converted at nominal value
with a cash payment equal to the aggregate value of the convertible
loan outstanding multiplied by the shortfall on nominal value
payable to Gamesys Group plc. Under this arrangement, the maximum
dilution to Gaming Realms shareholders will be approximately 11%,
assuming the convertible loan is converted in full.
The option violates the fixed-for-fixed criteria for equity
classification as the number of shares is variable and as a result
is classified as a liability.
The fair value of the conversion feature is determined at each
reporting date with changes recognised in profit or loss. The
initial fair value was GBP0.6m based on a probability assessment of
conversion and future share price. This is a level 3 valuation as
defined by IFRS 13. The fair value as at 31 December 2020 was
GBP0.6m (2019: GBP0.3m) based on revised probabilities of when and
if the option will be exercised. The key inputs into the valuation
model included timing of exercise by the counterparty (based on a
probability assessment) and the share price.
The initial fair value of the host debt was calculated as
GBP2.7m, being the present value of expected future cash outflows.
The initial rate used to discount future cashflows was 14.1%, being
the Group's incremental borrowing rate. This rate was calculated by
reference to the Group's cost of equity in the absence of reliable
alternative evidence of the Group's cost of borrowing given it is
predominantly equity funded. Expected cashflows are based on
directors' judgement that a change in control event would not
occur. Subsequently the loan is carried at amortised cost. The
residual GBP0.2m of proceeds were allocated to the obligation to
provide free services.
Fair Fair
value Obligation value
of debt to provide of derivative
host free services Liability Total
GBP GBP GBP GBP
----------------------- ---------- ---------------- ---------------- ----------
At 1 January 2019 2,795,602 209,000 200,000 3,204,602
Utilisation of free
services - (8,000) - (8,000)
Effective interest 406,912 - - 406,912
Interest paid (276,841) - - (276,841)
Change in fair value - - 72,000 72,000
----------------------- ---------- ---------------- ---------------- ----------
At 31 January 2019 2,925,673 201,000 272,000 3,398,673
----------------------- ---------- ---------------- ---------------- ----------
At 1 January 2020 2,925,673 201,000 272,000 3,398,673
Utilisation of free
services - (52,000) - (52,000)
Effective interest 437,050 - - 437,050
Interest paid (206,853) - - (206,853)
Change in fair value - - 355,000 355,000
----------------------- ---------- ---------------- ---------------- ----------
At 31 December 2020 3,155,870 149,000 627,000 3,931,870
----------------------- ---------- ---------------- ---------------- ----------
10. Share capital
Ordinary shares
2020 2020 2019 2019
Number GBP Number GBP
Ordinary shares of 286,647,315 28,664,731 284,428,747 28,442,874
------------ ----------- ------------ -----------
10 pence each
--------------------- ------------ ----------- ------------ -----------
The increase of 2,218,568 ordinary shares relates to the
exercise of share options during the year. The total amount
received by the Company for the exercise price settlement was
GBP281,613, which has been recorded as an increase in share capital
and share premium as follows:
GBP
---------------- --------
Share capital 221,857
Share premium 59,756
---------------- --------
281,613
---------------- --------
11. POST BALANCE SHEET EVENTS
On 6 January 2021, the Group was awarded a provisional iGaming
supplier license by the Michigan Gaming Control Board to allow the
Group to provide its Slingo Originals game content to Michigan's
licensed online casino operators.
On 1 April 2021, the Group received GBP1.0m from River for full
and final settlement of the deferred consideration receivable,
certain other receivable balances, and various legal proceedings
and other out of court disputes between the parties.
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END
FR BCGDSLBDDGBL
(END) Dow Jones Newswires
April 27, 2021 02:00 ET (06:00 GMT)
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