TIDMGMR
RNS Number : 2867J
Gaming Realms PLC
26 April 2022
Gaming Realms plc
(the "Company" or the "Group")
Annual Results 2021
Strong performance underpinned by increased global presence
Licensing strategy delivering adjusted EBITDA[1] growth of 69%
and adjusted EBITDA of GBP5.7m[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 2021 and Q1 highlights for 2022.
Gaming Realms' licensing strategy has enabled the Group to grow
revenues at high margins during FY21. The Group launched in several
new regulated iGaming markets which will provide continued growth
in the coming year.
2021 Financial Highlights:
-- Revenue increased by 29% to GBP14.7m (2020: GBP11.4m) for the year
o Licensing revenue increased 48% to GBP11.1m (2020:
GBP7.5m)
o Social publishing revenue decreased 8% to GBP3.6m (2020:
3.9m). On a constant currency basis, the decline was 1%
-- Adjusted EBITDA before share option and related charges
increased 71% to GBP5.7m (2020: GBP3.3m)
-- EBITDA increased 146% to GBP5.0m (2020: GBP2.0m)
o Licensing segment generated GBP6.4m EBITDA (2020: GBP3.5m)
o Social publishing segment generated GBP1.1m EBITDA (2020:
GBP1.4m)
o Head office costs were GBP2.5m (2020: GBP2.9m including
GBP0.7m of restructuring costs and impairment charges) due largely
to the increase in share option and related charges and growth in
business activities
-- Profit after tax for the year of GBP1.3m (2020: Loss of GBP1.5m)
-- Year-end cash balance increased to GBP4.4m (2020: GBP2.1m)
2021 Operational Highlights:
-- Increased portfolio to 53 proprietary games on the Group's
remote game server ("RGS") (2020: 44)
-- Launched in 2 regulated iGaming markets in the U.S. in Michigan and Pennsylvania
-- Launched in European regulated iGaming markets in Italy, Romania and the Netherlands
-- Launched with 35 new partners for Slingo Originals content
including Wynnbet, Sisal, Aspire Global and Goldbet
-- Signed inward brand licensing deals with Everi, Discovery
Channel, IGT, Play AGS, Pragmatic Play
-- Increased unique players in licensing business by 48%
-- Prepared for launch in the Ontario, Quebec and Spanish markets
-- Extended brand licensing deal with Scientific Games for
Slingo branded lottery instant scratch cards
Q1 2022 Highlights:
-- Increased licensing revenue 43% in Q1 2022 to GBP3.0m (Q1 2021: GBP2.1m)
-- Launched in Spain with Gamesys and Yo Bingo (part of Rank Group)
-- Launched with Loto-Québec
-- Obtained iGaming Supplier Licence from Ontario with subsequent launch earlier this month
-- Released four new Slingo games: Slingo Superspin, Slingo Fire & Ice and Slingo Racing
[1] EBITDA is profit before interest, tax, depreciation,
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 EBITA excluding non-recurring
material items which are outside the normal scope of the Group's
ordinary activities. Adjusting items in the prior year include
management restructuring costs and impairment of financial
assets.
[2] Adjusted EBITDA before share option and related charges.
Outlook:
Gaming Realms continues to deliver on its strategy of expanding
its game portfolio and launching into new regulated markets. In
2021, the Group launched in 5 new regulated markets, including
Michigan and Pennsylvania in the U.S., and will continue to grow
its market share in these territories during 2022. Since the
beginning of 2022, the Group has launched its Slingo portfolio in
Spain and, more recently, Canada through the newly launched market
in Ontario and with Loto-Québec. With 10 new partners launched to
date in 2022, together with the launch of 4 new Slingo games, the
Board is confident in the Group's strategy and expectations for the
current year. Whilst still early in the year, the Company is
currently trading ahead of management expectations and therefore is
confident in the outlook for the year.
Commenting on the Group's performance, Michael Buckley,
Executive Chairman, said:
"2021 was another exceptional year for the Group as we expanded
our Slingo portfolio and entered new regulated iGaming markets,
increasing revenue by 29% and producing a maiden profit for the
financial year of GBP1.3m.
"Our core licensing business continued to go from strength to
strength as we secured 35 new licensing and distribution partners
throughout the year that supported a 48% growth in the number of
unique players enjoying our content globally.
"The Group's commitment to increasing our global presence during
the period has provided us with a strong foundation on which to
deliver further growth in 2022 as we remain focused on expanding
our foothold in these territories. Momentum has certainly continued
into the year so far, having already released four new games and
launched in both Spain and Canada. With additional planned launches
in new markets and with new partners in the pipeline, we look
forward to providing further updates in due course."
An analyst briefing will be held virtually at 9:00am today. To
attend, please email gamingrealms@yellowjerseypr.com .
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
Lalit Bose
Yellow Jersey 07747 788 221
Charles Goodwin
Annabel Atkins
Annabelle Wills
About Gaming Realms
Gaming Realms creates and licenses innovative games for mobile,
with operations in the UK, U.S., Canada and Malta. 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
Introduction
The Group made excellent progress during the year, increasing
revenues by 29% to GBP14.7m (2020: GBP11.4m), and adjusted EBITDA
by 71% to GBP5.7m (2020: GBP3.3m) before share options and related
charges. We invested heavily in our proprietary Remote Game Server
"RGS" platform, and expanded into multiple regulated markets. We
also increased our Slingo Originals game portfolio to 53 with the
addition of 10 new games, and licenced Slingo into adjacent markets
including our lottery deal for physical scratch cards in North
America.
This resulted in revenue growth of 48% in our licensing business
to GBP11.1m (2020: GBP7.5m), and we are continuing to see strong
momentum in this area with increased international demand for our
Slingo Originals portfolio. With growing distribution via our RGS
combined with control of overheads, we were able to increase our
EBITDA margin within the licensing division to 57% (2020: 50%).
Licensing business highlights:
-- Increased library of proprietary games to 53 games in total at year-end.
-- Went live with 35 new partners during the year, all of whom
have licensed the Company's Slingo Originals content.
-- Launched in 2 additional regulated iGaming markets in the
U.S. being Michigan and Pennsylvania.
-- Launched in 3 regulated iGaming markets in Europe, being
Romania, Italy and the Netherlands.
-- Increased unique players in the year by 48% to 3.36m (2020: 2.28m).
-- Signed deals with IGT, Play AGS and Pragmatic Play as
partners for new branded Slingo games.
-- With growth in New Jersey, together with launches in Michigan
and Pennsylvania in the second half of the year, U.S. content
licensing revenues grew 47% in 2021, and by 56% with constant
currency conversion.
-- Extended brand licensing deal with Scientific Games for
Slingo branded lottery instant scratch games.
We continue to operate our Social business as a partially
integrated division. This gives us an opportunity to rebrand our
real money games for social users, and monetise them further. It
also keeps the Slingo brand within the Group, and has the advantage
of bringing our games to a wider audience, many of whom play for
real money as and when they are in a regulated territory.
Revenue from Social decreased 8% to GBP3.6m (2020: GBP3.9m), but
this decline was marginal at 1% on a constant currency basis.
EBITDA decreased to GBP1.1m (2020: GBP1.4m), the decline again
exaggerated by currency movements. However, the Social business
continued to provide a positive cash contribution to the Group.
North America
The Group made significant progress during 2021 towards
expanding its presence in the U.S. iGaming market beyond New
Jersey, being granted additional full iGaming Supplier Licences in
the U.S. states of Michigan and Pennsylvania. An application
process was started for a supplier license in Ontario, Canada,
which was subsequently granted in March 2022. Ontario is likely to
be a larger market than any of the currently regulated U.S.
states.
Capitalising on these opportunities, we signed a number of
direct integration and multi-State deals, and the Group now has
licensing agreements with the majority of the U.S. iGaming market.
These include multi-State deals with BetMGM, Draftkings, Fanduel,
Rush Street Interactive, Golden Nugget, Poker Stars, Barstool/PNG,
Kindred, Wynn Interactive, Parx, Tropicana/Gamesys and Caesars
Entertainment. The Company also has direct integrations with
BetMGM, Draftkings, Rush Street Interactive, Fanduel, Golden
Nugget, Gamesys, Wynn Interactive and 888.
Europe
Gaming Realms continued to strengthen its position in the
growing European market having successfully launched in the Italian
iGaming market with Goldbet and Sisal in January 2021.
In November 2021, Gaming Realms entered the regulated Romanian
iGaming market through a partnership agreement with Superbet, the
largest digital and retail betting operator in Romania. Superbet
now publishes many of the games from the Slingo Original's
portfolio.
Further bolstering its European presence, Gaming Realms went
live in December 2021 with JVH gaming and entertainment group in
the newly regulated Dutch market under the Jack's Casino and Sports
brand ("Jack's Casino").
Board and employees
Despite a number of Covid-19-related challenges during 2021, the
Group's senior management and staff demonstrated outstanding
teamwork and resilience, and the operational and financial outcomes
achieved during the year owe much to their skill and commitment. On
behalf of the Board and shareholders, I would like to pass on my
sincere thanks to all of them.
After joining the Board in 2019, Chris Ash resigned as a
Non-Executive Director of the Company in September 2021 given
conflicts of interest that could arise from our third-party
distribution agreement with 4ThePlayer.com, of which he is a
Director. On behalf of the Company, I would like to thank Chris
once again for the valuable guidance and strategic advice he
provided in scaling our licensing business.
Post Period End and Outlook
Gaming Realms continues to 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
Momentum has continued into 2022, with Gaming Realms focusing on
regulated markets and North America in particular. In this regard,
we launched our game portfolio in Ontario on 4 April 2022, having
already gone live with Loto Quebec in March. With the increased
number of states we are now in, together with our multi-State deals
with the largest operators, we are well placed to gain market share
in North America.
In January of this year, the Group entered the regulated Spanish
market with long-term strategic partner Gamesys (now part of
Bally's Corporation) under its Monopoly and Botamania brands and
has since launched with Yo Bingo (part of Rank Group). Looking to
the future, we have recently signed a deal with Microgaming, one of
the largest distributors of content in the industry, and hope to
launch our game portfolio with some of their partners shortly.
We have already increased our games portfolio with 4 new games
in 2022, and during the course of this year we will introduce new
marketing features on our platform. These developments will
maintain and drive stronger relationships with our partners and
players. The Company has made an excellent start to the current
year, with licensing revenues increasing by 43% year-on-year for
the first quarter of 2022, and unique players increasing by 39% to
over 1.5 million in the same period. This strong performance in the
first quarter, combined with new markets and partners coming on
stream, leads your Board to believe the Company will continue to
grow significantly following its proven successful strategy.
Michael Buckley
Executive Chairman
Financial Review
Overview
The Group's financial results for the year ended 31 December
2021 reflect the continued delivery of the core strategy of scaling
the licensing business.
The Group delivered total revenue growth of 29% to GBP14.7m
(2020: GBP11.4m), driven by the performance of the licensing
business.
For the year, the Group delivered adjusted EBITDA before share
option and related charges of GBP5.7m (2020: GBP3.3m) which has
translated into the Group recording a pre-tax profit of GBP1.0m
compared with a GBP1.6m loss in the previous year.
The GBP1.0m pre-tax profit represents a GBP2.6m increase on the
previous year (2020: GBP1.6m pre-tax loss). This is materially
explained by; the GBP2.0m increase in adjusted EBITDA generated in
the current year, no adjusting items in the current year (2020:
GBP0.9m total charge for restructuring expenses and an impairment
against financial assets), offset by a GBP0.2m increase in the
current year amortisation charge and GBP0.1m higher net finance
costs.
The table below sets out the split of revenue and adjusted
EBITDA:
Licensing Social Publishing Head office Total
2021 GBP GBP GBP GBP
Revenue 11,100,085 3,567,616 - 14,667,701
Marketing expense (20,348) (282,579) (76,303) (379,230)
Operating expense (1,209,530) (992,789) - (2,202,319)
Administrative expense (3,325,714) (1,228,709) (1,856,570) (6,410,993)
Share option and
related charges (170,062) (7,441) (521,691) (699,194)
Adjusted EBITDA 6,374,431 1,056,098 (2,454,564) 4,975,965
Licensing Social 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 3,744,781 1,385,118 (2,190,377) 2,939,522
Performance
Year-on-year Group revenues increased 29% to GBP14.7m (GBP2020:
GBP11.4m) due to the strong performance of the licensing segment,
offset by an 8% decline in social publishing revenues in the
year.
The overall Group generated adjusted EBITDA of GBP5.0m (2020:
GBP2.9m) and GBP5.7m before share option and related charges (2020:
GBP3.3m). Adjusting items in the prior year relate to management
restructuring costs and impairment of financial assets, while there
were no such costs in the current year.
Operating expenses incurred remained stable compared with the
previous year at GBP2.2m (2020: GBP2.2m). Between the segments this
was split between a GBP0.1m increase in revenue associated
operational costs in the licensing segment offset against GBP0.2m
lower operational costs in the social publishing division due to
revenue driven costs falling in line with segmental revenues.
Adjusted administrative expenses increased to GBP6.4m (2020:
GBP5.5m) predominantly due to increased staff costs in the
licensing segment required to deliver the segments growth, along
with other incremental business expansion costs.
Licensing
Licensing segment revenues increased 48% to GBP11.1m (2020:
GBP7.5m). This can be split as:
-- Content licensing revenue growth of 36% to GBP9.1m (2020: GBP6.7m); and
-- Brand licensing revenue increasing 137% to GBP2.0m (2020: GBP0.9m).
The segment delivered GBP6.4m adjusted EBITDA (2020:
GBP3.7m).
Content licensing
Growth in the content licensing business remains the key focus
of the Group. The current year performance reflects the successful
implementation of the Group's strategy of growing the games
portfolio and increasing the distribution footprint to an increased
number of operators in Europe and the U.S.
During 2021 the Group began operating with partners in 5 new
regulated markets; Italy, Romania, the Netherlands, and the U.S.
states of Michigan and Pennsylvania. After the year-end, the Group
was awarded an iGaming supplier license within the Canadian
province of Ontario and started trading in April 2022. The Group
also started trading in the Spanish regulated market in January
2022.
Outside of going live with partners in these newly entered
regulated markets, we also went live with a further 18 partners
during 2021 in existing markets in Europe and New Jersey. This has
been further bolstered with an additional 10 partners going live in
2022 to date in these jurisdictions.
The strong operational leverage and largely fixed cost base of
the segment's content business model allowed total expenses
(excluding share option and related costs) to increase by 23% to
GBP4.6m (2020: GBP3.7m) compared to the 36% content licensing
revenue increase.
The Group released 10 new Slingo games to the market during
2021, including Slingo Starburst and Slingo Lucky Larry's
Lobstermania. Due to the popularity of Slingo as a genre amongst
our partners and players, in addition to these new Slingo games, a
number of partner themed Slingo and table games were released to
the market during the year.
A key focus of the segment remains identifying and partnering
with the leading gaming brands in the market, in order to bring the
best possible content to players. During the year we released new
Slingo game collaborations with key partners including King Show
Games, NetEnt and Pragmatic Play. Further agreements were entered
into during the year for the development of innovative new Slingo
collaborations, which will be released to the market in 2022.
Revenues from North America continue to be a focus for the
segment, and in 2021 increased to GBP4.5m (2020: GBP2.4m),
representing 40% of total licensing revenues (2020: 32%). We
anticipate this to increase further in 2022 with a full year of
trading in Michigan and Pennsylvania, as well as the impact of the
recent entry into the Ontario market and expected entry into the
Connecticut market later in 2022.
Brand licensing
The significant GBP1.1m increase in brand licensing revenues in
2021 compared with the prior year is predominantly the result of a
significant deal completed in the year.
The Group's Slingo brand is well-known by consumers, which
allows us to license this brand into adjacent markets where the
right opportunities arise.
Social publishing
The Group's social publishing business saw an 8% decline in
revenues to GBP3.6m (2020: GBP3.9m), largely as a result of
currency headwinds experienced during 2021, with the majority of
the segments transactions denominated in U.S. Dollars. At constant
currency, the revenue of the segment would have decreased by 1% as
opposed to the reported 8%.
Operational costs, which are largely driven by revenues, reduced
by 15% from the previous year to GBP1.0m (2020: GBP1.2m).
Marketing expenses of GBP0.3m were incurred (2020: GBP0.2m) with
the aim of driving player activity and revenues.
The 13% increase in segmental administrative expenses is due to
investment in the development and operational team. In recent years
there has been a successful implementation of cost controls, which
has resulted in the segment having a stable fixed cost base.
Excluding staff costs, segmental administrative expenses remained
stable with the prior year, increasing 3%.
As a result, the segment delivered GBP1.1m adjusted EBITDA for
the year, a 24% reduction on the GBP1.4m in 2020.
Cashflow, Balance Sheet and Going Concern
Net cash increased by GBP2.3m in 2021 (2020: decreased by
GBP0.5m) to GBP4.4m at 31 December 2021 (2020: GBP2.1m).
The current year increase in net cash was largely driven through
the GBP5.0m cash inflow from operating activities (2020: GBP2.0m)
and GBP1.0m deferred consideration received (2020: GBPNil), offset
by the GBP3.4m of development costs capitalised in the year (2020:
GBP2.4m).
The GBP1.0m increase in development costs capitalised in 2021
compared with the previous year is a function of the Group
investing in the development teams in both the licensing and social
publishing segments, to enable the delivery of an expanded games
portfolio in both segments, and to develop and enhance the Group's
proprietary RGS with new tools, features and capabilities to cater
for the demands of expanding partner and territory numbers.
During the year, the Group received GBP1.0m from River Tech plc
("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 GBP13.1m (2020: GBP10.9m).
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 GBP0.1m (2020: GBP0.05m) in research and
development credits in Canada. A current year tax credit of GBP0.3m
(2020: GBP0.05m) largely relates to the unwind of deferred tax of
GBP0.1m (2020: 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 2021
2021 2020
GBP GBP
Revenue 14,667,701 11,403,486
Marketing expenses (379,230) (355,394)
Operating expenses (2,202,319) (2,232,032)
Administrative expenses (6,410,993) (5,971,970)
Impairment of financial asset - (449,422)
Share option and related charges (699,194) (372,344)
Adjusted EBITDA 4,975,965 2,939,522
Impairment of financial asset - (449,422)
Restructuring expenses - (467,776)
EBITDA 4,975,965 2,022,324
Amortisation of intangible assets (3,064,299) (2,817,043)
Depreciation of property, plant
and equipment (216,834) (216,323)
Impairment of property, plant and
equipment - (22,876)
Impairment of goodwill (73,677) -
Finance expense (689,935) (882,032)
Finance income 26,496 333,664
Profit / (loss) before tax 957,716 (1,582,286)
Tax credit 296,436 48,229
Profit / (loss) for the financial
year 1,254,152 (1,534,057)
Other comprehensive income / (loss)
Items that will or may be reclassified
to profit or loss:
Exchange gain / (loss) arising
on translation of foreign operations 39,153 (226,666)
Total other comprehensive income
/ (loss) 39,153 (226,666)
Total comprehensive income / (loss) 1,293,305 (1,760,723)
Profit / (loss) attributable to:
Owners of the parent 1,257,698 (1,527,964)
Non-controlling interest (3,546) (6,093)
1,254,152 (1,534,057)
Total comprehensive income / (loss)
attributable to:
Owners of the parent 1,296,851 (1,754,630)
Non-controlling interest (3,546) (6,093)
1,293,305 (1,760,723)
Profit / (loss) per share Pence Pence
Basic 0.44 (0.54)
Diluted 0.42 (0.54)
Consolidated Statement of Financial Position
As at 31 December 2021
31 December 31 December
2021 2020
GBP GBP
Non-current assets
Intangible assets 11,815,598 11,137,123
Other investments - 401,291
Property, plant and equipment 484,578 560,793
Other assets 150,646 150,528
12,450,822 12,249,735
Current assets
Trade and other receivables 3,260,687 2,343,739
Deferred consideration - 972,554
Finance lease asset - 140,058
Cash and cash equivalents 4,412,375 2,105,167
7,673,062 5,561,518
Total assets 20,123,884 17,811,253
Current liabilities
Trade and other payables 2,241,114 1,943,714
Lease liabilities 172,887 343,859
Other Creditors 3,489,278 -
Derivative liabilities 744,000 -
6,647,279 2,287,573
Non-current liabilities
Other Creditors - 3,304,870
Derivative liabilities - 627,000
Deferred tax liability 199,876 320,913
Lease liabilities 168,227 340,175
368,103 4,592,958
Total liabilities 7,015,382 6,880,531
Net assets 13,108,502 10,930,722
Equity
Share capital 28,970,262 28,664,731
Share premium 87,370,856 87,258,166
Merger reserve (67,673,657) (67,673,657)
Foreign exchange reserve 1,418,269 1,379,116
Retained earnings (36,977,228) (38,768,257)
Total equity attributable to owners
of the parent 13,108,502 10,860,099
Non-controlling interest - 70,623
Total equity 13,108,502 10,930,722
Consolidated Statement of Cash Flows
For the year ended 31 December 2021
2021 2020
GBP GBP
Cash flows from operating activities
Profit / (loss) for the financial year 1,254,152 (1,534,057)
Adjustments for:
Depreciation of property, plant and equipment 216,834 216,323
Impairment of property, plant and equipment - 22,876
Loss / (profit) on disposal of property,
plant and equipment 2,125 (1,000)
Loss on disposal of intangible assets (2,004) -
Impairment of goodwill 73,677 -
Amortisation of intangible fixed assets 3,064,299 2,817,043
Impairment of financial asset - 449,422
Finance income (26,496) (333,664)
Finance expense 689,935 882,032
Income tax credit (296,436) (48,229)
Exchange differences 22,374 (54,940)
Share based payment expense 466,254 330,308
Increase in trade and other receivables (745,778) (463,237)
Increase / (decrease) in trade and other
payables 208,400 (233,543)
Net cash flows from operating activities
before taxation 4,927,336 2,049,334
Net tax received / (paid) in the year 40,439 (33,717)
Net cash flows from operating activities 4,967,775 2,015,617
Investing activities
Acquisition of property, plant and equipment (141,546) (30,143)
Acquisition of intangible assets (323,608) -
Capitalised development costs (3,435,308) (2,440,559)
Proceeds from disposal of property, plant
and equipment - 1,000
Disposal of other investments 362,436 -
Interest received 145 47
Finance lease asset - sublease receipts 146,505 163,324
Net cash used in investing activities (3,391,376) (2,306,331)
Financing activities
Receipt of deferred consideration 972,554 -
Principal paid on lease liability (388,494) (300,086)
Issue of share capital on exercise of
options 418,221 281,613
Interest paid (215,169) (225,516)
Net cash from / (used in) financing activities 787,112 (243,989)
Net increase / (decrease) in cash and
cash equivalents 2,363,511 (534,703)
Cash and cash equivalents at beginning
of year 2,086,785 2,608,455
Exchange (loss) / gain on cash and cash
equivalents (37,921) 13,033
Cash and cash equivalents at end of year 4,412,375 2,086,785
Consolidated Statement of Changes in Equity
For the year ended 31 December 2021
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 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
1 January 2021 28,664,731 87,258,166 (67,673,657) 1,379,116 (38,768,257) 10,860,099 70,623 10,930,722
Profit for the
year - - - - 1,257,698 1,257,698 (3,546) 1,254,152
Other
comprehensive
income - - - 39,153 - 39,153 - 39,153
Total
comprehensive
income
for the year - - - 39,153 1,257,698 1,296,851 (3,546) 1,293,305
Contributions by
and
distributions
to owners
Share-based
payment on
share
options - - - - 466,254 466,254 - 466,254
Exercise of
options 305,531 112,690 - - - 418,221 - 418,221
Recycling of
non-controlling
interest - - - - 67,077 67,077 (67,077) -
31 December 2021 28,970,262 87,370,856 (67,673,657) 1,418,269 (36,977,228) 13,108,502 - 13,108,502
Notes to the Consolidated Financial Statements
For the year ended 31 December 2021
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 UK adopted 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 2021.
The financial information set out in this document does not
constitute the Group's statutory accounts for the year ended 31
December 2021 or 31 December 2020.
Statutory accounts for the year ended 31 December 2020 have been
filed with the Registrar of Companies and those for the year ended
31 December 2021 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 2021 is
unmodified.
The independent auditor's reports on the Annual Report and
Accounts for the year ended 31 December 2021 and 31 December 2020
were unqualified and did not contain a statement under 498(2) or
498(3) of the Companies Act 2006.
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 2024,
which include the potential repayment of the convertible loan in
December 2022, 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 2023, which the Directors
consider sufficiently robust. Scenarios considered include but are
not limited to; failure to expand into planned new regulated
jurisdictions during the forecast period 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.
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
There were no new standards, amendments or interpretations that
were relevant to the Group for the year ended 31 December 2021.
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 following amendments are effective for the period beginning
1 January 2023:
-- Disclosure of Accounting Policies (Amendments to ISA 1 and IFRS Practice Statement 2);
-- Definition of Accounting Estimates (Amendments to IAS 8); and
-- Deferred Tax Related to Assets and Liabilities arising from a
Single Transaction (Amendments to IAS 12).
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:
2021 2020
GBP GBP
Impairment of financial
asset - (449,422)
Restructuring costs - (467,776)
Adjusting items - (917,198)
Restructuring costs
Restructuring costs of GBP467,776 in the prior year related to a
management restructure following the change in focus to the
licensing business. No such costs were incurred in 2021.
Impairment of financial asset
In the prior year, an impairment provision of GBP449,422 was
recorded in the income statement following management's expected
credit loss review performed over its deferred consideration and
trade and other receivables balances. The provision was split
between deferred consideration (GBP527,446) and other receivables
(credit of GBP78,024). No such impairments were recognised in
2021.
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 reportable operating segments:
-- Licensing - brand and content licensing to partners in Europe and the US
-- Social Publishing - providing freemium games to the US
Social
Licensing publishing Head Office Total
2021 GBP GBP GBP GBP
Revenue 11,100,085 3,567,616 - 14,667,701
Marketing expense (20,348) (282,579) (76,303) (379,230)
Operating expense (1,209,530) (992,789) - (2,202,319)
Administrative expense (3,325,714) (1,228,709) (1,856,570) (6,410,993)
Share option and
related
charges (170,062) (7,441) (521,691) (699,194)
Adjusted EBITDA 6,374,431 1,056,098 (2,454,564) 4,975,965
Impairment of -
financial
asset
Restructuring expenses -
EBITDA 4,975,965
Amortisation of
intangible
assets (3,064,299)
Depreciation of
property,
plant and equipment (216,834)
Impairment of goodwill (73,677)
Finance expense (689,935)
Finance income 26,496
Profit before tax 957,716
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 3,744,781 1,385,118 (2,190,377) 2,939,522
Impairment of financial
asset (449,422)
Restructuring expenses (467,776)
EBITDA 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 (1,582,286)
4. finance income and expense
2021 2020
GBP GBP
Finance income
Interest received 145 47
Fair value gain on other investments - 111,780
Interest income on unwind of deferred
income 19,087 -
Interest income on unwind of finance
lease asset 7,264 20,500
Interest income on unwind of deferred
consideration receivable - 201,337
Total finance income 26,496 333,664
Finance expense
Bank interest paid 20,238 18,663
Fair value loss on other investments 38,855 -
Fair value movement on derivative
liability 117,000 355,000
Effective interest on other creditor 468,339 437,050
Interest expense on lease liability 45,503 71,319
Total finance expense 689,935 882,032
5. tax credit
2021 2020
GBP GBP
Current tax
Current tax credit / (charge) 38,310 (93,997)
Adjustment for current tax of prior periods 4,952 (34,232)
R&D tax credit for the year 130,878 46,127
Total current tax 174,140 (82,102)
Deferred tax
Unwind of deferred tax 122,296 130,331
Total deferred tax credit 122,296 130,331
Total tax credit 296,436 48,229
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:
2021 2020
GBP GBP
Profit / (loss) before tax for the year 957,716 (1,582,286)
Expected tax at effective rate of corporation
tax in the UK of 19.0% (2020: 19.0%) 181,966 (300,634)
Expenses not deductible for tax purposes 274,425 3,369
Effects of overseas taxation (38,310) 93,997
Adjustment for tax in respect of prior
periods (4,952) 34,233
Research and development tax credit (130,878) (46,127)
Timing difference (136,257) 12,745
Relief for losses brought forward (781,569) -
Tax losses for which no deferred tax assets
have been recognised 461,435 284,519
Unwind of deferred taxes recognised on
business acquisitions (122,296) (130,331)
(296,436) (48,229)
6. EARNINGS / (LOSS) per share
Basic earnings / (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. The calculation
of diluted EPS is based on the result attributable to ordinary
shareholders and weighted average number of ordinary shares
outstanding after adjusting for the effects of all dilutive
potential ordinary shares. The Group's potentially dilutive
securities consist of share options and a convertible loan. The
convertible loan is anti-dilutive and so is ignored in calculating
diluted EPS.
2021 2020
GBP GBP
Profit / (loss) after tax attributable
to the owners of the parent Company 1,257,698 (1,527,964)
Number Number
Denominator - basic
Weighted average number of ordinary
shares 288,496,688 285,165,652
Denominator - diluted
Weighted average number of ordinary
shares 288,496,688 285,165,652
Weighted average number of option
shares 13,140,665 -
Weighted average number of shares 301,637,353 285,165,652
Pence Pence
Basic earnings / (loss) per share 0.44 (0.54)
Diluted earnings / (loss) per share 0.42 (0.54)
7. Intangible assets
Customer Development Domain Intellectual
Goodwill database Software costs Licenses names Property Total
GBP GBP GBP GBP GBP GBP GBP GBP
Cost
At 1 January
2020 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
Additions - - 76,286 3,435,308 247,322 - - 3,758,916
Disposals (73,677) - (212,215) (198,043) - - - (483,935)
Exchange differences 50,382 14,886 14,122 - - 89 58,568 138,047
At 31 December
2021 6,673,924 1,490,536 1,262,416 17,470,157 247,322 8,874 5,844,747 32,997,976
Accumulated amortisation
and impairment
At 1 January
2020 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
Amortisation
charge - - 31,978 2,269,464 43,469 - 719,388 3,064,299
Impairment 73,677 - - - - - - 73,677
Disposals (73,677) - (212,215) (200,047) - - - (485,939)
Exchange differences - 14,886 14,122 2,227 - 89 51,192 82,516
At 31 December
2021 1,650,000 1,490,536 1,218,108 12,102,389 43,469 8,874 4,669,002 21,182,378
Net book value
At 31 December
2020 5,047,219 - - 4,202,147 - - 1,887,757 11,137,123
At 31 December
2021 5,023,924 - 44,308 5,367,768 203,853 - 1,175,745 11,815,598
8. Deferred consideration
GBP
At 1 January 2020 1,298,663
Interest recognised as finance
income on 2019 disposal 201,337
Impairment recognised (527,446)
At 31 December 2020 972,554
Deferred consideration received
in the year (972,554)
At 31 December 2021 -
During 2019, the Group disposed of its B2C real money gaming
CGU. As part of this transaction the Group was due GBP1.5m deferred
consideration on 31 December 2020, which was discounted at
inception. During 2020, interest income of GBP201,337 was
recognised within finance income on the unwind of the balance,
while an impairment provision of GBP527,446 was recorded in the
income statement following managements impairment assessment.
During the current year, 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.
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%, which has been updated to a
fixed 5.75% following the cessation of LIBOR on 31 December 2021.
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 2021 was
GBP0.7m (2020: GBP0.6m) 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 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
At 1 January 2021 3,155,870 149,000 627,000 3,931,870
Utilisation of free services - (89,000) - (89,000)
Effective interest 468,339 - - 468,339
Interest paid (194,931) - - (194,931)
Change in fair value - - 117,000 117,000
At 31 December 2021 3,429,278 60,000 744,000 4,233,278
10. Share capital
Ordinary shares
2021 2021 2020 2020
Number GBP Number GBP
Ordinary shares
of 289,702,626 28,970,262 286,647,315 28,664,731
10 pence each
The increase of 3,055,311 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
GBP418,221, which has been recorded as an increase in share capital
and share premium as follows:
GBP
Share capital 305,531
Share premium 112,690
418,221
11. POST BALANCE SHEET EVENTS
On 6 January 2022, 3,900,000 share options were granted to
certain Directors and employees of the Group. The options vest in
tranches on 15 October 2022, 2023 and 2024. All options have an
exercise price of 32.5 pence per share.
On 23 February 2022, Bally's Corporation (owner of Gamesys
Group) exercised their option to convert GBP500,000 of the
GBP3,500,000 convertible loan into Gaming Realms plc ordinary
shares. This resulted in the issue of 2,170,817 new ordinary
shares.
On 4 March 2022, the Group was awarded a full iGaming supplier
license by the Alcohol and Gaming Commission of Ontario to allow
the Group to provide its Slingo Original's game content to
Ontario's licensed online casino operators. Following this, the
Group launched its content on 4 April 2022, the first day the newly
regulated market opened.
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