TIDMNKTN
RNS Number : 1956I
Nektan PLC
31 March 2020
31 March 2020
NEKTAN PLC
("Nektan", the "Company" or the "Group")
Interim Results for the six months ended 31 December 2019
FOCUS ON INTERNATIONAL EXPANSION AS A GAMING TECHNOLOGY AND
CONTENT PROVIDER
Nektan plc (AIM: NKTN), the international gaming technology and
services provider, announces its unaudited interim results for the
six months ended 31 December 2019.
These unaudited results are released at time of material
uncertainty for the sector, from which Nektan is not immune. While
progress has been made in the Company's transformation to a B2B
business, in light of the unforeseen impact of COVID-19, the
Directors announce that they are in discussions with advisors and
stakeholders regarding the future of the Group, including but not
limited to efforts to secure funding by the issue of new equity to
provide the necessary additional working capital. The Company, like
others in the sector, faces material uncertainty as to the impact
of COVID-19 on its business, including the possible consequential
impact arising from how key stakeholders, including partners and
suppliers, are able to respond. A further announcement will be made
in due course.
The Directors have prepared these interim results on the same
basis as the Company's audited accounts for the year ended 30 June
2019.
Financial Summary:
Unaudited Unaudited six
six months months ended
ended 31 December 31 December
2019 2018(1)
GBP'000 GBP'000
Revenue from continuing operations 797 310
Total Adjusted EBITDA(2) (1,653) (1,773)
Operating loss from continuing operations (2,469) (2,310)
Loss before taxation from continuing
operations (2,923) (2,952)
Profit / (loss) for the period from
discontinued operations 157 (1,821)
Basic & diluted loss per share (pence)
continuing operations (2.3) (9.3)
Basic & diluted loss per share (pence)
continued & discontinued operations (2.2) (14.9)
(1) Comparatives for the unaudited six months ended 31 December
2018 have been restated to reflect the Company's continuing
business at 31 December 2019.
(2) Adjusted EBITDA loss excludes depreciation, amortisation,
income or expenditure relating to exceptional items, non-cash
charges relating to share based payments and impairments.
Summary:
-- Revenue in H1 FY20 up 157% versus six months ended 31
December 2018 (H1 FY19) on a continuing basis.
-- The UK B2C operations have been classified as discontinued in
the current and prior periods following the Company's announcement
on 7 January 2020 of the sale of its UK B2C business to Grace Media
Limited. The prior period also reflects the US operations as
discontinued. The associated assets and liabilities of these two
segments have been classified as held for sale in the current and
prior periods.
-- The operating loss from continuing operations increased in H1
FY20 as the continuing business gains traction with new partner
launches while continuing to absorb a higher cost base currently
supporting the transition of the UK B2C business to Grace Media
Limited.
-- Refocused the business strategy in H1 FY20 towards
international gaming technology and content provision, working with
leading operators in their respective markets.
-- This higher margin business is currently forecast to deliver
a breakeven / EBITDA positive result on a monthly basis in H1 FY21,
subject to securing the required working capital from funding.
-- In August 2019, Lucy Buckley resigned as CEO of the Company,
and Gary Shaw, Founder and Executive Director, was appointed
Interim CEO to stabilise the business and drive the focus on the
international expansion.
-- In November 2019, the Company completed a restructuring of
its capital structure, raising GBP2.725m (before costs) in new
equity, converting the full outstanding principal and accrued
interest on the Series A CLN, and restructuring the terms of the
Series B CLN and shareholder loans.
-- In December 2019, the Company announced the appointment of
Paul Hughes as a Non-Executive Director, bringing extensive
corporate banking and commercial experience to the Board.
-- In December 2019, and as part of the Group's restructuring
programme to ensure the protection of the intellectual property
within the Group, and the ongoing B2B and international business,
for the benefit of all creditors and shareholders, the Group
transferred certain trade and assets and all Gibraltar based staff,
to two recently incorporated new legal entities in Gibraltar.
Post period-end:
-- In January 2020, following the appointment of administrators
to Nektan (Gibraltar) Limited, the administrators completed the
sale of the UK B2C business to Grace Media Limited, for an upfront
cash consideration of GBP0.2m and an ongoing, exclusive, platform
arrangement for which the Company receives an ongoing royalty.
-- At the end of January 2020, the Company was live with 34
sites in its expanding B2B portfolio, and there are currently a
further 21 confirmed sites currently in the pipeline to be launched
over coming months.
-- In February 2020, the Directors were advised that Rapid Games
has now ceased to operate following the inability of the majority
shareholder to secure additional funding in the current economic
climate, and following the closure of casinos in North America.
This is not expected to impact on FY20 full year results as the
carrying value of our investment had been reduced to zero in
FY19.
Gary Shaw, Interim Chief Executive Officer of Nektan, said:
"Whilst we are currently live with 34 sites across multiple
continents, we see a strong pipeline of partner launches from
leading global businesses to deliver their online gaming solutions.
The roll-out of these sites should take place over the next 2-3
months, which will significantly transform the revenue profile of
the Group. This higher margin revenue is forecast to drive the
Group to EBITDA break-even by the end of this current financial
year.
However, the effects of COVID-19 are only beginning to be
understood by the Company and our sector, which creates material
uncertainty as we understand the effects on our key stakeholders.
The Directors are assessing all available options and we will
provide further updates as appropriate.
I place on record my thanks to the Board, our staff, our
partners and all stakeholders in their continued efforts and
support for the business."
For further information on the Group, please contact:
Nektan
Jim Wilkinson, Chairman
Gary Shaw, Interim Chief Executive Officer +44 203 478 2648
Shore Capital (Nominated Adviser and Joint Broker)
Tom Griffiths / David Coaten +44 207 408 4050
------------------
Novum Securities (Joint Broker)
Jon Belliss / Colin Rowbury +44 207 399 9425
------------------
Further information on Nektan can be found on the Group's
website at www.nektan.com .
About Nektan:
Nektan is an international gaming technology and services
provider, specialising in mobile casino. It licenses its
proprietary technology to leading operators, including
BetVictor.
Nektan's full end-to-end technology platform, Evolve, enables
the management of the full customer experience and back-office
operations, allowing operators on this platform to allow their
partners to focus on marketing the product to their consumers.
The E-Lite platform is Nektan's B2B gaming content aggregator
and bonusing platform that delivers a wide range of premium content
from the world's leading game studios. It is an easily-integrated
add on module for operators, giving them an array of options and
flexibility on how they manage and distribute a breadth of premium
gaming content across their networks.
Headquartered in Gibraltar, Nektan is regulated by the Gibraltar
Licensing Authority, the UK Gambling Commission and the Information
Commissioners Office. As a socially responsible licence holder,
Nektan endeavours to deliver a safe, secure and robust player
gaming experience.
Nektan plc was admitted to the AIM market of the London Stock
Exchange in November 2014.
INTERIM CHIEF EXECUTIVE'S STATEMENT
Overview
The first six months of this current financial year have
continued to be one of change for the Group; primarily to focus the
Group's strategy on becoming a leading international gaming
technology and content provider. Moving away from operating the UK
B2C business which dominated our recent history, we now have a
truly global outlook, with our casino platform and integrated
gaming technology adopted by partners in markets across Europe,
Africa and Asia.
Restructuring the Group to provide the platform to support this
growth, we are now working at speed to deliver integrations with
partners across global markets, including expansion into LATAM in
the coming months, which we believe will transform the revenue
profile of the Group.
Strategic and corporate review
As previously announced, and to support the Group in this
strategy, the Group embarked on a restructuring programme in the
first six months of the current financial year, whereby it (i)
raised GBP2.725 million of new equity through the issuance of new
shares at 5p per share in November 2019, (ii) reduced debt through
the conversion of the entire Series A Convertible Loan Notes
('CLN') of GBP3.9m (principal and accrued interest) into equity at
5p per share, leaving the Company with GBP1.1m Series B CLNs, the
terms of which were amended, (iii) restructured the terms of the
Shareholder Loans, and (iv) afforded protection through
administration to the Group's previous exposure to the UK HMRC for
Remote Gaming Duty of GBP5.9m at 31 December 2019.
The Group incorporated two new legal entities in Gibraltar, as
part of completing the restructuring process to ensure the
protection of the intellectual property within the Group, and the
ongoing B2B and international business.
On 19 December 2019, the Company announced the appointment of
Paul Hughes as a Non-Executive Director. Paul has extensive
corporate banking and commercial experience, with a focus on
fundraising, the turnaround of loss-making businesses, risk
management and fast-growing private and public companies. He also
has extensive experience as a non-executive director and chairman
of a variety of private and public companies.
Finally, in completing the restructuring programme, the
Directors made the decision to seek the protection of
administration for the Group's subsidiary company, Nektan
(Gibraltar) Limited ("NGL"). Administrators were appointed to NGL
on 7 January 2020, and in one of the first acts following their
appointment, the administrators completed the conditional sale of
the UK B2C business to Grace Media Limited. Not only does this see
the Group free up capital to focus on the strategic growth areas
where the Group has a strong proposition, it also allows the Group
to retain a foothold in the UK market by providing the ongoing
platform and gaming content to the acquirer for a monthly fee.
This ensured the conditional sale could complete and enables the
legacy HMRC liability to be considered in an orderly fashion which
does not threaten the future of the Group. This has not impacted
the ongoing operations of the Group.
Financial Review and KPIs
The financial review and KPIs are impacted in H1 FY20 due to the
decision to dispose of the Company's UK B2C business, which means
the continuing business revenues as reported for the six months
ended 31 December 2019 are delivered through the full existing cost
base of the Group. This cost base also supports the sale of the UK
B2C business through the transition to its new owner.
However, notwithstanding, the KPIs for the continuing business
demonstrate robust growth for the Company. Significantly, the
ongoing business has reported a 157% increase in revenues over H1
FY19, and with the continued growth in revenue, new partner
launches and close control on costs, we continue on our path to
profitability.
-- Revenues increased to GBP797k (H1 FY19: GBP310k);
-- Number of sites live 28 (H1 FY19: 5); and
-- Sites in pipeline to launch 21 (H1 FY19: 6).
Taking the continued operations, adjusted EBITDA loss has
decreased to GBP1,653k (H1 FY19 GBP1,773k).
The total loss for the period, including discontinued
operations, reduced to GBP2,767k (H1 FY19: GBP4,798k).
Our technology and business model
Nektan is a growing, international gaming technology and
services provider operating in the iGaming sector, specialising in
mobile casino. Through the Evolve platform it aggregates premium
casino content, including the latest games from the industry's
leading game providers, which, using its proprietary technology, it
delivers as a platform and content distributor to its international
partners. During H1 FY20 , Nektan also operated a fully managed
white label casino solution to its B2C partners, prior to the sale
of this division.
The E-lite platform is Nektan's B2B gaming content aggregator
and bonusing platform that delivers a wide range of premium content
from the world's leading game studios. It is an easily integrated
add on module for operators, giving them an array of options and
flexibility on how they manage and distribute a breadth of premium
gaming content across their networks.
We are now supporting sites across a number of countries and
continents, including Europe, Africa and Asia, in 16 languages, and
due to Nektan's speed of integration, we continue to attract
leading global operators in their markets.
Nektan's previously operated white label solution was delivered
via its Evolve platform, which enabled the management of the full
customer experience and back-office operations, and allowed
partners to focus on marketing the product to their consumers.
Nektan had a material stake (42.5%) in US-based interactive
gaming operator, Rapid Games, which provides US land-based casinos
with an in-venue mobile gaming solution. The Directors have been
advised that Rapid Games has now ceased to operate following the
inability of the majority shareholder to secure additional funding
in the current economic climate, and following the closure of
casinos in North America. This is not expected to impact on FY20
full year results as the carrying value of our investment had been
reduced to zero in FY19.
As a socially responsible organisation, Nektan adopts the
necessary compliance and regulatory procedures.
Nektan aims to be the go-to provider of the richest, most robust
and socially responsible casino platforms globally.
Outlook and Current Funding
The Company expects revenue from continuing operations to grow
in coming months, not only as existing and recently launched sites
gain traction in their respective markets, but also as the pipeline
of new sites are launched in the coming months. We anticipate a
number of these sites to become strategic partners for the Group
and to deliver significant revenues to the business in the coming
years.
The Group remains committed to reaching an agreement with the
administrators of Nektan (Gibraltar) Limited ("NGL") on a repayment
plan that would see all creditors of NGL paid in full over an
agreed period.
Finally, this is a time of material uncertainty for the sector,
from which Nektan is not immune. While progress has been made in
the Company's transformation to a B2B business, in light of the
unforeseen impact of COVID-19, the Directors announce that they are
in discussions regarding the future of the Group, including but not
limited to efforts to secure funding by the issue of new equity to
provide additional working capital. The Company, like others in the
sector, faces material uncertainty as to the impact of COVID-19 on
its business, including the possible consequential impact arising
from how key stakeholders, including partners and suppliers, are
able to respond. A further announcement will be made in due
course.
Team
On behalf of the Board, I would like to thank the entire team at
Nektan for all their hard work over the period. Without their
belief in the business and considerable efforts over the last six
months, we would not be in this position of looking towards
sustained profitability for the Group in the short to medium term.
It is their dedication and professionalism that is driving the
Company and helping to attract major partners who want to use our
technology to enhance and build their gaming brands across the
globe.
Gary Shaw
Interim Chief Executive Officer
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the 6 months ended 31 December 2019
Unaudited six Unaudited
months to 31 six months
December 2019 to 31 December
2018
Notes GBP'000 GBP'000
Revenue 2 797 310
Cost of sales (266) -
---------------- -----------------
Gross profit 531 310
Marketing, partner and affiliate - -
costs
Administrative expenses (3,000) (2,620)
Adjusted EBITDA (1,653) (1,773)
Exceptional items (209) (6)
Depreciation (95) (28)
Amortisation of intangible assets (465) (484)
Impairment of fixed assets (47) -
Share based payment charge - (19)
Operating loss (2,469) (2,310)
Net finance expense 4 (454) (642)
Loss before taxation (2,923) (2,952)
Tax credit/(charge) (1) (25)
Loss after tax from continuing
operations (2,924) (2,977)
Profit/(loss) from discontinued
operations 157 (1,821)
Loss after tax from continuing
and discontinued operations (2,767) (4,798)
Other comprehensive income for
the period
Exchange differences arising
on translation of foreign operations
which may be reclassified to
profit or loss (63) 41
---------------- -----------------
Total comprehensive loss for
the period (2,830) (4,757)
================ =================
Loss per share attributable to
the Ordinary equity holders of
the parent
Loss per share from continuing
operations
Basic and diluted (pence) 3 (2.3) (9.3)
Profit/(loss) per share from
discontinuing operations
Basic and diluted (pence) 3 0.1 (5.7)
Loss per share from continuing
and discontinuing operations
Basic and diluted (pence) 3 (2.2) (14.9)
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
For the six months ended 31 December 2019
Unaudited
as at 31 December Audited at
2019 30 June 2019
Notes GBP'000 GBP'000
Non-current assets
Intangible assets 1,641 1,441
Property, plant and equipment 58 137
Right of use assets 475 -
2,174 1,578
Current assets
Trade and other receivables 5 1,501 993
Cash and cash equivalents 6 589 857
-------------------- ----------------
Assets in disposal groups classified
as held for sale 10 1,678 949
-------------------- ----------------
3,768 2,799
Total assets 5,942 4,377
==================== ================
Current liabilities
Trade and other payables 7 (10,047) (8,948)
Derivative financial liabilities - (12)
Convertible loan notes 8 - (4,652)
Shareholder loans 12 (1,497) (1,480)
-------------------- ----------------
Liabilities in disposal groups classified
as held for sale 10 (846) (860)
-------------------- ----------------
(12,390) (15,952)
Non-current liabilities
Convertible loan notes 8 (1,100) -
Lease liability 11 (489) -
Deferred tax - (25)
-------------------- ----------------
(1,589) (25)
Total liabilities (13,979) (15,977)
-------------------- ----------------
Net liabilities (8,037) (11,600)
==================== ================
Equity attributable to equity holder:
Share capital 9 2,418 1,118
Share premium 43,788 38,695
Merger reserve (2) (2)
Capital contribution reserve 3,306 3,306
Share option reserve 1,055 1,055
Foreign exchange reserve (68) (5)
Retained earnings (58,534) (55,767)
Total deficit (8,037) (11,600)
==================== ================
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 31 December 2019
Share Share Share Capital Merger Foreign Retained Total
capital premium option contribution reserve exchange earnings equity
reserve reserve reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 July 2018 474 29,679 1,038 3,306 (2) (304) (46,552) (12,361)
Loss for the
period - - - - - - (4,798) (4,798)
Other
comprehensive
income - - - - - 41 - 41
Issue of shares - - - - - - - -
(net of costs)
Share based
payments - - 19 - - - - 19
At 31 December
2018 474 29,679 1,057 3,306 (2) (263) (51,350) (17,099)
========== ========== ========== ============== ========== ========== =========== ==========
Loss for the
period - - - - - - (4,417) (4,417)
Other
comprehensive
income - - - - - 258 - 258
Issue of shares
(net of costs) 644 9,016 - - - - - 9,660
Share based
payments - - (2) - - - - (2)
At 30 June 2019 1,118 38,695 1,055 3,306 (2) (5) (55,767) (11,600)
========== ========== ========== ============== ========== ========== =========== ==========
Loss for the
period - - - - - - (2,767) (2,767)
Other
comprehensive
income - - - - - (63) - (63)
Issue of shares
(net of costs) 1,300 5,093 - - - - - 6,393
Share based - - - - - - - -
payments
At 31 December
2019 2,418 43,788 1,055 3,306 (2) (68) (58,534) (8,037)
========== ========== ========== ============== ========== ========== =========== ==========
The following describes the nature and purpose of each reserve
within equity:
Share capital
Represents the nominal value of shares allotted, called up and
fully paid.
Share premium
Represents the amount of subscribed for share capital in excess
of nominal value.
Share option reserve
Represents the cumulative value of share option charges recorded
in the consolidated statement of comprehensive income.
Capital contribution reserve
Represents:
(a) Nominal value of shares held by a shareholder in a
subsidiary Company and contributed to Nektan plc.
(b) The release of the Group's obligation to repay borrowings of GBP3,306,000 by a shareholder.
Merger reserve
The difference between the nominal value of the Nektan
(Gibraltar) Limited shares acquired in May 2011 and the nominal
value of shares in Nektan plc issued to acquire these shares as
part of a Group restructuring.
Foreign exchange reserve
Represents the gains/losses arising on retranslating the net
assets of overseas operations into UK Pound Sterling.
Retained earnings
Represents the cumulative net gains and losses recognised in the
consolidated statement of comprehensive income.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months ended 31 December 2019
Unaudited Unaudited
six Months six Months
to 31 December to 31 December
2019 2018
Notes GBP'000 GBP'000
Cash flow from operating activities
Loss for the period (2,767) (4,798)
Adjusted for:
Amortisation of intangible assets 465 1,039
Amortisation of right of use assets 61 -
Impairment of intangible assets - 2,974
Impairment of fixed assets 47 -
Impairment of investments 39 -
Movement in intangibles (200) -
Depreciation of property, plant and
equipment 34 52
Share based payment expense - 19
Finance expense 465 622
Finance income (11) -
Income tax charge/(credit) 1 (139)
Movement in foreign exchange (31) -
Operating cash flow before movement
in working capital (1,897) (231)
Increase in trade and other receivables (512) (55)
Increase in trade and other payables 1,074 1,114
Increase in trade and other receivables
held for sale (729) (213)
Decrease in trade and other payables
held for sale (14) (252)
----------------- ------------------
Net cash (used in)/generated from
operating activities (2,077) 363
Cash flow from investing activities
Purchase and internally developed
intangible fixed assets (467) (1,258)
Purchase of property, plant and equipment (6) (161)
Net cash (used in)/generated from
investing activities (473) (1,419)
Cash flow from financing activities
Interest paid (42) (28)
Payment of lease liability (60) -
Payment to acquire JV partner share - (100)
Proceeds on subscription for shares 2,385 -
(net of costs)
----------------- ------------------
Net cash generated from/ (used in)
financing activities 2,283 (128)
Net (decrease)/increase in cash and
cash equivalents (268) (1,184)
----------------- ------------------
Cash and cash equivalents at beginning
of period 6 857 1,402
Cash and cash equivalents at end
of period 6 589 218
================= ==================
1. Accounting policies
General information
The unaudited condensed interim consolidated financial
statements for the six months ended 31 December 2019, which were
approved by the Board of Directors on 31 March 2020, do not
comprise statutory accounts and should be read in conjunction with
the Annual Report and Accounts, which includes audited financial
information for the year ended 30 June 2019.
The report of the auditors on those accounts drew attention to
the fact that in forming their opinion on the financial statements,
which was unmodified, that they have considered the adequacy of the
disclosures made in note 1 to the financial statements concerning
the Group and the Company's ability to continue as a going concern.
The report stated that there was a material uncertainty relating to
going concern and this was dependent on the ability of the
directors to successfully secure sufficient funding for the
foreseeable future, including further funds should Board approved
forecasts not be met.
Basis of preparation
The unaudited interim condensed consolidated financial
statements are prepared on the basis of the accounting policies
stated in the Group's Annual Report and Account for the year ended
30 June 2019, with the exception of the adoption of IFRS 16 Leased
Assets which is effective for the first time, which has brought
onto the balance sheet operating leases as a right of use asset
with a corresponding liability.
The interim financial statements have been prepared on a going
concern basis.
The Directors have reviewed forecast cash flows for the
forthcoming 12 months from the date of approval of these interim
financial statements and consider that provided new equity is
raised, that the business has sufficient cash resources to continue
as a going concern. If however, circumstances were to change, the
Directors would look at other options including seeking additional
capital through further fundraising and/or asset sales or part
sales. In addition, the Directors remain in discussions with the
administrators of Nektan (Gibraltar) Limited in regards to agreeing
a repayment plan for creditors of this business (including
HMRC).
Based on the above, the Directors have a reasonable expectation
to believe that it is appropriate to continue to prepare the
financial statements on a going concern basis. However, there are
therefore material uncertainties related to events or conditions
that may cast significant doubt on the Group and the Company's
ability to continue as a going concern. If the business is unable
to raise additional finance, it may be unable to realise its assets
and discharge its liabilities in the normal course of business.
2. Segmental information
Due to the sale during the year of the on-premise gaming
segment, there is only one segment for the period ended 31 December
2019.
Geographical analysis of non-current assets
The following table provides an analysis of the Group's
non-current assets, excluding goodwill and assets held for sale
Unaudited
at 31 December Audited at
2019 30 June 2019
GBP'000 GBP'000
Gibraltar 1,845 1,553
UK 4 5
India 125 20
1,974 1,578
--------------------------- -------------------------
Geographical analysis of revenues
The following table provides an analysis of the Group's revenue
by geographical segment:
Unaudited Unaudited
six Months six Months
to 31 December to 31 December
2019 2018
GBP'000 GBP'000
UK 288 84
Rest of the World 509 226
797 310
=========================== ===========================
3. Loss per share
Basic loss per share is calculated by dividing the (loss)/profit
attributable to Ordinary shareholders by the weighted average
number of ordinary shares outstanding during the period.
Unaudited six Unaudited six
months to 31 months to 31
December 2019 December 2018
Basic and diluted - continuing operations
Loss after tax (GBP'000) (2,924) (2,977)
Weighted average number of shares 126,807,521 32,120,224
Weighted average loss per share
(pence) (2.3) (9.3)
Basic and diluted - discontinuing
operations
Profit/(loss) after tax (GBP'000) 157 (1,821)
Weighted average number of shares 126,807,521 32,120,224
Weighted average profit/(loss) per
share (pence) 0.1 (5.7)
Basic and diluted - continuing &discontinued
operations
Loss after tax (GBP'000) (2,767) (4,798)
Weighted average number of shares 126,807,521 32,120,224
Weighted average loss per share
(pence) (2.2) (14.9)
At the period-end there are a number of potentially dilutive
instruments including share options and convertible loan notes.
However, as the exercise price of the share options and
convertibles is in excess of the share price at period-end and
throughout the period, none of these instruments give rise to a
dilution impact for the purposes of calculating the diluted
earnings per share. The result for the six months ended 31 December
2019 was a loss and therefore there was no difference between the
basic and diluted loss per share.
4. Finance income and costs
Unaudited Unaudited
six months six months
to 31 December to 31 December
2019 2018
GBP'000 GBP'000
Finance income
Gain on movement in fair value of
derivative financial instruments 11 157
--------------------------- -------------------
Total finance income 11 157
Finance expense
Loss on movement in fair value of
derivative financial instruments (90) (210)
Interest expense on convertible
loan notes (86) (469)
Interest on leases (13) -
Bank interest and charges (19) -
Interest on shareholder loans (24) (120)
Interest payable - effective rate
adjustment (233) -
--------------------------- -------------------
Total finance expense (465) (799)
Net finance expense (454) (642)
=========================== ===================
5. Trade and other receivables
Unaudited Audited
at 31 December at 30 June
2019 2019
GBP'000 GBP'000
Trade receivables and client segregated
funds 533 416
Payment processor receivables 1,678 949
Prepayments & other receivables 968 577
--------------------------- -------------------
3,179 1,942
--------------------------- -------------------
The Directors consider that the carrying amount of the trade and
other receivables approximate to their fair value due to their
short-term maturity. The maximum exposure to credit risk at the
reporting date is the carrying value of each class of receivable
shown above. The Group does not hold any collateral as
security.
6. Cash and cash equivalents
Unaudited at Audited at
31 December 2019 30 June 2019
GBP'000 GBP'000
Cash in bank accounts 589 857
Interest is earned at floating rates on cash held on short-term
deposit. All of the Group's cash and cash equivalents are held with
major UK, Gibraltar or US banks. The Directors consider that the
carrying value of cash and cash equivalents is approximate to their
fair value.
7. Trade and other payables
Unaudited at Audited
31 December at 30 June
2019 2019
GBP'000 GBP'000
Trade payables 868 847
Other payables 376 551
Amounts payable to related parties - 90
Partner revenue shares 708 463
Gaming duty 5,864 4,649
Jackpot contribution accruals 1,127 1,030
Other accruals 1,104 1,318
10,047 8,948
======================== ===================
The Directors consider that the carrying value of trade and
other payables is approximate to their fair value.
The Group has financial risk management policies in place to
ensure that all payables are paid within the credit timeframe and
no interest has been charged by any suppliers as a result of late
payment of invoices.
8. Convertible Loan Notes
The Company raised GBP11.1m through the issue of convertible
loan notes in the years ended 30 June 2015 and 30 June 2016. The
conversion price was set at a 25% premium to the price at the most
recent equity issue price prior to the conversion of the loan
notes, subject to a maximum conversion price. The maximum
conversion price is subject to rebasing in the event of a share
issue. At the balance sheet date, the conversion price was
6.25p.
Interest of 10 % per annum was payable quarterly in arrears,
however in the year ended 30 June 2019, the Company reached
agreement with the Series A CLN holders to reduce the interest rate
to 2.5%. This followed agreement in the year ended 30 June 2018 to
defer the interest on the Series A CLN until April 2020, with the
Company having the option quarterly to restart interest payments.
If the Company exercised its right to defer interest, the Series A
CLN holders were granted a warrant to buy Ordinary shares,
exercisable immediately at the lower prevailing equity issue price
per share up to the value of the interest so deferred. This
agreement did not apply to the VCT portion, Series B CLN holders,
of principal totalling GBP1.1m.
On 18 November 2019, as part of the equity fundraising completed
at this time, the Directors reached agreement with the holders of
the Series A CLN to fully convert their remaining outstanding
principal and accrued interest, giving rise to a loss on conversion
of debt to shares in the period of GBP3,877,000. At the same time,
the Directors reached agreement with the holder of the Series B CLN
to amend the terms of its instrument. This resulted in a
substantial modification of the Series B CLN leading to
derecognition of the existing Series B CLN and recognition of the
modified Series B CLN, giving rise to a loss on modification of
GBP1,052,000.
The Convertible Loan Notes are secured by a first ranking fixed
and floating charge on the assets of the Company and each of the
Company's subsidiaries, with all other loans to the Company ranking
behind the Convertible Loan Notes' security.
Unaudited at 31 Audited at
December 2019 30 June 2019
GBP'000 GBP'000
Balance at 1 July 2019 4,652 9,411
Principal amount and accrued
interest converted (6,226)
Loss on conversion of Series
A CLN (3,877) (317)
Loss on modification of Series (1,052) -
B CLN
Effective interest 234 1,287
Accrued interest in the period 43 497
Principal of new CLN 1,100 -
--------------------------------- --------------------------- ---------------
Balance at 31 December 2019 1,100 4,652
--------------------------------- --------------------------- ---------------
With the full conversion of the Series A CLN during the period,
the derivative financial liability has been revalued at the balance
sheet date to zero.
9. Share capital
Ordinary shares Ordinary shares
Number ('000) GBP
Allotted, issued and fully paid
At 31 December 2018 47,413 474,126
Issued during the period 64,439 644,390
--------------------------- ---------------------------
At 30 June 2019 111,852 1,118,516
Issued during the period 129,974 1,299,741
--------------------------- ---------------------------
At 31 December 2019 241,826 2,418,257
=========================== ===========================
Authorised share capital
The authorised share capital of the Group is GBP5,000,000
divided into 500,000,000 Ordinary Shares of GBP0.01 each, of which
241,825,665 Ordinary Shares have been issued, credited as fully
paid (2018: 47,412,602) at the balance date.
As part of the 18 November 2019 raise, the issue of 4,690,000
shares was deferred until January 2020.
10. Net assets and liabilities held for Sale
Following the Company's decision to consider a sale of its UK
B2C business, subsequently completed by the administrators of
Nektan (Gibraltar) Limited in January 2020, the following are the
assets and liabilities held for sale in respect of the UK B2C
business at 31 December 2019.
Unaudited at Audited at
31 December 30 June 2019
2019 GBP'000 GBP'000
Client segregated funds 1,678 949
Player balances (846) (860)
------------------------------------- ------------------------- -------------------------
Net assets held for sale 832 89
------------------------------------- ------------------------- -------------------------
Player balances represent amounts due to customers including net
deposits received, undrawn winnings and certain promotional
bonuses.
11. Right of use assets
For financial years beginning on or after 1 January 2019, IFRS
16, "Leases" now applies. The period to 31 December 2019 is the
first reporting period for which IFRS 16 has been applied by the
Group.
Under IFRS, a contract is, or contains, a lease if the contract
conveys the right to control the use of an identified asset for a
period of time in exchange for a consideration. IFRS 16 removes the
distinction between operating and finance leases for lessees, and
requires them to recognise a lease liability reflecting future
lease payments and a "right-of-use asset" for virtually all lease
contracts; the only exceptions are short-term and low-value
leases.
The Group has applied the standard from its mandatory adoption
date of 1 July 2019 and has applied the simplified transition
approach. Under this approach, the Group will not restate
comparative amounts for the year prior to first adoption, the lease
liability is measured at the present value of the remaining lease
payments as at 1 July 2019, and the right-of-use assets at that
date will be measured at an amount equivalent to this lease
liability plus prepaid lease expenses. The Group has entered into
lease arrangements for the use of land and buildings; these
arrangements were classified as operating leases under IAS 17.
The adoption of IFRS 16 will also result in the replacement of
operating lease rental expenditure on this arrangement by
amortisation of the right-of-use asset, and by an interest cost on
the lease liability. These figures have been separately shown in
this report.
The table below represents the cumulative effects of the initial
application of IFRS 16 on the Condensed Consolidated Statement of
Financial Position at 31 December 2019.
Unaudited at
31 December
2019 GBP'000
Assets
Right of use asset 475
Total assets 475
------------------------------- -------------------------
Liabilities
Lease liability (489)
Total liabilities (489)
------------------------------- -------------------------
Under IFRS 16, the Group has recognised amortisation and
interest costs, instead of operating lease expense. During the six
months ended 31 December 2019, the Group recognised GBP61k in
amortisation charges for right of use assets and GBP13k in
additional interest costs from leases.
Set out below is the carrying amount of the right of use asset
and lease liability for the Group including the movement during the
period.
Right of use Lease liability
asset
Total
Land and Buildings GBP'000
GBP'000
At 1 July 2019
On initial recognition 536 536
Amortisation charge (61) -
Interest expense - 13
Payments - (60)
At 31 December 2019 475 (489)
----------------------------------- ------------------------------- ---------------------------
12. Related party transactions
Balances and transactions between the Company and its
subsidiaries, which are related parties, have been eliminated on
consolidation and are not disclosed in this note.
During the period, the following directors had transactions or
interests in the Company's Convertible Loan Notes:
At 31 December At 30 June
2019 2019
Gary Shaw CLN Balance - -
Interest received - -
in the period
Deferred interest - GBP24,986
balance
Deferred interest - -
warrants
Jim Wilkinson CLN Balance - -
Interest received - -
in the period
Deferred interest - GBP20,822
balance
Deferred interest - -
warrants
Venture Tech CLN Balance - GBP1,000,000
Assets*
Interest received - -
in the period
Deferred interest GBP9,658 GBP87,466
balance
Deferred interest - -
warrants
In July 2017, the Company announced that it had secured
commitments to raise GBP2,500,000 through two separate facility
agreements with two of its Shareholders, Gary Shaw for GBP1,300,000
and Venture Tech Assets, a company associated with Sandeep Reddy,
for GBP1,200,000, with a redemption date of two years following the
draw down and a coupon of 10%. As part of the equity raise
completed in April 2019, the Directors agreed to amend the terms of
the facility agreements, reducing the interest rate from 10% to
2.5%. As part of the November 2019 raise, the Directors agreed to
amend the terms of the facility agreements, extending the
redemption date to April 2021.
During the year ended 30 June 2019, as part of the equity raise
completed in April 2019, Gary Shaw agreed to convert into equity
GBP0.65m of his principal facility along with accrued interest
calculated to 30 June 2019 of GBP0.2m.
At the balance sheet date, the position with respect to the
Shareholder Loans was as follows:
At 31 December At 30 June
2019 2019
Gary Shaw Loan facility GBP1,300,000 GBP1,300,000
Loan drawn down GBP535,000 GBP535,000
Interest paid - -
Interest accrued GBP9,002 GBP2,259
Venture Tech Loan facility GBP1,200,000 GBP1,200,000
Assets*
Loan drawn down GBP800,000 GBP800,000
Interest paid - -
Interest accrued GBP152,827 GBP142,745
* A company associated with Sandeep Reddy
13. Acquisitions and disposals
UK
During the six months ended 31 December 2019, Directors began
the process of exploring a sale of the UK B2C business. At the
balance sheet date, negotiations were progressing well.
The assets and liabilities related to the UK B2C business have
been presented separately in the Condensed Consolidated Statement
of Financial Position and are presented as discontinued operations
in the Condensed Consolidated Statement of Comprehensive Income.
The comparatives in the prior year have also been restated.
14. Post-balance sheet events
In completing the restructuring programme commenced during the
period, the Directors made the decision to seek the protection of
administration for the Group's subsidiary company Nektan
(Gibraltar) Limited ("NGL"). Administrators were appointed to NGL
on 7 January 2020, and in one of the first acts following their
appointment, the administrators completed the conditional sale of
the UK B2C business. The Group secured an ongoing platform deal for
a minimum 3-year period as part of this transaction.
On 31 January 2020, the Directors announced that the 4,690,000
of Ordinary Shares subscribed in the November 2019 raise, but
deferred, would be admitted to trading on AIM on 3 February 2020,
following which the Company had 246,515,665 Ordinary Shares in
issue and admitted to trading on AIM.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR GIGDXUXXDGGB
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