TIDMALOG
RNS Number : 4270R
AsianLogic Limited
30 April 2009
AsianLogic Limited
("AsianLogic" or "the "Company")
Preliminary Results for the year ended 31 December 2008
AsianLogic Limited, the diversified Asia-Pacific online and land-based gaming
company, announces its preliminary results for the year ended 31 December 2008.
The Company is also providing an update on current trading, principally for the
period of the first quarter of 2009.
Financial Highlights
* Revenues for the year are up 82% to US$98.7m (2007:US$54.3m)
- Average daily casino turnover up 83% to US$11.5m (2007:US$6.2m)
- Average daily poker rake increased by 4.5 times to US$15,051
(2007:US$2,718)
* Adjusted* profit before tax of US$6.3m (2007:US$12.4m), following a significant
increase in operational expenses, increasing margin pressure on wholesale
business and bad debt provisions. In addition, in 2008 there was no repeat of
the exceptional gain on disposal of associates as in 2007
* Overall losses before tax of US$11.9m (2007:profits before tax of US$7.9)
* Average net gaming per day increased from US$145,249 in 2007 to US$254,193 in
2008, a rise of 75%
* Basic and diluted loss per share of 11.3 cents per share (2007:earnings per
share of 12.2 cents)
* No final dividend is being paid, making the total for the year 2.9 cents per
share, as declared in interim results
* Net cash balances as at 31 December 2008 of US$48.6m
(*) Adjusted profit before income tax is calculated after adding back share
based payments and non cash losses in relation to investments in CY Foundation
Group Limited, Leisure & Resorts World Corporation and Elixir Gaming
Technologies Inc which do not form part of the Group's core business.
Operational Highlights
* Company continuing to move out of wholesale business into deposit accounts
albeit with impact on operational profitability
* Challenging economic circumstances - 90% of revenues from Asia market, which has
not been immune to the global economic downturn. Nevertheless AsianLogic has
continued to see growth in major markets in its emerging deposit business
* Poker continuing to grow in popularity in Asia - both online and land based.
Asian Poker Tour now established as Asia's premier poker tournament attracting
players from across Asia and from online networks across the world
* Casino business growing, but impacted by capital expenditure in western-style
CRM, marketing and advertising and development of affiliate network
* Launch of investment fund intentionally delayed until later in 2009, reflecting
poor investment market conditions. FSA approval received for the fund manager
* Play for Real Asian games being rolled out with further product development
underway to support major promotion throughout 2009 and beyond
Current Trading and Outlook
* Trading conditions continue to be in line with update of 19 February 2009, with
increased capital expenditure linked to repositioning and bad debt provision
negatively impacting the business
* While top line revenues are expected to increase, net profits are expected to be
negligible. This position is expected to continue through 2009
* Ongoing strategic review to determine most appropriate manner to prioritise
shareholder value
Tom Hall, Executive Vice Chairman, said:
"While it was pleasing to see revenues grow at such a strong pace, the
increasing pressure on our lower margin wholesale business profitability, and
increasing bad debt provision meant the Company's adjusted net profit nearly
halved. To counter this, the Board is repositioning the business by looking to
dispose of its wholesale business and invest further into higher margin deposit
and retail based products, as well as services and again we expect revenues to
continue to grow. However, the capital expenditure, marketing and advertising
spend required to grow this business means that profitability will be impacted
throughout 2009 and into 2010. The global economic crisis has not helped our
trading but we see continuing long term opportunity in our core Asian gaming
marketplace."
- ends -
For further information contact:
Tom Hall, Executive Vice Chairman
AsianLogic Ltd +852 9037 3749
Piers Coombs/Adam Cowen
Collins Stewart - Nominated Adviser to AsianLogic Ltd +44 207 523 8350
David Rydell/Samantha Boston
Bell Pottinger Corporate & Financial +44 207 861 3232
Chairman's Statement
AsianLogic finds itself at a crossroads in its corporate development. Its
traditional reliance on the wholesale provision of services and products to the
Asian gaming marketplace came under significant margin pressure in the last six
months of the 2008 financial year. Increased tightening of wholesale business
margins and overall bad debt provision have resulted in a significant decline in
profitability.
While the top line revenues of the business grew, the profit element has been
absorbed by the cost of the Company taking the necessary steps in altering its
business model to arrest the long term erosion of profits through current
activities. As stated in November 2008, the Company is committed to focusing its
activities on higher margin retail delivery of gaming services and products
rather than acting as a wholesale reseller as it develops and this gradual shift
in income generation continues to accelerate.
Importantly the Company is moving away from wholesale-based gaming services to
risk-averse deposit based provision of games and services. The Board considers
this move entirely prudent and in the long term interests of the business
considering the decline in wholesale betting.
The Company operates primarily in the Asian market place with 90 per cent of
revenues coming from the region. Asia has not been immune from the global
economic downturn. Average net gaming per day peaked during the period of April
2008 to June 2008 but declined thereafter.
All of the above required that the Company took decisive and prompt action. In
the latter part of 2008, the Company started to invest heavily in advertising
and marketing to build the deposit-based business as well as having to recruit
new staff and buy in new systems that allowed the relevant expertise to be
applied. This capital expenditure has continued into 2009. This is a very new
market in Asia and is still developing but the Company believes this is where
the long term growth in the region lies.
The changes in trading and margins have led to an adjusted* profit of US$6.3m
for the year ended 31 December 2008, resulting in losses per share (basic and
diluted) of 11.3 cents per share. Overall the Company reported losses of
US$11.9m.
In terms of our core products both poker and casino have performed relatively
well. Poker continues to grow in popularity in Asia generally with Macau now
operating three dedicated poker rooms in its casinos. Our deposit online poker
business continues to grow with revenues increasing six fold to US$7.2m. We are
also looking forward to the launch of leading online poker group PKR's Chinese
language product due to launch in the summer of 2009 where we are their
exclusive partner in Asia. All indications are that this sector will continue
to grow both online and land based and we are well positioned for this growth.
In casino, the wholesale business grew in 2008 and is still contributing
considerably in 2009 although we are reviewing options for the business as it is
likely to become noncore as the Company establishes itself as deposit-based.
Wholesale betting casino margins remain very tight. The Company has invested
significantly in staffing on the deposit casino side from the senior management
through to improved customer support, CRM and SEO teams. The results are
beginning to come through but will not become material in 2009.
This is an area still new in Asia and the Company is having to adapt long
established "western" systems and operational procedures to cope with Asian
players and their requirements. Our investment in people is resulting in better
player retention and should also increase player values. However, to
significantly build this business we are also having to develop affiliate
networks which is a slow and costly process and it is unlikely that the Company
will see a return on its investment until 2010 at the earliest.
The acquisition of the Asian Poker Tour has proved successful. In 2008 it was
firmly established as Asia's premier, high quality poker tournament attracting
players from across Asia and from online networks across the world. The two
major events in 2008 have already been supplemented with a successful Manila
event in January 2009 and an expanded two-week "Festival of Poker" is scheduled
for Macau in August 2009. The events should be the largest field ever seen in
Asia. The brand already has global recognition and the Company expects an
expanded calendar of events going forward.
Our land based gaming initiatives have progressed with a sports betting business
in the Philippines being awarded an operator licence.
The Company is committed to innovation and in conjunction with its partner
company Playtech Ltd, has commenced the roll out of Play for Real Asian games in
early 2009. Further software enhancement is underway with promotion and
marketing initiatives finalised. The Company continues to seek further partner
opportunities, particularly with online gaming media operators with a focus on
the Asian market place.
The Company is committed to the launch of an investment fund that will seek
investment opportunities in existing and emerging technologies and businesses
serving primarily the Asian online and land based gaming market. The fund
manager received FSA approval in early 2009 and while this represented an
intentional delay regarding expected timing, a later launch of the fund is
likely to prove beneficial as the investment opportunities to date have not been
acceptable, reflecting the economic issues of the wider economy.
The Company has a dividend policy whereby 50% of distributable profits will be
returned to shareholders by way of a dividend. At the half year, the company
returned 2.9 cents per share but the resulting year end losses meant that a
final dividend was not payable.
In terms of current trading, the wholesale business continues to be affected by
shortening net margins. Bad debt provision is likely to increase. The focus on
retail and deposit-led trading is growing but is in its formative period and
requires significant further capital expenditure and is therefore loss making.
While top line revenues have grown in the first quarter of 2009, the net result
is that the Company is likely to make a small loss in the period. The outlook
for the remainder of the year is unclear.
The Company enjoys a reasonably strong balance sheet (with cash balances at the
end of April of approximately US$42.7m) although it has been impacted by the
impairment in the value of investments in CY Foundation Group Limited, Leisure &
Resorts World Corporation and Elixir Gaming Technologies Inc. The Company has
minimal exposure to currency fluctuations as the business trades in US dollars.
AsianLogic is at an important stage of its development and there are challenges
ahead. It is changing its business model to become more risk averse. It is
investing in the right people and the right teams as well as the right technical
infrastructure, improving the customer experience, building affiliate networks
and investing in viable brands through significant marketing and advertising
initiatives. The Board is clear that this is the right path for the long term
viability of the business although it has impacted on profitability and will
continue to do so in the medium term. The Company has initiated a strategic
review to determine the most appropriate manner in which to prioritise
shareholder value and will report in due course.
Jong-Dae Lee
Non-Executive Chairman
30 April 2009
AsianLogic Limited
Consolidated income statement
for the year ended 31 December 2008
(Expressed in United States dollars)
+-------------------------------------+---------+------------------+----------------+
| | | 2008 | 2007 |
+-------------------------------------+---------+------------------+----------------+
| | | US$'000 | US$'000 |
+-------------------------------------+---------+------------------+----------------+
| | | | |
+-------------------------------------+---------+------------------+----------------+
| Revenue | | 98,736 | 54,314 |
+-------------------------------------+---------+------------------+----------------+
| Cost of sales | | (86,556) | (48,765) |
+-------------------------------------+---------+------------------+----------------+
| | | | |
+-------------------------------------+---------+------------------+----------------+
| Gross profit | | 12,180 | 5,549 |
+-------------------------------------+---------+------------------+----------------+
| | | | |
+-------------------------------------+---------+------------------+----------------+
| Other revenue | | 2,769 | 1,840 |
+-------------------------------------+---------+------------------+----------------+
| Gain on disposal of associates | | - | 4,050 |
+-------------------------------------+---------+------------------+----------------+
| Distribution costs | | (3,164) | (563) |
+-------------------------------------+---------+------------------+----------------+
| Administrative expenses | | (2,683) | (1,872) |
+-------------------------------------+---------+------------------+----------------+
| Share based payments | | (1,838) | (4,594) |
+-------------------------------------+---------+------------------+----------------+
| Other operating expenses | | (6,945) | (2,762) |
+-------------------------------------+---------+------------------+----------------+
| | | | |
+-------------------------------------+---------+------------------+----------------+
| Results from operating activities | | 319 | 1,648 |
+-------------------------------------+---------+------------------+----------------+
| | | | |
+-------------------------------------+---------+------------------+----------------+
| Finance income | | 5,628 | 6,721 |
+-------------------------------------+---------+------------------+----------------+
| Finance expense | | (17,886) | (495) |
+-------------------------------------+---------+------------------+----------------+
| | | | |
+-------------------------------------+---------+------------------+----------------+
| Net finance (expense)/income | | (12,258) | 6,226 |
+-------------------------------------+---------+------------------+----------------+
| | | | |
+-------------------------------------+---------+------------------+----------------+
| (Loss)/profit before income tax | | (11,939) | 7,874 |
+-------------------------------------+---------+------------------+----------------+
| Income tax expense | | (36) | (23) |
+-------------------------------------+---------+------------------+----------------+
| | | | |
+-------------------------------------+---------+------------------+----------------+
| (Loss)/profit for the year | | (11,975) | 7,851 |
+-------------------------------------+---------+------------------+----------------+
| | | | |
+-------------------------------------+---------+------------------+----------------+
| Attributable to: | | | |
+-------------------------------------+---------+------------------+----------------+
| Equity holders of the Company | | (11,975) | 7,851 |
+-------------------------------------+---------+------------------+----------------+
| Minority interests | | - | - |
+-------------------------------------+---------+------------------+----------------+
| | | | |
+-------------------------------------+---------+------------------+----------------+
| | | (11,975) | 7,851 |
+-------------------------------------+---------+------------------+----------------+
| | | | |
+-------------------------------------+---------+------------------+----------------+
| (Loss)/earnings per share | | | |
+-------------------------------------+---------+------------------+----------------+
| Basic and diluted (loss)/earnings | | (11.3 cents) | 12.2 cents |
| per share | | | |
+-------------------------------------+---------+------------------+----------------+
AsianLogic Limited
Consolidated balance sheet
for the year ended 31 December 2008
(Expressed in United States dollars)
+---------------------------------------------+----------+--+------------+-----------+
| | | 2008 | 2007 |
+---------------------------------------------+-------------+------------+-----------+
| | | US$'000 | US$'000 |
+---------------------------------------------+-------------+------------+-----------+
| | | | |
+---------------------------------------------+-------------+------------+-----------+
| Non-current assets | | | |
+---------------------------------------------+-------------+------------+-----------+
| Property, plant and equipment | | 2,018 | 1,403 |
+---------------------------------------------+-------------+------------+-----------+
| Intangible assets | | 6,136 | 3,890 |
+---------------------------------------------+-------------+------------+-----------+
| Investments in associates | | 800 | 800 |
+---------------------------------------------+-------------+------------+-----------+
| Available-for-sale financial assets | | 8,868 | 16,385 |
+---------------------------------------------+-------------+------------+-----------+
| | | | |
+---------------------------------------------+-------------+------------+-----------+
| | | 17,822 | 22,478 |
+---------------------------------------------+-------------+------------+-----------+
| | | | |
+---------------------------------------------+-------------+------------+-----------+
| Current assets | | | |
+---------------------------------------------+-------------+------------+-----------+
| Inventories | | 84 | 9 |
+---------------------------------------------+-------------+------------+-----------+
| Trade and other receivables | | 9,918 | 9,170 |
+---------------------------------------------+-------------+------------+-----------+
| Amounts due from related parties | | 58 | 263 |
+---------------------------------------------+-------------+------------+-----------+
| Cash and cash equivalents | | 48,589 | 105,731 |
+---------------------------------------------+-------------+------------+-----------+
| | | | |
+---------------------------------------------+-------------+------------+-----------+
| | | 58,649 | 115,173 |
+---------------------------------------------+-------------+------------+-----------+
| | | | |
+---------------------------------------------+-------------+------------+-----------+
| TOTAL ASSETS | | 76,471 | 137,651 |
+---------------------------------------------+-------------+------------+-----------+
| | | | |
+---------------------------------------------+-------------+------------+-----------+
| EQUITY | | | |
+---------------------------------------------+-------------+------------+-----------+
| Paid in capital | | 86,441 | 84,603 |
+---------------------------------------------+-------------+------------+-----------+
| Reserves | | (17,820) | 23,815 |
+---------------------------------------------+-------------+------------+-----------+
| | | | |
+---------------------------------------------+-------------+------------+-----------+
| Total equity attributable to equity holders | | | |
+--------------------------------------------------------+--+------------+-----------+
| of the Company | | 68,621 | 108,418 |
+--------------------------------------------------------+--+------------+-----------+
| | | | |
+---------------------------------------------+-------------+------------+-----------+
| TOTAL EQUITY | | 68,621 | 108,418 |
+---------------------------------------------+-------------+------------+-----------+
| | | | |
+---------------------------------------------+-------------+------------+-----------+
| Non-current liabilities | | | |
+---------------------------------------------+-------------+------------+-----------+
| Provision for retirement benefit | | 62 | 48 |
| obligations | | | |
+---------------------------------------------+-------------+------------+-----------+
| | | | |
+---------------------------------------------+-------------+------------+-----------+
| | | | |
+---------------------------------------------+-------------+------------+-----------+
| Current liabilities | | | |
+---------------------------------------------+-------------+------------+-----------+
| Trade and other payables | | 7,763 | 4,868 |
+---------------------------------------------+-------------+------------+-----------+
| Amounts due to related parties | | 0 | 24,291 |
+---------------------------------------------+-------------+------------+-----------+
| Income tax payables | | 25 | 26 |
+---------------------------------------------+-------------+------------+-----------+
| | | | |
+---------------------------------------------+-------------+------------+-----------+
| | | 7,788 | 29,185 |
+---------------------------------------------+-------------+------------+-----------+
| | | | |
+---------------------------------------------+-------------+------------+-----------+
| TOTAL LIABILITIES | | 7,850 | 29,233 |
+---------------------------------------------+-------------+------------+-----------+
| | | | |
+---------------------------------------------+-------------+------------+-----------+
| TOTAL EQUITY AND LIABILITIES | | 76,471 | 137,651 |
+---------------------------------------------+-------------+------------+-----------+
| | | | |
+---------------------------------------------+----------+--+------------+-----------+
AsianLogic Limited
Consolidated statement of changes in equity
for the year ended 31 December 2008
(Expressed in United States dollars)
+-------------------------------------+----------+--------------+--------------+
| | | 2008 | 2007 |
+-------------------------------------+----------+--------------+--------------+
| | | US$'000 | US$'000 |
+-------------------------------------+----------+--------------+--------------+
| | | | |
+-------------------------------------+----------+--------------+--------------+
| Total equity, beginning of year | | 108,418 | 12,908 |
+-------------------------------------+----------+--------------+--------------+
| | | | |
+-------------------------------------+----------+--------------+--------------+
| Changes in fair values of | | | |
| available-for-sale | | | |
+-------------------------------------+----------+--------------+--------------+
| financial assets | | (10,582) | 8,502 |
+-------------------------------------+----------+--------------+--------------+
| Exchange differences arising on | | | |
| translation of | | | |
+-------------------------------------+----------+--------------+--------------+
| overseas subsidiaries' financial | | 238 | (300) |
| statements | | | |
+-------------------------------------+----------+--------------+--------------+
| | | | |
+-------------------------------------+----------+--------------+--------------+
| Net (loss)/gain recognised directly | | (10,344) | 8,202 |
| in equity | | | |
+-------------------------------------+----------+--------------+--------------+
| Net (loss)/profit for the year | | (11,975) | 7,851 |
+-------------------------------------+----------+--------------+--------------+
| | | | |
+-------------------------------------+----------+--------------+--------------+
| Total recognised (loss)/gain for | | (22,319) | 16,053 |
| the year | | | |
+-------------------------------------+----------+--------------+--------------+
| | | | |
+-------------------------------------+----------+--------------+--------------+
| Issue of share prior to IPO | | - | 1 |
+-------------------------------------+----------+--------------+--------------+
| Share repurchase | | (15,713) | (19,669) |
+-------------------------------------+----------+--------------+--------------+
| IPO proceeds | | - | 108,177 |
+-------------------------------------+----------+--------------+--------------+
| Expenses incurred for listing | | - | (8,499) |
+-------------------------------------+----------+--------------+--------------+
| Share based payments | | 1,838 | 4,594 |
+-------------------------------------+----------+--------------+--------------+
| Disposals of available-for-sale | | (363) | (3,664) |
| financial assets | | | |
+-------------------------------------+----------+--------------+--------------+
| Dividends | | (3,240) | (1,483) |
+-------------------------------------+----------+--------------+--------------+
| | | | |
+-------------------------------------+----------+--------------+--------------+
| | | (39,197) | 95,510 |
+-------------------------------------+----------+--------------+--------------+
| | | | |
+-------------------------------------+----------+--------------+--------------+
| Total equity, end of year | | 68,621 | 108,418 |
+-------------------------------------+----------+--------------+--------------+
AsianLogic Limited
Consolidated cash flow statement
for the year ended 31 December 2008
(Expressed in United States dollars)
+------------------------------------------------+------+------------+------------+
| | | 2008 | 2007 |
+------------------------------------------------+------+------------+------------+
| | | US$'000 | US$'000 |
+------------------------------------------------+------+------------+------------+
| | | | |
+------------------------------------------------+------+------------+------------+
| Operating activities | | | |
+------------------------------------------------+------+------------+------------+
| Cash (used in)/generated from operations | | (25,361) | 2,600 |
+------------------------------------------------+------+------------+------------+
| Income tax paid | | (37) | (11) |
+------------------------------------------------+------+------------+------------+
| | | | |
+------------------------------------------------+------+------------+------------+
| Net cash (used in)/generated from operating | | (25,398) | 2,589 |
| activities | | | |
+------------------------------------------------+------+------------+------------+
| | | | |
+------------------------------------------------+------+------------+------------+
| Cash flows from investing activities | | | |
+------------------------------------------------+------+------------+------------+
| Acquisition of available-for-sale financial | | (14,178) | (515) |
| assets | | | |
+------------------------------------------------+------+------------+------------+
| Acquisition of interests in associates | | - | (7,280) |
+------------------------------------------------+------+------------+------------+
| Acquisition of interest in a subsidiary | | (73) | - |
+------------------------------------------------+------+------------+------------+
| Proceeds from disposals of property, plant and | | 24 | - |
| equipment | | | |
+------------------------------------------------+------+------------+------------+
| Proceeds from disposals of associates | | - | 6,480 |
+------------------------------------------------+------+------------+------------+
| Proceeds from disposals of available-for-sale | | 3,808 | 6,275 |
| financial assets | | | |
+------------------------------------------------+------+------------+------------+
| Purchases of property, plant and equipment | | (1,528) | (933) |
+------------------------------------------------+------+------------+------------+
| Purchases of intangible assets | | (2,808) | (2,995) |
+------------------------------------------------+------+------------+------------+
| Interest received | | 1,850 | 19 |
+------------------------------------------------+------+------------+------------+
| Dividends received | | 70 | 155 |
+------------------------------------------------+------+------------+------------+
| | | | |
+------------------------------------------------+------+------------+------------+
| Net cash (used in)/generated from investing | | (12,835) | 1,206 |
| activities | | | |
+------------------------------------------------+------+------------+------------+
| | | | |
+------------------------------------------------+------+------------+------------+
| Cash flows from financing activities | | | |
+------------------------------------------------+------+------------+------------+
| Share repurchases | | (15,713) | - |
+------------------------------------------------+------+------------+------------+
| Proceeds from initial public offering | | - | 108,177 |
+------------------------------------------------+------+------------+------------+
| Payment of share issue costs | | - | (6,199) |
+------------------------------------------------+------+------------+------------+
| Dividends paid | | (3,184) | (1,483) |
+------------------------------------------------+------+------------+------------+
| | | | |
+------------------------------------------------+------+------------+------------+
| Net cash (used in)/generated from financing | | (18,897) | 100,495 |
| activities | | | |
+------------------------------------------------+------+------------+------------+
| | | | |
+------------------------------------------------+------+------------+------------+
| Net (decrease)/increase in cash and cash | | (57,130) | 104,290 |
| equivalents | | | |
+------------------------------------------------+------+------------+------------+
| | | | |
+------------------------------------------------+------+------------+------------+
| Cash and cash equivalents at the beginning of | | 105,731 | 1,267 |
| the year | | | |
+------------------------------------------------+------+------------+------------+
| Effect of foreign exchange rate changes | | (12) | 174 |
+------------------------------------------------+------+------------+------------+
| | | | |
+------------------------------------------------+------+------------+------------+
| | | | |
+------------------------------------------------+------+------------+------------+
| Cash and cash equivalents at the end of the | | 48,589 | 105,731 |
| year | | | |
+------------------------------------------------+------+------------+------------+
| | | | |
+------------------------------------------------+------+------------+------------+
Turnover
Segment information:
(i) Business segments
The Group's continuing operating gaming businesses are organised and managed
separately as four principal segments according to the nature of the services
provided and are set out below:
+---------------------------------------+----------------------------------------+
| | |
+---------------------------------------+----------------------------------------+
| Casino gaming revenues | Casino gaming revenues from both |
| | online and land based gaming. This |
| | equates to net win generated from |
| | casino players. |
+---------------------------------------+----------------------------------------+
| Live gaming video streaming services | Live gaming videostreaming services |
| | from the provision of services to |
| | casino licencees. This equates to a |
| | contracted flat fee of a contracted |
| | fee based on gaming volumes, plus |
| | royalties and share of tips. |
+---------------------------------------+----------------------------------------+
| Peer-to-peer ("P2P") revenue | P2P revenues from the provision of |
| | poker rooms to players who play |
| | against each other. This equates to |
| | the rake generated on coordinating the |
| | poker offering and tournament fees. |
+---------------------------------------+----------------------------------------+
| Others | Consultancy fee income and technical |
| | support services income. |
+---------------------------------------+----------------------------------------+
In prior years, the Group's system of internal reporting did not separate
assets and liabilities by business segments. Therefore, the directors are not
able to disclose the assets and liabilities associated with each business
segment. As the business of the Group has developed, the Group has been
gradually transforming its management and control systems and will continue to
monitor the appropriate provision of segmental information as required by IFRS.
The following tables present revenue, results, expenditure information regarding
the Group's business segments for the years ended 31 December 2008 and 2007.
+-------------------+---------+-----------+---------+-----------+---------+----------+
| | | Live | | | | |
+-------------------+---------+-----------+---------+-----------+---------+----------+
| | | gaming | | | | |
+-------------------+---------+-----------+---------+-----------+---------+----------+
| | Casino | video | | | | |
+-------------------+---------+-----------+---------+-----------+---------+----------+
| | gaming | streaming | P2P | | | |
+-------------------+---------+-----------+---------+-----------+---------+----------+
| 2008 | revenue | revenue | revenue | Sub-total | Others | Total |
+-------------------+---------+-----------+---------+-----------+---------+----------+
| | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 |
+-------------------+---------+-----------+---------+-----------+---------+----------+
| | | | | | | |
+-------------------+---------+-----------+---------+-----------+---------+----------+
| Business segment | | | | | | |
+-------------------+---------+-----------+---------+-----------+---------+----------+
| Segment revenue | 87,693 | 3,442 | 7,336 | 98,471 | 265 | 98,736 |
+-------------------+---------+-----------+---------+-----------+---------+----------+
| Segment results | 9,697 | 978 | 1,505 | 12,180 | 8,397 | 20,577 |
+-------------------+---------+-----------+---------+-----------+---------+----------+
| | | | | | | |
+-------------------+---------+-----------+---------+-----------+---------+----------+
| Unallocated | | | | | | (32,516) |
| expenses | | | | | | |
+-------------------+---------+-----------+---------+-----------+---------+----------+
| Loss before | | | | | | (11,939) |
| income tax | | | | | | |
+-------------------+---------+-----------+---------+-----------+---------+----------+
| | | | | | | |
+-------------------+---------+-----------+---------+-----------+---------+----------+
| Income tax | | | | | | (36) |
| expense | | | | | | |
+-------------------+---------+-----------+---------+-----------+---------+----------+
| Loss for the year | | | | | | (11,975) |
+-------------------+---------+-----------+---------+-----------+---------+----------+
+-------------------+---------+-----------+---------+-----------+---------+----------+
| | | Live | | | | |
+-------------------+---------+-----------+---------+-----------+---------+----------+
| | | gaming | | | | |
+-------------------+---------+-----------+---------+-----------+---------+----------+
| | Casino | video | | | | |
+-------------------+---------+-----------+---------+-----------+---------+----------+
| | gaming | streaming | P2P | | | |
+-------------------+---------+-----------+---------+-----------+---------+----------+
| 2007 | revenue | revenue | revenue | Sub-total | Others | Total |
+-------------------+---------+-----------+---------+-----------+---------+----------+
| | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 |
+-------------------+---------+-----------+---------+-----------+---------+----------+
| | | | | | | |
+-------------------+---------+-----------+---------+-----------+---------+----------+
| Business segment | | | | | | |
+-------------------+---------+-----------+---------+-----------+---------+----------+
| Segment revenue | 50,138 | 2,616 | 1,164 | 53,918 | 396 | 54,314 |
+-------------------+---------+-----------+---------+-----------+---------+----------+
| Segment results | 4,985 | 366 | 198 | 5,549 | 12,611 | 18,160 |
+-------------------+---------+-----------+---------+-----------+---------+----------+
| | | | | | | |
+-------------------+---------+-----------+---------+-----------+---------+----------+
| Unallocated | | | | | | (10,286) |
| expenses | | | | | | |
+-------------------+---------+-----------+---------+-----------+---------+----------+
| Profit before | | | | | | 7,874 |
| income tax | | | | | | |
+-------------------+---------+-----------+---------+-----------+---------+----------+
| | | | | | | |
+-------------------+---------+-----------+---------+-----------+---------+----------+
| Income tax | | | | | | (23) |
| expense | | | | | | |
+-------------------+---------+-----------+---------+-----------+---------+----------+
| Profit for the | | | | | | 7,851 |
| year | | | | | | |
+-------------------+---------+-----------+---------+-----------+---------+----------+
(ii) Geographical segments
For geographical segments of the operating gaming business, revenue can be
attributed to the following three principal geographical areas of the world
based on customer orientation:
- Asia
- Europe
- Rest of the world
The following tables present revenue, results, expenditure information regarding
the Group's geographical segments for the years ended 31 December 2008 and 2007.
+--------------------------+-------------+----------+----------+------------+
| | | | Rest of | |
| | | | the | |
+--------------------------+-------------+----------+----------+------------+
| 2008 | Asia | Europe | world | Total |
+--------------------------+-------------+----------+----------+------------+
| | US$'000 | US$'000 | US$'000 | US$'000 |
+--------------------------+-------------+----------+----------+------------+
| Geographical segment | | | | |
+--------------------------+-------------+----------+----------+------------+
| | | | | |
+--------------------------+-------------+----------+----------+------------+
| Segment revenue | 98,013 | 579 | 144 | 98,736 |
+--------------------------+-------------+----------+----------+------------+
| Segment results | 20,488 | 71 | 18 | 20,577 |
+--------------------------+-------------+----------+----------+------------+
| | | | | |
+--------------------------+-------------+----------+----------+------------+
| Unallocated expenses | | | | (32,516) |
+--------------------------+-------------+----------+----------+------------+
| Loss before income tax | | | | (11,939) |
+--------------------------+-------------+----------+----------+------------+
| Income tax expense | | | | (36) |
+--------------------------+-------------+----------+----------+------------+
| Loss for the year | | | | (11,975) |
+--------------------------+-------------+----------+----------+------------+
+--------------------------+-------------+----------+----------+------------+
| | | | Rest of | |
| | | | the | |
+--------------------------+-------------+----------+----------+------------+
| 2007 | Asia | Europe | world | Total |
+--------------------------+-------------+----------+----------+------------+
| | US$'000 | US$'000 | US$'000 | US$'000 |
+--------------------------+-------------+----------+----------+------------+
| Geographical segment | | | | |
+--------------------------+-------------+----------+----------+------------+
| | | | | |
+--------------------------+-------------+----------+----------+------------+
| Segment revenue | 49,606 | 4,171 | 537 | 54,314 |
+--------------------------+-------------+----------+----------+------------+
| Segment results | 17,880 | 220 | 60 | 18,160 |
+--------------------------+-------------+----------+----------+------------+
| | | | | |
+--------------------------+-------------+----------+----------+------------+
| Unallocated expenses | | | | (10,286) |
+--------------------------+-------------+----------+----------+------------+
| Profit before income tax | | | | 7,874 |
+--------------------------+-------------+----------+----------+------------+
| Income tax expense | | | | (23) |
+--------------------------+-------------+----------+----------+------------+
| Profit for the year | | | | 7,851 |
+--------------------------+-------------+----------+----------+------------+
Other revenue
+---------------------------------------+---------------+--+----------------+
| | 2008 | | 2007 |
+---------------------------------------+---------------+--+----------------+
| | US$'000 | | US$'000 |
+---------------------------------------+---------------+--+----------------+
| | | | |
+---------------------------------------+---------------+--+----------------+
| Agency income | 2,048 | | 1,511 |
+---------------------------------------+---------------+--+----------------+
| Sundry income | 721 | | 329 |
+---------------------------------------+---------------+--+----------------+
| | 2,769 | | 1,840 |
+---------------------------------------+---------------+--+----------------+
Finance income and expense
+---------------------------------------+-------------+----------+--+----------------+
| | 2008 | | 2007 |
+---------------------------------------+------------------------+--+----------------+
| | US$'000 | | US$'000 |
+---------------------------------------+------------------------+--+----------------+
| | | | |
+---------------------------------------+------------------------+--+----------------+
| Interest income on bank deposits | 1,850 | | 19 |
+---------------------------------------+------------------------+--+----------------+
| Dividend income on available-for-sale | 70 | | 155 |
| financial assets | | | |
+---------------------------------------+------------------------+--+----------------+
| Gain on disposals of available-for-sale | | | |
+-----------------------------------------------------+----------+--+----------------+
| financial assets | 3,708 | | 5,931 |
+-----------------------------------------------------+----------+--+----------------+
| Net foreign exchange gain | - | | 616 |
+---------------------------------------+------------------------+--+----------------+
| Finance income | 5,628 | | 6,721 |
+---------------------------------------+------------------------+--+----------------+
| | | | |
+---------------------------------------+------------------------+--+----------------+
| Net foreign exchange loss | (261) | | - |
+---------------------------------------+------------------------+--+----------------+
| Loss on financial guarantee contracts | (5,706) | | - |
+---------------------------------------+------------------------+--+----------------+
| Impairment losses on | (10,697) | | - |
| available-for-sale | | | |
| financial assets | | | |
+---------------------------------------+------------------------+--+----------------+
| Impairment losses on trade and other | (1,222) | | (495) |
| receivables | | | |
+---------------------------------------+------------------------+--+----------------+
| Finance expense | (17,886) | | (495) |
+---------------------------------------+------------------------+--+----------------+
| | | | |
+---------------------------------------+------------------------+--+----------------+
| Net finance (expense)/income | (12,258) | | 6,226 |
+---------------------------------------+------------------------+--+----------------+
| | | | |
+---------------------------------------+-------------+----------+--+----------------+
Income tax
No provision for income tax has been made for the Company as the Group holding
company is not subject to tax on profits in the jurisdiction which it operates.
No provision for taxation has been made for the subsidiaries incorporated in
Hong Kong as the subsidiaries have estimated losses for Hong Kong profits tax
purposes in the year.
No provision for income tax has been made for two subsidiaries incorporated in
the British Virgin Islands, namely Bayview Technologies Limited and S-Tech
Limited, as these subsidiaries do not derive any taxable profits in the
jurisdiction in which they operate.
No provision for income tax has been made for other subsidiaries incorporated
overseas as the subsidiaries incurred losses during the year.
Philippines Cagayan Special Economic Zone and Freeport ("CSEZFP") tax is
provided at the rate of 5% on the Philippines subsidiaries and branches' taxable
profits, which is their gross income.
No deferred tax assets have been recognised in respect of the tax losses of the
subsidiaries operating in Hong Kong, Cyprus, Macau and Philippines, as it is not
certain that future taxable profits will be available against which these losses
can be utilised. The tax losses do not expire under the current tax legislation
prevailing in Hong Kong, Cyprus, Macau and Philippines. Other temporary
differences are not material at the balance sheet dates.
A reconciliation between the Group's income tax expense and accounting
(loss)/profit, at applicable tax rates, is set out below:
+----------------------------------------------+------------+--+------------+
| | | | |
+----------------------------------------------+------------+--+------------+
| | 2008 | | 2007 |
+----------------------------------------------+------------+--+------------+
| | US$'000 | | US$'000 |
+----------------------------------------------+------------+--+------------+
| | | | |
+----------------------------------------------+------------+--+------------+
| (Loss)/profit before income tax | (11,939) | | 7,874 |
+----------------------------------------------+------------+--+------------+
| Notional tax on (loss)/profit before income | | | |
| tax, | | | |
+----------------------------------------------+------------+--+------------+
| calculated at domestic tax rate of 35% | (4,179) | | 2,756 |
| (2007: 35%) | | | |
+----------------------------------------------+------------+--+------------+
| Tax effect of different tax rates for | (202) | | 22 |
| foreign countries | | | |
+----------------------------------------------+------------+--+------------+
| Tax effect of non-deductible expenses | 40,273 | | 2,094 |
+----------------------------------------------+------------+--+------------+
| Tax effect of non-taxable revenue | (36,247) | | (4,870) |
+----------------------------------------------+------------+--+------------+
| Tax effect of unused tax losses not | 391 | | 21 |
| recognised | | | |
+----------------------------------------------+------------+--+------------+
| Income tax expense | 36 | | 23 |
+----------------------------------------------+------------+--+------------+
The Group is licenced by the Philippine Securities and Exchange Commission to
establish a subsidiary company and a branch, namely Bayview Technologies, Inc
and S-Tech Limited Branch, in the Philippines primarily to engage in the
business of gaming-related facilities and activities, including, but not limited
to, online and interactive gaming video streaming facilities, including
marketing, technical and customer support.
The subsidiary company and the branch were registered as CSEZFP Enterprises.
Both business addresses are as follows:
Cagayan Economic Zone and Freeport Complex, Centro, Sta Ana, Cagayan,
Philippines.
Under these registrations, the subsidiary company and the branch are
beneficiaries of incentives established under the CSEZFP. Pursuant to Republic
Act 7922, otherwise known as 'Cagayan Special Economic Zone of 1995", Section 4
(c). As such, no taxes, local or national, shall be imposed on business
establishments operating within the Zone. In lieu of paying taxes, such business
establishments shall pay and remit to the national government 5% of their gross
income.
The Cagayan Economic Zone Authority ("CEZA") through First Cagayan Leisure &
Resorts Corporation ("FCLRC") granted Interactive Gaming Licences ("IGLs") to
the subsidiary company, and to the branch, up to 6 November 2009 and 24 April
2009 respectively. The IGLs are renewable every year upon approval of CEZA and
FCLRC.
(Loss)/earnings per share
The calculation of the basic and diluted (loss)/earnings per share is based on
the following data:
+----------------------------------------------+-------------+--+------------+
| | 2008 | | 2007 |
+----------------------------------------------+-------------+--+------------+
| | US$'000 | | US$'000 |
+----------------------------------------------+-------------+--+------------+
| (Loss)/earnings | | | |
+----------------------------------------------+-------------+--+------------+
| | | | |
+----------------------------------------------+-------------+--+------------+
| (Loss)/earnings for the purposes of basic | | | |
| and diluted | | | |
+----------------------------------------------+-------------+--+------------+
| (loss)/earnings per share | (11,975) | | 7,851 |
+----------------------------------------------+-------------+--+------------+
| | | | |
+----------------------------------------------+-------------+--+------------+
| Number of shares | | | |
+----------------------------------------------+-------------+--+------------+
| | | | |
+----------------------------------------------+-------------+--+------------+
| Weighted average number of ordinary shares | | | |
| for the | | | |
+----------------------------------------------+-------------+--+------------+
| purposes of basic and diluted | 105,582,270 | | 64,117,373 |
| (loss)/earnings per share | | | |
+----------------------------------------------+-------------+--+------------+
| | | | |
+----------------------------------------------+-------------+--+------------+
Dividends
During the year, an interim dividend of US$0.029 per share amounting to
US$3,240,317 was declared by the Company.
In the prior year, a dividend of US$235 per share amounting to US$1,482,850 was
declared and paid by Emphasis Services Limited being the year before admission
to the AIM of the London Stock Exchange.
Intangible assets
+---------------------------+----------------+--------------+--------------+
| | Software, | Websites | Total |
| | licenses, and | | |
| | patents | | |
+---------------------------+----------------+--------------+--------------+
| | US$'000 | US$'000 | US$'000 |
+---------------------------+----------------+--------------+--------------+
| Cost | | | |
+---------------------------+----------------+--------------+--------------+
| At 1 January 2007 | 1,395 | - | 1,395 |
+---------------------------+----------------+--------------+--------------+
| Additions | 445 | 2,550 | 2,995 |
+---------------------------+----------------+--------------+--------------+
| Exchange alignment | 23 | - | 23 |
+---------------------------+----------------+--------------+--------------+
| At 31 December 2007 | 1,863 | 2,550 | 4,413 |
+---------------------------+----------------+--------------+--------------+
| Additions | 716 | 2,092 | 2,808 |
+---------------------------+----------------+--------------+--------------+
| Exchange alignment | (16) | - | (16) |
+---------------------------+----------------+--------------+--------------+
| At 31 December 2008 | 2,563 | 4,642 | 7,205 |
+---------------------------+----------------+--------------+--------------+
| | | | |
+---------------------------+----------------+--------------+--------------+
| Accumulated amortisation | | | |
+---------------------------+----------------+--------------+--------------+
| At 1 January 2007 | 110 | - | 110 |
+---------------------------+----------------+--------------+--------------+
| Charge for the year | 389 | - | 389 |
+---------------------------+----------------+--------------+--------------+
| Exchange alignment | 24 | - | 24 |
+---------------------------+----------------+--------------+--------------+
| At 31 December 2007 | 523 | - | 523 |
+---------------------------+----------------+--------------+--------------+
| Charge for the year | 543 | - | 543 |
+---------------------------+----------------+--------------+--------------+
| Exchange alignment | 3 | - | 3 |
+---------------------------+----------------+--------------+--------------+
| At 31 December 2008 | 1,069 | - | 1,069 |
+---------------------------+----------------+--------------+--------------+
| | | | |
+---------------------------+----------------+--------------+--------------+
| Carrying value | | | |
+---------------------------+----------------+--------------+--------------+
| At 31 December 2008 | 1,494 | 4,642 | 6,136 |
+---------------------------+----------------+--------------+--------------+
| | | | |
+---------------------------+----------------+--------------+--------------+
| At 31 December 2007 | 1,340 | 2,550 | 3,890 |
+---------------------------+----------------+--------------+--------------+
Software, licences and patents comprise both internally generated intangible
assets and other intangible assets. The carrying amount of the Playtech licence
at 31 December 2008 and 2007 was US$426,250 and US$481,250 respectively. The
licence is being amortised on the straight line basis over 10 years. All other
intangible assets relate to internally generated software and other assets.
On 6 July 2007, Emphasis Services Limited entered into an agreement with Geneva
Group Limited to acquire their Zipang and 777Baby online gaming businesses for a
consideration of US$2,550,000 which was adjusted to approximately US$4,642,000
based on the audited profit of the websites for the period ended 30 June 2008.
An additional amount of approximately US$2,092,000 was paid to Geneva Group
Limited during the year. These websites are well known and established in the
online gaming market. In the opinion of the directors, these acquired websites
are capable of generating positive cash flows indefinitely to the Group.
Therefore, these websites are not amortised but are tested for impairment
annually.
No amortisation has yet been charged against the development costs of sports
book software as the software is not yet operational.
In the opinion of the directors, there is no indication of impairment in the
carrying amounts of the above intangible assets and the carrying amount
approximates their fair value.
Available-for-sale financial assets
+----------------------------------------+---------------+--+--------------+
| | | | |
+----------------------------------------+---------------+--+--------------+
| | 2008 | | 2007 |
+----------------------------------------+---------------+--+--------------+
| | US$'000 | | US$'000 |
+----------------------------------------+---------------+--+--------------+
| | | | |
+----------------------------------------+---------------+--+--------------+
| At 1 January | 16,385 | | 7,326 |
+----------------------------------------+---------------+--+--------------+
| Additions | 14,178 | | 515 |
+----------------------------------------+---------------+--+--------------+
| Transferred from associates | - | | 4,050 |
+----------------------------------------+---------------+--+--------------+
| Disposals | (3,116) | | (4,008) |
+----------------------------------------+---------------+--+--------------+
| Provision of impairment losses | (10,697) | | - |
+----------------------------------------+---------------+--+--------------+
| Net (loss)/gain transferred to equity | (7,882) | | 8,502 |
+----------------------------------------+---------------+--+--------------+
| At 31 December | 8,868 | | 16,385 |
+----------------------------------------+---------------+--+--------------+
+----------------------------------------+---------------+--+--------------+
| | 2008 | | 2007 |
+----------------------------------------+---------------+--+--------------+
| | US$'000 | | US$'000 |
+----------------------------------------+---------------+--+--------------+
| | | | |
+----------------------------------------+---------------+--+--------------+
| Listed in the United Kingdom | 2,517 | | 5,453 |
+----------------------------------------+---------------+--+--------------+
| Listed in Hong Kong | 2,337 | | 10,417 |
+----------------------------------------+---------------+--+--------------+
| Listed in the United States | 84 | | - |
+----------------------------------------+---------------+--+--------------+
| Listed in the Philippines | 741 | | - |
+----------------------------------------+---------------+--+--------------+
| Unlisted | 3,189 | | 515 |
+----------------------------------------+---------------+--+--------------+
| | 8,868 | | 16,385 |
+----------------------------------------+---------------+--+--------------+
| | | | |
+----------------------------------------+---------------+--+--------------+
The carrying amount of available-for-sale financial assets is denominated in the
following currencies:
+----------------------------------------+---------------+--+--------------+
| | 2008 | | 2007 |
+----------------------------------------+---------------+--+--------------+
| | US$'000 | | US$'000 |
+----------------------------------------+---------------+--+--------------+
| | | | |
+----------------------------------------+---------------+--+--------------+
| United States dollars | 84 | | - |
+----------------------------------------+---------------+--+--------------+
| Philippine pesos | 746 | | 5 |
+----------------------------------------+---------------+--+--------------+
| Pounds sterling | 2,517 | | 5,963 |
+----------------------------------------+---------------+--+--------------+
| Hong Kong dollars | 2,337 | | 10,417 |
+----------------------------------------+---------------+--+--------------+
| Euro | 3,184 | | - |
+----------------------------------------+---------------+--+--------------+
| | 8,868 | | 16,385 |
+----------------------------------------+---------------+--+--------------+
| | | | |
+----------------------------------------+---------------+--+--------------+
Equity securities listed in the Philippines represent an investment in Leisure &
Resorts World Corporation, a company incorporated in the Philippines with
limited liability and listed on the Philippines Stock Exchange during the year.
Equity securities listed in the United Kingdom represent an investment in
Playtech Limited, a related company incorporated in the British Virgin Islands
with limited liability and listed on the AIM of the London Stock Exchange.
Equity securities listed in Hong Kong represent an investment in CY Foundation
Group Limited, a company incorporated in Bermuda with limited liability and
listed on the Hong Kong Stock Exchange.
Equity securities listed in the United States represent an investment in Elixir
Gaming Technologies, Inc, a company incorporated in Las Vegas with limited
liability and listed on the New York Stock Exchange.
Unlisted securities represent an investment in Evolution Core Holdings Limited,
a private limited liability company incorporated in Cyprus.
During the year ended 31 December 2008, the decrease in fair value of the
available-for-sale equity securities amounting to approximately US$7,882,000
(2007: increase in fair value of approximately US$8,502,000) was recognised
directly in equity.
During the year ended 31 December 2008, the prolonged decline in fair value of
the available-for-sale equity securities amounting to approximately
US$10,697,000 (2007: US$Nil) was recognised directly in profit or loss.
Listed equity securities were stated at fair values based on their quoted market
prices. Unlisted equity securities were stated at cost, which the directors
considered to be approximate to fair value.
The maximum exposure to price risk at the balance sheet date is the carrying
amount of the equity investments.
Playtech Limited and its affiliated companies are related by virtue of Thomas
Alexej Hall being a common shareholder and director, as well as Playtech Limited
and the Group being shareholders in each other (see note 31).
Cash and cash equivalents
Cash and cash equivalents represent cash at banks and in hand. Cash at banks
earn interest at floating interest rates based on daily bank deposit rates.
The carrying amount of cash and cash equivalents is denominated in the following
currencies:
+----------------------------------------+---------------+--+--------------+
| | | | |
+----------------------------------------+---------------+--+--------------+
| | 2008 | | 2007 |
+----------------------------------------+---------------+--+--------------+
| | US$'000 | | US$'000 |
+----------------------------------------+---------------+--+--------------+
| | | | |
+----------------------------------------+---------------+--+--------------+
| United States dollars | 47,290 | | 1,182 |
+----------------------------------------+---------------+--+--------------+
| Philippine pesos | 893 | | 426 |
+----------------------------------------+---------------+--+--------------+
| Pounds sterling | 4 | | 104,021 |
+----------------------------------------+---------------+--+--------------+
| Hong Kong dollars | 175 | | 36 |
+----------------------------------------+---------------+--+--------------+
| Malaysian ringgit | 80 | | - |
+----------------------------------------+---------------+--+--------------+
| Others | 147 | | 66 |
+----------------------------------------+---------------+--+--------------+
| | 48,589 | | 105,731 |
+----------------------------------------+---------------+--+--------------+
Capital and reserves
Movements of capital and reserves for the Group for the year ended 31 December
2008 were as follows:
+------------------------------+-----------+---------+------------------+---------+------------+--------------+----------+-------------+--------------+-----------+------------+
| | | | | | | | | | | | |
+------------------------------+-----------+---------+------------------+---------+------------+--------------+----------+-------------+--------------+-----------+------------+
| | Paid | Share | Accumulated | Capital | Treasury | Share | Exchange | Revaluation | Attributable | Minority | Total |
| | in | | | | share | based | | | to equity | | |
| | | | | | | compensation | | | holders of | | |
+------------------------------+-----------+---------+------------------+---------+------------+--------------+----------+-------------+--------------+-----------+------------+
| | capital | premium | profits/(losses) | reserve | reserve | reserve | reserve | reserve | the | interests | equity |
| | | | | | | | | | Company | | |
+------------------------------+-----------+---------+------------------+---------+------------+--------------+----------+-------------+--------------+-----------+------------+
| | USD | USD | USD '000 | USD | USD | USD '000 | USD | USD | USD '000 | USD | USD |
| | '000 | '000 | | '000 | '000 | | '000 | '000 | | '000 | '000 |
+------------------------------+-----------+---------+------------------+---------+------------+--------------+----------+-------------+--------------+-----------+------------+
| At 1 January 2008 | 84,603 | - | 12,033 | 453 | - | - | (315) | 11,644 | 108,418 | - | 108,418 |
+------------------------------+-----------+---------+------------------+---------+------------+--------------+----------+-------------+--------------+-----------+------------+
| Exchange | - | - | - | - | - | - | 238 | - | 238 | - | 238 |
| differences arising | | | | | | | | | | | |
| on translation of | | | | | | | | | | | |
| overseas | | | | | | | | | | | |
| subsidiaries' | | | | | | | | | | | |
| financial | | | | | | | | | | | |
| statements | | | | | | | | | | | |
+------------------------------+-----------+---------+------------------+---------+------------+--------------+----------+-------------+--------------+-----------+------------+
| Net loss for the | - | - | (11,975) | - | - | - | - | - | (11,975) | - | (11,975) |
| year | | | | | | | | | | | |
+------------------------------+-----------+---------+------------------+---------+------------+--------------+----------+-------------+--------------+-----------+------------+
| Changes in fair | - | - | - | - | - | - | - | (10,582) | (10,582) | - | (10,582) |
| values of | | | | | | | | | | | |
| available-for-sale | | | | | | | | | | | |
| financial assets | | | | | | | | | | | |
+------------------------------+-----------+---------+------------------+---------+------------+--------------+----------+-------------+--------------+-----------+------------+
| Disposals of | - | - | - | - | - | - | - | (363) | (363) | - | (363) |
| available-for-sale financial | | | | | | | | | | | |
| assets | | | | | | | | | | | |
+------------------------------+-----------+---------+------------------+---------+------------+--------------+----------+-------------+--------------+-----------+------------+
| Dividends | - | - | (3,240) | - | - | - | - | - | (3,240) | - | (3,240) |
+------------------------------+-----------+---------+------------------+---------+------------+--------------+----------+-------------+--------------+-----------+------------+
| Share based | - | - | - | - | - | 1,838 | - | - | 1,838 | - | 1,838 |
| payments | | | | | | | | | | | |
+------------------------------+-----------+---------+------------------+---------+------------+--------------+----------+-------------+--------------+-----------+------------+
| Share repurchases | - | - | - | - | (15,713) | - | - | - | (15,713) | - | (15,713) |
+------------------------------+-----------+---------+------------------+---------+------------+--------------+----------+-------------+--------------+-----------+------------+
| Issue of shares | 1,838 | - | - | - | - | (1,838) | - | - | - | - | - |
+------------------------------+-----------+---------+------------------+---------+------------+--------------+----------+-------------+--------------+-----------+------------+
| At 31 December 2008 | 86,441 | - | (3,182) | 453 | (15,713) | - | (77) | 699 | 68,621 | - | 68,621 |
+------------------------------+-----------+---------+------------------+---------+------------+--------------+----------+-------------+--------------+-----------+------------+
Movements of capital and reserves for the Group for the year ended 31 December
2007 were as follows:
+------------------------------+---+------------+---------+-------------+---------+--------------+----------+-------------+--------------+-----------+------------+
| | | Paid in | Share | Accumulated | Capital | Share based | Exchange | Revaluation | Attributable | Minority | Total |
| | | | | | | compensation | | | to equity | | |
| | | | | | | | | | holders of | | |
+------------------------------+---+------------+---------+-------------+---------+--------------+----------+-------------+--------------+-----------+------------+
| | | capital | premium | profits | reserve | reserve | reserve | reserve | the | interests | equity |
| | | | | | | | | | Company | | |
+------------------------------+---+------------+---------+-------------+---------+--------------+----------+-------------+--------------+-----------+------------+
| | | USD | USD | USD '000 | USD | USD '000 | USD '000 | USD '000 | USD '000 | USD | USD |
| | | '000 | '000 | | '000 | | | | | '000 | '000 |
+------------------------------+---+------------+---------+-------------+---------+--------------+----------+-------------+--------------+-----------+------------+
| At 1 January 2007 | | 6 | 446 | 5,665 | - | - | (15) | 6,806 | 12,908 | - | 12,908 |
+------------------------------+---+------------+---------+-------------+---------+--------------+----------+-------------+--------------+-----------+------------+
| Exchange | | - | - | - | - | - | (300) | - | (300) | - | (300) |
| differences | | | | | | | | | | | |
| arising on | | | | | | | | | | | |
| translation of | | | | | | | | | | | |
| overseas | | | | | | | | | | | |
| subsidiaries' | | | | | | | | | | | |
| financial | | | | | | | | | | | |
| statements | | | | | | | | | | | |
+------------------------------+---+------------+---------+-------------+---------+--------------+----------+-------------+--------------+-----------+------------+
| Net profit for the | | - | - | 7,851 | - | - | - | - | 7,851 | - | 7,851 |
| year | | | | | | | | | | | |
+------------------------------+---+------------+---------+-------------+---------+--------------+----------+-------------+--------------+-----------+------------+
| Issue of shares | | 1 | - | - | - | - | - | - | 1 | - | 1 |
| prior to IPO | | | | | | | | | | | |
+------------------------------+---+------------+---------+-------------+---------+--------------+----------+-------------+--------------+-----------+------------+
| Acquisition by | | (7) | (446) | - | 453 | - | - | - | - | - | - |
| AsianLogic Limited | | | | | | | | | | | |
+------------------------------+---+------------+---------+-------------+---------+--------------+----------+-------------+--------------+-----------+------------+
| Changes in fair | | - | - | - | - | - | - | 8,502 | 8,502 | - | 8,502 |
| values of | | | | | | | | | | | |
| available-for-sale financial | | | | | | | | | | | |
| assets | | | | | | | | | | | |
+------------------------------+---+------------+---------+-------------+---------+--------------+----------+-------------+--------------+-----------+------------+
| Disposals of | | - | - | - | - | - | - | (3,664) | (3,664) | - | (3,664) |
| available-for-sale financial | | | | | | | | | | | |
| assets | | | | | | | | | | | |
+------------------------------+---+------------+---------+-------------+---------+--------------+----------+-------------+--------------+-----------+------------+
| Dividends | | - | - | (1,483) | - | - | - | - | (1,483) | - | (1,483) |
+------------------------------+---+------------+---------+-------------+---------+--------------+----------+-------------+--------------+-----------+------------+
| Share based | | - | - | - | - | 4,594 | - | - | 4,594 | - | 4,594 |
| payments | | | | | | | | | | | |
+------------------------------+---+------------+---------+-------------+---------+--------------+----------+-------------+--------------+-----------+------------+
| Share repurchases | | (19,669) | - | - | - | - | - | - | (19,669) | - | (19,669) |
+------------------------------+---+------------+---------+-------------+---------+--------------+----------+-------------+--------------+-----------+------------+
| Issue of shares | | 112,771 | - | - | - | (4,594) | - | - | 108,177 | - | 108,177 |
+------------------------------+---+------------+---------+-------------+---------+--------------+----------+-------------+--------------+-----------+------------+
| Expenses incurred | | (8,499) | - | - | - | - | - | - | (8,499) | - | (8,499) |
| for listing | | | | | | | | | | | |
+------------------------------+---+------------+---------+-------------+---------+--------------+----------+-------------+--------------+-----------+------------+
| At 31 December | | 84,603 | - | 12,033 | 453 | - | (315) | 11,644 | 108,418 | - | 108,418 |
| 2007 | | | | | | | | | | | |
+------------------------------+---+------------+---------+-------------+---------+--------------+----------+-------------+--------------+-----------+------------+
(a) Paid in capital
+---------------------------------------------+-------------+--+------------+
| | | | |
+---------------------------------------------+-------------+--+------------+
| | 2008 | | 2007 |
+---------------------------------------------+-------------+--+------------+
| | US$'000 | | US$'000 |
+---------------------------------------------+-------------+--+------------+
| Authorised | | | |
+---------------------------------------------+-------------+--+------------+
| Ordinary shares of no par value (2007: | - | | - |
| US$Nil each) | | | |
+---------------------------------------------+-------------+--+------------+
| | | | |
+---------------------------------------------+-------------+--+------------+
| Issued and fully paid | | | |
+---------------------------------------------+-------------+--+------------+
| 89,549,181 (2007: 110,281,250) ordinary | 86,441 | | 84,603 |
| shares of | | | |
| no par value | | | |
+---------------------------------------------+-------------+--+------------+
During the year, the Company repurchased, in aggregate, approximately 20,707,000
ordinary shares at market prices from the selling shareholders. The cost of the
repurchases amounts to approximately US$15,713,000, which is directly recognised
in the treasury share reserve.
(b) Share based payments
The Group operates a number of employee share ownership plans to grant options
and shares to its directors and employees. In addition, certain other third
parties have received equity settled share based payments in exchange for future
services/benefits provided to the Group.
The total share based payments recognised for the year in respect of these share
ownership plans is approximately US$1,838,000 (2007: US$4,594,000). The fair
value of the share based payments was assessed by an independent professional
valuer.
The Group had an equity share award scheme set up for key employees and other
third parties and a share option scheme set up for its two non-executive
directors during the IPO Admission process which are detailed as follows:
(i) Share awards
(a) Employees
The share awards granted to employees is intended to facilitate the retention of
senior executives and key employees of the Company by enabling them to receive
shares provided that they remain in the Group for a period of two years from the
date of grant. No payment will be required for the grant of an award.
Employee share awards have three different vesting conditions. The shares vest
either (i) 15% on the grant date, 30% on the first anniversary of the grant date
and 55% on the second anniversary, or (ii) subject to revenue performance or
(iii) fully vest in 2009. In accordance with IFRS 2 this is classified as a
non-market condition and therefore the shares have been fair valued by reference
to the IPO placing price.
(b) Other third parties
There were share awards of 212 and 143 ordinary shares of US$1 each granted to
Playtech Limited and Rise Investments Limited respectively by Emphasis Services
Limited prior to the IPO.
On 11 December 2007 the Group signed up for a new five year software licensing
deal with Playtech Limited. As part of the deal, Emphasis Services Limited
issued 212 new shares to Playtech Limited. The shares vested immediately. The
share based payments charged for the year ended 31 December 2007 was
approximately US$4 million.
Rise Investments Limited ("Rise") is a key Group affiliate. Rise agreed to a
reduction in the affiliate fee rate payable to them in return for the granting
of such shares. In addition, Rise agreed to guarantee a minimum level of net
gaming revenue for each of the next three years. The shares vest 50% in year
one, 30% in year two and 20% in year three.
(iii) Share options
The plan is an approved share option plan and was adopted on 13 December 2007.
It allows the Company to grant options to acquire shares to eligible employees.
These options will vest 15% on the first anniversary of grant, 30% on the second
anniversary and 55% on the third anniversary, and will generally be exercisable
at any time until the tenth anniversary. The two non-executive directors of the
company, Jong-Dae Lee and Jonathan Hubbard, were each granted 70,000 share
options on 1 January 2008 with an exercise price based on the share price as at
that date. Apart from as disclosed above, there were no other share options
granted for the year and subsequent to the balance sheet date up to the issue of
the financial statements.
(c) Nature and purpose of reserves
(i) Share premium
The share premium represents the share proceeds in excess of par value in
relation to Emphasis Services Limited.
(ii) Capital reserve
The capital reserve is a result of the method of accounting for the acquisition
of the entire share capital of Emphasis Services Limited in the year. In
accordance with International Accounting Standards, the acquisition has been
accounted for as a reverse acquisition.
(iii) Share based compensation reserve
The share based compensation reserve represents the fair value of shares granted
in relation to the share award schemes as mentioned in note 25(b)(i). The amount
will be transferred to the paid in capital account when the related shares are
vested.
(iv) Exchange reserve
The exchange reserve represents the accumulated exchange differences arising on
translation of overseas subsidiaries' financial statements.
(v) Revaluation reserve
The revaluation reserve comprises the cumulative net change in the fair value of
available-for-sale equity securities held at the balance sheet and is dealt with
in accordance with the accounting policies in note 3(d)(i).
(vi) Treasury share reserve
The treasury share reserve comprises the cost of the Company's shares held by
the Group. As at 31 December 2008, the Group held approximately 20,707,000 of
the Company's shares (2007: Nil).
(d) Capital management
The Group's primary objectives when managing capital are to safeguard the
Group's ability to continue as a going concern, so that it can continue to
provide returns for the shareholders, by pricing services commensurately with
the level of risk and by seeking adequate funding to meet all contractual
financial liabilities or commitments from the shareholders.
The Group manages capital by regularly monitoring its current and expected
liquidity requirements.
The Group is not subject to either internally or externally imposed capital
requirements.
Consolidated cash flow statement
Reconciliation of (loss)/profit before income tax to net cash (used
in)/generated from operations
+-----------------------------------------+--------------+--------------+
| | 2008 | 2007 |
+-----------------------------------------+--------------+--------------+
| | US$'000 | US$'000 |
+-----------------------------------------+--------------+--------------+
| | | |
+-----------------------------------------+--------------+--------------+
| | | |
+-----------------------------------------+--------------+--------------+
| Cash flows from operating activities | | |
+-----------------------------------------+--------------+--------------+
| (Loss)/profit before income tax | (11,939) | 7,874 |
+-----------------------------------------+--------------+--------------+
| | | |
+-----------------------------------------+--------------+--------------+
| Adjustments for: | | |
+-----------------------------------------+--------------+--------------+
| Amortisation | 543 | 389 |
+-----------------------------------------+--------------+--------------+
| Depreciation | 869 | 692 |
+-----------------------------------------+--------------+--------------+
| Gain on disposal of associates | - | (4,050) |
+-----------------------------------------+--------------+--------------+
| (Gain)/loss on disposal of property, | (2) | 38 |
| plant | | |
| and equipment | | |
+-----------------------------------------+--------------+--------------+
| Net finance expense/(income) | 12,258 | (6,226) |
+-----------------------------------------+--------------+--------------+
| Share based payment expenses | 1,838 | 4,594 |
+-----------------------------------------+--------------+--------------+
| Provision for retirement benefits | 47 | 27 |
+-----------------------------------------+--------------+--------------+
| | | |
+-----------------------------------------+--------------+--------------+
| Operating profit before changes in | 3,614 | 3,338 |
| working capital | | |
+-----------------------------------------+--------------+--------------+
| Movements in working capital elements: | | |
+-----------------------------------------+--------------+--------------+
| Inventories | (75) | (2) |
+-----------------------------------------+--------------+--------------+
| Security deposits | (136) | (40) |
+-----------------------------------------+--------------+--------------+
| Trade receivables | (2,209) | (1,100) |
+-----------------------------------------+--------------+--------------+
| Trade deposits | (3,579) | (151) |
+-----------------------------------------+--------------+--------------+
| Prepayments and other receivables | 3,954 | (1,963) |
+-----------------------------------------+--------------+--------------+
| Trade payables | 92 | (48) |
+-----------------------------------------+--------------+--------------+
| Other payables and accrued expenses | (2,841) | 478 |
+-----------------------------------------+--------------+--------------+
| Collateral deposits received | (62) | (50) |
+-----------------------------------------+--------------+--------------+
| Provision for retirement benefit | (33) | - |
| obligations | | |
+-----------------------------------------+--------------+--------------+
| Amounts due from/to related parties | (24,086) | 2,138 |
+-----------------------------------------+--------------+--------------+
| | | |
+-----------------------------------------+--------------+--------------+
| Cash (used in)/generated from | (25,361) | 2,600 |
| operations | | |
+-----------------------------------------+--------------+--------------+
-ends-
Basis of preparation
The consolidated financial information contained within these preliminary
results is unaudited and does not constitute the statutory accounts of the
Company for the year ended 31 December 2008.
The preparation of the
preliminary results requires the use of estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. The significant judgements and estimates applied by the Group
in these preliminary results have been applied on a consistent basis with the
statutory accounts for the year ended 31 December 2007. Although such estimates
are based on management's best knowledge of the amount, event or actions, actual
results ultimately may differ from those of estimates.
The accounting
policies applied in these preliminary results are in accordance with
International Financial Reporting Standards, as endorsed by the European Union
('IFRS') and are in accordance with the IFRS accounting policies that were
applied in the Group's statutory accounts for the year ended 31 December 2007.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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Asianlogic (LSE:ALOG)
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