RNS Number:5244K
Gaming International PLC
29 April 2003
For immediate release: 29 April 2003
GAMING INTERNATIONAL PLC
("Gaming" or the "Company")
Gaming International the International Gaming, Leisure and Facilities Management
company announces its Preliminary Results for the year ended 31 December 2002
Chairman's Statement
2002 has been a year of difficult trading conditions but also a year in which
further investment has been made into our trading businesses.
In Japan the economy continued to be difficult, resulting in a general
deterioration of business confidence and this was particularly evident in the
second half of the year.
In the Pachinko industry, competition for good locations and customers has
intensified, however business overall is profitable, and the trend towards
consolidation into larger outlets is continuing.
During the year, competition from other leisure activities and their television
coverage impacted upon the growth of the greyhound industry within the UK.
Additionally, protracted negotiations for the price paid by bookmakers for their
Greyhound Racing product became complicated and confrontational. It is
essential for the future prosperity of Greyhound Racing that an equitable and
long-term solution is found. I am comforted to see the commitment of the UK
Government and the recent advances made in negotiations.
The UK Government continues to progress its intended review and reorganisation
of gambling and gaming law and I am hopeful that the recommendations, which will
be beneficial to Gaming International, will become effective in the second half
of 2004.
The UK stock market has, along with all major stock markets, seen major falls in
relative values and trading levels. Importantly there has been a shift in
investor confidence, particularly in respect of small-capitalised companies.
This move has changed the investment environment making it difficult for us to
raise capital for expansion.
I remain optimistic and confident for both the Japanese Pachinko business and
for the UK greyhound racing and stadium operations business. The Board has
recommended the payment of a dividend of 1p per ordinary share, which reflects
the Board's optimism for the future.
I was sorry to lose the services of Peter Catto, who resigned as non-executive
Deputy Chairman on 7 March 2003 and I thank him for his valued contribution
during his time with the Company. I also welcome Graham Parr to the Board and I
am sure that his experience and ability will greatly assist the Board in the
future.
My thanks to my Board colleagues, our management and staff for their continued
support. I remain confident of our future success.
Chief Executive's review of Operations
Results
Turnover decreased by 10% to #12,909,000 (from #14,382,000 in 2001).
Gross profit decreased by 22% to #3,023,000 (from #3,894,000 in 2001).
Profit before interest and tax decreased to #87,000 (from #825,000 in 2001).
Pre-tax loss for the year #44,000 (2001: Pre-tax profit of #762,000).
Dividend for the year 1p per ordinary share (2001: Nil).
Japan Operations
Turnover for our operations in Japan increased from #4,291,000 to #4,352,000 and
operating profit decreased from #1,221,000 to #909,000. The figures for last
year represent trading from the date of acquisition on 14 February 2001.
Increased local competition drove a major reinvestment program in refurbished
premises, new games machines and in marketing expenditures towards the end of
the year. This had a detrimental effect on operating profits for 2002 however
this should result in a return to higher turnover and profit margins for 2003.
Our staff and management supply business achieved some growth from both slightly
increased contract prices and the number of managers and staff deployed.
Despite the efforts of our management team, the search for suitable
opportunities to expand our Pachinko operating business proved difficult. We
are continuing to evaluate suitable opportunities and the search remains
ongoing.
Greyhound Stadia UK
Turnover from UK Stadia Greyhound operations increased by 26.5% to #7,543,000
and operating profit decreased by 41.6% to #449,000.
Greyhound racing revenues were adversely affected by the staging of the FIFA
World Cup in June and by the general increase in live TV coverage of major
sports, particularly soccer and greyhound racing. The acquisition and operation
of Reading stadium had an impact on turnover and profitability.
Swindon Stadium
Turnover increased by 9% and profit contribution by 12%.
Revenues were driven by increased attendances, spend per customer and the number
of races operated for the Bookmakers' Afternoon Greyhound Service. Revenues
from the covered retail market remained static whilst speedway-racing
attendances increased by 4%.
The search for alternative premises is ongoing and we remain hopeful that a
suitable site for a new greyhound racing and speedway racing facility will be
identified, thereafter releasing the existing site for redevelopment.
Poole
Turnover increased by 5% and profit contribution increased by 8%.
Revenues were driven by increased customer spend and improvements in operational
efficiency. Average greyhound racing attendances remained static whilst
speedway attendances increased by 3%.
Appraisal of the extended or alternative uses for the site continued throughout
the year.
Milton Keynes
Turnover increased by 1% whilst profit contribution fell by 12%.
Increased local competition and the lack of investment in improving customer
facilities due to the likelihood of a move to a new site in 2004 adversely
affected profit contribution.
The planning for the move to new premises continued throughout the year.
Planning permission for the development of a facility on land adjacent to the
National Bowl was received on 11 December 2002. In parallel the detailed
application for permission to redevelop the existing stadium site for the
provision of housing was submitted on 13 December 2002.
Reading
On 17 April 2002 Gaming International Plc bought the trading operation and
assets of the Reading Greyhound and Speedway stadium. This is a well-located
facility close to Junction 11 of the M4 and to the Madjeski Stadium and retail
complex.
We have undertaken a limited refurbishment of the existing facilities with an
expectation of trading at the existing site for a further 2 or 3 years. We are
in well advanced negotiations with the Local Authority for an adjacent 18 acre
site with a long-term ground lease, enabling us to build a new stadium complex.
Turnover since acquisition is #806,000 contributing a loss before interest and
tax of #268,000. The work undertaken to improve customer facilities and to
market the stadium as a leisure destination should show positive returns during
2003. It should be noted that the Group has taken a prudent view to write off
its initial investment on acquisition and refurbishment, over the remaining
period of the existing lease.
Other UK Leisure Activities
Turnover from other UK leisure operations decreased from #3,387,000 to #413,000
and operating profit decreased from #335,000 to a loss of #297,000 due to the
absence of major events at the National Bowl.
National Bowl
Revenues fell dramatically at the National Bowl with no major events being
staged during the year. This was due to a very limited number of the world's
major music acts touring following the events of 11 September 2001.
Consequently this operation contributed a loss of #84,000 during the year.
Booking for 2003 has been much improved with 4 major concert days reserved.
Knightstone Island
Revenue fell by 20% with another poor holiday season in Weston-super-Mare.
Operating losses remained static at #191,000.
Ongoing discussions with North Somerset Council reached agreement and Redrow a
major property developer, has been secured to undertake a substantial
residential development of the site.
Operations will cease on 30 May 2003, this will stem our continuing operating
losses and we expect that the value to the Group resulting from the
redevelopment of this site will be in excess of the net book value.
Eastville Market
Revenue fell by 18% due primarily to the effect of competition and the
relatively small size of the market. Despite cost cutting operating losses of
#22,000 were incurred.
The owner of the site progressed negotiations preceding a planning application
and is expected to make a planning application to redevelop the site by June
2003. Our search for an alternative site for the Eastville Market has, so far,
proved unsuccessful and operations at this site will cease when redevelopment
commences. In addition we will receive a further #100,000 on redevelopment of
the site.
Property Division
Turnover from UK property activity decreased from #741,000 to #601,000 and
operating profit increased from a loss of #268,000 to a profit of #123,000 due
primarily to the first phase of the sale of Milton Keynes Groveway Stadium site.
Ross-on-Wye
Land assembly was completed in 2002 and detailed discussions and preparation for
a planning application for the development of a 40,000 sq ft food store
continued satisfactorily.
With the well publicised announcement of a bid for Safeway Plc, a number of the
UK's major food retailers are reluctant to commit to the opportunity at
Ross-on-Wye until the result of the Safeway ownership has been decided.
Consequently, our progress towards the redevelopment of a food store has been
temporarily halted.
We are considering alternative forms of redevelopment.
Bletchley
The sale of our 82,000 sq ft office building in Bletchley was exchanged on 4
December 2002 and will complete during July 2003. The sale was achieved at a
price in excess of our carrying value.
New Media
In November 2002 E-Tote, the on-line betting services company in which we have a
25% stake, purchased the operation of 24Dogs, the on-line greyhound racing
betting business, from Wembley plc. The 24Dogs operation was extensively
overhauled following its purchase. Consequently, revenues from the operation
were well below expectation in 2002 but E-Tote is optimistic for the future with
the operation of 24Dogs now directly under its control. Significant progress
has been made in securing the ability to co-mingle, pari-mutual pools direct to
racecourses and also in seeking partnership deals with other major sports.
Outlook
In Japan local competition to our Tokyo parlour is likely to increase however
our investment in marketing and the latest machines will help maintain turnover
and profit margins. The Japanese economy and banking restructuring makes it
difficult for us to obtain long-term finance for new projects in Japan. The
lack of investor confidence in the stock markets make it difficult to raise
money from new equity at a level representing value to shareholders. Existing
cash resources are insufficient to make a suitable parlour acquisition.
We are continuing to search for new outlets and development sites and to
consider alternative ways of raising the required levels of finance to purchase
or develop a second major outlet. The opportunities that may materialise for
other forms of gambling and gaming in Japan are monitored closely, particularly
those which may result in limited casino gambling becoming legal in Tokyo.
In the UK, three major issues dominate the greyhound racing industry and its
prospects. The relationship with the bookmaking industry and particularly the
payments made for and the effect of the use of greyhound product in betting
shops and new media. The control and effect of live TV coverage of greyhound
racing and the UK Government's review of gambling laws with the expected outcome
of new regulations by mid 2004.
The first of these, the relationship with the bookmaking industry, is a complex
one. Discussions became confrontational but have now moved to what we hope will
be a progressive dialogue with an outcome providing a trading and financial
environment able to encourage wider investment in greyhound racing based on the
expectation of a reasonable rate of return on that investment and, the security
of those arrangements in the future.
Secondly, the possible proliferation of live television coverage of greyhound
racing, would have a severe detrimental effect on the promotion of the sport.
Indications are that this is recognised by both the bookmaking industry and the
greyhound racing industry and we are optimistic that both industries will
resolve to control and limit the proliferation of TV coverage for the medium
term.
Finally, the new gambling and gaming laws, are set to provide new opportunities
for greyhound racing operators with suitable locations and facilities, to widen
their leisure offer and to increase both their opening times and revenues. We
have four locations in the UK, all of which are suitable for what can become an
intensified and more profitable use.
During 2002 we have invested and will continue to invest in the detailed design
of facilities, which will be capable of taking full advantage of the predicted
new regulations and will be attractive to a wider customer base. Significantly
our designs for the new Milton Keynes and Reading facilities have evolved to
incorporate the expected new regulations and we eagerly await the publication of
the UK Government's final proposals, which are expected in May 2003.
The realisation of all three of these major issues in ways which can benefit the
greyhound racing industry will, in our opinion, bring a new landscape for future
operations and basic security and confidence in the position of greyhound racing
promotion in the rapidly growing gambling and leisure market place.
Our search for future opportunities to acquire or develop further greyhound
racing and associated leisure facilities was restrained in 2002 by a combination
of the uncertainties with the major issues noted earlier and the acquisition, or
proposed acquisition, of racecourses by bookmaking companies. This latter
activity provided both uncertainty and increased expectation of price. We will
continue our search for suitable existing stadia or redevelopment opportunities
whilst we continually evaluate the progress in the three major areas affecting
the greyhound racing industry.
Our consideration of opportunities occasioned by our investment in Japan and the
expertise and technology that it brings, particularly in the field of slot
machine management, continued but has been tempered by the wait for the
certainty of the UK government's proposals.
Despite the various uncertainties within the world economies, we have a solid
platform and a strong balance sheet with which to further develop our businesses
over the coming years.
Consolidated profit and loss account
for the year ended 31 December 2002
2002 2002 2001 2001
#'000 #'000 #'000 #'000
Turnover: group and share of joint ventures
Continuing operations - existing 12,103 14,382
- acquisitions 806 -
Less: share of joint ventures' turnover - (474)
Group turnover 12,909 13,908
Cost of sales (9,886) (10,014)
Gross profit 3,023 3,894
Administrative expenses (3,229) (2,977)
Operating (loss)/profit
Continuing operations - existing 62 917
- acquisitions (268) (206) - 917
Gain on the sale of a fixed asset 318 -
Share of operating loss of joint ventures - (8)
Share of operating loss of associated (25) (84)
undertakings
Profit on ordinary activities before 87 825
interest
Interest receivable 80 226
Interest payable and similar charges
- group (211) (216)
- joint ventures - (211) (73) (289)
(Loss)/profit on ordinary activities before (44) 762
taxation
Taxation
Overseas tax payable (94) (43)
Overseas deferred tax (379) (473)
(473) (516)
(Loss)/profit on ordinary activities after (517) 246
taxation
Minority interests - equity (62) 14
(Loss)/profit for the financial year (579) 260
Dividends - equity (228) -
Retained (loss)/profit for the financial (807) 260
year
Basic and diluted (loss)/earnings per (2.6)p 1.2p
ordinary share
Reconciliation of movement in consolidated shareholders' funds
For the year ended 31 December 2002
2002 2001
#'000 #'000
(Loss)/profit for the year (579) 260
Dividends payable (228) -
New share issue 114 7,762
Deferred consideration satisfied in shares - 2,364
Unrealised gain/(loss) on foreign exchange 1 (1,144)
Net (reduction)/increase to shareholders' funds (692) 9,242
Opening shareholders' funds 19,739 10,497
Closing shareholders' funds 19,047 19,739
Statement of total recognised gains and losses
For the year ended 31 December 2002
2002 2001
#'000 #'000
(Loss)/profit for the year (579) 260
Unrealised currency translation differences on Japanese 1 (1,144)
Yen net investment - arising on Gaming International Japan
Co Ltd
Total gains and losses recognised since last financial (578) (884)
statements
Consolidated balance sheet
at 31 December 2002
2002 2002 2001 2001
#'000 #'000 #'000 #'000
Fixed assets
Intangible assets - goodwill 1,512 1,491
Tangible assets 5,456 8,254
6,968 9,745
Investments
Investments in joint ventures
Share of gross assets 29 29
Share of gross liabilities (31) (31)
(2) (2)
Goodwill arising on acquisition of associates 421 444
Investments in associated undertakings 91 116
510 558
Current assets
Stocks 5,707 5,936
Debtors 6,517 6,218
Cash at bank and in hand 5,613 5,229
17,837 17,383
Creditors: due within one year (4,672) (5,503)
Net current assets 13,165 11,880
Total assets less current liabilities 20,643 22,183
Creditors: due after more than one year (1,627) (2,537)
Net assets 19,016 19,646
Capital and reserves
Called up share capital 570 564
Deferred consideration 2,364 2,364
Share premium account 8,128 8,020
Other reserves 18 18
Profit and loss account 7,967 8,773
Equity shareholders' funds 19,047 19,739
Minority interests (equity) (31) (93)
19,016 19,646
Net assets per ordinary share 83p 87p
Consolidated cash flow statement
for the year ended 31 December 2002
2002 2002 2001 2001
#'000 #'000 #'000 #'000
Operating activities
Net cash (outflow)/inflow from operating (453) 2,321
activities
Returns on investments and servicing of finance
Interest received 80 226
Interest paid (188) (207)
Finance lease interest paid (23) (9)
Net cash (outflow)/inflow from returns on (131) 10
investments and servicing of finance
Taxation paid (8) (70)
Capital expenditure and financial investment
Increase in funding to joint ventures - (90)
Payments to acquire tangible fixed assets (1,214) (1,103)
Proceeds from sale of tangible fixed assets 3,450 19
Net cash inflow/(outflow) from capital expenditure 2,236 (1,174)
and financial investment
Acquisitions and disposals
Payment to acquire subsidiary undertaking (263) (549)
Net cash acquired with subsidiary undertakings - 4,867
Investment in associated undertaking - (657)
Net cash (outflow)/inflow from acquisitions and (263) 3,661
disposals
Financing
Issue of shares 114 -
(Repayment)/receipt of bank loans (1,034) 772
Capital element of finance lease rental payments (122) (42)
Net cash (outflow)/inflow from financing (1,042) 730
Increase in cash for the year 339 5,478
SEGMENTAL REPORTING
Results for the year 2002 2002 2001 2001
Turnover Profit/(loss) Turnover Profit/(loss)
before interest before interest
#'000 #'000 #'000 #'000
Gaming (Japan) 4,352 909 4,291 1,221
Property (UK) 601 123 741 (268)
Greyhound Stadia (UK) 7,543 483 5,963 770
Other Leisure (UK) 413 (297) 3,387 335
12,909 1,218 14,382 2,058
Less: share of joint ventures - - (474) -
12,909 1,218 13,908 2,058
Central costs (1,106) (1,141)
Share of joint ventures - (8)
Share of associated undertaking (25) (84)
Profit before interest 87 825
Taxation
The tax charge represents:
2002 2001
#'000 #'000
Overseas current tax 94 43
Overseas deferred tax
379 473
Tax on profit on ordinary activities 473 516
Tax reconciliation:
2002 2001
#'000 #'000
(Loss)/profit on ordinary activities before taxation (44) 762
(Loss)/profit on ordinary activities before tax at 30% (2001 - 30%) (13) 229
Effect of:
Differences in Overseas tax rates 111 121
Permanent differences (36) (330)
Timing differences 32 23
Total current tax 94 43
The Group has #7,800,000 tax losses available in the UK, which can be offset
against future taxable profits arising in the UK. A deferred tax asset has not
been recognised in the UK due to uncertainties surrounding the timing of any
reversals.
The overseas deferred tax charge arises in part as a result of the utilisation
of brought forward losses and a corresponding decrease in the deferred tax asset
carried forward. The reduction in the overseas deferred tax asset during the
year of #379,000 (2001: #473,000) leaves a deferred tax asset due to timing
differences at 31 December 2002, of #87,000 after currency translation
adjustments (2001: #462,000).
RECONCILIATION OF OPERATING (LOSS)/PROFIT TO NET CASH (OUTFLOW)/INFLOW FROM
OPERATING ACTIVITIES
2002 2001
#'000 #'000
Operating (loss)/profit (206) 917
Depreciation and amortisation 1,512 993
Decrease/(increase) in stocks 104 (1,188)
(Increase)/decrease in debtors (678) 377
(Decrease)/increase in creditors (1,189) 1,232
Loss/(profit) on sale of fixed assets 4 (10)
Net cash (outflow)/inflow from operating activities (453) 2,321
reconciliation of net cash flow to movements in net funds
2002 2001
#'000 #'000
Increase in cash during year 339 681
Bank loans repaid/(taken out) in the year 1,034 (800)
Cash outflow from lease financing 122 -
Change in net debt from cash flows 1,495 (119)
Net cash acquired with subsidiary undertakings - 4,867
Net debt acquired with subsidiary undertakings - (890)
New finance leases (248) (272)
Currency movements 4 (517)
Net funds/(debt) as at 31 December 2001 1,330 (1,739)
Net funds as at 31 December 2002 2,581 1,330
NOTES TO THE PRELIMINARY RESULTS
1. The financial information set out in this preliminary announcement does
not constitute statutory accounts as defined in Section 240 of the Companies Act
1985. The summarised balance sheet at 31 December 2002 and the summarised
profit and loss account, summarised cash flow statement and associated notes for
the year then ended have been extracted from the Group's 2002 statutory
financial statements upon which the auditors opinion is unqualified and does not
include any statement under Section 237 of the Companies Act 1985.
2. The financial information has been based on accounting policies and
applicable accounting standards up to and including FRS 19 Deferred Taxation.
3. Loss per share for the year ended 31 December 2002 has been calculated on
22,637,163 shares, being the average number of shares in issue during the
period. The earnings per share for the year ended 31 December 2001 has been
calculated on 21,348,482 shares, being the average number of shares in issue
during that period.
4. A final dividend of 1p per ordinary share(2001: Nil) has been recommended
by the directors for the year ended 31 December 2002. The record date for the
payment of the dividend is the 1st August 2003. The proposed payment date is the
1st September 2003.
5. Copies of the Annual Report will be circulated to shareholders shortly
and will be available from the Registered Office of the Company.
For further information, please contact:
Clarke Osborne
CEO of Gaming International PLC
01179 029250
07802-606532
Adam Reynolds
Hansard Communications
020-7735-9415
07785-908158
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