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World Gaming plc reports third quarter results

Discussion in 'Casino Industry Discussion' started by mary, Nov 5, 2003.

  1. mary

    mary Dormant account

    [color=0000ff]Impressive turnaround if they can keep this up.
    [/color]
    World Gaming plc reports third quarter results by Phantom Fiber Technology
    4 November 2003


    PRESS RELEASE

    SOURCE: World Gaming plc

    LONDON, UK, Nov. 4 -- World Gaming plc (OTC BB: WGMGY), a UK-based Internet-gaming software and e-business services group of companies (the "Group), is pleased to report financial results for the three and nine months ended September 30, 2003.


    Highlights
    - Year to date profit $24,000 vs. $4,754,000 loss for the same period
    last year.
    - Net loss for the quarter $181,000 vs. loss of $903,000 for the same
    period last year.
    - Royalty revenue up 5 percent from the same nine-month period last year.
    - Operating expenses down 26% from the same nine-month period last year.
    - Settlement of Sinsational Intertainment legal claim.
    - Settlement of a significant capital lease obligation.
    - Highest system uptime in Group's history.
    - New products scheduled for release.


    Fiscal results

    Total revenues for the quarter ended September 30 were $2,818,000 compared to $3,558,000 for the same period last year. This 21% decline in revenues in the quarter is directly attributable to the poor net win achieved by our licensees towards the end of the quarter and controlled system downtime in July due to the upgrade of the Group's operating platform.

    Net loss for the quarter ended September 30, 2003 was $181,000 or $0.01 loss per share compared to a net loss of $903,000 or $0.03 loss per share for the corresponding period last year. Net profit was $24,000 for the nine months ended September 30, 2003 or $0.01 per share compared to a loss of $4,754,000 or $0.14 loss per share for the corresponding period last year.

    The Group experienced a 24 percent decrease in royalty revenues in the quarter when compared to the same period last year. In the quarter, stronger licensee player winnings, specifically towards the end of the quarter and controlled system downtime as a result of the Oracle 9i software upgrade each contributed to this decline. However, for the nine months ended September 30, 2003 royalty revenues exceeded last year by 5%.

    Subsequent to the end of the quarter, licensee net win primarily on sports, have exceeded Management's expectations. Furthermore, volumes are now exceeding last year in both deposits and wagering.

    Assisted by enhanced product offerings and the release of the Group's new Casino 3.3.1 product, the value of average amount wagered with licensees continued to climb a further 8% in the quarter when compared to the same period last year. Several of our larger licensees' businesses continue to show strong year-on-year growth.

    Transaction processing revenues increased 152% for the three-month period to $346,000 from $137,000 during the same period last year. The increase in transaction processing revenues has been achieved through the implementation of a revised pricing structure for this service. The revised pricing structure has resulted in full cost recovery in this area, whereas this area of the business has historically resulted in losses. The Group currently processes less than 6% of total deposit volume on behalf of licensees. Transaction processing remains a challenging area of the business.

    There was no revenue from new licenses for the quarter as the Group continued to focus on existing licensees. As the enhancement of its platform and product suite continues, the Group expects to widen its focus to once again include marketing to new licensees, but only to the extent the Group is in a position to fully support such licensees.

    The gross margin for the quarter was 87.4 percent as compared to 90.4 percent for the same period last year. The reduction in gross margin is primarily a result of lower royalty revenue due to weaker licensee net winnings, particularly at the end of the quarter from the Sportsbook product. In addition, the increase in revenues from transaction processing due to greater volumes contributed to the lower gross margin in the quarter as direct costs as a percentage of these revenue sources are typically higher than those associated with royalty revenue.

    Operating expenses decreased 26 per cent to $2,948,000 during the second quarter of 2003 compared to $3,989,000 for the same period last year. The primary contributors to this reduction were:

    $Nil bad debts in the quarter compared to $222,000 for the same period last year due to improved due diligence procedures and risk sharing with licensees; a 45% reduction in corporate overhead or $494,000, primarily in the areas of salary costs and communications;

    the elimination of the Group's direct sales force team, completed in the third quarter of 2002, contributing to $189,000 of costs during the second quarter of 2002. Professional fees were substantially higher in the quarter, directly as a result of advice obtained in respect of inherited legal issues.

    Subsequent to the end of the quarter, the Group made significant progress in settling a substantial outstanding legal dispute with Sinsational Intertainment. The terms of this settlement involves the agreement by Sinsational Intertainment to terminate all of its claims against the Company in exchange for which the Company will not further pursue its claims against Sinsational Intertainment. Any amounts owed to the Group by Sinsational Intertainment had been provided for in full in the quarter to June 30, 2003.

    In addition, the Company resolved issues relating to an outstanding equipment lease with EMC Corporation. At the time of settlement, EMC had indicated an amount equal to $1,500,000 CAD may have accrued. This was settled in full for $300,000 by an upfront payment of $100,000 with the remainder payable in equal instalments over twelve months.

    The result of settlement of the above claims has given rise to write-back of $274,000 of amounts previously accrued in respect of the equipment lease.


    Selected statement of operations information (unaudited, in thousands)

    For the three months ended For the nine months ended
    September 30, September 30,
    2003 2002 2003 2002
    --------------------------- --------------------------
    Net Sales $ 2,818 $ 3,558 $ 10,341 $ 10,734
    Gross Profit 2,464 3,217 9,081 9,483
    Operating Expenses 2,948 3,989 9,772 14,211
    Net (Loss)/Profit (181) (903) 24 (4,754)


    Operational update

    Throughout the third quarter, The Group experienced the highest level of system and network uptime in its history. This is directly attributable to the work performed before the start of the football season in upgrading the Oracle Database and network infrastructure.

    Several areas of the business remain under review. Those areas requiring enhancement, or those that are not congruent with the Group's core business will be restructured over the coming 6 months. Any restructuring will stem from a focus on delivery of quality products on a timely basis to our licensees.

    In keeping with the Group's commitment to deliver an enhanced product suite, a new concept in on-line gaming called Virtual Games will be released to our licensees in the fourth quarter of 2003. These games have proven to be very successful in the European market and will add an additional revenue stream to the Group that is less susceptible to seasonal fluctuations.

    The Group remains committed to delivering an expanded horseracing product, the timetable for which has extended beyond Management's expectations due to supplier-based matters. These matters have now been rectified and further stages of development have commenced.

    In addition, the Group is investigating delivering a multi-player poker product in 2004.

    Daniel Moran, World Gaming's CEO commented:

    "The Group has undergone an extremely busy period in dealing with inherited issues that were of direct detriment to the Group's viable future. The resolution of many of these issues, in particular those of a litigious nature, are extremely positive and dissipate a significant distraction to Management. The Board's resolve to grow the business through enhanced products and infrastructure remains and a culture of heightened fiscal responsibility is strengthening the Group's financial position."
     

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