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JPJ Group plc (Formerly Jackpotjoy plc) Results for the Six Months Ended 30 June 2018

Zoltan Tundik

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Reading Time: 41 minutes

LONDONAugust 14, 2018 

Total gaming revenue up 10% year-on-year, performance in line with expectations
Shares transferred to a Premium Listing on LSE

JPJ Group plc (LSE: JPJ) (the ‘Group’), a leading global online bingo-led operator, today announces results for the six months ended 30 June 2018.

Financial summary

                                     Six months ended Six months ended  Reported
                                     30 June 2018     30 June 2017      Change
                                     (GBPm)           (GBPm)            (%)
    Total gaming revenue             161.1            146.6             10
    Net loss (as reported under IFRS)(0.4)            (20.1)            98
    Adjusted EBITDA[1]               56.9             59.2              (4)
    Adjusted net income[1]           45.5             42.6              7
    Operating cash flows             49.0             45.6              7
    Diluted net loss per share[2]    GBP(0.01)        GBP(0.27)         96
    Diluted adjusted net income per
    share[1],[2]                     GBP0.61          GBP0.57           7

Financial highlights for first six months

  • Good financial performance
    • Total gaming revenue rose 10% year-on-year (12% excluding social)
    • Adjusted EBITDA[1] decreased 4% year-on-year, reflecting the planned increase in marketing costs and the application of point of consumption tax to gross gaming revenue (‘POC2’) in the UK from Q4 2017
    • Adjusted net income[1] increased 7% year-on-year, principally due to a 37% decrease in interest expense
  • Strong ongoing cash generation
    • Operating cash flow of £49.0 million, an increase of 7% year-on-year, and 65p of operating cash flow per share[2]
    • Adjusted EBITDA[1] to cash conversion of 86%; free cash flow[3] of £47.8 million
    • Adjusted net debt[4] of £362.9 million (31 December 2017: £387.3 million) and adjusted net leverage ratio[5] of 3.41x (31 December 2017: 3.57x)
  • Final Botemania earn-out payment of £58.5 million and a £5.0 million milestone payment made in June 2018 out of existing cash resources
  • Signed a share purchase agreement for the sale of the social business for cash consideration of £18.1 million. Post completion, the Group will be exclusively focussed on its core activity of real money gaming and the disposal will represent another positive step in reducing net leverage
  • Performance in line with expectations; outlook for the Group remains positive for the full year

Operational highlights

  • Continued improvement in core KPIs[6] year-on-year:
    • Average Active Customers per Month[6] grew to 259,861 in the twelve months to 30 June 2018, an increase of 7% year-on-year
    • Average Real Money Gaming Revenue per Month[6] grew to £25.0 million, an increase of 15% year-on-year
    • Monthly Real Money Gaming Revenue per Average Active Customer[6] of £96, an increase of 8% year-on-year

Business segments highlights for H1 2018

  • Jackpotjoy[7] (72% of Group revenue) – Total gaming revenue growth of 2% year-on-year, reflecting strong growth in Botemania and Starspins (25% of segment revenues) and the impact of a reduction in social gaming revenue; Adjusted EBITDA[1] decreased 9% due to the impact of higher distribution costs from the UK TV advertising campaign and the introduction of POC2 on gross gaming revenue in the UK in Q4 2017
  • Vera&John (28% of Group revenue) – Total gaming revenue growth of 37% year-on-year, 34% on a constant currency basis; Adjusted EBITDA[1] increased 31% due to strong organic revenue growth[8] partially offset by higher marketing spend and increased gaming tax

Neil Goulden, Executive Chairman, commented:

“The first half of the year has seen a continuation of the strong momentum that JPJ Group plc has reported since listing in the UK in January 2017. Group revenue grew 10% with Average Active Customers per Month[6] also increasing 7%, driven by good growth across our global footprint, in particular in Spain and a number of relatively new markets. As expected, Adjusted EBITDA[1] was down 4% year-on-year, but is expected to return to growth in the second half of the year following the conclusion of the TV advertising campaigns and as we pass the anniversary of the introduction of the POC2 on gross gaming revenue in the UK.”

“There were also several significant milestones for the Group during the period. In June, we announced the intention to move to a Premium Listing on the London Stock Exchange (‘LSE’) which was effective from 26 July 2018. We believe this provides us with an appropriate platform for continued growth, as well as exposure to a wider investor base and enhanced liquidity in our shares. In addition, also in June, we made the final earn-out payment to Gamesys in relation to Botemania, which was comfortably met from existing cash balances, and today we announced that we have signed a share purchase agreement for the sale of the social business enabling us to focus solely on our core activity of real money gaming. Looking ahead, I am confident that the Group’s strong cash flow generation provides us with the opportunity to create additional value for shareholders as we continue to deleverage.”

Outlook

Profitability in the first six months of the financial year has been as expected and we are comfortable with market expectations for FY 2018. The Group’s ongoing strong free cash flow generation is enabling us to rapidly deleverage, with net debt reduction to below 2.5x net debt/EBITDA remaining a key strategic target and the point at which we can consider options to return cash to shareholders. Significant growth opportunities continue to exist in global online gaming markets and we are confident that we are well-placed to take advantage of this backdrop.

Conference call

A conference call for analysts and investors will be held today at 1.00pm BST / 8.00am ET. To participate, interested parties are asked to dial +44 (0) 20 3003 2666 or +1 800 608-0547, or for US shareholders +1 866 966-5335, 10 minutes prior to the scheduled start of the call using the reference “JPJ” when prompted.  A replay of the conference call will be available for 30 days by dialling +44 (0) 20 8196 1998 or +1 866 583-1035 and using reference 9762655#. A transcript will also be made available on JPJ Group plc’s website at http://www.jpjgroup.com/investors

EXECUTIVE CHAIRMAN’S REVIEW

Overview and summary of results

JPJ Group plc has had a solid first half in the current financial year, continuing the strong momentum the company has demonstrated since listing on the London Stock Exchange in 2017. During the six-month period, we increased Group total gaming revenue by 10% and grew our customer base by 7%, to 259,861 Average Active Customers per Month[6]. Operating cash flow also remained strong, increasing by 7% year-on-year, and representing an Adjusted EBITDA[1] cash conversion rate of 86%.

The good performance across the Group was driven by strong growth in Botemania in Spain and Starspins in the UK. Vera&John also performed strongly, increasing total gaming revenue by 37%.  Total gaming revenue growth in our Jackpotjoy[7] segment did slow in Q2 and partly reflects the impact of lower revenues in social gaming where high CPAs (cost per acquisition) shifted the focus to profitability. The introduction of a range of responsible gambling initiatives in the UK was also a feature of H1 and meant that good growth in actives was to a degree offset by lower UK average revenue per customer[9].

As previously highlighted and expected, Adjusted EBITDA[1] was negatively impacted in the first half of the year by higher distribution costs from the UK and Spanish TV advertising campaigns and the introduction of POC2 on gross gaming revenue in the UK in Q4 2017, resulting in a 4% year-on-year decline.

Significant milestones achieved during the period

There were several significant milestones for the Group during the period. In June we announced the intention to transfer to a Premium Listing on the LSE, providing us with an appropriate platform for continued growth, as well as exposure to a wider investor base and enhanced liquidity in our shares.

Also in June, we paid our final earn-out payment of £58.5 million to the Gamesys group in relation to Botemania, comfortably met from existing cash balances, which now stand at £29.5 million at 30 June 2018. The Group will make two further milestone payments of no more than £10.0 million in aggregate should the Jackpotjoy[7] brands attain certain EBIT targets in the years to March 2019 and March 2020.

Additionally, we were pleased to announce the appointment of Andria Vidler as a non-executive director to the Board at our AGM in June. She will also join the Group’s Remuneration Committee. As the chief executive of Centaur Media, a leading business information group, Andria brings a wealth of experience in developing businesses and has a strong track record of creating digital solutions to engage with consumers and drive loyalty.

Outlook for the second half

Looking ahead to the second half of the year, we expect an improvement in Adjusted EBITDA[1] growth year-on-year following the conclusion of the successful TV advertising campaigns and as we pass the anniversary of the introduction of the UK POC2 gross gaming revenue tax. The Group will continue to focus on generating strong cash flow and will use this to deleverage towards and below 2.5x net debt/EBITDA. At this level, our strong cash flow provides us with opportunities to return cash to shareholders.

Conclusion and strategy update

Having delivered consistently strong results since our listing and given continued deleverage of the Group’s balance sheet, we intend to announce an update at our 2018 Full Year Results next March that will outline our plans to return cash to shareholders.

As an organisation, we remain committed to delivering a best-in-class customer experience across all verticals that is underpinned by a robust approach to responsible gaming. Additionally, I believe securing a Premium Listing for JPJ Group plc is further proof that we are now a business that operates to the highest standards of corporate governance, and one that is set to continue delivering a fun and safe environment for our customers while generating value for our shareholders.

Neil Goulden
Executive Chairman

Note Regarding Non-IFRS financial measures

The following non-IFRS definitions are used in this release because management believes that they provide additional useful information regarding ongoing operating and financial performance. Readers are cautioned that the definitions are not recognised measures under IFRS, do not have standardised meanings prescribed by IFRS, and should not be considered in isolation or construed to be alternatives to revenues and net income/(loss) and comprehensive income/(loss) for the period determined in accordance with IFRS or as indicators of performance, liquidity or cash flows. Our method of calculating these measures may differ from the method used by other entities. Accordingly, our measures may not be comparable to similarly titled measures used by other entities or in other jurisdictions.

Adjusted EBITDA, as defined by the Group, is income before interest expense including accelerated debt costs and other accretion (net of interest income), income taxes, amortisation and depreciation, share-based compensation, severance costs, realised loss on cross currency swap, fair value adjustments on contingent consideration, transaction related costs, foreign exchange (gain)/loss, and gain on sale of intangible assets. Management believes that Adjusted EBITDA is an important indicator of the issuers ability to generate liquidity to service outstanding debt and fund acquisition milestone payments and uses this metric for such purpose. The exclusion of share-based compensation eliminates non-cash items and the exclusion of realised loss on cross currency swap, fair value adjustments on contingent consideration, severance costs, transaction related costs, foreign exchange (gain)/loss, and gain on sale of intangible assets eliminates items which management believes are either non-operational and/or non-routine. 

Adjusted Net Income, as defined by the Group, means net income plus or minus items of note that management may reasonably quantify and believes will provide the reader with a better understanding of the Groups underlying business performance. Adjusted Net Income is calculated by adjusting net income for accretion on financial liabilities, amortisation of acquisition related purchase price intangibles (including non-compete clauses), share-based compensation, severance costs, realised loss on cross currency swap, fair value adjustments on contingent consideration, transaction related costs, foreign exchange (gain)/loss and gain on sale of intangible assets. The exclusion of accretion on financial liabilities and share-based compensation eliminates the non-cash items and the exclusion of amortisation of acquisition related purchase price intangibles (including non-compete clauses), realised loss on cross currency swap, fair value adjustments on contingent consideration, severance costs, transaction related costs, foreign exchange (gain)/loss, and gain on sale of intangible assets eliminates items which management believes are non-operational and/or non-routine.  Adjusted Net Income is considered by some investors and analysts for the purpose of assisting in valuing a company.

Diluted Adjusted Net Income per share, as defined by the Group, means Adjusted Net Income divided by the diluted weighted average number of shares outstanding, calculated using the IFRS treasury method, for the applicable period. Management believes that Diluted Adjusted Net Income per share assists with the Groups ability to analyse Adjusted Net Income on a diluted weighted average per share basis.

Cautionary Note Regarding Forward-Looking Information

This release contains certain information and statements that may constitute forward-looking information (including future-oriented financial information and financial outlooks) within the meaning of applicable laws, including Canadian securities laws. Often, but not always, forward-looking information can be identified by the use of words such as plansexpectsestimatesprojectspredictstargetsseeksintendsanticipatesbelieves, or is confident of or the negative of such words or other variations of or synonyms for such words, or state that certain actions, events or results maycouldwouldshouldmight or will be taken, occur or be achieved. Forward-looking information involves known and unknown risks, uncertainties and other factors which may cause actual results, performance, achievements or developments to be materially different from those anticipated by the Group and expressed or implied by the forward-looking statements. Forward-looking information contained in this release includes, but is not limited to, statements with respect to the Groups future financial performance, the future prospects of the Groups business and operations, the Groups growth opportunities and the execution of its growth strategies, the Groups milestone payment obligations, the future performance of the Jackpotjoy segment, the possibility of the Group drawing on the Revolving Facility, and the statements made under the heading Outlook of this release. Certain of these statements may constitute a financial outlook within the meaning of Canadian securities laws. These statements reflect the Groups current expectations related to future events or its future results, performance, achievements or developments, and future trends affecting the Group. All such statements, other than statements of historical fact, are forward-looking information. Such forward-looking information is based on a number of assumptions which may prove to be incorrect, including, but not limited to, the ability of the Group to secure, maintain and comply with all required licences, permits and certifications to carry out business in the jurisdictions in which it currently operates or intends to operate; governmental and regulatory actions, including the introduction of new laws or changes in laws (or the interpretation thereof) related to online gaming; general business, economic and market conditions (including market growth rates and the withdrawal of the UK from the European Union); the Group operating in foreign jurisdictions; the competitive environment; the expected growth of the online gaming market and potential new market opportunities; anticipated and unanticipated costs; the protection of the Groups intellectual property rights; the Groups ability to successfully integrate and realise the benefits of its completed acquisitions, the amount of expected milestone payments required to be made; the Groups continued relationship with the Gamesys group and other third parties; the ability of the Group to service its debt obligations; and the ability of the Group to obtain additional financing, if, as and when required. Such statements could also be materially affected by risks relating to the lack of available and qualified personnel or management; stock market volatility; taxation policies; competition; foreign operations; the Groups limited operating history and the Groups ability to access sufficient capital from internal or external sources.  However, whether actual results and developments will conform with the expectations and predictions contained in the forward-looking information is subject to a number of risks and uncertainties, many of which are beyond the Groups control, and the effects of which can be difficult to predict, including that the assumptions outlined above may not be accurate.  For a description of additional risk factors, see Schedule A attached to JPJ Group plcs most recently filed annual information form. Although the Group has attempted to identify important factors that could cause actual results, performance, achievements or developments to differ materially from those described in forward-looking statements, there may be other factors that cause actual results, performance, achievements or developments not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results, performance, achievement or developments are likely to differ, and may differ materially, from those expressed in or implied by the forward-looking information contained in this release. Accordingly, readers should not place undue reliance on forward-looking information. While subsequent events and developments may cause the Groups expectations, estimates and views to change, the Group does not undertake or assume any obligation to update or revise any forward-looking information, except as required by applicable securities laws. The forward-looking information contained in this release should not be relied upon as representing the Groups expectations, estimates and views as of any date subsequent to the date of this release. The forward-looking information contained in this release is expressly qualified by this cautionary statement.  Investors should not place undue reliance on forward-looking statements as the plans, intentions or expectations upon which they are based might not occur.

Any future-oriented financial information or financial outlooks in this release are based on certain assumptions regarding expected growth, results of operations, performance, and business prospects and opportunities.  While the Group considers these assumptions to be reasonable, based on information currently available, they may prove to be incorrect.  These risks, uncertainties and other factors include, but are not limited to: credit, market, currency, operational, liquidity and funding risks, including changes in economic conditions, and interest rates or tax rates.

Financial Review

Total gaming revenue

The Group’s total gaming revenue during the three months ended 30 June 2018 consisted of:

– £56.3 million in revenue earned from Jackpotjoy’s[7] operational activities.
– £24.2 million in revenue earned from Vera&John’s operational activities.

The Group’s total gaming revenue during the three months ended 30 June 2017 consisted of:

– £57.8 million in revenue earned from Jackpotjoy’s[7] operational activities.
– £17.4 million in revenue earned from Vera&John’s operational activities.

The increase in total gaming revenue for the three months ended 30 June 2018 in comparison with the three months ended 30 June 2017 relates primarily to organic growth[8] of the Vera&John segment, where total gaming revenue increased by 39%.

The Group’s total gaming revenue during the six months ended 30 June 2018 consisted of:

– £115.8 million in revenue earned from Jackpotjoy’s[7] operational activities.
– £45.4 million in revenue earned from Vera&John’s operational activities.

The Group’s total gaming revenue during the six months ended 30 June 2017 consisted of:

– £113.5 million in revenue earned from Jackpotjoy’s[7] operational activities.
– £33.1 million in revenue earned from Vera&John’s operational activities.

The increase in total gaming revenue for the six months ended 30 June 2018 in comparison with the six months ended 30 June 2017 relates primarily to organic growth[8] of the Vera&John and Jackpotjoy[7] segments, where total gaming revenue increased by 37% and 2%, respectively.

Costs and expenses

                          Three month     Three month     Six month       Six month period
                          period ended    period ended    period ended    ended
                          30 June 2018    30 June 2017    30 June 2018    30 June 2017
                          (GBP000's)      (GBP000's)      (GBP000's)      (GBP000's)

    Distribution costs    39,487          34,302          80,986          65,546
    Administrative costs  27,051          27,664          54,823          52,877
    Transaction related
    costs                 1,418           -               1,493           1,315
    Severance costs       -               -               450             -
                          67,956          61,966          137,752         119,738

Distribution costs

                          Three month     Three month    Six month       Six month period
                          period ended    period ended   period ended    ended
                          30 June 2018    30 June 2017   30 June 2018    30 June 2017
                          (GBP000's)      (GBP000's)     (GBP000's)      (GBP000's)

    Selling and marketing 13,298          10,846         27,848          20,449
    Licensing fees        11,739          11,826         23,483          22,912
    Gaming taxes          10,056          8,469          21,319          16,461
    Processing fees       4,394           3,161          8,336           5,724
                          39,487          34,302         80,986          65,546

 

Selling and marketing expenses consist of payments made to affiliates and general marketing expenses related to each brand. Licensing fees consist of the fees for the Jackpotjoy[7] segment to operate on its platforms and game suppliers’ fees paid by both, Vera&John and Jackpotjoy[7] segments. Gaming taxes largely consist of point of consumption taxes (‘POC’), payable in the regulated jurisdictions that the Group operates in. Variance in gaming taxes from prior periods relates to a 15% general betting duty on all free or discounted online bets (‘POC2’), which came into effect in the UK in Q4 2017. Processing fees consist of costs associated with using payment providers and include payment service provider transaction and handling costs, as well as deposit and withdrawal fees. With the exception of selling and marketing expenses, distribution costs tend to be variable in relation to revenue.

The increase in distribution costs for the three and six months ended 30 June 2018 compared to the same periods in 2017 is mainly due to higher revenues achieved and increased selling and marketing spending in the Jackpotjoy[7] and Vera&John segments.

Administrative costs

                          Three month     Three month     Six month       Six month period
                          period ended    period ended    period ended    ended
                          30 June 2018    30 June 2017    30 June 2018    30 June 2017
                          (GBP000's)      (GBP000's)      (GBP000's)      (GBP000's)

    Compensation and
    benefits              8,108           8,016           16,828          16,091
    Professional fees     811             797             2,100           2,005
    General and
    administrative        2,497           2,440           4,697           4,621
    Amortisation and
    depreciation          15,635          16,411          31,198          30,160
                          27,051          27,664          54,823          52,877

Compensation and benefits costs consist of salaries, wages, bonuses, directors’ fees, benefits and share-based compensation expense.  The increase in these expenses for the three and six months ended 30 June 2018 compared to the same periods in 2017 is due to additional staff hired in these periods as well as bonus accruals.

Professional fees consist mainly of legal, accounting and audit fees. These costs remained relatively flat in the three and six months ended 30 June 2018 compared to the same periods in 2017.

General and administrative expenses consist of items, such as rent and occupancy, travel and accommodation, insurance, listing fees, technology and development costs, and other office overhead charges. These costs also remained relatively flat in the three and six months ended 30 June 2018compared to the same periods in 2017.

Amortisation and depreciation consists of amortisation of the Group’s intangible assets and depreciation of the Group’s tangible assets over their useful lives.  The increase in amortisation and depreciation for the six months ended 30 June 2018 is due to the non-compete clauses for which amortisation started in Q2 2017.

Transaction related costs

Transaction related costs consist of legal, professional, due diligence, other direct costs/fees associated with transactions and acquisitions contemplated or completed, costs associated with the Group’s Premium Listing, and the refinancing of the Group’s external debt. Q1 2017 transaction related costs also included costs associated with the UK strategic review and implementation of UK-centred strategic initiatives, including the listing of the Group on the London Stock Exchange.

Severance costs

Severance costs during the six months ended 30 June 2018 relate to personnel redundancies resulting from internal restructuring.

Business unit results

Jackpotjoy[7] 

                                 Q2 2018       Q2 2017       Variance
                                 GBP(millions) GBP(millions) GBP(millions) Variance %
    Gaming revenue               53.6          53.9          (0.3)         (1%)
    Social gaming revenue        2.7           3.9           (1.2)         (31%)
    Total gaming revenue         56.3          57.8          (1.5)         (3%)
    Distribution costs           27.7          26.1          1.6           6%
    Administrative costs         4.9           4.4           0.5           11%
    Adjusted EBITDA[1]           23.7          27.3          (3.6)         (13%)

                                 YTD 2018      YTD 2017      Variance
                                 GBP(millions) GBP(millions) GBP(millions) Variance %
    Gaming revenue               110.1         105.1         5.0           5%
    Social gaming revenue        5.7           8.4           (2.7)         (32%)
    Total gaming revenue         115.8         113.5         2.3           2%
    Distribution costs           56.5          49.6          6.9           14%
    Administrative costs         9.5           8.9           0.6           7%
    Adjusted EBITDA[1]           49.8          55.0          (5.2)         (9%)

Total gaming revenue for the Jackpotjoy[7] segment for the three months ended 30 June 2018 was 3% lower than in the same period in 2017 due to declines in the Mandalay and social gaming brands.  Collectively they accounted for 10% of this segment’s revenue. These decreases were partially offset by increases in Starspins and Botemania brands, which accounted for 25% of this segment’s revenue.

Total gaming revenue for the six months ended 30 June 2018 was 2% higher than in the same period in 2017 due to organic growth[8] led by increases in the Starspins and Botemania brands. Collectively, they accounted for 25% of this segment’s revenue.

The increase in distribution costs for the three and six months ended 30 June 2018 is driven by costs from the segment’s TV marketing campaigns, as well as an incremental gaming tax expense, which relates to tax on bonuses through UK POC2 tax introduced in Q4 2017.

Vera&John

                                 Q2 2018       Q2 2017       Variance
                                 GBP(millions) GBP(millions) GBP(millions) Variance %
    Total gaming revenue         24.2          17.4          6.8           39%
    Distribution costs           11.8          8.3           3.5           42%
    Administrative costs         4.0           4.0           -             -
    Adjusted EBITDA[1]           8.4           5.1           3.3           65%

                                 YTD 2018      YTD 2017      Variance
                                 GBP(millions) GBP(millions) GBP(millions) Variance %
    Total gaming revenue         45.4          33.1          12.3          37%
    Distribution costs           24.5          15.9          8.6           54%
    Administrative costs         8.5           7.7           0.8           10%
    Adjusted EBITDA[1]           12.4          9.5           2.9           31%

 

Total gaming revenue for the Vera&John segment for the three and six months ended 30 June 2018increased by 39% and 37%, respectively, compared to the same periods in 2017 due to a combination of organic growth[8] and period-over-period GBP to EUR exchange rate movement. On a constant currency basis, revenue increased by 36% and 34% in the three and six months ended 30 June 2018compared to the same periods in 2017. Constant currency amounts are calculated by applying the same EUR to GBP average exchange rates to both current and prior year comparative periods.

Distribution costs increased by 42% and 54%, respectively, for the three and six months ended 30 June 2018 compared to the same periods in 2017 as a result of higher marketing spending in the current period. The increase was further driven by higher gaming tax due to increased revenue in regulated jurisdictions compared to the prior period.

The increase in administrative costs for the six months ended 30 June 2018 compared to the same period in 2017 was mainly driven by increases in personnel costs as the segment continues to grow.

Unallocated Corporate Costs

Adjusted EBITDA[1] on Unallocated Corporate Costs increased from (£2.5) million to (£2.3) million in the three months ended 30 June 2018 as compared to the three months ended 30 June 2017. The variance mainly relates to a £0.1 million decrease in general and administrative overhead costs and a £0.1 million decrease in professional fees.

Adjusted EBITDA[1] on Unallocated Corporate Costs was flat for the six months ended 30 June 2018compared to the six months ended 30 June 2017.

Net loss on Unallocated Corporate costs decreased from £20.5 million to £9.3 million in the three months ended 30 June 2018 as compared to the three months ended 30 June 2017. This decrease is primarily related to lower interest expense incurred as a result of the debt refinance that took place in Q4 2017. The decrease in net loss can further be attributed to the fact that there were no fair value adjustments on contingent consideration in the current period as the earn-out period ended in Q1 2018.

Net loss on Unallocated Corporate Costs decreased from £55.2 million to £30.5 million in the six months ended 30 June 2018 as compared to the six months ended 30 June 2017. This decrease is primarily related to lower interest expense incurred as a result of the debt refinance that took place in Q4 2017. The decrease in net loss can further be attributed to the fact that there were no fair value adjustments on contingent consideration in Q2 2018 as the earn-out period ended in Q1 2018.

Costs included in net loss which are excluded from the Adjusted EBITDA[1] measure are discussed on page 6 of this release.

Key performance indicators

Average Active Customers is a key performance indicator used by management to assess real money customer acquisition and real money customer retention efforts of each of the Group’s brands. The Group defines Average Active Customers (‘Average Active Customers’) as being real money customers who have placed at least one bet in a given month. ‘Average Active Customers per Month’ is the Average Active Customers per month, averaged over a twelve-month period. While this measure is not recognised by IFRS, management believes that it is a meaningful indicator of the Group’s ability to acquire and retain customers.

Total Real Money Gaming Revenue and Average Real Money Gaming Revenue per Month are key performance indicators used by management to assess revenue earned from real money gaming operations of the business. The Group defines Total Real Money Gaming Revenue (‘Total Real Money Gaming Revenue’) as revenue less revenue earned from affiliate websites and social gaming. The Group defines Average Real Money Gaming Revenue per Month (‘Average Real Money Gaming Revenue per Month’) as Real Money Gaming Revenue per month, averaged over a twelve-month period. While these measures are not recognised by IFRS, management believes that they are meaningful indicators of the Group’s real money gaming operational results.

Monthly Real Money Gaming Revenue per Average Active Customer is a key performance indicator used by management to assess the Group’s ability to generate Real Money Gaming Revenue on a per customer basis. The Group defines Monthly Real Money Gaming Revenue per Average Active Customer (‘Monthly Real Money Gaming Revenue per Average Active Customer’) as being Average Real Money Gaming Revenue per Month divided by Average Active Customers per Month. While this measure is not recognised by IFRS, management believes that it is a meaningful indicator of the Group’s ability to generate Total Real Money Gaming Revenue.

                                           Twelve         Twelve
                                           months ended   months ended
                                           30 June 2018   30 June 2017  Variance  Variance %
    Average Active Customers per Month (#) 259,861        243,896       15,965    7%
    Total Real Money Gaming Revenue
    (GBP000's) [(1)]                       299,779        261,707       38,072    15%
    Average Real Money Gaming Revenue per
    Month (GBP000's)                       24,982         21,809        3,173     15%
    Monthly Real Money Gaming Revenue per
    Average Active Customer (GBP)          96             89            7         8%

[(1)]Total Real Money Gaming Revenue for the twelve months ended 30 June 2018 consists of total revenue less revenue earned from affiliate websites and social gaming revenue of £19.4 million (30 June 2017  £24.2 million).

Monthly Real Money Gaming Revenue per Average Active Customer[6] increased by 8% year-over-year which is in line with the Group’s overall customer acquisition and retention strategy.

Principal risks and uncertainties

Details of the Group’s principal risks were set out on pages 20 to 25 of the Annual Report for the year ended 31 December 2017 (the ‘2017 Annual Report’). As at 30 June 2018, the directors have reviewed the Group’s risk profile in the context of current market conditions and the outlook for the remaining six months of the financial year. In addition, they have reconsidered previous statements made on risk appetite, risk governance and internal controls and do not consider there to be any significant changes since the 2017 Annual Report.

Directors responsibility statement in respect of the half yearly financial report

For the six months ended 30 June 2018

We confirm to the best of our knowledge that:

  1. The condensed interim set of financial statements has been prepared in accordance with IAS 34  ̶  Interim Financial Reporting as adopted by the European Union;
  2. The Interim Report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and
  3. The Interim Report includes a fair review of the information required by DTR 4.2.8 R (disclosure of related parties’ transactions and changes therein).

Signed by order of the Board of Directors

Neil Goulden
Executive Chairman
14 August 2018

Independent review report to JPJ Group plc

Introduction

We have been engaged by the company to review the condensed set of financial statements in the interim financial report for the three and six months ended 30 June 2018 which comprises the Interim Condensed Consolidated Statement of Comprehensive Income, Interim Condensed Consolidated Balance Sheet, Interim Condensed Consolidated Statement of Changes in Equity, Interim Condensed Consolidated Statement of Cash Flows and the related notes.

We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors responsibilities

The interim financial report for the three and six months ended 30 June 2018 is the responsibility of and has been approved by the directors. With regard to the six months ended 30 June 2018, the directors are responsible for preparing the interim financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom’s Financial Conduct Authority.

As disclosed in note 2, the annual financial statements of the group are prepared in accordance with International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board and International Financial Reporting Standards (IFRSs) as adopted by the European Union. The condensed set of financial statements included in this interim financial report has been prepared in accordance with International Accounting Standard 34, ‘‘Interim Financial Reporting’’, as issued by the International Accounting Standards Board and International Accounting Standard 34, ‘‘Interim Financial Reporting’’, as adopted by the European Union.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the interim financial report based on our review.

Our report has been prepared in accordance with the terms of our engagement, and, with regard to the six months ended 30 June 2018, to assist the company in meeting its responsibilities in respect of interim financial reporting in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom’s Financial Conduct Authority and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements 2410, ‘‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’’ as issued by the International Auditing and Assurance Standards Board and  International Standard on Review Engagements (UK and Ireland) 2410, ‘‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’’, issued by the Financial Reporting Council for use in the United Kingdom.  A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.  A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing or International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit.  Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the interim financial report for the three and six months ended 30 June 2018 is not prepared, in all material respects, in accordance with International Accounting Standard 34, as issued by the International Accounting Standards Board, International Accounting Standard 34, as adopted by the European Union, and, in respect of the six months ended 30 June 2018, the Disclosure Guidance and Transparency Rules of the United Kingdom’s Financial Conduct Authority.

BDO LLP  
Chartered Accountants 
London

14 August 2018

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 

  
                                                Three      Three      Six        Six
                                                months     months     months     months
                                                ended      ended      ended      ended
                                                30 June    30 June    30 June    30 June
                                                2018       2017       2018       2017
                                               (GBP000's) (GBP000's) (GBP000's) (GBP000's)

    Gaming revenue[4]                           77,728     71,316     155,443    138,205
    Social gaming revenue[4]                    2,738      3,877      5,695      8,364
     Total gaming revenue                        80,466     75,193     161,138    146,569
    Costs and expenses
    Distribution costs[4],[5]                   39,487     34,302     80,986     65,546
    Administrative costs[5]                     27,051     27,664     54,823     52,877
    Severance costs[4]                          -          -          450        -
    Transaction related costs[4]                1,418      -          1,493      1,315
    Foreign exchange (gain)/loss[4]             (285)      4,766      125        6,899
    Total costs and expenses                    67,671     66,732     137,877    126,637
    Gain on sale of intangible assets           -          -          -          (1,002)
    Fair value adjustments on
    contingent consideration[15]                -          1,845      11,450     14,701
    Realised loss on cross currency swap        -          -          -          3,534
    Interest income[6]                          (85)       (57)       (170)      (95)
    Interest expense[6]                         4,950      7,720      9,889      15,667
    Accretion on financial liabilities[6]       489        3,662      2,026      7,051
    Financing expenses                          5,354      13,170     23,195     40,858
    Net income/(loss) for
    the period before taxes                     7,441      (4,709)    66         (19,924)
    Current tax provision                       228        168        699        359
    Deferred tax recovery                       (98)       (105)      (197)      (210)
    Net income/(loss) for the period
    attributable to owners of the parent        7,311      (4,772)    (436)      (20,073)
    Other comprehensive income/(loss): Items
    that will or may be reclassified to
    profit or loss in subsequent periods
    Foreign currency translation gain           1,081      13,088     198        18,643
    Unrealised loss on cross currency hedge     -          (4,032)    -          (4,845)
    Unrealised loss on interest rate hedge[10]  (559)      -          (974)      -
    Total comprehensive income/(loss) for the
    period attributable to owners of the parent 7,833      4,284      (1,212)    (6,275)
    Net income/(loss) for the period per share
    Basic[7]                                    GBP0.10    GBP(0.06)  GBP(0.01)  GBP(0.27)
    Diluted[7]                                  GBP0.10    GBP(0.06)  GBP(0.01)  GBP(0.27)
    See accompanying notes

 

UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS

                                                    As at              As at
                                                    30 June 2018       31 December 2017
    ASSETS                                          (GBP000's)         (GBP000's)

    Current assets
    Cash[15]                                        29,462             59,033
    Restricted cash[15]                             195                208
    Customer deposits[15]                           8,677              8,180
    Trade and other receivables[8]                  16,100             19,379
    Taxes receivable                                6,719              6,432
    Total current assets                            61,153             93,232
    Tangible assets                                 1,243              1,339
    Intangible assets[11]                           263,737            292,223
    Goodwill[11]                                    296,976            296,781
    Other long-term receivables[9],[15]             5,078              5,604
    Total non-current assets                        567,034            595,947
    Total assets                                    628,187            689,179
    LIABILITIES AND EQUITY
    Current liabilities
    Accounts payable and accrued liabilities[12]    14,646             17,821
    Other short-term payables[10],[13],[15]         10,048             12,151
    Interest payable[15]                            675                924
    Payable to customers[15]                        8,677              8,180
    Convertible debentures[17]                      -                  254
    Current portion of contingent consideration[15] 4,463              51,866
    Provision for taxes                             5,390              7,273
    Total current liabilities                       43,899             98,469
    Contingent consideration[15]                    4,170              7,717
    Other long-term payables[10],[15],[16]          5,482              8,245
    Deferred tax liability                          1,361              1,204
    Long-term debt[14],[15]                         369,519            369,487
    Total non-current liabilities                   380,532            386,653
    Total liabilities                               424,431            485,122
    Equity
    Share capital[17]                               7,427              7,407
    Share premium and other reserves                196,329            196,650
    Total equity                                    203,756            204,057
    Total liabilities and equity                    628,187            689,179
    See accompanying notes

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

   
                                                 Share-
                                          Redee  Based   Transl  Retained
                 Share   Share    Merger  mable  Payment ation   Hedge   (Deficit)/
                 Capital Premium  Reserve Shares Reserve Reserve Reserve Earnings   Total
                 (GBP    (GBP     (GBP    (GBP   (GBP    (GBP    (GBP    (GBP      (GBP
                 000's)  000's)   000's)  000's) 000's)  000's)  000's)  000's)    000's)
    Balance at 1
    January 2017  7,298  403,883  (6,111) 50     8,667   (3,958) -       (170,361) 239,468

    Comprehensive
    income/(loss)
    for the period:
    Net loss for
    the period    -      -         -       -     -        -      -       (20,073)  (20,073)
    Other
    comprehensive
    income/(loss) -      -         -       -     -       18,643  (4,845)  -        13,798
    Total
    comprehensive
    income/(loss)
    for the
    period:       -      -         -       -     -       18,643  (4,845) (20,073)  (6,275)
    Contributions
    by and distri-
    butions
    to sharehol-
    ders:
    Conversion
    of
    debentures   75      2,263     -       -     -       -        -       -        2,338
    Exercise of
    options      15      462       -       -    (105)    -        -       -        372
    Cancellation
    of redeemable
    shares        -      -         -      (50)   -       -        -       -        (50)
    Cancellation
    of share
    premium[2]    -     (405,932)  -       -     -       -        -       405,932   -
    Share-based
    compensation  -     -         -       -     878     -        -       -         878
    Total
    contributions
    by and
    distributions
    to
    shareholders: 90    (403,207)  -      (50)   773     -        -      405,932    3,538
    Balance at
    30 June 2017  7,388  676      (6,111)  -     9,440   14,685  (4,845) 215,498    236,731
    Balance at 1
    January 2018  7,407  1,342    (6,111)  -     9,971   23,649   -      167,799    204,057

    Comprehensive
    income/(loss)
    for the period:
    Net loss for
    the period     -      -       -       -      -        -       -      (436)     (436)
    Other
    comprehensive
    income/(loss)  -      -       -       -      -       198     (974)    -        (776)
    Total
    comprehensive
    income/(loss)
    for the
    period:        -      -       -       -      -       198     (974)   (436)     (1,212)

    Contributions
    by and
    distributions
    to
    shareholders:
    Conversion of
    debentures
    [17]          6      186      -       -      -       -       -        -        192
    Exercise of
    options[17]   14     379      -       -     (110)    -       -        110      393
    Share-based
    compensation
    [17]          -      -        -       -      326     -       -        -        326
    Total
    contributions
    by and
    distributions
    to
    shareholders: 20     565      -       -      216     -       -        110      911
    Balance at 30
    June 2018     7,427  1,907   (6,111)  -      10,187  23,847  (974)    167,473  203,756
    See accompanying notes

 

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                      
                                                 Three      Three       Six        Six
                                                 months     months      months     months
                                                 ended      ended       ended      ended
                                                 30 June    30 June     30 June    30 June
                                                 2018       2017        2018       2017
                                                 (GBP000's) (GBP000's)  (GBP000's) (GBP000's)
    Operating activities
    Net income/(loss) for the period             7,311      (4,772)     (436)      (20,073)
    Add (deduct) items not involving cash
    Amortisation and depreciation                15,635     16,411      31,198     30,160
    Share-based compensation expense[17]         170        353         326        878
    Current tax provision                        228        168         699        359
    Deferred tax recovery                        (98)       (105)       (197)      (210)
    Interest expense, net[6]                     5,354      11,325      11,745     22,623
    Gain on sale of intangible assets            -          -           -          (1,002)
    Fair value adjustments on contingent
    consideration[15]                            -          1,845       11,450     14,701
    Realised loss on cross currency swap         -          -           -          3,534
    Foreign exchange (gain)/loss                 (285)      4,766       125        6,899
                                                 28,315     29,991      54,910     57,869

    Trade and other receivables                  2,061      (1,012)     1,821      (525)
    Other long-term receivables                  328        468         508        452
    Accounts payable and accrued liabilities     (2,697)    (415)       (3,322)    (1,844)
    Other short-term payables                    (620)      130         (2,103)    (3,542)
    Cash generated from operations               27,387     29,162      51,814     52,410
    Income taxes paid                            (3,236)    (6,871)     (3,326)    (6,899)
    Incomes taxes received                       402        -           402        102
    Total cash provided by operating activities  24,553     22,291      48,980     45,613
    Financing activities
    Restriction of cash balances                 -          154         (75)       175
    Proceeds from exercise of options            -          109         393        372
    Proceeds from cross currency
    swap settlement                              -          -           -          34,373
    Debenture settlement[17]                     (62)       -           (62)       -
    Repayment of non-compete liability[16]       (2,000)    (1,333)     (4,000)    (1,333)
    Interest repayment                           (5,328)    (7,659)     (10,254)   (15,209)
    Payment of contingent consideration[15]      (63,455)   (94,218)    (63,455)   (94,218)
    Principal payments made
    on long-term debt[14]                        -          (6,510)     -          (12,806)
    Total cash used in financing activities      (70,845)   (109,457)   (77,453)   (88,646)
    Investing activities
    Purchase of tangible assets                  (89)       (252)       (163)      (763)
    Purchase of intangible assets                (1,370)    (713)       (2,457)    (1,262)
    Proceeds from sale of intangible assets      -           -          1,450      1,002
    Total cash used in investing activities      (1,459)    (965)       (1,170)    (1,023)
    Net decrease in cash during the period       (47,751)   (88,131)    (29,643)   (44,056)
    Cash, beginning of period                    76,231     112,297     59,033     68,485
    Exchange gain/(loss) on cash
    and cash equivalents                         982        (203)       72         (466)
    Cash, end of period                          29,462     23,963      29,462     23,963

 

See accompanying notes

SUPPLEMENTARY NOTES FOR THREE AND SIX MONTHS ENDED 30 JUNE 2018

1. Corporate information

JPJ Group plc, formerly Jackpotjoy plc, is an online gaming holding company that was incorporated under the Companies Act 2006 (England and Wales) on 29 July 2016.  On 27 June 2018, Jackpotjoy plc changed its name to JPJ Group plc.  JPJ Group plc’s registered office is located at 35 Great St. Helen’s, London, United Kingdom. Unless the context requires otherwise, use of ‘Group’ in these accompanying notes means JPJ Group plc and its subsidiaries, as applicable.

The Group currently offers bingo, casino and other games to its customers using the Jackpotjoy, Starspins, Botemania, Vera&John, Costa Bingo, InterCasino, and other brands. The Jackpotjoy, Starspins, and Botemania brands operate off proprietary software owned by the Gamesys group, the Group’s principal B2B software and support provider. The Vera&John and InterCasino brands operate off proprietary software owned by the Group. The Costa Bingo and related brands operate off the Dragonfish platform, a software service provided by the 888 group.

These Unaudited Interim Condensed Consolidated Financial Statements were authorised for issue by the Board of Directors of JPJ Group plc on 14 August 2018.

2. Basis of preparation

Basis of presentation

These Unaudited Interim Condensed Consolidated Financial Statements have been prepared by management on a going concern basis, are presented in compliance with International Accounting Standard (‘IAS’) 34 – Interim Financial Reporting, and have been prepared on a basis consistent with the accounting policies and methods used and disclosed in JPJ Group plc’s consolidated financial statements for the year ended 31 December 2017 (the ‘Annual Financial Statements’), except as described below.  Certain information and disclosures normally included in the Annual Financial Statements prepared in accordance with International Financial Reporting Standards (‘IFRS’) as adopted by the European Union, and in accordance with IFRS as issued by the International Accounting Standards Board, have been omitted or condensed.

These Unaudited Interim Condensed Consolidated Financial Statements should be read in conjunction with the Annual Financial Statements.  All defined terms used herein are consistent with those terms as defined in the Annual Financial Statements.

These Unaudited Interim Condensed Consolidated Financial Statements have been prepared under the historical cost convention, other than for the measurement at fair value of the Group’s Interest Rate Swap (as defined in note 10), contingent consideration, certain hedged loan instruments, and loan receivable.

On 1 February 2017, having been approved in the High Court, the Group’s share premium was cancelled. Accordingly, the balance has been reallocated within equity reserves to the Group’s retained earnings account. This is now shown in the Unaudited Interim Condensed Consolidated Statements of Changes in Equity as an adjustment to the balances on the Group’s equity reserves at 30 June 2017.  There is no impact on the income statement, earnings per share or total equity.

The comparative financial information for the year ended 31 December 2017 in these Unaudited Interim Condensed Consolidated Financial Statements does not constitute statutory accounts for that year.  The auditors’ report on the statutory accounts for the year ended 31 December 2017 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under sections 498(2) or 498(3) of the Companies Act 2006.

Basis of consolidation

JPJ Group plc’s Unaudited Interim Condensed Consolidated Financial Statements consolidate the parent company and all of its subsidiaries. The parent controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. All transactions and balances between companies are eliminated on consolidation.

Subsidiaries are fully consolidated from the date of acquisition, being the date on which JPJ Group plc obtains control, and continue to be consolidated until the date that such control ceases.

Intercompany transactions, balances, income and expenses on transactions between JPJ Group plc’s subsidiaries are eliminated.  Profit and losses resulting from intercompany transactions that are recognised in assets are also eliminated.

3. Summary of significant accounting policies

For a description of the Group’s significant accounting policies, critical accounting estimates and assumptions, and related information see note 3 to the Annual Financial Statements.  Other than as described below, there have been no changes to the Group’s significant accounting policies or critical accounting estimates and assumptions during the six months ended 30 June 2018.

Financial instruments

Effective from 1 January 2018, the Group adopted IFRS 9 – Financial Instruments: Recognition and Measurement (‘IFRS 9’) to account for the Gaming Realms Transaction (as defined in note 9). As a result, the Group no longer separates the embedded derivative from its host contract and the entire asset is measured at fair value through profit or loss. The adoption of IFRS 9 resulted in balances shown as other long-term receivables and other long-term assets at 31 December 2017 being combined into a single figure and shown as other long-term receivables at 30 June 2018.

Hedge accounting

The Group elected to use hedge accounting for the purposes of recognising realised and unrealised gains and losses associated with the Interest Rate Swap, in accordance with guidance provided in IFRS 9.

IFRS 9 permits hedge accounting under certain circumstances provided that the hedging relationship is:

– Formally designated and documented, including the entity’s risk management objective and strategy for undertaking the hedge, identification of the hedging instrument, the hedged item, the nature of the risk being hedged, and how the entity will assess the hedging instrument’s effectiveness;

– Expected to be highly effective in achieving offsetting changes in fair value or cash flows attributable to the hedged risk as designated and documented, and effectiveness can be reliably measured; and

– Assessed on an ongoing basis and determined to have been highly effective.

Based on the Group’s analysis of the requirements outlined above, it was concluded that the Interest Rate Swap meets all the necessary criteria and qualifies for use of hedge accounting.  The Interest Rate Swap was designated as a cash flow hedge.

Impairment policy

In accordance with IFRS 9, the Group reviewed its impairment policy and concluded that no impairment provision on its financial instruments, as discussed in note 15, is required.  The Group uses the credit loss model to assess impairment.

Revenue recognition

Effective from 1 January 2018, the Group adopted IFRS 15 – Revenue from Contracts with Customers(‘IFRS 15’), which replaces IAS 18 – Revenue.  Applying this standard did not impact the Group’s financial information as the Group’s policy was already in compliance with the key principles outlined in IFRS 15.

4. Segment information

In March 2018, the Group determined that its reportable operating segments had changed such that the Mandalay segment was aggregated with the Jackpotjoy segment with effect from 1 January 2018, as Mandalay no longer met the criteria for a reportable operating segment, set out in IFRS 8 – Operating Segments. Mandalay was therefore aggregated with the Jackpotjoy segment consistent with the Group’s other third-party platform hosted operations and all 2017 comparative segment figures have been restated accordingly.

The following tables present selected financial results for each segment and the Unallocated Corporate Costs:

Three months ended 30 June 2018:

                                                          Unallocated
                                                          Corporate
                                    Jackpotjoy Vera&John  Costs       Total
                                    (GBP000's) (GBP000's) (GBP000's)  (GBP000's)
    Gaming revenue                  53,549     24,179     -           77,728
    Social gaming revenue           2,738      -          -           2,738
    Total gaming revenue            56,287     24,179     -           80,466

    Distribution costs              27,701     11,763     23          39,487
    Amortisation and depreciation   13,074     2,464      97          15,635
    Compensation, professional, and
    general and administrative
    expenses                        4,909      4,041      2,466       11,416
    Transaction related costs       -          -          1,418       1,418
    Foreign exchange loss/(gain)    11         (180)      (116)       (285)
    Financing, net                  1          (30)       5,383       5,354
    Income/(loss) for the period
    before taxes                    10,591     6,121      (9,271)     7,441
    Taxes                           -          130        -           130
    Net income/(loss) for the
    period                          10,591     5,991      (9,271)     7,311
    Net income/(loss) for the
    period                          10,591     5,991      (9,271)     7,311
    Interest expense/(income), net  1          (30)       4,894       4,865
    Accretion on financial
    liabilities                     -          -          489         489
    Taxes                           -          130        -           130
    Amortisation and depreciation   13,074     2,464      97          15,635
    EBITDA                          23,666     8,555      (3,791)     28,430
    Share-based compensation        -          -          170         170
    Transaction related costs       -          -          1,418       1,418
    Foreign exchange loss/(gain)    11         (180)      (116)       (285)
    Adjusted EBITDA                 23,677     8,375      (2,319)     29,733
    Net income/(loss) for the
    period                          10,591     5,991      (9,271)     7,311
    Share-based compensation        -          -          170         170
    Transaction related costs       -          -          1,418       1,418
    Foreign exchange loss/(gain)    11         (180)      (116)       (285)
    Amortisation of acquisition
    related purchase price
    intangibles                     13,057     1,967      -           15,024
    Accretion on financial
    liabilities                     -          -          489         489
    Adjusted net income/(loss)      23,659     7,778      (7,310)     24,127

Six months ended 30 June 2018:

                                                          Unallocated
                                                          Corporate
                                    Jackpotjoy Vera&John  Costs       Total
                                    (GBP000's) (GBP000's) (GBP000's)  (GBP000's)
    Gaming revenue                  110,093    45,350     -           155,443
    Social gaming revenue           5,695      -          -           5,695
    Total gaming revenue            115,788    45,350     -           161,138

    Distribution costs              56,511     24,450     25          80,986
    Amortisation and depreciation   26,147     4,862      189         31,198
    Compensation, professional, and
    general and administrative
    expenses                        9,488      8,549      5,588       23,625
    Severance costs                 -          450        -           450
    Transaction related costs       -          -          1,493       1,493
    Foreign exchange loss/(gain)    213        (70)       (18)        125
    Financing, net                  3          (66)       23,258      23,195
    Income/(loss) for the period
    before taxes                    23,426     7,175      (30,535)    66
    Taxes                           -          488        14          502
    Net income/(loss) for the
    period                          23,426     6,687      (30,549)    (436)
    Net income/(loss) for the
    period                          23,426     6,687      (30,549)    (436)
    Interest expense/(income), net  3          (66)       9,782       9,719
    Accretion on financial
    liabilities                     -          -          2,026       2,026
    Taxes                           -          488        14          502
    Amortisation and depreciation   26,147     4,862      189         31,198
    EBITDA                          49,576     11,971     (18,538)    43,009
    Share-based compensation        -          -          326         326
    Severance costs                 -          450        -           450
    Fair value adjustments on
    contingent consideration        -          -          11,450      11,450
    Transaction related costs       -          -          1,493       1,493
    Foreign exchange loss/(gain)    213        (70)       (18)        125
    Adjusted EBITDA                 49,789     12,351     (5,287)     56,853
    Net income/(loss) for the
    period                          23,426     6,687      (30,549)    (436)
    Share-based compensation        -          -          326         326
    Severance costs                 -          450        -           450
    Fair value adjustments on
    contingent consideration        -          -          11,450      11,450
    Transaction related costs       -          -          1,493       1,493
    Foreign exchange loss/(gain)    213        (70)       (18)        125
    Amortisation of acquisition
    related purchase price
    intangibles                     26,114     3,945      -           30,059
    Accretion on financial
    liabilities                     -          -          2,026       2,026
    Adjusted net income/(loss)      49,753     11,012     (15,272)    45,493

Three months ended 30 June 2017:

                                                          Unallocated
                                                          Corporate
                                    Jackpotjoy Vera&John  Costs       Total
                                    (GBP000's) (GBP000's) (GBP000's)  (GBP000's)
    Gaming revenue                  53,904     17,412     -           71,316
    Social gaming revenue           3,877      -          -           3,877
    Total gaming revenue            57,781     17,412     -           75,193

    Distribution costs              26,008     8,278      16          34,302
    Amortisation and depreciation   13,852     2,465      94          16,411
    Compensation, professional, and
    general and administrative
    expenses                        4,430      4,024      2,799       11,253
    Foreign exchange (gain)/loss    (67)       419        4,414       4,766
    Financing, net                  1          (53)       13,222      13,170
    Income/(loss) for the period
    before taxes                    13,557     2,279      (20,545)    (4,709)
    Taxes                           -          63         -           63
    Net income/(loss) for the
    period                          13,557     2,216      (20,545)    (4,772)
    Net income/(loss) for the
    period                          13,557     2,216      (20,545)    (4,772)
    Interest expense/(income), net  1          (53)       7,715       7,663
    Accretion on financial
    liabilities                     -          -          3,662       3,662
    Taxes                           -          63         -           63
    Amortisation and depreciation   13,852     2,465      94          16,411
    EBITDA                          27,410     4,691      (9,074)     23,027
    Share-based compensation        -          -          353         353
    Fair value adjustments on
    contingent consideration        -          -          1,845       1,845
    Foreign exchange (gain)/loss    (67)       419        4,414       4,766
    Adjusted EBITDA                 27,343     5,110      (2,462)     29,991
    Net income/(loss) for the
    period                          13,557     2,216      (20,545)    (4,772)
    Share-based compensation        -          -          353         353
    Fair value adjustments on
    contingent consideration        -          -          1,845       1,845
    Foreign exchange (gain)/loss    (67)       419        4,414       4,766
    Amortisation of acquisition
    related purchase price
    intangibles                     13,837     2,105      -           15,942
    Accretion on financial
    liabilities                     -          -          3,662       3,662
    Adjusted net income/(loss)      27,327     4,740      (10,271)    21,796

Six months ended 30 June 2017:

                                                          Unallocated
                                                          Corporate
                                    Jackpotjoy Vera&John  Costs       Total
                                    (GBP000's) (GBP000's) (GBP000's)  (GBP000's)
    Gaming revenue                  105,102    33,103     -           138,205
    Social gaming revenue           8,364      -          -           8,364
    Total gaming revenue            113,466    33,103     -           146,569

    Distribution costs              49,562     15,926     58          65,546
    Amortisation and depreciation   25,135     4,833      192         30,160
    Compensation, professional, and
    general and administrative
    expenses                        8,876      7,684      6,157       22,717
    Transaction related costs       -          -          1,315       1,315
    Foreign exchange (gain)/loss    (87)       478        6,508       6,899
    Gain on sale of intangible
    assets                          -          (1,002)    -           (1,002)
    Financing, net                  2          (87)       40,943      40,858
    Income/(loss) for the period
    before taxes                    29,978     5,271      (55,173)    (19,924)
    Taxes                           -          149        -           149
    Net income/(loss) for the
    period                          29,978     5,122      (55,173)    (20,073)
    Net income/(loss) for the
    period                          29,978     5,122      (55,173)    (20,073)
    Interest expense/(income), net  2          (87)       15,657      15,572
    Accretion on financial
    liabilities                     -          -          7,051       7,051
    Taxes                           -          149        -           149
    Amortisation and depreciation   25,135     4,833      192         30,160
    EBITDA                          55,115     10,017     (32,273)    32,859
    Share-based compensation        -          -          878         878
    Fair value adjustments on
    contingent consideration        -          -          14,701      14,701
    Realised loss on cross currency
    swap                            -          -          3,534       3,534
    Transaction related costs       -          -          1,315       1,315
    Gain on sale of intangible
    assets                          -          (1,002)    -           (1,002)
    Foreign exchange (gain)/loss    (87)       478        6,508       6,899
    Adjusted EBITDA                 55,028     9,493      (5,337)     59,184
    Net income/(loss) for the
    period                          29,978     5,122      (55,173)    (20,073)
    Share-based compensation        -          -          878         878
    Fair value adjustments on
    contingent consideration        -          -          14,701      14,701
    Realised loss on cross currency
    swap                            -          -          3,534       3,534
    Transaction related costs       -          -          1,315       1,315
    Gain on sale of intangible
    assets                          -          (1,002)    -           (1,002)
    Foreign exchange (gain)/loss    (87)       478        6,508       6,899
    Amortisation of acquisition
    related purchase price
    intangibles                     25,120     4,212      -           29,332
    Accretion on financial
    liabilities                     -          -          7,051       7,051
    Adjusted net income/(loss)      55,011     8,810      (21,186)    42,635

The following table presents net assets per segment and Unallocated Corporate Costs as at 30 June 2018:

                                                     Unallocated
                                                     Corporate
                               Jackpotjoy Vera&John  Costs       Total
                               (GBP000's) (GBP000's) (GBP000's)  (GBP000's)
    Current assets             16,796     29,981     14,376      61,153
    Goodwill                   240,960    56,016     -           296,976
    Other non-current assets   228,666    29,130     12,262      270,058
    Total assets               486,422    115,127    26,638      628,187

    Current liabilities        9,806      17,098     16,995      43,899
    Non-current liabilities    -          1,361      379,171     380,532
    Total liabilities          9,806      18,459     396,166     424,431
    Net assets                 476,616    96,668     (369,528)   203,756

 

The following table presents net assets per segment and Unallocated Corporate Costs as at 31 December 2017:

                                                     Unallocated
                                                     Corporate
                               Jackpotjoy Vera&John  Costs       Total
                               (GBP000's) (GBP000's) (GBP000's)  (GBP000's)
    Current assets             20,960     41,970     30,302      93,232
    Goodwill                   240,960    55,821     -           296,781
    Other non-current assets   249,703    31,878     17,585      299,166
    Total assets               511,623    129,669    47,887      689,179

    Current liabilities        10,958     19,877     67,634      98,469
    Non-current liabilities    -          1,204      385,449     386,653
    Total liabilities          10,958     21,081     453,083     485,122
    Net assets                 500,665    108,588    (405,196)   204,057

During the six months ended 30 June 2018 and 2017, substantially all of the revenue earned by the Group was in Europe. Revenue was earned from customers located in the following locations:  United Kingdom – 60% (six months ended 30 June 2017 – 64%), Sweden – 8% (six months ended 30 June 2017– 10%), rest of Europe – 17% (six months ended 30 June 2017 – 13%), rest of world – 15% (six months ended 30 June 2017 – 13%).

Non-current assets by geographical location as at 30 June 2018 were as follows: Europe £85.1 million (31 December 2017 – £87.7 million) and Americas £481.9 million (31 December 2017 – £508.2 million).

5. Costs and expenses

                                   Three months  Three months  Six months   Six months
                                   ended         ended         ended        ended
                                   30 June 2018  30 June 2017  30 June 2018 30 June 2017
                                   (GBP000's)    (GBP000's)    (GBP000's)   (GBP000's)
    Distribution costs:
    Selling and marketing          13,298        10,846        27,848       20,449
    Licensing fees                 11,739        11,826        23,483       22,912
    Gaming taxes                   10,056        8,469         21,319       16,461
    Processing fees                4,394         3,161         8,336        5,724
                                   39,487        34,302        80,986       65,546

    Administrative costs:
    Compensation and benefits      8,108         8,016         16,828       16,091
    Professional fees              811           797           2,100        2,005
    General and administrative     2,497         2,440         4,697        4,621
    Tangible asset depreciation    137           111           261          184
    Intangible asset amortisation  15,498        16,300        30,937       29,976
                                   27,051        27,664        54,823       52,877

6. Interest income/expense

                                     Three months Three months Six months   Six months
                                     ended        ended        ended        ended
                                     30 June 2018 30 June 2017 30 June 2018 30 June 2017
                                     (GBP000's)   (GBP000's)   (GBP000's)   (GBP000's)
    Interest earned on cash held
    during the period                31           57           65           95
    Interest earned on long-term
    loan receivable                  54           -            105          -
    Total interest income            85           57           170          95

    Interest paid and accrued on
    long-term debt                   4,947        7,702        9,883        15,627
    Interest paid and accrued on
    convertible debentures           3            18           6            40
    Total interest expense           4,950        7,720        9,889        15,667
    Accretion of discount recognised
    on contingent consideration      32           2,365        1,055        4,468
    Interest accretion recognised on
    convertible debentures           -            12           8            30
    Debt issue costs and accretion
    recognised on long-term debt     143          777          282          1,560
    Interest accretion recognised on
    other long-term liabilities      314          508          681          993
    Total accretion on financial
    liabilities                      489          3,662        2,026        7,051

7.Earnings per share

The following table presents the calculation of basic and diluted earnings per share:

                              Three months  Three months  Six months    Six months
                              ended         ended         ended         ended
                              30 June 2018  30 June 2017  30 June 2018  30 June 2017
                              (GBP000's)    (GBP000's)    (GBP000's)    (GBP000's)
    Numerator:
    Net income/(loss) -
    basic                     7,311        (4,772)        (436)         (20,073)
    Net income/(loss) -
    diluted[1]                7,311        (4,772)        (436)         (20,073)

    Denominator:
    Weighted average number
    of shares outstanding -
    basic                     74,259       73,785         74,177        73,680
    Weighted average number
    of shares outstanding -
    diluted[1]                74,992       73,785         74,177        73,680
    Instruments, which are
    anti-dilutive:
    Weighted average effect
    of dilutive share options  -            401            740          391
    Weighted average effect
    of convertible
    debentures[2]              -            312            39           399
    Net income/(loss) per
    share[3],[4]
    Basic                    GBP0.10       GBP(0.06)       GBP(0.01)    GBP(0.27)
    Diluted[1]               GBP0.10       GBP(0.06)       GBP(0.01)    GBP(0.27)

[ 1 ] In the case of a net loss, the effect of share options potentially exercisable on diluted loss per share will be anti-dilutive; therefore, basic and diluted net loss per share will be the same.

[2] An assumed conversion of convertible debentures had an anti-dilutive effect on loss per share for the six months ended 30 June 2018 and the three and six months ended 30 June 2017.

[3] Basic income/(loss) per share is calculated by dividing the net income/(loss) attributable to common shareholders by the weighted average number of shares outstanding during the period.

[4] Diluted income per share is calculated by dividing the net income attributable to ordinary shareholders by the weighted average number of shares outstanding during the period and adjusted for the number of potentially dilutive share options and contingently issuable instruments.

8. Trade and other receivables

Trade and other receivables consist of the following items:

                                                30 June 2018        31 December 2017
                                                (GBP000's)          (GBP000's)
    Due from the Gamesys group                  8,047               8,634
    Due from the 888 group                      1,739               3,101
    B2B and affiliate revenue receivable        3,464               2,481
    Receivable for intangible assets sold       -                   1,450
    Prepaid expenses                            2,289               2,375
    Other                                       561                 1,338
                                                16,100              19,379

9. Other long-term receivables

On 29 November 2017, the Group entered into a secured convertible loan and services agreement with Gaming Realms plc (‘Gaming Realms’) (the ‘Gaming Realms Transaction’).

Key terms of the Gaming Realms Transaction include: (a) five-year secured convertible loan to Gaming Realms in the principal amount of £3.5 million with an interest rate of 3 month UK LIBOR plus 5.5% per annum; (b) conversion option that allows the Group to convert some or all of the loan (in tranches of £0.5 million) into ordinary shares of Gaming Realms after 12 months; (c) a ten-year services agreement (‘Services Agreement’) for the supply by Gaming Realms of some of its content to websites of the Group’s choosing free-of-charge. The value of the free-of-charge services provided under this Services Agreement will be capped at £3.5 million over the first five years of the agreement, at which point the provision of free-of-charge services will cease.

In connection with this transaction, the Group recognised a long-term receivable of £3.5 million for the secured convertible loan, in accordance with IFRS 9, based on the calculation of fair value at 30 June 2018, as explained in note 15.

10. Interest rate swap

On 16 February 2018, JPJ Group plc entered into an interest rate swap agreement (the ‘Interest Rate Swap’) in order to minimise the Group’s exposure to interest rate fluctuations.  The Interest Rate Swap has an effective date of 15 March 2018 (the ‘Effective Date’) and an expiry date of 15 March 2023.  Under this agreement, JPJ Group plc will pay a fixed 6.439% rate of interest in place of floating GBP interest payments of GBP LIBOR plus 5.25%. The fixed interest rate will be paid on 60% of the GBP Term Facility (£150.0 million – the ‘Notional Amount’) to start. The Notional Amount will decrease by £30.0 million every 12 months from the Effective Date.  The Interest Rate Swap was designated as a cash flow hedge, as described in note 3.

As at 30 June 2018, the fair value of the Interest Rate Swap was a £0.7 million payable (31 December 2017 – £nil). The Group has included £0.1 million of this payable in current liabilities, as shown in note 13 (31 December 2017 – £nil), with the value of the remaining balance, being £0.6 million (31 December 2017 – £nil), included in other long-term payables.

11. Intangible assets

As at 30 June 2018

                          Customer
                Gaming    relationsh         Brand   Partnership Non-compete          Total
                licences  ips (GB   Software (GBP    agreements  clauses   Goodwill  (GBP
               (GBP000's) P000's)  (GBP000's) 000's) (GBP000's) (GBP000's)(GBP000's) 000's)
    Cost
    Balance, 1
    January 2018  93       337,655  25,211   70,019  12,900     20,434     316,386   782,698
    Additions     -        -        2,206    -       -          -          -         2,206
    Translation  (5)       17       177      66      -          -          650       905
    Balance, 30
    June 2018     88       337,672  27,594   70,085  12,900     20,434     317,036   785,809

    Accumulated
    amortisation
    /impairment
    Balance, 1
    January 2018  81       139,333  12,551   10,005  4,458      7,661      19,605    193,694
    Amortisation  22       20,651   2,599    1,747   811        5,107      -         30,937
    Translation  (58)      42       7        19      -          -          455       465
    Balance, 30
    June 2018     45       160,026  15,157   11,771  5,269      12,768     20,060    225,096
    Carrying value
    Balance, 30
    June 2018     43       177,646  12,437   58,314   7,631     7,666      296,976   560,713

As at 31 December 2017

                          Customer
                Gaming    relationsh         Brand   Partnership Non-compete          Total
                licences  ips (GB   Software (GBP    agreements  clauses   Goodwill  (GBP
               (GBP000's) P000's)  (GBP000's) 000's) (GBP000's) (GBP000's)(GBP000's) 000's)
    Cost
    Balance, 1
    January 2017    94     340,927   21,670   70,054  12,900     20,434    317,829   783,908
    Additions       -      -         2,708    -       -          -         -         2,708
    Disposals       -      (3,822)   -        -       -          -         -         (3,822)
    Translation     (1)    550       833      (35)    -          -         (1,443)   (96)
    Balance, 31
    December 2017   93     337,655   25,211  70,019  12,900      20,434    316,386   782,698

    Accumulated
    amortisation
    /impairment
    Balance, 1
    January 2017    34     96,811    7,414   6,523   2,824       -         21,477    135,083
    Amortisation    41     44,958    4,820   3,504   1,634       7,661     -         62,618
    Disposals       -      (2,638)   -       -       -           -         -         (2,638)
    Translation     6      202       317     (22)    -           -         (1,872)   (1,369)
    Balance, 31
    December 2017   81     139,333   12,551  10,005  4,458       7,661     19,605    193,694
    Carrying value
    Balance, 31
    December 2017   12     198,322   12,660  60,014  8,442       12,773    296,781   589,004

12. Accounts payable and accrued liabilities

Accounts payable and accrued liabilities consist of the following items:

                                                      30 June 2018      31 December 2017
                                                      (GBP000's)        (GBP000's)
    Affiliate/marketing expenses payable              4,899             6,547
    Payable to game suppliers                         2,120             1,899
    Compensation payable                              4,046             4,868
    Professional fees                                 995               875
    Gaming tax payable                                2,109             2,101
    Other                                             477               1,531
                                                      14,646            17,821

13. Other short-term payables

Other short-term payables consist of:

                                                      30 June 2018      31 December 2017
                                                      (GBP000's)        (GBP000's)

    Transaction related payables                      1,237             3,484
    Current portion of other long-term payables (note
    16)                                               8,667             8,667
    Interest Rate Swap (note 10)                      144               -
                                                      10,048            12,151

14. Credit facilities

                                Incremental Second
                                First Lien  Lien       EUR Term   GBP Term
                     Term Loan  Facility    Facility   Facility   Facility   Total
                     (GBP000's) (GBP000's)  (GBP000's) (GBP000's) (GBP000's) (GBP000's)

    Balance, 1
    January 2017     220,016    67,534      83,243     -          -          370,793
    Principal        -          -           -          122,574    250,000    372,574
    Repayment        (218,793)  (70,000)    (90,000)   -          -          (378,793)
    Debt financing
    costs            -          -           -          (1,397)    (3,434)    (4,831)
    Accretion[*]     7,846      2,466       6,757      8          18         17,095
    Foreign exchange
    translation      (9,069)    -           -          1,718      -          (7,351)
    Balance, 31
    December 2017    -          -           -          122,903    246,584    369,487
    Accretion[*]     -          -           -          85         197        282
    Foreign exchange
    translation      -          -           -          (250)      -          (250)
    Balance, 30 June
    2018             -          -           -          122,738    246,781    369,519

    Current portion  -          -           -          -          -          -
    Non-current
    portion          -          -           -          122,738    246,781    369,519

*Effective interest rates are as follows:  EUR Term Facility  4.44%, GBP Term Facility  6.01%.

15. Financial instruments

The principal financial instruments used by the Group are summarised below:

Financial assets

                                                Financial assets as subsequently
                                                  measured at amortised cost
                                              30 June 2018          31 December 2017
                                              (GBP000's)            (GBP000's)
    Cash and restricted cash                  29,657                59,241
    Trade and other receivables               16,100                19,379
    Other long-term receivables               1,614                 2,104
    Customer deposits                         8,677                 8,180
                                              56,048                88,904

Financial liabilities

                                               Financial liabilities as subsequently
                                                     measured at amortised cost
                                              30 June 2018          31 December 2017
                                              (GBP000's)            (GBP000's)
    Accounts payable and accrued liabilities  14,646                17,821
    Other short-term payables                 9,904                 12,151
    Other long-term payables                  4,908                 8,245
    Interest payable                          675                   924
    Payable to customers                      8,677                 8,180
    Convertible debentures                    -                     254
    Long-term debt                            369,519               369,487
                                              408,329               417,062

The carrying values of the financial instruments noted above approximate their fair values.

Other financial instruments

                                                   Financial instruments at fair value
                                                        through profit or loss -
                                                          assets/(liabilities)
                                               30 June 2018          31 December 2017
                                               (GBP000's)            (GBP000's)
    Interest Rate Swap                         (718)                 -
    Contingent consideration                   (8,633)               (59,583)
    Other long-term receivables                3,464                 3,500
                                               (5,887)               (56,083)

Fair value hierarchy

The hierarchy of the Group’s financial instruments carried at fair value is as follows:

                                   Level 2                            Level 3
                        30 June 2018   31 December 2017    30 June 2018    31 December 2017     
                        (GBP000's)     (GBP000's)          (GBP000's)      (GBP000's)
    Interest Rate Swap  (718)          -                   -               -
    Other long-term
    receivables         3,464          3,500               -               -
    Contingent
    consideration       -              -                  (8,633)         (59,583)

The Interest Rate Swap balance represents the fair value of expected cash outflows under the Interest Rate Swap agreement.

Other long-term receivables represent the fair value of the loan receivable from Gaming Realms.  The key inputs into the fair value estimation of this balance include the share price of Gaming Realms on the date of cash transfer, a five-year risk-free interest rate of 1.339%, and an estimated share price return volatility rate of Gaming Realms of 39.3%.

A discounted cash flow valuation model was used to determine the value of the contingent consideration.  The model considers the present value of the expected payments, discounted using a risk-adjusted discount rate of 7%. The expected payments are determined by considering the possible scenarios of forecast EBITDA, the amount to be paid under each scenario and the probability of each scenario.

On 15 June 2018, JPJ Group plc made a final earn-out payment of £58.5 million for the Botemania brand, its Spanish business within the Jackpotjoy segment and a £5.0 million milestone payment related to certain performance achievements within the Jackpotjoy segment. This final payment was met using existing cash resources.

As at 30 June 2018, the contingent consideration balance related to the two remaining milestone payments for the Jackpotjoy segment. The value of these remaining milestone payments reflects the high likelihood of these amounts becoming payable by their respective due dates.

The movement in Level 3 financial instruments is detailed below:

                                                        (GBP000's)

    Contingent consideration, 1 January 2017            120,187
    Fair value adjustments                              27,562
    Payments                                            (94,218)
    Accretion of discount                               6,052
    Contingent consideration, 31 December 2017          59,583
    Fair value adjustments                              11,450
    Payments                                            (63,455)
    Accretion of discount                               1,055
    Contingent consideration, 30 June 2018              8,633
    Current portion                                     4,463
    Non-current portion                                 4,170

16. Other long-term payables

The Group is required to pay the Gamesys group £24.0 million in equal monthly instalments in arrears over the period from April 2017 to April 2020, for additional non-compete clauses that came into effect in April 2017 and that expire in March 2019.  The Group has included £8.7 million of this payable in current liabilities, as shown in note 13 (31 December 2017  £8.7 million), with the discounted value of the remaining balance, being £4.9 million (31 December 2017  £8.2 million), included in other long-term payables. During the six months ended 30 June 2018, the Group has paid a total of £4.0 million (six months ended 30 June 2017  £1.3 million) in relation to the additional non-compete clauses.

17. Share capital

As at 30 June 2018, JPJ Group plc’s issued share capital consisted of 74,258,930 ordinary shares, each with a nominal value of £0.10. JPJ Group plc does not hold any shares in treasury and there are no shares in JPJ Group plc’s issued share capital that do not represent capital.

                                                                       Ordinary shares
                                                                       of GBP0.10
                                                         (GBP000's)    #
    Balance, 1 January 2017                              7,298         72,983,277
    Conversion of convertible debentures, net of costs   92            916,498
    Exercise of options                                  17            165,156
    Balance, 31 December 2017                            7,407         74,064,931
    Conversion of convertible debentures, net of costs   6             56,499
    Exercise of options                                  14            137,500
    Balance, 30 June 2018                                7,427         74,258,930

Ordinary shares

During the six months ended 30 June 2018, JPJ Group plc did not issue any additional ordinary shares, except as described below.

Convertible debentures 

During the six months ended 30 June 2018, debentures at an undiscounted value of £0.2 million were converted into 56,499 ordinary shares of JPJ Group plc.  The remaining convertible debentures were redeemed in full to the value of £0.1 million on 1 June 2018.

Share options

During the six months ended 30 June 2018, nil share options were granted, 137,500 share options were exercised, nil share options were forfeited, and nil share options expired.

During the three and six months ended 30 June 2018, the Group recorded £0.1 million and £0.2 million, respectively (2017  £0.4 million and £0.9 million) in share-based compensation expense relating to the share option plan with a corresponding increase in share-based payment reserve.

Long-term incentive plan

On 26 March 2018, JPJ Group plc granted a mirror award over ordinary shares of JPJ Group plc. The mirror award is on the same commercial terms as the Group’s long-term incentive plan for key management personnel.

On 28 March 2018, JPJ Group plc granted additional awards over ordinary shares of JPJ Group plc under the Group’s long-term incentive plan for key management personnel.

During the three and six months ended 30 June 2018, the Group recorded £0.1 million and £0.1 million, respectively (2017  £nil) in share-based compensation expense relating to the long-term incentive plan with a corresponding increase in share-based payment reserve.

18. Contingent liabilities

Indirect taxation

JPJ Group plc subsidiaries may be subject to indirect taxation on transactions that have been treated as exempt supplies of gambling, or on supplies that have been zero rated where legislation provides that the services are received or used and enjoyed in the country where the service provider is located. Revenue earned from customers located in any particular jurisdiction may give rise to further taxes in that jurisdiction. If such taxes are levied, either on the basis of current law or the current practice of any tax authority, or by reason of a change in the law or practice, then this may have a material adverse effect on the amount of tax payable by the Group or on its financial position.

Where it is considered probable that a previously identified contingent liability will give rise to an actual outflow of funds, then a provision is made in respect of the relevant jurisdiction and period impacted. Where the likelihood of a liability arising is considered remote, or the possible contingency is not material to the financial position of the Group, the contingency is not recognised as a liability at the balance sheet date.  As at 30 June 2018, the Group had recognised £nil liability (31 December 2017– £nil) related to potential contingent indirect taxation liabilities.

19. Subsequent events

On 14 August 2018, the Group signed a share purchase agreement for the sale of its social business for a cash consideration of £18.1 million.

References

1. This release contains non-IFRS financial measures, which are noted where used. For additional details, including with respect to the reconciliations from these non-IFRS financial measures, please refer to the information under the heading ‘Note Regarding Non-IFRS Measures’ of this release and Note 4 – Segment Information of the unaudited interim condensed consolidated financial statements on pages 22 through 27 of this release.

2. Per share figures are calculated on a diluted weighted average basis using the IFRS treasury method.

3. Operating cash flow plus proceeds from sale of intangible assets, net of capital expenditures.

4. Adjusted net debt consists of existing term loan, convertible debentures, non-compete clause payout, fair value of swap and contingent consideration liability, less non-restricted cash.

5. Adjusted net leverage ratio consists of existing term loans, non-compete clause payout, fair value of swap and contingent consideration liability less non-restricted cash  divided by LTM to 30 June 2018Adjusted EBITDA of £106.3 million.

6. For additional details, please refer to the information under the heading ‘Key performance indicators’ on page 12 of this release.

7. Effective 1 January 2018, the Mandalay segment has been aggregated with the Jackpotjoy segment.  Refer to Note 4 – Segment Information of the unaudited interim condensed consolidated financial statements on pages 22 through 27 of this release for further discussion.

8. Organic growth is growth achieved without accounting for acquisitions or disposals.

9. Defined as Monthly Real Money Gaming Revenue per Average Active Customer – please refer to information under the heading ‘Key performance indicators’ on page 12 on this release.

Enquiries

JPJ Group plc
Jason Holden
Director of Investor Relations
jason.holden@jpj.com
+44(0)203-907-4032

Amanda Brewer
Vice President of Corporate Communications
amanda.brewer@jpj.com
+1-416-720-8150

Media Enquires
Finsbury

James Leviton, Andy Parnis
jpj@finsbury.com
+44(0)207-251-3801

SOURCE JPJ Group plc

After starting out as an affiliate in 2009 and developing some recognized review portals, I have moved deeper into journalism and media. My experience has lead me to move into the B2B sector and write about compliance updates and report around the happenings of the online and land based gaming sector.

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5Dimes Owner William Sean Creighton Found Dead in Costa Rica

Niji Narayan

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5Dimes Owner William Sean Creighton Found Dead in Costa Rica
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William Sean Creighton, the founder of online sportsbook 5Dimes, was found dead in Costa Rica. The cause of death has not been confirmed. Creighton, who was born in West Virginia, moved to Costa Rica and founded 5Dimes in 1999.

“We can confirm Costa Rican authorities identified the remains of a U.S. citizen in Costa Rica. We offer our sincerest condolences to the family on their loss. We are closely monitoring local authorities’ investigation into the cause of death,” a United States State Department spokesperson said.

Costa Rican officials said that Creighton was abducted last September and that his family received a $5 million ransom demand. Officials arrested 12 people in connection with his abduction in both Costa Rica and Spain in January. His body was found nearly three hours from where he was initially abducted.

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Soft2Bet celebrates its 3rd birthday!

George Miller

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Soft2Bet celebrates its 3rd birthday!
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Soft2Bet, а leading online gambling operator and software provider, announces third anniversary of the company’s founding.

Established by a few passionate industry veterans in September 2016, now Soft2Bet boasts a team of more than 200 dedicated employees spread in four international offices in key European centres – Kyiv, Sofia, Limassol, and Malta.

Known as a multi-brand company, three years ago Soft2Bet started with MalinaCasino, an online casino and sports brand. Then, by the end of 2016 BuranCasino and YoYoCasino were launched. Nowadays, the portfolio consists of 13 unique brands, the latest of which is called Nomini and went officially live just a few days before the company’s anniversary.

Soft2Bet is known for providing clients with an online casino experience that can be rarely seen anywhere else in the industry. At the beginning its brands were offering well-known casino games as well as sports betting options. Now, clients can play more than 2,500 games coming from industry leading providers. Sport fans can bet on thousands of pre-match and live events on over 30 types of sports including virtuals. Adding more verticals is on the roadmap of the company in the near future. But that is not all – some of the brands, the newest one, Nomini, for example incorporate a gamification technology that allows players not only to enjoy high-quality casino games but participate in ‘a game in the game’ – unlock achievements, collect special points, exchange them, earn prizes, and etc.

In terms of game providers, Soft2Bet brands are offering titles from top companies in the business as well as from trusted emerging iGaming software development studios. Working only with a few of them at the beginning, now Soft2Bet partners up with 44 key iGaming providers. Among the company’s partners are Play’N GoNetEntEvolution GamingAltenarPragmatic Play and Microgaming.

It is important to mention the two significant milestones reached during the last year – the acquisition of a licence from the Malta Gaming Authority and the BMM-certification that brings Soft2Bet one step closer to operating on the fruitful Swedish market. These are huge achievements that place the young company among the major online casino providers on the regulated European market!

Borish Chaikin, CEO of Soft2Bet comments: “We remain ambitious and hungry to improve further – to launch new products, incorporate the latest technologies, expand our geographical reach, introduce our brands to more people. We are at the right place now, and we wouldn’t be here without the continued support of our partners. I hope our growth during these three years has also helped them in the development of their own businesses as well. And as far as I can conclude from our mutual growth results – it is the case. We will continue to put all our efforts to evolve in the future and conquer new heights. A ‘thank you’ doesn’t sound enough, but we are thankful to all parties involved in our success story – from our business partners to our dedicated employees!”

A spectacular event with a circus show was organised on September 12 to celebrate the company’s third anniversary together with employees and valued partners.

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British Gate777 player wins €3.3M jackpot on NetEnt’s Mega Fortune

George Miller

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British Gate777 player wins €3.3M jackpot on NetEnt’s Mega Fortune
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Mega Fortune continues to deliver life-changing wins after a 50 cent bet generated a €3.3 million euro jackpot win.

A British player on Gate 777, operated by White Hat Gaming, bagged a whopping €3.3 million euros when hitting the jackpot on NetEnt’s Mega Fortune – after a bet of just 50 cents.

“We are thrilled that Mega Fortune has again created another instant multi-millionaire and delivered a life-changing win. Since their releases, Mega Fortune and its sibling titles have generated an astonishing 60 one-million-plus euro jackpots,” said Bryan Upton, NetEnt Director of Games.

NetEnt has a strong legacy with jackpot games, with classics like Mega Fortune, Mega Fortune Dreams, Arabian Nights and Hall of Gods. Lately, new jackpot games like Grand Spinn Superpot, Mercy of the Gods and Imperial Riches have been added to the offering.

“We know that the chance of hitting it real big is something that players really love. Therefore, we’ve made a push to add even more exciting jackpot games to our portfolio. Stay tuned for more innovation in this space from NetEnt,” added Upton.

Ronna Shilon, CEO at Gate777, said: “On behalf of everyone at Gate777, I extend huge congratulations to our big winner. We are beyond thrilled when our players have a fantastic experience with us and when they win. We work hard to bring them the best slot and table games the industry has to offer, and we look forward to seeing more and more winners on Gate777.”

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