RNS Number : 6264E
AsianLogic Limited
30 September 2008
AsianLogic Limited
("AsianLogic" or "ALOG", the "Group" or the "Company")
Interim Results for the half year ended 30 June 2008
AsianLogic Limited, the diversified Asia-Pacific online and land-based gaming company, is pleased to announce its interim results for
the half year financial period ended 30 June 2008.
Financial Highlights
* Total revenues up 208% to US$54.9 (2007:US$17.8 m)
* Casino revenues up 184% to US$47.4m (2007: US$16.7)
* Poker revenues up 760% to US$2.6m, (2007: US$0.3 million)
* Other revenues, including reseller commissions, of US$2.7m (2007:US$1.0m)
* Profit before tax and adjustment for share based awards up 155% to US$7.05m (2007:$2.76m)
* Average daily casino turnover up 180% to US$12.9m (2007:US$4.6 m)
* Average casino net gaming per day increased from US$98,811 to US$281,609, an increase of 185%
* Average daily poker rake and tournament fees showing monthly growth of 16%.
* Strong balance sheet - cash and cash equivalents of US$80.7 million
* Adjusted earnings per share of 5.48 cents per share (2007: 4.35 cents)
* Maiden interim dividend of 2.9 cents per share.
Operational Highlights
* Continuing diversification strategy targeting the operators and end-users.
* Underlying business continues to grow strongly with progress across all divisions.
* Continuing investment in poker market, enhanced by acquisition of Asian Poker Tour ("APT") in February 2008.
* Three new gaming websites launched in the first half of 2008, with a further five intended for launch in the second half of 2008.
* Strategic agreement with a Philippine land based sportsbook company Leisure Resorts and World Corporation (LRWC).
* Acquisition of significant minority stake (US$3.4m) in a European based gaming solutions provider that is moving into
profitability in 2008 whose clients include five blue chip gaming operators.
* Talks continue on a strategic investment and commercial tie-up with a leading Asian online gaming technology and services
provider.
* Successful soft launch of play for real Asian games with full roll out expected in Q4
* Initial set-up procedures completed and anticipated launch of our global gaming fund due in next 120 days with a number of
investment opportunities already identified.
Tom Hall, Chief Executive of AsianLogic, commented:
"I am pleased to report a strong set of interim results for H1 2008. AsianLogic continues to grow organically and through acquisition.
During the period we have made several important strategic acquisitions and investments. We are adapting to and driving market trends
through the expansion of our Poker and P2P business and foresee that acquisitions such as the Asian Poker Tour and its successful roll out
will continue to raise the profile of this renowned card game and benefit AsianLogic's shareholders. This has assisted in rapidly growing
higher margin "retail" side of the business, where we directly target the gaming end user, as a counterpart to the provision of services to
third party marketing partners where the business originated. It was gratifying to note that our rapidly increasing industry profile was
recognised at this year's E-Gaming Awards, at which we were named Asian Operator of the Year. The Board is entirely committed to delivering
excellent returns for its shareholders, and is confident of achieving further growth in revenues and profitability in the current financial year and beyond."
- ends -
For further information contact:
Tom Hall, CEO +852 9037 3749
AsianLogic
c/o Bell Pottinger Corporate & Financial +44 207 861 3232
Mark Connelly
Nominated Adviser to AsianLogic
Collins Stewart +44 207 523 8350
David Rydell/Chris Hamilton/Helen Tarbet
Bell Pottinger Corporate & Financial +44 207 861 3232
Chairman's Statement
I am delighted to report a strong set of interim results. As a diversified business, AsianLogic continues to evolve, powered by the
combination of a strong and growing market for Asian-focused gaming services and a continuing diversification into end-user facing
operator-led activities, both online and in land based venues.
Profit before tax adjusted for share based awards rose to US$7.05m, a 155% increase on the same period in 2007, driven by a push into
the emerging Asian Poker market and organic growth augmented by key acquisitions and agreements made during the period.
Total revenues for the period rose to US$54.9 million, representing an increase of 208% on the US$17.8 million achieved in the same
period in 2007. Reflecting the Asian gaming cultures that we serve, Casino-related activities continue to represent the majority of Group
income, increasing by 184% per cent from US$16.7 million to US$47.4 million over the comparable period. Casino-related activities are likely
to form the majority of income in future years but the Board continues to widen its suite of products for clients and gamers and in this
regard is pleased to note the 760 per cent improvement in Poker-related turnover to US$2.6 million in the period.
As part of our commitment to maximising shareholder returns, we are also pleased to announce in line with our stated dividend policy of
distributing approximately 50% of the Group's profit after tax our maiden interim dividend of 2.9 cents per share, which will be paid on 7
November 2008 to those shareholders on the register at the close of business on 10 October 2008, the record date, the ex-dividend date will
be 8 October 2008. The dividend will be converted and paid in GBP.
The Group has high expectations for its Poker activities, a game growing extremely fast in popularity, though still not yet widely
played in Asian societies thereby offering significant scope for growth. The Board believes Poker's combination of high liquidity and big
win opportunities will encourage more Asian gamers to take up the card game and AsianLogic currently enjoys first mover advantage. This
position was strengthened in February 2008 with the acquisition of the Asian Poker Tour and the opening of the Group's first land based
poker room in Macau.
The remainder of revenues comes mainly from reseller commissions, notably as agent for AIM-listed gaming software provider Playtech Ltd
throughout the region, and we continue to benefit from this strategic relationship.
The Group maintains a strong balance sheet with cash in the bank of US$80.7m at the half year end.
The Board is committed to pursuing its dual strategy as an Asian-focused gaming operator while at the same time increasing its activity
in marketing services in partnership with select major Western brands that have recognised the Group's experience in the Asia-Pacific region
and seek access to these large markets. This in effect better balances the activities of the Group between wholesale provision of services
to operators with the retail-led approach of a direct to consumer operator.
The Group continues to grow through a mix of organic and acquisitive development and I am pleased to report the signing of several
strategic partnerships during the period. These include a strategic agreement with the Philippines-based Leisure Resorts and World
Corporation, the acquisition of a US$3.4m minority stake in a European based gaming solutions provider, and a long term strategic
partnership with a leading poker platform provider, full details of which will be announced at the end of October.
The Group has committed to the launch of a global gaming fund and good progress is being made on the prerequisite procedures to set up
the fund, not least through the appointment of the lead fund manager and the identification of a number of investment opportunities that
have the potential to be of benefit to AsianLogic shareholders in the medium to long term. The fund's primary objective will be to take
minority stakes in a range of fast growing gaming businesses that are primarily in the early to mid stages of their development. As well as
providing investment capital, AsianLogic will be able to supply its investee companies with significant market expertise and opportunities
that would otherwise not have been available to them.
AsianLogic operates in a fast moving and dynamic marketplace. The business will continue to evolve and will change as the Board takes
advantages of new opportunities as they arise. The executive management are committed, driven and experts in their field. AsianLogic is
growing rapidly and with a strong pipeline of products and websites, high calibre partnerships and strong presence in the Asia-Pacific
region, the Board is confident of AsianLogic's progress for the remainder of 2008 and beyond.
Jong-Dae Lee
Non-executive Chairman
30 September 2008
Chief Executive Officer's Report
I am pleased to report a successful first half performance for 2008. During the period the Group has further consolidated its position
as a leading online and land-based gaming company, focusing on the Asia-Pacific markets.
The Group continues to diversify its products and services for the multi-billion US dollar Asian gaming marketplace. Of increasing
interest are the retail-facing or operator opportunities for AsianLogic dealing directly with gaming end users, where it can apply its
unique local and in-depth knowledge to what is a complex marketplace and benefit directly from the resulting progress. This is a high growth
opportunity encompassing both online and land-based activities and the Board has made progress in enhancing this revenue stream and expects
to increase its activities in this arena in the coming years. The Group will continue to offer the market-leading wholesale services via
third party marketing partners and products from which the business originated and believes that a combination offering of wholesale and
retail products and services will be of most benefit to shareholders.
Of note is the Group's growing interest in Poker where the Board believes it has gained significant first mover advantage with the
benefit of important strategic agreements. Casino, which makes up the bulk of our business, has also seen impressive growth in player
numbers and revenue. As part of its diversification strategy, the Group is also making significant inroads in the land based gaming market.
Financial Review
Profit before tax and adjustment for share based awards rose to US$7.05m, a 155% increase on the same period in 2007. Total revenues
for the period were US$54.9 million, representing an increase of 208% on the US$17.8 million achieved in the same period in 2007. Casino
revenues totalled US$47.4 million, an increase of 184% from US$16.7 million in the same period in 2007. Poker revenues for the period
totaled US$2.6 million, an increase of 760% from the US$0.3 million in the same period in 2007.
During the period, average daily casino turnover increased from US$4.6 million to US$12.9 million, an increase of 180% on the same
period in 2007. Net gaming per day increased from US$98,811 to US$281,609, an increase of 185% on the same period in 2007. Poker fees
continue to grow, with average daily rake and tournament fees combined showing monthly growth of 16%. Gross margins in the period were 11%,
compared to the 8% which was achieved in the same period in 2007.
The Group incurred a one-off charge of US$510,000 following the write down of an investment in a sports statistics analysis service for
gaming and professional book making services, which recently went into receivership.
AsianLogic is satisfied with the growth across all its divisions, particularly with the progress achieved in Poker, and Management is
confident of achieving a successful outcome for the full year.
Strategic Review
The Group is involved in the development, operation, management and/or marketing of online casinos, online poker, multiplayer P2P
including Asian games, online and land-based sportsbetting, land-based slot machine and server-based gaming, such as live videostream casino
gaming across the Asia-Pacific region.
The Group is pursuing a strategy of diversification in order to effectively exploit the full range of gaming media, including land based
gaming and new gaming trends such as the growth in popularity of Poker amongst Asian gamers. The Group believes that evolving its business
model to include new games and gaming styles, as well as more operator led activities to balance its services business, will not only
mitigate against the sort of industry pressures faced by its more narrowly focused competitors but will also deliver sustainable growth
across all its operations in order to maximise shareholder returns. The Group seeks to deliver this strategy through the launch of new
online gaming sites and products, strengthening relationships with key marketing partners via acquisition and investment and the further
development of land based gaming activities.
AsianLogic sees exciting opportunities to drive and exploit increasing Asian interest in Poker. While it is not a traditional game in
the region, the Asian market is fast moving and has shown itself to be open to new trends, and in Poker, AsianLogic has taken important
steps to ensure it enjoys first mover advantage and is seeing strong rates of growth in the area. The Group's Poker strategy comprises
launching and running multi-product and branded online "play for real" Poker sites, offering subscriptions for "play for points Poker",
opening land based Poker rooms, and running marketing initiatives.
In February 2008 the Group acquired the Asian Poker Tour ("APT") and its first major APT tournaments during the period in Manila in May,
attracting 316 players (a record level of attendance for any poker tournament held in the Philippines) from 23 countries. The second event
was held after the end of the period in Macau in August, and set the record for the largest ever guaranteed Poker Prize Pool in Asia
(US$1.5m).
AsianLogic opened its first Asian land based APT Poker Room in conjunction with the Galaxy StarWorld ("Starworld") casino in Macau on 1
August 2008. The venue is already trading above initial expectations and showing promising growth prospects with plans already in place to
expand the number of tables and floor area offered to players. This is the first of several Poker rooms the Group intends to open across the
region in order to exploit the growing interest in and demand for the game.
AsianLogic has also secured, via APT, exclusive promotional agreements with key, high-profile Asian Poker Professionals. The "Poker
Pack" will represent APT on the World Poker circuit in order to further drive demand for AsianLogic's poker products in the region.
As part of its drive into operator led activities, during the period the Group launched three new gaming sites with a further five
intended for launch in the second half of 2008.
Product Development
AsianLogic continues its strategy of diversifying its product offering in order to exploit all the gaming trends across the region.
During the period, the Group "soft-launched" play for real Asian Games, which include traditional Asian favourites Big2, 13 Card poker & Dou
Di Zhu. A full roll out of these products is intended for Q4. The Group continues to work with a range of high profile European online
gaming software providers seeking access to the Asian market place and foresee strong growth in this area of the business as more and more
providers seek to globalise their offerings.
Investment and Acquisition Strategy
As mentioned in the Group's trading statement of July 2008, AsianLogic has signed a strategic agreement with Philippines-based gaming
company Leisure Resorts and World Corporation ("LRWC") to operate a land-based sportsbook operation. As part of the transaction, AsianLogic
has sold its domestic sportsbook to LRWC and as a result has the potential to own a significant stake in LRWC.
In conjunction with a third party international sportsbook operator, and subject to performance targets being met, the Group and its
sportsbook partner will be issued up to 342 million LRWC shares (approximately 30% of the enlarged capital of LRWC) over the next three
years. AsianLogic will work with LRWC to expand the number of betting outlets, increase the number of games offered to players and boost
turnover.
In total, AsianLogic's investment in LRWC is US$5.6 million. The part new shares and part purchase of treasury shares (subject to the
completion of Stock Exchange Filing) equates to approximately 10% of the expanded LRWC share capital. Approximately US$1 million will be
used by LRWC for development and infrastructure work in LRWC's projects under its subsidiary, First Cagayan Leisure and Resorts Corporation
in Cagayan valley, with the balance to be used to set up a new land based gaming entity in Metro-Manila, Philippines. AsianLogic has made a
further investment of US$3.4m, and thus acquired a significant minority stake in a European based gaming solutions provider, that is moving
into profitability in 2008 and who have an existing stable of five blue chip Gaming Companies and are rapidly adding more Licensees
The Group has acquired 54.5% of Bele Group Limited ("BELE") for a total commitment of US$985,000. This acquisition is a significant
strategic investment for ALOG as BELE holds a Chinese online cultural content license and publishing license, which allows it to offer
online casual games in China. BELE have also successfully developed and licensed its proprietary award winning 3D mahjong product ("2007
Best Game Software Award" issued by the Department of Culture in Sichuan province) to third party operators. BELE's play for fun Mahjong
portal already enjoys a membership base of 10,000 active players. Along with the licenses and games, a team of 17 developers and programmers
boosts ALOG's programming resources.
The Group has signed an MOU to set up a JV with Cola Salenet Digital Tech. Co. Ltd, "MYCOLA" ,where ALOG will commit up to US$1,000,000
in funding. MYCOLA is a Taiwanese company which develops and installs internet cafmanagement systems across Taiwan and promotes it via the
website www.players.com.tw. Currently, the MYCOLA system is being used by over 600 internet cafes in Taiwan, representing approximately 40%
of the market. The JV will localise the MYCOLA system and market it into China where there are in excess of 120,000 internet cafes.
Negotiations with a leading Asian online gaming technology provider and other gaming operators are ongoing. Current financial market
conditions and the Group's significant cash balance sheet position allow it to negotiate favourable terms and Management are conducting
further due diligence in several areas in light of opportunities created by the rapidly changing economics in several major markets.
Outlook and Current Trading
The underlying business continues to grow strongly and is cash generative. Casino revenues continue to grow at a rate that is above
management expectations although revenues for July, August and September slowed marginally as a result of the traditional seasonality and,
the Board believes, the Beijing 2008 Olympics, in which three of the Group's major revenue contributing countries finished in the top seven
on the medal table. Poker rake and tournament fees continued their strong growth in July, but fell marginally in August (down 2.9% over
July), again due to the impact of the Olympics. However poker margins remain consistent, and continued their sharp upward growth trend
during September. The Group has commenced a strategy of increasing its focus on higher margin gaming end users and has begun terminating
certain low margin marketing partnerships with third parties, which will lead to a short term reduction in overall gaming turnover growth
but an improvement in operating margins.
With a strategy of diversification into Poker, land based gaming and operator activities, as well as strengthening its Asian games
offering and building partnerships with providers wishing to expand in the region, the Board is confident that any reduction in Casino
turnover growth from moving away from lower to higher margin operations will not impact the overall performance of business.
The Group is launching five new gaming sites in the second half of 2008, which are expected to have a positive impact on revenues in Q4
and beyond. The Group's Philippines subsidiary Gamebuilders Inc has begun trading by providing online casino software to PAGCOR E-Games
outlets where ALOG participates on a revenue share basis.
The Management team has also been significantly strengthened with the addition of industry veterans Bostjan Torkar, as Landbased Gaming
Director, and Dimitris Karatzas, as Online Gaming Director. Mr Torkar was formerly the slots director for HIT Casino Perla, in Slovenia, the
EUs largest casino with some 1,200 slots and 80 gaming tables and assumes overall responsibility for land based gaming ventures, evaluation
of land based gaming proposals, selection of gaming equipment and slot club partnerships. Mr Karatzas worked with Ladbrokes.com from 2002 to
2005, as Regional Manager for Southern Europe before moving on to become Marketing Director of Expekt.com and then Managing Director for
Maltese based winunited.com.Dimitris will be responsible for non-PRC online gaming ventures, expanding SEO and retention teams and ongoing
online marketing and business development strategy.
AsianLogic is making good progress on preparations for the launch of its global gaming fund, which is expected in by the end of the
year. This fund will identify and invest in a combination of publicly traded gaming counters and small to medium fast growing companies in
the sector. Stephen Ford, formerly online gaming equity research analyst at Collins Stewart, has been recruited to manage the fund, and a
number of important investment opportunities have already been identified.
In summary, the Board is very pleased with the Group's progress in the first half of this year. AsianLogic believes that its diversified
business model, enhanced product portfolio and strategy of achieving growth both organically and through acquisition, places the Group in a
strong position to achieve its targets for 2008 and beyond.
Thomas Hall
Executive Vice Chairman and Chief Executive Officer
30 September 2008
Consolidated Income Statements For the six months ended For the year ended
30 June 2008 30 June 2007 31 December 2007
US$'000 US$'000 US$'000
(Unaudited) (Unaudited) (Audited)
Revenue 52,210 16,753 54,314
Cost of sales (46,551) (15,424) (48,765)
Gross profit 5,659 1,329 5,549
Other revenue 2,683 1,061 2,475
Gain on disposal of an - - 4,050
associated company
Income from investment and 3,708 2,547 6,086
corporate finance activities
Distribution costs (565) (128) (563)
Administrative expenses (1,978) (907) (1,872)
Employee benefits recognised (1,026) - (4,594)
from shares granted
Other operating expenses (2,458) (1,144) (3,257)
Profit before tax 6,023 2,758 7,874
Income tax (16) (10) (23)
Profit for the period/year 6,007 2,748 7,851
Attributable to
Shareholders 6,007 2,748 7,851
Minority interests - - -
6,007 2,748 7,851
Earnings per share
Basic and diluted 5.48 cents 4.35 cents 12.2 cents
Consolidated Balance Sheets As at As at As at
30 June 30 June 31 December
2008 2007 2007
US$'000 US$'000 US$'000
(Unaudited) (Unaudited) (Audited)
NON-CURRENT ASSETS
Property, plant and equipment 1,468 1,202 1,403
Intangible assets 7,365 2,293 3,890
Associates 800 800 800
Investment in a joint venture 300 - -
Available for sale financial 11,486 43,275 16,385
assets
21,419 47,570 22,478
CURRENT ASSETS
Inventories 21 6 9
Trade and other receivables 8,716 2,777 9,170
Amounts due from related 270 1,375 263
parties
Amounts due from associated - 49 -
companies
Cash and cash equivalents 80,706 3,181 105,731
89,713 7,388 115,173
CURRENT LIABILITIES
Trade and other payables 8,035 2,033 4,868
Amounts due to related parties 2,065 11,584 24,291
Income tax payable 13 10 26
10,113 13,627 29,185
NON-CURRENT LIABILITIES
Provision for retirement 47 41 48
benefit obligations
NET ASSETS 100,972 41,290 108,418
Represented by:
EQUITY ATTRIBUTABLE TO
SHAREHOLDERS
Paid in capital 84,603 6 84,603
Reserves 16,369 41,284 23,815
Equity attributable to 100,972 41,290 108,418
shareholders
Minority Interest - - -
TOTAL EQUITY 100,972 41,290 108,418
The financial statements were approved by the Board and authorized for issue on 29 September 2008.
Thomas Alexej Hall Gary Underwood
Chief Executive Officer Chief Financial Officer
Consolidated Statement of 30 June 2008 30 June 2007 31 December 2007
Changes in Equity
US$'000 US$'000 US$'000
(Unaudited) (Unaudited) (Audited)
Total equity, beginning of 108,418 12,908 12,908
period/year
Changes in fair values of (8,543) 25,728 8,502
available for sale financial
assets
Exchange differences arising (1,249) (94) (300)
on translation of overseas
subsidiaries' financial
information
Net (loss)/gain recognised (9,792) 25,634 8,202
directly in equity
Net profit for the period/year 6,007 2,748 7,851
Total recognised (loss)/gain (3,785) 28,382 16,053
for the period/year
Issue of share prior to IPO 1 - 1
Treasury shares (3,671) - -
Share repurchase - - (19,669)
IPO proceeds - - 108,177
Expenses incurred for listing - - (8,499)
Employee share ownership plans 1,026 - 4,594
Realisation of reserves upon (1,017) - (3,664)
disposal of available for sale
financial assets
Dividends - - (1,483)
(7,446) 28,382 95,510
Total equity, end of 100,972 41,290 108,418
period/year
Consolidated Cash Flow For the six months ended For the year ended
Statement
30 June 2008 30 June 2007 31 December 2007
US$'000 US$'000 US$'000
(Unaudited) (Unaudited) (Audited)
OPERATING ACTIVITIES
Cash generated from operations 4,786 1,414 2,793
Income tax paid (17) (14) (11)
Net cash generated from 4,769 1,400 2,782
operating activities
CASH FLOWS FROM INVESTING
ACTIVITIES
Acquisition of available for (6,250) - (515)
sale financial assets
Acquisition of interests in - (800) (800)
associates
Dividends received 69 94 155
Proceeds from disposals of 3,808 2,720 6,275
available for sale financial
assets
Proceeds from disposals of - 26 -
property, plant & equipment
Purchases of intangible assets (2,995) (1,181) (2,995)
Purchases of property, plant (516) (395) (933)
and equipment
Net cash (used in)/generated (5,884) 464 1,187
from investing activities
CASH FLOWS FROM FINANCING
ACTIVITIES
Dividends paid to shareholders - - (1,483)
Proceeds from initial public - - 108,177
offering
Treasury stock (3,708) - -
Payment to shareholders (17,902) - -
IPO related costs (2,300) - -
Share issue costs - - (6,199)
Net cash (used in)/generated (23,910) - 100,495
from financing activities
NET (DECREASE)/ INCREASE IN (25,025) 1,864 104,464
CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS AT 105,731 1,267 1,267
THE BEGINNING OF THE
PERIOD/YEAR
Effect of foreign exchange - 26 -
rate changes
CASH AND CASH EQUIVALENTS FOR 80,706 3,157 105,731
THE PERIOD/ YEAR
Notes to the Condensed Consolidated Financial Statements
1. General information
AsianLogic Limited ("the Company") is a company incorporated in the British Virgin Islands and has its registered office in Mill Mall,
Suite 6, Wickhams Cay, P O Box 3085, Road Town, Tortola, British Virgin Islands and it exerts its management control from Hong Kong.
AsianLogic and its subsidiaries (together the "Group") is an active participant in the online and land-based gambling industry with a
particular focus on the Asia Pacific markets. The Group is involved in the development, operation, management and/or marketing of online
casinos, online poker, multiplayer P2P and Asian Games, online and land-based sports betting, land-based slot machine and server-based
gaming, including live video stream casino gaming across the Region. The Group has developed and maintained a corporate advisory team
specialising in the gambling sector.
The consolidated interim financial information as at 30 June 2008, and 2007 and the six months then ended, respectively, have been
reviewed by the Group's external auditors.
The financial statements for the year ended 31 December 2007, which were prepared under IFRS received an unqualified audit report.
However, those financial statements included an emphasis of matter paragraph relating to contingent liabilities.
The financial information for the periods ended 30 June 2007 and 30 June 2008 contained in this interim announcement is unaudited.
2. Basis of preparation
The consolidated interim financial information have been prepared in accordance with the accounting policies that are expected to be
adopted in the Group's full financial statements for the year ended 31 December 2008 which are not expected to be significantly different to
those set out in Note 3 of the Group's audited financial statements for the year ended December 2007. These are based on the recognition and
measurement principles of IFRS in issue as adopted by the European Union (EU) and are effective at 31 December 2008 or are expected to be
adopted and effective at 31 December 2008. The financial information has not been prepared (and is not required to prepare) in accordance
with IAS 34. The accounting policies have been applied consistently throughout the Group for the purposes of preparation of this financial
information.
These results have been prepared on the basis of accounting policies expected to be adopted in the Group's full financial statements for
the year ended 31 December 2008 which are not expected to be significantly different to those set out in Note 3 to the Group's audited
financial statements for the year ended 31 December 2007.
In the current year, the Group will adopt the following standards and interpretations, issued by the International Accounting Standards
Board or the IFRIC, for the first time with no significant impact on its consolidated results or financial position.
IFRIC 11 - Group and treasury share transactions (effective for annual periods commencing on or after 1 March 2007).
There has been no change in the nature of the critical accounting estimates and judgments as set out in Note 3 to the Group's audited
financial statements for the year ended 31 December 2007.
The financial information is presented in U.S. dollars because that is the currency the Group primarily operates in.
The risks and uncertainties faced by the Group have not changed significantly since the 2007 Annual Report was published and still
continue to represent risk during the remaining six months of the financial year.
3. Turnover
Segment information
i. Business segments
The Group's continuing operating gaming businesses are organised and managed separately as four principal segments according to the
nature of the services provided and are set out below:
Casino gaming revenues Casino gaming revenues from both online and land
based gaming. This equates to net win generated
from casino players.
Live gaming video streaming Live gaming video streaming services from the
provision of services to casino licencees. This
equates to a contracted flat fee of a contracted
fee based on gaming volumes, plus royalties and
share of tips.
Peer-to-peer (P2P) revenue P2P revenues from the provision of poker rooms
to players who play against each other. This
equates to the rake generated on coordinating
the poker offering and tournament fees.
Other Consultancy fee income and technical support
services income.
In prior years, the Group's system of internal reporting did not separate assets and liabilities by business segments. Therefore, the
directors are not able to disclose the assets and liabilities associated with each business segment. As the business of the Group has
developed, the Group has been gradually transforming its management and control systems and will continue to monitor the appropriate
provision of segmental information as required by IFRS.
Corporate finance
The Group is also an active investor in gaming-related businesses. Equity shareholdings are taken in both public and private companies.
Income generated from these activities is separately disclosed as Income from Investment and Corporate Finance Activities and is not
included directly in the following segmental analysis of revenue due to the Directors opinion that there are no directly attributable costs
to this activity. The analysis of investment income is therefore separately presented at the end of the primary business segmental
analysis.
The following tables present revenue and profit information regarding the Group's business segments for the periods ended 30 June,2008
and 2007 and year ended 31 December 2007.
30 June 2008 (Unaudited) Casino gaming Live video streaming P2P Revenue Sub-total Others Total
revenue revenue
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Revenue
Segment revenue 47,391 1,793 2,998 52,182 28 52,210
Segment results 5,462 20 464 5,946 6,104 12,050
Unallocated expenses (6,027)
Profit before income tax 6,023
Income tax (16)
Profit for the period 6,007
30 June 2007 (Unaudited) Casino gaming Live video streaming P2P Revenue Sub-total Others Total
revenue revenue
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Revenue
Segment revenue 14,867 1,267 276 16,410 343 16,753
Segment results 2,670 380 (67) 2,983 2,600 5,583
Unallocated expenses (2,825)
Profit before income tax 2,758
Income tax (10)
Profit for the period 2,748
31 December 2007 (Audited) Casino gaming Live video streaming P2P Revenue Sub-total Others Total
revenue revenue
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Revenue
Segment revenue 50,138 2,616 1,164 53,918 396 54,314
Segment results 4,985 366 198 5,549 12,611 18,160
Unallocated expenses (10,286)
Profit before income tax 7,874
Income tax (23)
Profit for the year 7,851
Income from investments and corporate finance Period ended 30 June Period ended 30 June 2007 Year ended 31 December 2007
2008
US$'000 US$'000 US$'000
Dividend income 69 106 155
Gain on disposals of available for sale financial 3,639 2,441 5,931
assets
3,708 2,547 6,086
ii. Geographical segments
For geographical segments of the operating gaming business (and not corporate finance activities), revenue can be attributed to the
following three principal geographical areas of the world based on customer orientation:
- Asia
- Europe
- Rest of the World
The following tables present revenue, results and expenditure regarding the Group's geographical segments for the total operations for
the periods ended 30 June 2008 and 2007 and year ended 31 December 2007.
30 June 2008 (Unaudited) Asia Europe Rest of the world Total
US$'000 US$'000 US$'000 US$'000
Segment revenue 50,564 1,520 126 52,210
Segment results 11,424 510 116 12,050
Unallocated expenses (6,027)
Profit before income tax 6,023
Income tax (16)
Profit for the period 6,007
30 June 2007 (Unaudited) Asia Europe Rest of the world Total
US$'000 US$'000 US$'000 US$'000
Segment revenue 15,824 2,331 455 18,610
Segment results 2,695 (19) 82 2,758
Unallocated expenses -
Profit before income tax 2,758
Income tax (10)
Profit for the period 2,748
31 December 2007 (Audited) Asia Europe Rest of the world Total
US$'000 US$'000 US$'000 US$'000
Segment revenue 49,606 4,171 537 54,314
Segment results 17,880 220 60 18,160
Unallocated expenses (10,286)
Profit before income tax 7,874
Income tax (23)
Profit for the year 7,851
4. Earnings per Share
The calculation of the basic and diluted earnings per share is based on the following data:
At 30 June At 30 June At 31 December
2008 2007 2007
US$'000 US$'000 US$'000
Earnings 6,007 2,748 7,851
Number of shares
Weighted average number of 107,931,250 63,100,000 64,117,373
ordinary shares for the
purposes of basic and diluted
earnings per share
The weighted average number of ordinary shares and earnings per share for 2007 have been restated for the impact of the share exchange
of Emphasis Services Limited shares.
5. Intangible Assets
Software, licenses trademarks and Websites Total
patents
US$'000 US$'000 US$'000
Cost
At 1 January 2007 1,395 - 1,395
Additions 445 2,550 2,995
Exchange alignment 23 - 23
At 31 December 2007 1,863 2,550 4,413
Additions 1,975 2,092 4,067
Exchange alignment 10 10
At 30 June 2008 3,848 4,642 8,490
At 30 June 2007 2,582 - 2,582
Accumulated amortization
At 1 January 2007 110 - 110
Charge for the year 389 - 389
Exchange alignment 24 - 24
At 31 December 2007 523 - 523
Charge for the year 590 590
Exchange alignment 12 12
At 30 June 2008 1,125 - 1,125
At 30 June 2007 289 - 289
Carrying Amount
At 30 June 2008 2,723 4,642 7,365
At 30 June 2007 2,293 - 2,293
At 31 December 2007 1,340 2,550 3,890
Software, licences, trademarks and patents comprise both internally generated intangible assets and other intangible assets. The
carrying amount of the Playtech licence at period 30 June 2008 and year ended 31 December 2007 was US$458,333 and US$481,250, respectively.
The licence is being amortised on a straight-line basis over 10 years. All other intangible assets relate to internally generated software
and other assets.
On 6 July 2007, ESL entered into an agreement with Geneva Group Limited to acquire their Zipang and 777Baby online gaming businesses for
a consideration of US$2,550,000, which may be adjusted depending upon the audited profit of Geneva for the period ended 30 June 2008. Based
on the 30 June 2008 profit of approximately US$1.5 million the company is to pay an additional US$1.1 million, up to US$4.6 million, three
times of profit , to Geneva in accordance with the agreement dated 6 July 2007. These websites are well known and established in the online
gaming market. In the opinion of the directors, these acquired websites are capable of generating positive cash flows indefinitely to the
Group. Therefore, these websites are not amortised but are tested for impairment annually.
During 2007, receivables due from Laverock von Schoultz and Elberfield Management Limited representing deposits and other advances paid
in relation to the sports book software being developed by the Group have been reclassified as intangible assets. No amortisation has yet
been charged against these development costs as the software is not yet operational.
On 13 February 2008 the Group entered into an agreement with Singapore based Capital Events Pte to acquire and take over the running of
the renowned Asian Poker Tour ("APT"), Asia's original and largest poker tour. The APT has further strengthened its presence in Asia with
the addition of the Korean Professional Poker Tour as a shareholder and exclusive partner in Korea.
In the opinion of the directors, there is no indication of impairment in the carrying amounts of the above intangible assets and the
carrying amount approximates their fair value.
6. Associates
During the periods, the Group acquired and disposed of certain material associates. The movements and details are disclosed below:
At 30 June At 30 June At 31 December
2008 2007 2007
US$'000 US$'000 US$'000
Additions 800 7,280 7,280
Transferred to available for sale - (4,050) (4,050)
financial assets
Disposals - (2,430) (2,430)
800 800 800
The Group has a 25% equity investment in APE Group Limited a company incorporated in the British Virgin Islands. The Company has
contributed US$750,000 in seed capital to develop network gaming solutions and provide a platform for the software to be played online with
a specific focus on Asia. The software is still under development.
The Company acquired a 20% stake in Must Read Publications Limited, a company incorporated in Macau for US$50,000.
During the year the Group invested in CY Foundation Group Limited with two related parties. To effect this transaction a special purpose
vehicle, Copernicus Trading Limited, was set up ("Copernicus"). The Group effectively took a 50% equity interest in Copernicus for a
consideration of HKD50,625,000 (approximately US$6,481,000) in the form of a shareholder's loan. Subsequently, 18.75% was disposed of for
HKD50,625,000 (approximately US$6,481,000). When the Copernicus transaction was completed and the Special Purpose Vehicle was wound down the
Group generated a gain on disposal of US$4,050,000.
There were no sharing of associates results for the period/year as all associates are in their start-up stage with no material
transactions. The underlying value of interests in associates was, in the opinion of the directors, not less than the carrying value as at
the period/year end.
7. Available for Sale Financial Assets
At 30 June At 30 June At 31 December
2008 2007 2007
US$'000 US$'000 US$'000
At 1 January 16,385 7,326 7,326
Additions 6,250 35,949 515
Transferred from associates - - 4,050
Disposals (2,605) - (4,008)
Net gains/(losses) transferred (8,544) - 8,502
to equity
11,486 43,275 16,385
At 30 June At 30 June At 31 December
2008 2007 2007
US$'000 US$'000 US$'000
Listed in the United Kingdom 3,277 9,402 5,453
Listed in Hong Kong 7,399 33,873 10,417
Listed in the United States of 805 - -
America
Unlisted 5 - 515
11,486 43,275 16,385
Equity securities listed in the United Kingdom represents an investment in Playtech Limited, a related company incorporated in the
British Virgin Islands with limited liability and listed on AIM London Stock Exchange.
Equity securities listed in Hong Kong represent an investment in CY Foundation Group Limited, a company listed on the Hong Kong Stock
Exchange.
In March 2008, the Group acquired 700,000 shares of Elixir Gaming Technologies Inc. a company listed on the New York Stock Exchange for
a total consideration of US$2,500,000. At 30 June 2008, the closing price per share was US$1.15. This has resulted in the fair value of
these shares decreasing by approximately US$1,700,000. The directors consider this reduction in value as a non-adjusting post balance sheet
event and have not, therefore, been accounted for at the balance sheet date.
The investment in StatsOnSport Limited, a private limited liability company incorporated in England, of US$510,000 was written off to
the income statement as the company went into receivership.
At 19 September 2008, the closing price of listed shares in CY Foundation Group Limited was HK$16cents compared to HK$38cents as at 30
June 2008. This has resulted in the fair value of these shares decreasing by approximately US$1,800,000. This reduction in value is a
non-adjusting post balance sheet event and has not therefore been accounted for as at the balance sheet date.
During the period ended 30 June 2008 and year ended 31 December 2007 , the decrease/ increase in fair value of the available for sale
equity securities amounting to approximately (US$8,544,000) and US$8,502,000 respectively were recognised directly in equity.
Listed equity securities were stated at fair values based on their quoted market prices. Unlisted equity securities were stated at cost,
in which the directors considered to be approximate to fair value.
The maximum exposure to price risk at the balance sheet date is the carrying amount of the equity investments.
Playtech Limited and its affiliated companies are related by virtue of Mr. Thomas Alexej Hall being a common shareholder and director,
as well as Playtech Limited and the Group being shareholders in each other.
8. Contingent Liabilities
From time to time the Group may be subject to legal claims and actions against it, due to amendments and changes to gambling legal and
regulatory framework in the principal jurisdictions in which it operates
(a) Regulatory issues
The Group undertakes ongoing compliance and operational risk assessment processes and management continue to monitor legal and
regulatory developments, their potential impacts on the business, and continue to take appropriate advise on these developments.
Based on legal advice, the Directors decided to terminate the Group's online gaming activities in Italy. At the end of 2007 and as at 30
June 2008 was effecting an orderly shutdown of its online gaming activities in Indonesia.
(b) Taxation
(i) Risk of a Change in the Taxation to Which the Group is Subject
The Group's tax liability is dependent upon the tax regimes in the countries in which it is either incorporated, tax resident or has
business operations, continuing on a consistent basis. If there is a change in tax legislation, or in the interpretation of existing tax law
in these countries then such changes could, if material, increase the Group's taxation exposure to corporate income taxes, turnover taxes,
withholding and other tax liabilities, both past and present and may include the possibility of interest and penalties.
(ii) Risk Associated with Tax Residence
The Group's tax charge is also dependent on the tax residence of the Company and its subsidiaries not being challenged by a taxation
authority. In particular, certain taxation authorities base taxation on the tax residence of a company. The test of tax residence varies,
but is commonly based on the location where a company is centrally managed and controlled or effectively managed. This may depend upon the
residence of the Directors and where they exercise central management and control or effective management. This may differ from the
company's place of incorporation. Were the taxing authority to successfully maintain that a company was resident in their territory then
this could result in increased tax liabilities. There is therefore a danger that the residence of the Directors, or the location of their
meetings, could result in changes in tax residence resulting in increased tax charges.
(c) Others
On 16 March 2007, Golden Aquila Holdings Limited, a shareholder of the Group, advanced HK$50,625,000 (approximately US$6,481,000) as 50%
of the total consideration to purchase the entire issued share capital of Copernicus Trading Limited, a company formerly 50% owned by
Carmila Hall, the wife of Thomas Alexej Hall. On 15 October 2007, the Group transferred 18.75% of the issued share capital of Copernicus
Trading Limited to Golden Aquila Holdings Limited, being full and final settlement of the loan.
The Group has guaranteed to Golden Aquila Holdings Limited that if it is unable to sell its Foundation shares at above HK$0.675 it will
make up any shortfall. In addition, Golden Aquila Holdings Limited will share with the Group (on the basis of the prescribed formula) any
surplus. The Directors are unable to quantify any possible financial impact and consequently, no provisions have been made. Foundation
shares traded at HK$0.38 as at the date of the interim review.
Independent Review Report to AsianLogic Limited
(Incorporated in the British Virgin Islands with limited liability)
Introduction
We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six
months ended 30 June 2008 which comprises the Consolidated Income Statement, the Consolidated Balance Sheet, the Consolidated Cash Flow
Statement, the Consolidated Statement of Changes in Equity and the related explanatory notes 1 to 8.
Management is responsible for the presentation and fair preparation of this interim financial information in accordance with
International Financial Reporting Standards.
Directors' responsibilities
The interim report, including the financial information contained therein, is the responsibility of and has been approved by the
directors. The directors are responsible for preparing the interim report in accordance with the rules of the London Stock Exchange for
companies trading securities on the Alternative Investment Market which require that the half-yearly report be presented and prepared in a
form consistent with that which will be adopted in the company's annual accounts having regard to the accounting standards applicable to
such annual accounts.
Our responsibility
It is our responsibility to form a conclusion, based on our review, on the interim financial information and to report our conclusion
solely to you, as a body, in accordance with our agreed terms of engagement, and for no other purpose. We do not assume responsibility
towards or accept liability to any other person for the contents of this report.
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". A review of interim financial information consists of making inquiries, 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 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
half-yearly financial report for the six months ended 30 June 2008 is not prepared, in all material respects, in accordance with the rules
of the London Stock Exchange for companies trading securities on the Alternative Investment Market.
Emphasis of matter
In forming our review conclusion, which is not qualified, we have considered the adequacy of, and draw attention to, the disclosures
made in note 8 to the financial information concerning the uncertainty over the actions, if any, that certain regulatory authorities may
take. Further information is set out in note 8, which states that the Directors consider that no provision is necessary in respect of this
matter.
Baker Tilly Hong Kong Limited
Certified Public Accountants
Hong Kong,
Andrew David Ross
Practising Certificate number P01183
29 September 2008
This information is provided by RNS
The company news service from the London Stock Exchange
END
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