TIDMXLM
RNS Number : 8663R
XLMedia PLC
17 September 2014
For Immediate Release 17 September 2014
XLMedia PLC
("XLMedia " or "the Group")
Interim Results for the six months ended 30 June 2014
Continued growth and investment underpins strong start to second
half of the year
XLMedia (AIM:XLM), a leading provider of digital performance
marketing services, is pleased to announce its interim results for
the six months ended 30 June 2014.
Financial Highlights:
-- Revenues increased 24% to $19.9M (H1 2013: $16M)
-- Gross Profit increased 10% to $11.3M (H1 2013: $10.3M)
-- Adjusted EBITDA was $6.4M (H1 2013: $7.2M) reflects increased
investment in line with strategy to generate future growth, which
is showing results
-- Increase of 8% compared to H2 2013 and positive outlook for second half of 2014
-- Cash balance of $56.6 million (June 30, 2013: $4.2M)
-- Interim dividend of $3M declared
o Dividend to be paid on 31 October 2014 (the ex-dividend date
is 24 September 2014 and the record date for the dividend is 26
September 2014. The dividend equates to $0.0158 per share
Operating Highlights up-to-date:
-- Strong six month trading in core performance marketing segment
o Maintained market leading position in Nordic markets
o Accelerated growth in newer territories including Canada,
Greece, Denmark, Austria and Germany. Continued to position for US
market
-- Significant progress with acquisitions, a strategic priority
since listing on AIM in March 2014
o Successful entry into the social and mobile gaming arena
following the acquisition of EDM (September), a leading company in
the social gaming market with excellent track record of growth, the
Group's largest transaction to date
o Bolt-on acquisitions include Nordic Content Network (July) and
Sports Betting Content Site (August)
o Acquisitions are all earnings enhancing and strengthen the
Group's position in newer markets and products
o Acquisition pipeline remains strong in a highly fragmented
market
The Board is confident the outlook remains positive for the rest
of 2014 and beyond.
Ory Weihs, Chief Executive Officer of XLMedia, commented:
"We are delighted to report the Group has made an excellent
start to 2014, reflecting strong sales momentum in our core
European markets. The demand for our services remains high with
gaming operators continuing to seek out our services in order to
maintain significant levels of high quality traffic to their
sites.
"We have also made good progress with our acquisition strategy,
a key growth initiative articulated at the time of our IPO earlier
this year. The acquisition of EDM, our largest to date, on 1
September 2014, takes the Group into the fast growing social gaming
arena, which we believe will be a significant growth engine for
XLMedia in the coming years.
"Our investment across the business is now generating positive
results. We have already made a strong start to the second half of
the year and believe the business is now very well placed for the
remainder of 2014. It is this continued positive momentum which
underpins our confidence in meeting market expectations for the
full year and supports our dividend policy."
For further information, contact:
XLMedia PLC
Ory Weihs Tel: 020 7466 5000 (today)
Tel: 020 8817 5283 thereafter
www.xlmedia.com
Buchanan
Jeremy Garcia / Sophie McNulty / Clare Akhurst Tel: 020 7466 5000
www.buchanan.uk.com
Cenkos Securities plc
Ivonne Cantu/ Callum Davidson Tel: 020 7397 8900
1 Adjusted EBITDA - Earnings before interest, taxes.
depreciation and amortisation, and adjusted to exclude share based
payments
Operational Review
Introduction
We are pleased to report a strong period of both operational and
strategic progress for the Group. Our successful listing on AIM
earlier this year continues to act as a positive catalyst for the
Group and has significantly enhanced our brand, market presence and
more importantly, ability to execute our strategy and consolidate
additional businesses into ours.
Our core online gambling and social gaming markets continue to
expand, underpinned by the global proliferation of mobile and
tablet devices. These strong market fundamentals reinforce our
continued confidence in the Group's core business.
During the period we have generated significant levels of
organic revenue growth and completed a number of acquisitions,
culminating with the acquisition of Excitead Digital Marketing Ltd
("EDM"), a leading operator in the social and mobile segment of our
industry, for up to $19 million.
Turning to our results, revenues were up 24% to $19.9M (H1 2013:
$16M) and gross profit up 10% to $11.3M (H1 2013: $10.3M),
underpinned by high levels of organic growth in all segments.
Results reflect the operational foundations we have laid down
during the past two years, resulting in a strong platform for
future growth to implement our acquisition strategy. With the
effect of these investments in infrastructure and organisation, we
remain confident of our performance for the remainder of the year
and beyond.
As previously stated, the business model and growth prospects
for the Group support a progressive dividend policy. As such
management reaffirms its intention to return at least 50% of
retained earnings in any financial period to equity holders as
dividends and the Board is recommending an interim dividend of $3
million or $0.0158 per share to shareholders on the register on 26
September 2014. In June 2014 the Group announced the 2013 dividend
of $5.25 million.
Business Summary
The Group has leading marketing capabilities that attract online
users who are then directed to online gambling and social gaming
operators' sites and applications, in return for either a share of
the revenue generated by such players, a fee generated per player
acquired or action performed, fixed fees or a hybrid of any of
these models.
The three principal revenue generating activities of the Group
are: content and search, digital media buying and our own affiliate
network.
Content and search: XLMedia earns the majority of its revenue
from the monetisation of traffic generated by its own portfolio of
websites. The Group owns more than 2,000 websites which provide
gambling related content, in 18 languages, to potential players.
These sites' content, written by professional writers, is designed
to attract online gamblers which the Group then directs to gambling
operators. The sites either direct players to a certain operator or
allow the players to select the operator most relevant to their
requirements.
Media Buying: The Group's Media Buying division acquires online
advertising media targeted at potential players with the objective
of directing them to the Group's customers. The Group buys
advertising space on search engines, websites, mobile websites
& applications and social networks and places adverts referring
potential players to the Group's customers' websites or to its own
websites. The Group uses proprietary campaign optimisation and
analysis tools as well as a strong business intelligence ("BI")
backend expertise.
Affiliate network: The Group currently manages approximately 300
active affiliates, whose role is to direct potential players to the
Group's customers for which the Group receives revenues. The Group
is then responsible for paying its affiliate partners. The
Directors believe that the Group's affiliate programme is
attractive to existing and potential affiliates as it enables them
to have a single point of contact to direct traffic to, and receive
monies from, rather than engaging in multilateral negotiation,
administration and collection of revenues from the operators.
Growth strategy
Since its IPO in March 2014, XLMedia has had a very clear growth
strategy to expand and diversify its activities into complementary
areas and act as a consolidator in a fragmented market. As demand
for digital marketing within the gambling and social gaming sectors
continues to grow, XLMedia is perfectly situated to capitalise on
this growth.
XLMedia continues to focus on growing its market share in key
territories, including Scandinavia and English and German speaking
countries particularly, as the EU remains the biggest and most
sophisticated gambling arena worldwide. The current operation
structure, following all additions made during 2013 and H1 2014,
allows for expansion without significant capital expenditure and
the Group looks towards extending its reach in territories such as
the US, Canada, Austria, Germany, Switzerland, Greece and Denmark
as potential growth geographies.
Since its IPO earlier this year, XLMedia has made good progress
towards this strategy, completing acquisitions all of which are
highly complementary to the existing business, delivering a wide
range of synergies and strategic benefits.
Mobile and tablet users are becoming increasingly important to
the online gambling industry with mobile users expected to account
for 44% of the global interactive gambling market by 2018,
according to H2 Gambling Capital. As this growth continues, the
Group's online marketing practices become even more essential to
maintain market presence for gambling and social gaming operators.
As industry leaders in mobile marketing and social media
activities, with content and search skills set to continue to
evolve and further investment in innovative marketing technologies
and optimisation, the Group is well positioned to maximise its
potential.
Turning to the US market, although it is currently in its
initial stage, it is expected to generate growth in the regulated
states in the near future with the introduction of regulated online
gambling to new states. The Group is positioning itself as a
leading provider once further states open, and has established a
strategic partnership with a leading online gambling operator, has
acquired a number of domains and websites targeted at the north
American markets and has recruited the appropriate teams as well as
discussing with both New Jersey and Nevada regulators to obtain a
full marketing licence to allow more flexible revenue models.
Acquisitions
The acquisition strategy of the Group is consistent with our
broader growth strategy to increase our presence in regulated
markets; expand and develop new territories; and diversify across
selected vertical markets, products and channels; whilst acting as
a consolidator in a largely fragmented market. The mobile arena and
more specifically mobile enabling technology, is now a key focus
for the Group as both mobile and tablet gaming and gambling
increase.
We have a pipeline of potential acquisition prospects in these
areas.
We are pleased to have made significant progress securing
attractive acquisitions for the Group, which include the following
transactions:
-- Q2 2014 - completing two small bolt-on acquisitions of high
potential domains operating in North American markets for a total
consideration of $430,000.
-- June 2014 - a leading Scandinavian website network within the
online gaming sector for a cash consideration of $2.3 million -
offering a complementary geographic footprint to XLMedia's existing
Scandinavian presence and extending its reach into Denmark, a fully
regulated market.
-- August 2014 - the Group acquired a website which is focused
on UK web and mobile traffic and specialised in sports betting
content for a cash consideration of GBP4 million ($ 6.72 million).
This acquisition gives the Group access to new sports betting
customers in this regulated market and management is planning to
enhance the new websites, translating them into more languages and
extending them to new markets.
-- September 2014 - the Group announced its largest deal to date
with the acquisition of ExciteAd Digital Marketing Ltd ("EDM") for
a total consideration of up to $19 million in cash and shares. EDM
provides marketing services to game developers and eases the Group
penetration to the social and mobile gaming market, which is a
rapidly developing and growing market and one that is not subject
to the same regulatory requirements as the online gambling
market.
In addition, earlier this month the Company announced it had
agreed to acquire an additional 21% in the joint venture which
operates the Group's Finnish websites (the "JV"), for a cash
consideration of US$1.49 million. The acquisition will take
XLMedia's holding in the JV to 93% (previously 72%). This
acquisition will increase the Group's net income attributable to
its shareholders. This will in turn increase the retained earnings
available for distribution to shareholders as dividends.
Management believes that consolidation in what is a highly
fragmented market within the gaming arena will help accelerate
innovation, geographic reach and the Group's market position. Our
strengthened balance sheet following the successful placing and
admission to AIM continues to allow the Group to accelerate its
growth objectives through its acquisition strategy.
EDM Acquisition
On 1 September, the Group announced its largest deal to date
with the acquisition of EDM (trading as "Dauup.com"). EDM
specialises in social and mobile advertising specifically targeted
at 'user acquisition' for social gaming applications.
EDM provides marketing services to game developers in social and
mobile platforms, providing the Group with an improved footprint in
the social and mobile gaming market, which is rapidly developing
and growing and one that is not subject to the same regulatory
requirements as the online gambling market. EDM's principal
geographical market is the US, in addition to other English and
German speaking markets.
EDM's revenue model is based mainly on performance and for the
12 months ended 30 June 2014 EDM delivered revenues of $12.8M and
PBT of $3.0M with approximately 50% of revenues generated through
mobile users. The acquisition was earnings enhancing and management
expects EDM's contribution to support a strengthened performance in
the second half of the current financial year and beyond.
The acquisition of EDM will diversify the business into new
products and markets, targeting a new customer base, as well as
providing enhanced growth opportunities within existing markets. In
particular, benefits for the Group include:
-- Strong growth in a fast paced and expanding market - social
and mobile games and applications are a fast expanding market which
is not subject to the same regulatory regime as the online gambling
market. EDM will provide the Group additional growth opportunities
in this new area.
-- Social expertise - EDM's expertise in social and mobile
marketing supplements XLMedia's knowledge and understanding in
marketing online gambling.
-- Mobile expertise - approximately 50% of EDM's revenues are
generated through mobile users. Mobile users have also become a
significant part of the online gambling industry, with an
anticipated 44% share of the global interactive gambling market by
2018, according to market research provider H2 Gambling Capital
(H2).
-- Revenue streams from regulated products and markets - social
gaming, which does not involve real money gambling, does not
require a licence. Expanding XLMedia's product range into this
sector will therefore strengthen the Group's position in regulated
online gambling markets such as the US and UK.
-- A new customer base - EDM's customers typically comprise of
game developers in social platforms, presenting a new target
audience for XLMedia.
-- An expanded geographic reach - EDM's principal market is the
US, with additional revenues derived from other English and German
speaking markets as well as other countries outside of XLMedia's
core Scandinavian markets, representing diversification for the
Group into new geographies.
-- Strong analytic systems - EDM uses its proprietary internal
systems for both analysis of performance as well as for campaign
definitions and building. Integrating these tools into XLMedia's
own network will contribute to the Group's performance and
improvement.
Divisional update
As we add scale and geographic diversity across our business,
our operational divisions have also expanded.
Within Media Buying, growth continues to be supported by new
media channels, such as display and social media, which represent
new areas for the Group compared to 2013. Whilst revenues within
Media Buying grew, as expected, segment profit remained stable due
to lower margins resulting from the entry into this new media
channel. Despite the lower margin in display and social media
buying compared to the Pay Per Click search campaigns we anticipate
substantial volume increases and platform innovation to offset any
margin dilution going forward. Both social media and mobile remain
significant revenue and profit drivers for our Media Buying
activities in the near term.
Content and search, which remains a highly specialised division,
continues to innovate and invest in platform development. Customer
activity with key European gaming operators remained strong.
Elsewhere, we have increased our ongoing investments in R&D,
developing our core BI systems to support sophisticated campaign
management and improve margins for new media channels such as
social and mobile networks, which represent the Group's significant
growth engines. We believe that technology is a competitive
advantage in our market and therefore intend to invest more in
developing and acquiring mobile, social and BI capabilities in the
coming years.
Our Affiliate Network continues to generate significant traffic
for both the Group and our customers. We continue to expand our
incentive packages and have invested in additional back office
support providing greater levels of statistics and intelligence for
our partners.
We are also pleased to have broadened our customer base during
the period with our largest customer now accounting for 17% of
Group revenues compared to 25% in 2013 and 31% in 2012.
Current Trading & Outlook
The Group has performed strongly in the first six months of the
year, with good sales momentum in core European markets.
The recent acquisitions are expected to have a positive impact
on both H2 2014 and FY 2015. As a result, management expects both
sales and EBITDA in H2 to exceed H1 2014 with full year results in
line with market expectations.
The Group continues to see strong levels of demand in its core
markets and anticipates further traction in new and expanding
territories. In addition, the Group remains well placed to pursue
further strategic bolt-on acquisitions, underpinned by its strong
financial position.
With the progress made in H1 2014, and in view of the strong
second half weighting to our business, the Board remains confident
of delivering continued growth in 2014 and beyond.
Financial Review
Results summary, US$ millions:
H1 2014 H2 2013 H1 2013
Revenues 19.9 18.5 16.0
Gross Profit 11.3 10.2 10.3
Gross Margin 57% 55% 64%
Operating expenses 6.2 5.1 3.3
Adjusted Operating expenses
excluding share based
payments 5.4 5.0 3.3
Adjusted EBITDA* 6.4 6.0 7.2
============================= ======== ======== ========
* Earnings before interest, taxes, depreciation and amortization
and excluding IPO expenses and share based payments
The first six months to 30 June 2014 saw a record performance in
revenues. Content and Search accounted for 53.6% of revenues or
$10.7 million (H1 2013: $9.4M, 58.6%), Media Buying for 33.8% or
$6.7 million (H1 2013: $4.0M, 24.8%) and the affiliate network for
12.6% or $2.5 million (H1 2013: $2.7, 16.6%).
Growth in the content segment was mainly due to increased
performance of our current website network, whilst the H1 2014
results do not reflect the additions of the recent
acquisitions.
Growth in the Media segment is attributable to the fast growing
of new media channels such as social networks and mobile
advertising as well as posting ads with display networks.
Management expects to see even higher increase in growth of this
segment with recent acquisition of EDM which is focused on social
and mobile advertising for game developers.
Gross profit rose 10.8% in H1 2014 to $11.3 million (H2 2013:
$10.2M). Gross margin reflects an increase to 57% (H2 2013: 57%) as
benefits of scale take effect as the business grows as well as
additional BI tools and organisation backend support implemented
and increased efficiency. Gross margins reflect a decrease compared
to Gross margins in H1 2013 (64%) due to lower margins resulting
from expansion of media channels, such as display media buying and
social media, which are characterised by lower margins compared to
the paid search campaigns in previous years.
Operating Expenses have increased to $6.2 million (H1 2013
$3.3M, H2 2013: $5.1M). The increase compared to H2 2013 is mainly
attributed to share based payments to employees. Excluding share
based payments operating expenses increased 8% reflecting the
additional costs involved with being a listed company. The
significant investments in building our operational teams to
position the Group for growth are completed and the current run
rate of operational expenses (excluding share based payments)
reflects the required levels of expenses going forward for current
size of the group.
Adjusted EBITDA was $6.4M (H1 2013: $7.2M; H2 2013: $6.0M)
reflecting an 8% increase compared to H2 2013 as a result of
increase in sales and gross profit. Adjusted EBITDA reflects a
decrease compared to H1 2013 as a result of the additional
operating expenses as a PLC.
As at 30 June 2014 XLMedia presented a very strong balance
sheet:
-- Cash balance of $56.6M (H2 2013: $15.5M)
-- 95% total equity to total assets ratio (H2 2013: $79%)
-- Working capital of $59.7M (H2 2013: $15.8M)
Cash flow from operating activities increased as well, to $5.8M
(H2 2013: $4.1M). Cash flow for investing activity amounted to
$3.5M (H2 2013: $0.8M) reflecting the acquisition of Scandinavian
network in June this year and additional domain acquisitions as
well as investing in our software and BI systems. Cash flow from
financing activities amounts to $38.9M (H2 2013: $8.0M) which
consisted of the net IPO proceeds of $48.9M offset by dividend
payment of $5.2M, other long term liabilities paid as well as
dividends to non-controlling interests.
The Board is recommending an interim dividend of $3 million or
$0.0158 per share to shareholders on the register on 26 September
2014. The interim dividend is in line with the Group's stated
strategy to return at least 50% of retained profits to shareholders
and reflects the strong outlook for the Group.
INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
AS OF JUNE 30, 2014
CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME
Six months ended Year ended
30 June 31 December
------------------ ------------
2014 2013 2013
-------- -------- ------------
Unaudited Audited
------------------ ------------
U.S. dollars in thousands
(except EPS data)
--------------------------------
Revenues 19,877 16,005 34,503
Cost of revenues 8,611 5,747 14,054
Gross profit 11,266 10,258 20,449
Research and development expenses 427 392 907
Selling and marketing expenses 1,129 826 1,785
General and administrative expenses 4,677 2,122 5,755
6,233 3,340 8,447
Operating income before expenses in connection
with IPO 5,033 6,918 12,002
Expenses in connection with IPO 461 - -
-------- -------- ------------
Operating income after expenses in connection
with IPO 4,572 6,918 12,002
Finance expenses (263) (428) (496)
Finance income 310 136 123
Income before other income (expenses),
net 4,619 6,626 11,629
Other income (expenses), net (9) - 32
Profit before taxes on income 4,610 6,626 11,661
Taxes on income 324 124 552
Net income and other comprehensive income 4,286 6,502 11,109
======== ======== ============
Attributable to:
Equity holders of the Company 3,001 5,415 8,838
Non-controlling interests 1,285 1,087 2,271
-------- -------- ------------
4,286 6,502 11,109
======== ======== ============
Net earnings per share attributable to
equity holders of the Company:
Basic and diluted net earnings per share
(in U.S. dollars ) 0.02 0.05 0.09
======== ======== ============
Weighted average number of shares used
in computing basic earnings per share
(in thousands) 159,103 100,000 101,436
======== ======== ============
Weighted average number of shares used
in computing diluted earnings per share
(in thousands) 162,087 100,000 101,820
======== ======== ============
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
30 June 31 December
-------------
2014 2013
------------ -------------
Unaudited Audited
------------ -------------
U.S. dollars in thousands
---------------------------
Assets
Current assets:
Cash and cash equivalents 56,632 15,455
Short-term investments 465 428
Trade receivables 4,912 4,498
Related parties - 147
Other receivables 1,675 1,974
63,684 22,502
-------------
Non-current assets:
Long-term investments 346 340
Other receivables 507 552
Property and equipment 759 738
Intangible assets 9,939 6,853
Goodwill 2,416 2,416
13,967 10,899
------------ -------------
77,651 33,401
============ =============
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Trade payables 1,808 1,536
Related parties - 605
Contingent consideration payable - 2,867
Other liabilities and accounts payable 2,164 1,646
3,972 6,654
------------ -------------
NON-CURRENT LIABILITIES - 227
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS
OF THE COMPANY:
Share capital *) *)
Share premium 62,152 14,311
Capital reserve from share-based transactions 1,997 479
Capital reserve from transaction with non-controlling
interests 106 106
Retained earnings 8,248 10,494
72,503 25,390
Non-controlling interests 1,176 1,130
------------ -------------
Total equity 73,679 26,520
------------ -------------
77,651 33,401
============ =============
*) Lower than U.S. dollars 1 thousand.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended Year ended
30 June 31 December
------------------ ------------
2014 2013 2013
-------- -------- ------------
Unaudited Audited
------------------ ------------
U.S. dollars in thousands
--------------------------------
Cash flows from operating activities:
Net income 4,286 6,502 11,109
-------- -------- ------------
Adjustments to reconcile net income
to net cash provided by operating activities:
Adjustments to the profit or loss items:
Depreciation and amortisation 514 317 794
Finance expense (income), net (318) 119 255
Loss (gain) from sale of assets 9 - (32)
Cost of share-based payment 1,137 - 479
Taxes on income 324 124 552
-------- -------- ------------
1,666 560 2,048
-------- -------- ------------
Changes in asset and liability items:
Decrease (increase) in trade receivables (414) 59 (1,546)
Decrease (increase) in other receivables (508) 79 (183)
Decrease (increase) in related parties (3) 275 93
Increase in trade payables 272 533 682
Increase in other accounts payable 455 171 357
(198) 1,117 (597)
-------- -------- ------------
Cash paid (received) during the period
for:
Interest paid - (131) (136)
Interest received 21 4 13
Taxes paid (98) (249) (547)
Taxes received 113 - -
36 (376) (670)
-------- -------- ------------
Net cash provided by operating activities 5,790 7,803 11,890
-------- -------- ------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended Year ended
30 June 31 December
------------------ ------------
2014 2013 2013
-------- -------- ------------
Unaudited Audited
------------------ ------------
U.S. dollars in thousands
--------------------------------
Cash flows from investing activities:
Purchase of property, plant and equipment (174) (99) (482)
Decrease in other financial assets, net,
acquired in business combination - 457
Purchase of intangible assets (3,484) (383) (936)
Proceeds from sale of assets 178 - 50
Short- term and long-term investments - (265) (607)
Net cash used in investing activities (3,480) (747) (1,518)
-------- -------- ------------
Cash flows from financing activities:
Prepaid expenses for share capital issuance - - (707)
Sale of shares to non-controlling interests - 31 31
Financing by non-controlling interests 57 - 10
Dividend paid to equity holders (5,247) - (1,800)
Dividend to equity holders as result of
the acquisition of Subsidiary - - (2,888)
Repayment of long-term and short-term
liabilities (716) - -
Dividend paid to non-controlling interests (1,301) (1,098) (2,055)
Issue of share capital (net of issue costs) 48,917 - 14,311
Proceeds from exercise of options 12 - -
Repayment of liabilities to Related Parties (2,855) (4,381) (4,381)
Net cash provided by (used in) financing
activities 38,867 (5,448) 2,521
-------- -------- ------------
Increase in cash and cash equivalents 41,177 1,608 12,893
Cash and cash equivalents at the beginning
of the period 15,455 2,562 2,562
-------- -------- ------------
Cash and cash equivalents at the end of
the period 56,632 4,170 15,455
======== ======== ============
Significant non-cash transactions:
Dividend payable to equity holders as
result of the acquisition of Subsidiary --512
===
Dividend payable to non-controlling interests --237
===
Receivable from sale of assets --826
===
NOTES TO INTERIM CONDENSED CONSOLIDTED FINANCIAL INFORMATION
NOTE 1: GENERAL
The Group is a global digital publisher and marketing company
which attracts paying users from different online channels and
directs them to online gambling operators.
The Group operates as a marketing affiliate to multiple gambling
operators. The Group attracts players through online marketing
techniques and subsequently seeks to channel high value "traffic"
(i.e. players) to gambling operators who, in turn, convert such
traffic into paying customers. Online gamblers are attracted by the
Group's publications and advertisements and are then directed, by
the Group, to online gambling operators in return for a share of
the revenue generated by such players, a fee generated per player
acquired, fixed fees or a hybrid of any of these three models.
NOTE 2: OPERATING SEGMENTS
(a) General:
The operating segments are identified on the basis of
information that is reviewed by the chief operating decision maker
("CODM") to make decisions about resources to be allocated and
assess its performance. Accordingly, for management purposes, the
Group is organised into operating segments based on the products
and services of the business units and has operating segments as
follows:
Content and Search - The Group owns more than 2,000 websites
- which provide gambling related content,
Engine Optimisation in 18 languages, to potential players.
("Content") The sites' content, written by professional
writers, is designed to attract online
gamblers which the Group then directs
to gambling operators. The sites either
direct players to a certain operator
or will allow the players to select
the operator most relevant to their
requirements.
Media - The Group's Media Buying division acquires
online advertising Media targeted at
potential players with the objective
of directing them to the Group's customers.
The Group buys advertising space on
search engines, websites and social
networks and places adverts referring
potential players to the Group's customers'
websites or to its own websites.
Affiliates Network - The Group manages affiliates, whose
role is to direct potential players
to the Group's customers for which the
Group receives revenues. The Group is
responsible for paying its affiliate
partners. The Group's affiliate program
enables affiliates to have a single
point of contact to direct traffic to,
and receive monies from, rather than
engaging in multilateral negotiation,
administration and collection of revenues.
Segment performance (segment income) is evaluated based on
revenues less direct operating costs.
Items that were not allocated are managed on a group basis.
NOTE 2: OPERATING SEGMENTS (cont.)
(b) Reporting on operating segments:
Affiliates
Content Media Network
segment segment segment Total
-------- -------- ---------- -------
U.S. dollars in thousands
---------------------------------------
Six months ended 30
June 2014 (unaudited):
Revenues 10,659 6,716 2,502 19,877
======== ======== ========== =======
Segment profit 7,986 2,927 353 11,266
======== ======== ==========
Unallocated corporate
expenses (6,694)
Other expenses, net (9)
Finance income, net 47
Profit before taxes
on income 4,610
=======
Affiliates
Content Media Network
segment segment segment Total
-------- -------- ---------- -------
U.S. dollars in thousands
---------------------------------------
Six months ended 30
June 2013 (unaudited):
Revenues 9,374 3,976 2,655 16,005
======== ======== ========== =======
Segment profit 7,340 2,567 351 10,258
======== ======== ==========
Unallocated corporate
expenses (3,340)
Finance expense, net (292)
Profit before taxes
on income 6,626
=======
Affiliates
Content Media Network
segment segment segment Total
-------- -------- ---------- -------
U.S. dollars in thousands
---------------------------------------
Year ended 31 December
2013 (audited):
Revenues 18,840 10,071 5,592 34,503
======== ======== ========== =======
Segment profit 14,234 5,583 632 20,449
======== ======== ==========
Unallocated corporate
expenses (8,447)
Other income, net 32
Finance expense, net (373)
Profit before taxes
on income 11,661
=======
NOTE 2: OPERATING SEGMENTS (Cont.)
(c) Geographic information:
Revenues classified by geographical areas based on internet user
location:
Six months ended Year ended
30 June 31 December
------------------ ------------
2014 2013 2013
-------- -------- ------------
Unaudited Audited
------------------ ------------
U.S. dollars in thousands
--------------------------------
Scandinavia 12,921 9,812 21,748
Other European countries 2,320 2,340 4,708
North America 765 162 418
Other countries 428 246 760
------------
Total revenues from identified
locations 16,434 12,560 27,634
Revenues from unidentified
locations 3,443 3,445 6,869
------------
Total revenues 19,877 16,005 34,503
============
This information is provided by RNS
The company news service from the London Stock Exchange
END
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