JPJ Group PLC Announces Half-Year Report

JPJ Group plc
Results for the six months ended 30 June 2019

Gaming revenue grows 14% year-on-year; adjusted EBITDA up 2%
Trading in line with expectations; confident in full year outlook

LONDON / ACCESSWIRE / August 13, 2019 / JPJ Group plc (LSE: JPJ) (the 'Group'), a leading global online bingo-led operator, today announces the results for the six months ended 30 June 2019.

Financial summary^[1]

Financial highlights for first six months

• Strong financial performance

o Gaming revenue rose 14% year-on-year, driven by strong organic growth^[4] at Vera&John

o Adjusted EBITDA² increased 2% year-on-year due to revenue growth and partially offset by expected impact from higher UK gaming taxes

o Adjusted net income² decreased by 2% year-on-year due to higher depreciation on purchased tangible assets and higher amortisation on internally generated intangible assets

• Ongoing cash generation and reduction in net debt

o Free cash flow^[5] of £30.8 million and adjusted net debt^[6] of £269.9 million (compared to £302.1 million at 31 December 2018)

o Adjusted net leverage ratio^[7] of 2.47x reduced from 2.68x at 31 December 2018. Slightly higher than Q1 2019 due to cash requirements in Q2 2019

• Following the good trading in the first six months of 2019, the Board remains confident in the full year outlook

Operational highlights

• Continued improvement in core KPIs^[8],[9] year-on-year:

o Average Active Customers per Month^8,9 grew to 245,893 in the twelve months to 30 June 2019, an increase of 7% year-on-year

o Average Real Money Gaming Revenue per Month^8,9 grew to £26.5 million, an increase of 12% year-on-year

o Monthly Real Money Gaming Revenue per Average Active Customer^8,9 of £108, an increase of 5% year-on-year

Business segments highlights for H1 2019

• Jackpotjoy⁹ (58% of Group revenue) - Gaming revenue fell by 6% year-on-year following a decline in both Jackpotjoy's UK and Swedish brands due to enhanced responsible gambling measures introduced in the UK and recent regulatory changes in Sweden; adjusted EBITDA² decreased 26% due to higher gaming taxes in the UK and Sweden and an increase in marketing spend in Spain and the UK; Botemania brand (17% of segment revenues) continues to perform strongly
• Vera&John (42% of Group revenue) - Gaming revenue growth of 58% (or 59% on a constant currency basis^[10]); adjusted EBITDA² increased substantially (up by 109%) as a result, with distribution and administrative costs growing more modestly at 33% and 57%, respectively

Gamesys acquisition

• Conditional agreement to acquire the business of Gamesys (Holdings) Limited ('Gamesys'), excluding sports brands and games, announced on 13 June 2019
• An important transformational step in the Group's growth, providing significant benefits for shareholders, employees and customers; enhancing scale and creating a world class online gaming company
• Expected completion of the Gamesys acquisition in Q3 2019
• Gamesys gaming revenue^[11] of £96.1 million in H1 2019, which represents growth of 8% year over year; adjusted EBITDA^2,11 of £29.6 million in H1 2019 which represents a decline of 15% year-on-year due to higher gaming taxes in the UK and an increase in marketing spend. Gamesys results in line with management expectations

Outlook

Trading in the second quarter has been in line with management's expectations and we remain confident in the full-year outlook. Our international markets are well-placed to continue to deliver strong growth and Jackpotjoy UK is set to pass the anniversary of the introduction of enhanced UK responsible gambling measures during the second half of 2019.

Neil Goulden, Executive Chairman, commented:

"I'm pleased to report that the Group has delivered another good quarter of revenue growth, alongside the expected impact of higher gaming taxes on EBITDA. Group revenues were up 14% in H1 2019, driven by a strong performance in Vera&John, while adjusted EBITDA² increased 2%, notwithstanding the increased rate of POC tax in the UK to 21% from 15% and effective as of 1 April 2019, as well as the introduction of POC tax in Sweden at a rate of 18% from 1 January 2019.

On 13 June 2019, we announced our intention to acquire Gamesys which represents a transformational step in the Group's growth and one which will provide significant benefits for shareholders, employees and customers. We expect the Gamesys acquisition to deliver double digit earnings accretion in the first full financial year of ownership and our employees will benefit from the combination of two companies with a strong commitment to responsible gaming, with a scale to further enhance our product development and technology capabilities. Our customers will also now have an even greater choice of major brands and different games, creating a truly leading UK and international operator. We expect the Gamesys acquisition to complete during Q3 2019 and we will update the market further in due course."

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 (UK shareholders); +1 866 378-3566 (Canada); or +1 866 966-5335 (US), 10 minutes prior to the scheduled start of the call using the reference "JPJ"'. A replay of the conference call will be available for 30 days by dialling +44 (0) 20 8196 1998 or +1 866 583-1039 and using reference 0435633#. A transcript will also be made available on JPJ Group plc's website at www.jpjgroup.com/investors.

Executive Chairman's Review

Overview and summary of results

JPJ Group plc has had a strong first half in the current financial year and continues to demonstrate the strong momentum in performance shown during 2018. In the six month period, we increased Group total gaming revenue by 14% and in the twelve month period, we grew our customer base by 7%, to 245,893 Average Active Customers per Month^8,9. Adjusted EBITDA² increased 2% year-on-year due to strong revenue growth and the expected impact from higher UK and Swedish gaming taxes.

Vera&John continues its impressive performance and now accounts for 42% of Group revenue. This has been driven by the segment's success in new markets, including Germany, Brazil and Japan. It also continues to see significant B2B growth across the broader Asian region. We expect Vera&John to continue to be our fastest growing segment as we focus on growing our business both in further emerging markets in Asia, Latin America and more established European markets.

As a management team, we remain very proud of our market-leading position in the UK and acknowledge the challenges the Jackpotjoy brand has faced in recent months. It has been impacted in particular by the increase in remote gaming duty from 15% to 21% in Q2 2019 and the enhanced responsible gambling measures on our existing VIP customer base. We are committed to pursuing an active strategy to return Jackpotjoy UK into mature growth in the coming months and continue to grow our market share in new active customers.

The Group continues to benefit from pursuing a strategy of diversification, both geographically and in our product mix and it will continue to balance operations in both regulated and unregulated markets. UK revenues accounted for 47% of the Group's revenues in H1 2019 vs 53% across the rest of the world.

Corporate developments

Gamesys Acquisition

On 13 June 2019, we announced that the Group entered into a conditional agreement to acquire Gamesys, excluding sports brands and games, for a total valuation of c.£490.0 million^[12] via a mixture of cash and shares. The Gamesys Acquisition is expected to enhance scale, creating a group which is strategically well positioned for future growth in an evolving global gaming sector. The combined group will have a more diversified brand portfolio with international expansion opportunities and combines highly experienced management teams. The Gamesys Acquisition was approved by shareholders at the Group's General Meeting on 31 July 2019 and completion of the transaction is expected in the third quarter of 2019.

Mandalay sale

In March 2019, the Group completed the sale of its Mandalay business for £18.0 million. The Group received £12.0 million cash consideration upfront with the outstanding £6.0 million to be paid in September 2019.

Exchangeable shares

JPJ Group plc's subsidiary The lntertain Group Limited intends to seek the approval of the holders of exchangeable shares to amend the exchangeable share provisions to provide for the early redemption of the exchangeable shares. This amendment is subject to approval at a meeting of the exchangeable shareholders on 30 August 2019. If this amendment is approved and the exchangeable shares redeemed as intended, it would have the effect of rationalising the Group's share structure.

Syndication of additional facility

On 1 July 2019, the Group announced completion of syndication of the EUR equivalent of £175.0 million (being €196.0 million) additional term loan facility to be used to support the Gamesys Acquisition. The Group's new incremental term loan facility is fungible with the Group's existing EUR Term Facility.

Click on, or paste the following link into your web browser, to view the full announcement

http://www.rns-pdf.londonstockexchange.com/rns/7950I_1-2019-8-12.pdf

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit www.rns.com.

SOURCE: JPJ Group plc