Nektan plc (LON:NKTN), a leading international B2B gaming solutions and services provider, announced today its results for the year ended 30 June 2016, provides a post period-end update, and discloses a proposed equity fundraising.
Trading update for the quarter ended September 2016
· Q1 trading to the end of September 2016 – positive growth momentum which is accelerating into Q2
| Q1 | Change | ||
| 2017 | 2016 | ||
| Net Gaming Revenue (NGR) | £2.1m | £0.5m | 295% |
| First Time Depositors | 14,037 | 6,518 | 115% |
| Cash Wagering | £65.9m | £15.4m | 328% |
· Proposed fundraising of up to £2.275m gross to provide near term working capital by way of subscriptions for new ordinary shares. The Company has received indications of interest from investors which would be sufficient to complete the subscription
· Amendment to the terms of the convertible loan note where Series A Loan Note Holders have agreed to allow the Company, at its choice, to defer interest payments
· Continued realignment of the businesses in Europe and the US to accelerate more profitable and sustainable growth:
· On 21 December, the Company increased its ownership of Respin Inc, the Class II mobile on-premise solution provider, to 85% as additional funding was converted to an increased membership interest, transitioning the business to an operating subsidiary of Nektan from a joint venture
· On 22 August, the Company entered in to an asset disposal and separate licensing agreement with Buckingham HMB Ltd for three of the Company’s wholly-owned gaming brands for £1.95 million in cash and a five-year licencing agreement
Preliminary results summary
| Year ended | Year ended | |
| 30-Jun-16 | 30-Jun-15 | |
| £’000 | £’000 | |
| Total revenue | 5,783 | 528 |
| Adjusted EBITDA* | -5,744 | -5,109 |
| Operating loss | -8,349 | -7,209 |
| Loss after taxation | -10,486 | -8,123 |
| Basic loss per share (pence) | -44.8 | -39.6 |
| Diluted loss per share (pence) | -44.8 | -39.6 |
| *Adjusted EBITDA excludes exceptional costs and non-cash charges relating to share based payments | ||
Operational and strategic highlights for year ended 30 June 2016
· Net Gaming Revenue (NGR) growth of 1,402% to £5,783,000 (2015: £385,000)
· Delivered improved underlying growth momentum by expanding our engaged registered customer base:
o Recruited 48,723 new First Time Depositing Players (FTDs) (2015: 5,461)
o Total cash wagering up by 1,128% to £150 million (2015: £13.3 million)
o Processed 39,589,325 transactions (bets or spins) from 50,805 cash players in the financial year
· Adjusted LBITDA of £5,744,000 (2015: £5,109,000 loss) and loss for the year of £10,486,000 (2015 £8,142,000 loss)
· Launched 29 new partners on our casino network on multi-year contracts, helping to underpin recurring revenue growth, with an increasing focus on those that add most value to the casino network through player acquisition and product development improvements
· Continued strengthening of the business to deliver sustainable growth across Europe and the US by improving player attraction and retention and maximising player life time values through a number of product and process improvements
· Respin LLC, our US joint venture in partnership with Spin Games (which became a subsidiary after the year end) continued to innovate, with the launch of its Rapid Games product, a Class II Mobile in venue cash wagering solution, offering casino patrons the opportunity to wager on their own devices when in a casino
Proposed equity fundraising
· The Company is seeking to raise up to £2.275m gross to provide near term working capital by way of subscription for new ordinary shares
· The Company has received indications of interest from investors which would be sufficient to complete the subscription
· In addition, upon completion of the subscription, the directors will make an offer to qualify shareholders to subscribe for new ordinary shares with a value of up to £500,000
· Both the subscription and the offer will be priced at 27.5p (a discount of 15% to the mid-market share price at the close on 28 December 2016) and will include a warrant that will reprice the investors investment price to the issue price of any lower priced fundraising in the next 6 months
· The subscription will launch immediately following this announcement and a further announcement will be made to confirm its completion later today
· The funds being raised from the subscription will provide near term working capital but it is expected that long term funding will be required by the Company and, without undertaking alternative corporate transactions, the directors anticipate that the Company will need to undertake an additional fundraising
Proposed amendments to the Series A Convertible Loan Notes (“CLN”)
· There is currently £10,000,000 of Series A CLNs
· Subject to the completion of the fundraising, the Company has agreed with the noteholders to amend the terms of the Series A CLNs so that the Company has the right to defer the interest on the Series A CLNs until 2020
· If the Company exercises its right to defer interest, the Series A CLN holders will be granted a warrant to buy Ordinary Shares at the lowest prevailing equity issue price per share up to the value of the interest so deferred prior to the redemption date
· Ordinary Shares issued pursuant to the exercise of these warrants will not rebase the Conversion Price
· The Company will be able to opt to repay the Series A CLNs on any date after 30 April 2019 and prior to the end of the term
Increase in holding in US Joint Venture
· In November 2014, Nektan signed an agreement with Spin Games for the creation of the Respin LLC joint venture
· Historically, both parties have provided resources to Respin equally but over the last year the Company has provided Respin with approximately $1.7m of additional loans
· On 21 December, the Company has converted these loans and increase its membership interest in its ReSpin LLC joint venture from 50% to 85% , transitioning the business to an operating subsidiary of Nektan from a joint venture
Leigh Nissim, Nektan Plc Chief Executive Officer, said: “In Europe, Nektan continues to focus on accelerating momentum and optimising its casino network, with the addition of new partners, high quality casino games and improved features and facilities to keep attracting and retaining players, which we are further building on to deliver profitable growth.
We expect that our North American Respin business, now an operating subsidiary of the Group, will increase its installed customer base amongst tribal casinos due to the strength of our product, pipeline and level of interest from casinos for our on-premise Class II mobile casino solution.
We will continue to invest in our proprietary core platform, Evolve, which powers both our North American and European businesses. The intelligent use of the flexibility and speed this provides will allow us to leverage the Company’s assets, expertise and networks across both North America and Europe, to maximise revenue in both businesses and deliver profitable growth to shareholders. “
