PRN: Jackpotjoy plc Results for the Three Months Ended 31 March 2017

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Jackpotjoy plc Results for the Three Months Ended 31 March 2017

 
[16-May-2017]
 

LONDON, May 16, 2017 /PRNewswire/ --

Gaming revenue up 11% year-on-year 

Full year 2017 outlook confirmed 

Jackpotjoy plc (LSE: JPJ), the largest online bingo-led operator in the world, today announces the results of the Jackpotjoy group (the "Group") for the three months ended 31 March 2017.

Financial summary 

                                                                  Three months                                        Three months ended    ended        Reported                                          31 March 2017         31 March 2016 Change                                          GBPm)                 GBPm)          %     Gaming revenue                     71.4                  64.2          11     Net (loss)/income (as reported     under IFRS)                        (15.3)                5.1            -     Adjusted EBITDA[1]                 29.2                  28.0          4     Adjusted net income[1]             20.8                  23.4           (11) 

Group financial highlights 

  • Solid financial performance:
    • Gaming revenue growth of 11% driven by 14% growth in the Jackpotjoy segment (71% of revenue)
    • Adjusted EBITDA[1] increased 4%, or 9% excluding income of £1.2m earned from the revenue guarantee in the prior year
    • Adjusted net income[1] down 11% due to higher interest expense from additional debt facility obtained in Q4 2016, and the impact of income earned from the revenue guarantee in the prior year
  • Strong ongoing cash generation:
    • 31.3p of operating cash flow per share[2]. Excluding one-time/exceptional items[3], this metric would increase to 40.3p per share[2]
    • 80% conversion rate from Adjusted EBITDA[1] to operating cash flow. Excluding one-time/exceptional items[3] this metric would increase to 103%
    • Gross cash of £112.3m at 31 March 2017
    • Adjusted net debt[4] of £407.3m at 31 March 2017 (£408.1m at 31 December 2016)
  • No change to full year 2017 outlook - management expects revenue growth in line with market growth rates

1 This release contains non-IFRS financial measures, which are noted where used. For additional details, including with respect to the reconciliations from these non-IFRS financial measures, please refer to the information under the heading "Note Regarding Non-IFRS Measures" on page 4 of this release and Note 4 â€�“ Segment Information of the unaudited interim condensed consolidated financial statements on pages 19 through 21 of this release.

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

3 One-time/exceptional items include transaction-related costs paid.

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

5 For additional details, please refer to the information under the heading "Key performance indicators" on page 9 of this release.

Operational highlights 

  • Ongoing improvement in core KPIs[5] year-on-year
    • Average Active Customers[5] grew to 239,452 in LTM to 31 March 2017, an increase of 15% year-on-year
    • Average Real Money Gaming Revenue per month[5] grew to £20.9 million, an increase of 17% year-on-year
    • Monthly Real Money Gaming Revenue per Average Active Customer[5] of £87, an increase of 2%

Business segments 

  • Jackpotjoy (71% of Group revenue) - Strong quarterly performance across all brands with revenue growth of 14% and Adjusted EBITDA[1] growth of 18%; Starspins and Botemania (18% of segment revenues) particularly strong due to growth in mobile and new products
  • Vera&John (22% of Group revenue) - Revenue growth of 13% and Adjusted EBITDA[1] growth of 7%
  • Mandalay (7% of Group revenue) - Revenue fell 14% compared to a record Q1 in 2016 and an Adjusted EBITDA[1] reduction of 15% reflected changes to on-site promotional spend in preparation for the UK point-of-consumption ("POC") tax in August 2017

Outlook  

For 2017, management continues to expect revenue growth in line with market growth rates and Q2 has seen a strong start across the Group; the Jackpotjoy segment continues to deliver robust top line growth, Vera&John has enjoyed very strong trading, while Mandalay had a record period for revenues in April. Although there will be an impact on margin from the introduction of the POC tax on bonuses in the UK, due to commence in August 2017, this may now be delayed given the forthcoming UK General Election.

Andrew McIver, Chief Executive Officer, commented:  

"The past quarter has been an exciting time for the Group as we have settled into our new home on the London Stock Exchange. Against this backdrop it is pleasing to report strong gaming revenue growth of 11%, with particularly impressive growth of 14% at our largest brand, Jackpotjoy. Meanwhile, cash conversion remained strong at over 100% excluding one-off and exceptional items.

It is also pleasing to report that we are making good progress in executing on our strategy across our portfolio of brands. I look forward to updating you more on the initiatives underway at our half-year results in August. Group trading has continued to be in line with our expectations and we remain confident that we will grow in line with the market during 2017."

Conference call 

A conference call for analysts and investors will be held today at 1.00pm BST / 8.00am ET. To participate, interested parties are asked to dial +44 (0) 20 3003 2666 or +1 800 608-0547, 10 minutes prior to the scheduled start of the call using the reference "Jackpotjoy" when prompted. A replay of the conference call will be available for 30 days by dialling +44 (0) 20 8196 1998 or +1 888 889-0604 and using reference 8097981#. A transcript will also be made available on Jackpotjoy plc's website at http://www.jackpotjoyplc.com/investors.

Note Regarding Non-IFRS Measures 

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

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

Adjusted EBITDA, as defined by the Group, is income before interest expense (net of interest income), income taxes, amortisation, share-based compensation, Independent Committee related expenses, loss/(gain) on cross currency swap, fair value adjustments on contingent consideration, transaction related costs, foreign exchange, and gain on sale of intangible assets. Management believes that Adjusted EBITDA is another important indicator of the issuer's ability to generate liquidity to service outstanding debt and fund acquisition earn-out payments and uses this metric for such purpose. The exclusion of share-based compensation eliminates non-cash items and the exclusion of Independent Committee related expenses, loss/(gain) on cross currency swap, fair value adjustments on contingent consideration, transaction related costs, foreign exchange, and gain on sale of intangible assets eliminates items which management believes are non-operational and non-routin! e.  

Cautionary Note Regarding Forward-Looking Information 

This release contains certain information and statements that may constitute "forward-looking information" (including future-oriented financial information and financial outlooks) within the meaning of Canadian securities laws. Often, but not always, forward-looking information can be identified by the use of words such as "plans", "expects", "estimates", "projects", "predicts", "targets", "seeks", "intends", "anticipates", or "believes" or the negative of such words or other variations of or synonyms for such words, or state that certain actions, events or results "may",! "could", "would", "should", "might" or "will" be taken, occur or be achieved. Forward-looking information involves known and unknown risks, uncertainties and other factors which may cause actual results, performance, achievements or developments to be materially different from those anticipated by the Group and expressed or implied by the forward-looking statements. Forward-looking information contained in this release includes, but is not limited to, statements with respect to the Group's future financial performance (including with respect to 2017 trading, POC tax, taxes in Spain, cash conversion and our ability to pay down debt and earn-outs from future internally generat! ed cash), the future prospects of the Group'< i>s business and operations, the Group's growth opportunities and the execution of its growth strategies, and the Group's future dividend policy. Certain of these statements relating to the Company's anticipated revenue growth may constitute a financial outlook within the meaning of Canadian securities laws. These statements reflect the Group's current expectations related to future events or its future results, performance, achievements or developments, and future trends affecting the Group. All such statements, other than statements of historical fact, are forward-looking information. Such forward-looking information is based on a number of assumptions which may prove to be incorrect, including, but not limited to, the ability of the Group to secure, maintain and comply with all required! licenses, permits and certifications to carry out business in the jurisdictions in which it currently operates or intends to operate; governmental and regulatory actions, including the introduction of new laws or changes in laws (or the interpretation thereof) related to online gaming; general business, economic and market conditions (including market growth rates and the withdrawal of the UK from the European Union); the Group operating in foreign jurisdictions, the competitive environment; the expected growth of the online gaming market and potential new market opportunities; anticipated and unanticipated costs; the protection of the Group's intellectual property rights; the Group's ability to successfully integrate and realize the benefits of its completed acquisitions; the expected earn out payments required t! o be made; the Group's relationship with the Gam! esys gro up and other third parties; the Group's debt service obligations and the ability of the Group to obtain additional financing, if, as and when required. Such statements could also be materially affected by risks relating to the lack of available and qualified personnel or management; stock market volatility; taxation policies; competition; foreign operations; the Group's limited operating history; and the Group's ability to access sufficient capital from internal or external sources. The foregoing risk factors are not intended to represent a complete list of factors that could affect the Group. Additional risk factors are discussed in Jackpotjoy plc's annual information form dated 29 March 2017. Although Jackpotjoy plc has attempted to identify important factors that could cause actual results, performance, achievements or developments to differ materially from those described in forward-looking statements, there may be other factors that cause actual results, performance, achievements or developments not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results, performance, achievement or developments are likely to differ, and may differ materially, from those expressed in or implied by the forward-looking information contained in this release. Accordingly, readers should not place undue reliance on forward-looking information. While subsequent events and developments may cause the Group's expectations, estimates and views to change, Jackpotjoy plc does no! t undertake or assume any obligation to update or revis! e any fo rward-looking information, except as required by applicable securities laws. The forward-looking information contained in this release should not be relied upon as representing the Group's expectations, estimates and views as of any date subsequent to the date of this release. The forward-looking information contained in this release is expressly qualified by this cautionary statement. Investors should not place undue reliance on forward-looking statements as the plans, intentions or expectations upon which they are based might not occur.  

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

Financial Review 

Revenue 

The Group's revenues during the three months ended 31 March 2017 consisted of:

  • £50.7 million in revenue earned from Jackpotjoy's operational activities.  
  • £15.7 million in revenue earned from Vera&John's operational activities.
  • £5.0 million in revenue earned from Mandalay's operational activities.

The Group's revenues during the three months ended 31 March 2016 consisted of:

  • £44.5 million in revenue earned from Jackpotjoy's operational activities.  
  • £13.9 million in revenue earned from Vera&John's operational activities.
  • £5.8 million in revenue earned from Mandalay's operational activities.
  • £1.2 million in other income earned from the revenue guarantee (the "Revenue Guarantee") relating to the service agreement entered into with Amaya Inc.

The increase in revenue for the three months ended 31 March 2017 in comparison with the three months ended 31 March 2016 relates primarily to organic growth of the Jackpotjoy segment, which increased by 14% in 2017.

Costs and expenses 

                                              Three month       Three month                                        period ended      period ended                                        31 March 2017     31 March 2016                                         (GBP000's)        (GBP000's)      Expenses:     Distribution costs                 31,244            29,858     Administration costs               25,213            22,477     Transaction related costs          1,315             1,298                                        57,772            53,633 


Distribution costs 

                                             Three month    Three month                                        period ended   period ended                                         31 March 2017  31 March 2016                                         (GBP000's)     (GBP000's)      Selling and marketing              9,603          9,232     Licensing fees                     11,086         10,468     Gaming taxes                       7,992          7,116     Processing fees                    2,563          3,042                                        31,244         29,858 

Selling and marketing expenses consist of payments made to affiliates and general marketing expenses related to each brand.  Licensing fees consist of the fees for the Mandalay and Jackpotjoy segments to operate on their respective platforms and game suppliers' fees paid by the Vera&John and Jackpotjoy segments. Gaming taxes largely consist of point of consumption taxes ("POC"), which is a 15% tax on Real Money Gaming Revenue (as defined in the "Key performance indicators" sub-section of this release) introduced in the UK in December 2014. Processing fees consist of costs associated with using payment providers and include payment service provider transaction and handling costs, as well as deposit and withdrawal fees.  With the exception of selling and marketing expenses, distribution costs tend to be variable in relation to revenue.

The increase in distribution costs for the three months ended 31 March 2017 compared to the same period in 2016 is mainly due to higher revenues achieved.  Processing fees were lower than the comparative period due to the Group renegotiating terms with certain payment service providers.

Administrative costs 

                                           Three month       Three month                                       period ended      period ended                                        31 March 2017     31 March 2016                                       (GBP000's)        (GBP000's)      Compensation and benefits         8,075             5,885     Professional fees                1,208             2,293     General and administrative        2,181             1,322     Amortisation                     13,749            12,977                                      25,213            22,477 

Compensation and benefits costs consist of salaries, wages, bonuses, directors' fees, benefits and share-based compensation expense. The increase in costs for the three months ended 31 March 2017 compared to the same period in 2016, relates to staff additions and salary increases in various business units, as well as an increase in share-based compensation related to options granted during Q3 2016.  

Professional fees consist of legal fees, audit fees, and Independent Committee (as defined below) related expenses. As a result of a self-identified short-seller of Intertain's common shares issuing a report on Intertain in Q4 2015, the board of directors of Intertain (the "Intertain Board") established a committee of non-management directors (the "Independent Committee") to closely review the allegations contained within the report. On 22 February 2016, the Independent Committee completed its review and concluded that the allegations and innuendos of the short-seller, related to the quality and financial performance of the underlying businesses of Intertain, were grossly erroneous. As a result of this review, Q1 2016 included one time costs of £1.7 million. The decrease in professional fees for the three months ended 31 March 2017 compared to the same period in 2016 is the result of these one time costs incurre! d in Q1 2016.

General and administrative expenses consist of items, such as rent and occupancy, travel and accommodation, insurance, listing fees, technology and development costs, and other office overhead charges. The increase in these expenses for the three months ended 31 March 2017 compared to the same period in the prior year can be attributed to slightly higher travel, rent and overhead costs.

Amortisation consists of depreciation of the Group's tangible and intangible assets over their useful lives.  The increase in amortisation is due to intangible and tangible asset additions since Q1 2016.

Transaction related costs 

Transaction related costs consist of legal, professional, due diligence, and special committee fees; other direct costs/fees associated with transactions and acquisitions contemplated or completed; and costs associated with the UK strategic review undertaken by the board of directors of Intertain and implementing Intertain's UK-centered strategic initiatives.

Business unit results 

Jackpotjoy 

                                       Q1 2017       Q1 2016       Variance                                  GBP(millions) GBP(millions) GBP(millions) Variance %     Revenue                      50.7          44.5          6.2           14%     Distribution costs           20.5          18.8          1.7           9%     Administration costs         4.2           3.7           0.5           14%     Adjusted EBITDA              26.0          22.0          4.0           18% 

Revenue for the Jackpotjoy segment increased quarter over quarter due to organic growth in all brands except for social gaming. Jackpotjoy UK real money revenue accounted for 67% of the Jackpotjoy segment's revenue for the three months ended 31 March 2017. Revenue further increased as a result of significant growth quarter over quarter at both the Starspins and Botemania brands, which collectively accounted for 18% of this segment's revenue. The sharp increase in revenues from the Starspins and Botemania brands is a result of the Botemania brands mobile slots launch in Q2 2016 as well as continued overall growth progression of these two businesses.

Vera&John 

                                       Q1 2017        Q1 2016      Variance                                   GBP (millions) GBPmillions) GBP(millions) Variance %     Revenue*                     15.7           13.9         1.8           13%     Distribution costs           7.6            7.4          0.2           3%     Administration costs         3.7            2.4          1.3           54%     Adjusted EBITDA*            4.4            4.1          0.3           7% 

*Excludes other income earned from the Revenue Guarantee. In the three months ended 31 March 2017, £nil (2016 - £1.2 million) was earned from the Revenue Guarantee.  

Revenue for the Vera&John segment in Q1 2017 increased by 13% compared to Q1 2016, which is due to a combination of organic growth in the segment and differences in the GBP to EUR exchange rates in those periods.

Distribution costs increased by 3% in Q1 2017 compared to Q1 2016, which is primarily due to the increase in selling and marketing costs of 12%. Other distribution costs, such as game suppliers and payment providers' costs usually change proportionally with revenue; however, in Q1 2016 these distribution costs were higher than in Q1 2017 by 8%, as InterCasino was a separate segment on a different platform.  Due to the migration of InterCasino to the Plain Gaming platform, some economies of scale have been realised. This, combined with targeted efforts in Q1 2017 to streamline payment processing procedures and costs, led to the decrease in these costs against the comparative period in 2016. Increases in administration costs were mainly driven by increases in personnel and office related costs as the segment continues to expand.

Mandalay 

                                      Q1 2017       Q1 2016       Variance                                   GBP(millions) GBP(millions) GBP(millions) Variance %     Revenue                      5.0           5.8           (0.8)         (14%)     Distribution costs           3.0           3.5           (0.5)         (14%)     Administration costs         0.3           0.3          -             -     Adjusted EBITDA              1.7           2.0           (0.3)         (15%) 

There has been a decrease in revenues for the Mandalay segment of £0.8 million quarter over quarter as Q1 2016 was a record quarter for the Mandalay brands. There have also been changes to the on-site promotional spend in preparation for changes to UK POC tax, anticipated to occur in the second half of 2017, when bonuses will be subject to taxation. These changes have caused an initial decrease in revenues but should result in improved operational margins and deposit hold in the medium and long term.

Unallocated Corporate Costs 

Unallocated corporate costs increased from £1.2 million to £2.9 million in the three months ended 31 March 2017 as compared to the three months ended 31 March 2016. The variance mainly relates to a £0.6 million increase in compensation due to the addition of new staff, a £0.5 million increase in general and administrative overheads, and a £0.7 million increase in professional fees.

Key performance indicators 

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

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

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

                                                                                                          Twelve months Twelve       Variance  Variance %                                            ended         months ended                                                                    31 March                                                          31 March 2017 2016[(2)]                  Average Active Customers per month (#) 239,452       208,795      30,657    15%     Total Real Money Gaming Revenue     (GBP000) [(1)]                         250,269       213,772      36,497    17%     Average Real Money Gaming Revenue per     month (GBP000)                         20,856        17,814       3,042     17%     Monthly Real Money Gaming Revenue per     Average Active Customer (GBP)          87            85           2         2% 

[(1)]Total Real Money Gaming Revenue for the twelve months 31 March 2017 consists of total revenue less other income earned from the Revenue Guarantee and platform migration of £0.9 million (31 March 2016 - £8.0 million) and revenue earned from affiliate websites and social gaming revenue of £23.8 million (31 March 2016 - £24.0 million). 

[(2)]Figures presented on a pro-forma basis. 

Monthly Real Money Gaming Revenue per Average Active Customer is consistent year over year which is in line with the Group's overall customer acquisition and retention strategy.  

Independent review report to Jackpotjoy plc 

Introduction 

We have been engaged by the company to review the condensed set of financial statements in the quarterly financial report for the three months ended 31 March 2017 which comprises the Interim Condensed Consolidated Statement of Comprehensive Income, Interim Condensed Consolidated Balance Sheet, Interim Condensed Consolidated Statement of Changes in Equity, Interim Condensed Consolidated Statement of Cash Flows and the related notes.  

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

Directors' responsibilities 

The quarterly financial report is the responsibility of and has been approved by the directors.  

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

Our responsibility 

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

Our report has been prepared in accordance with the terms of our engagement and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.

Scope of review 

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

Conclusion 

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the quarterly financial report for the three months ended 31 March 2017 is not prepared, in all material respects, in accordance with International Accounting Standard 34, as issued by the International Accounting Standards Board, International Accounting Standard 34, as adopted by the European Union.

BDO LLP  

Chartered Accountants  

London 

United Kingdom 

15 May 2017 

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

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME  

                                                                                         Three months ended 31 March 2017 Three months ended 31 March 2016                                                                                                          (GBP000's)                       (GBP000's)     Revenue and other income     Gaming revenue                                                                                          71,376                           64,231     Other income earned from revenue guarantee                                                                    -                            1,181     Total revenue and other income                                                                           71,376                           65,412       Costs and expenses     Distribution costs[4],[5]                                                                                31,244                           29,858     Administrative costs[5]                                                                                 25,213                           22,477     Transaction related costs[4],[5]                                                                         1,315                            1,298     Foreign exchange loss[4]                                                                                  2,133                              521     Total costs and expenses                                                                                  59,905                           54,154      Gain on sale of intangible assets                                                                      (1,002)                                -      Fair value adjustments on contingent consideration[15]                                                   12,856                            1,673     Realised/unrealised loss/(gain) on cross currency swap[10]                                                3,534                          (4,030)     Interest income[6]                                                                                         (38)                             (29)     Interest expense[6]                                                                                      11,336                            8,378     Financing expenses                                                                                       27,688                            5,992      Net (loss)/income for the period before taxes                                                          (15,215)                            5,266      Current tax provision                                                                                       191                              281     Deferred tax recovery                                                                                    (105)                             (82)     Net (loss)/income for the period                                                                       (15,301)                            5,067      Other comprehensive income/(loss): Items that will or may be reclassified to     profit or loss in subsequent periods     Foreign currency translation gain                                                                         5,555                            2,470     Unrealised loss on cross currency hedge reserve                                                          (813)                                -     Total comprehensive (loss)/income for the period                                                      (10,559)                            7,537      Net (loss)/income for the period per share     Basic[7]                                                                                              GBP(0.21)                          GBP0.07     Diluted[7]                                                                                            GBP(0.21)                          GBP0.07     See accompanying notes 

UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS 

                                                                           As at         As at                                                              31 March 2017 31 March 2016    ASSETS                                                      (GBP000's)    (GBP000's)      Current assets     Cash[8]                                                       112,297        68,485     Restricted cash[8]                                                 282           253     Customer deposits                                                8,296         8,573     Trade and other receivables[9]                                  16,472        16,763     Current portion of cross currency swap[10],[15]                      -        38,171     Taxes receivable                                                 7,681         6,832     Total current assets                                           145,028       139,077      Tangible assets                                                 1,284           852     Intangible assets[11]                                          339,274       352,473     Goodwill[11]                                                   296,041       296,352     Other long-term receivables                                      2,651         2,624    Total non-current assets                                       639,250       652,301      Total assets                                                   784,278       791,378     LIABILITIES AND EQUITY      Current liabilities     Accounts payable and accrued liabilities[12]                    10,007         8,992     Current portion of cross currency swap payable [10],[15]           286             -     Other short-term payables[13]                                   11,649        15,321     Interest payable                                                   681           633     Payable to customers                                             8,296         8,573     Current portion of long-term debt[14]                           26,270        26,695     Current portion of contingent consideration[15]                 93,635        86,903     Provision for taxes                                             8,847         7,743    Total current liabilities                                     159,671       154,860      Contingent consideration[15]                                    41,511        33,284     Other long-term payables[16]                                    12,964        14,505     Cross currency swap payable[10],[15]                               527             -     Deferred tax liability                                          1,428         1,897     Convertible debentures[17]                                       1,188         3,266     Long-term debt[14]                                             335,230       344,098     Total non-current liabilities                                  392,848       397,050      Total liabilities                                              552,519       551,910     Equity     Retained earnings                                            (186,038)     (170,737)     Share capital                                                    7,372         7,298     Other reserves                                                 410,425       402,907     Total equity                                                   231,759       239,468      Total liabilities and equity                                   784,278       791,378 

See accompanying notes 

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY 

                                                                                                                                                                                                                                                                                                                                                                     Share-Based                                      Share      Other          Redeemable     Payment        Translation                       Capital    Reserves       Shares         Reserve        Reserve                            (GBP000's) (GBP000's)     (GBP000's)     (GBP000's)     (GBP000's)           Balance 1     January 2016  7,051      390,481         -              6,779          14,816               Comprehensive     income for     the period     Net income     for the     period               -          -         -              -              -                                          Other     comprehensive     income               -          -         -              -              2,470                                        Total     comprehensive     income for     the period           -          -         -              -              2,470                                        Contributions     by and     distributions     to     shareholders:     Conversion of     debentures[17     ]                   2          42        -              -              -                                            Exercise of     common share     warrants[17]        4          187       -              -              -                                              Share-based     compensation[     17]                 -          -         -              298            -                                             Total     contributions     by and     distributions     to     shareholders        6          229       -              298            -                                             Balance at 31     March 2016        7,057      390,710     -              7,077          17,286                Balance at 1     January 2017      7,298      397,772     50             8,598          (3,513)            Comprehensive     income (loss)     for the     period     Net loss for     the period          -          -         -              -              -                                      Other     comprehensive     income              -          -         -              -              5,555                                          Loss on cross     currency     hedge reserve       -          -         -              -              -                            Total     comprehensive     income (loss)     for the     period              -          -         -              -              5,555                                Contributions     by and     distributions     to     shareholders:     Conversion of     debentures[17     ]                  63         2,049     -              -              -                  Exercise of     options[17]        11         329       -              (77)           -                                Cancellation     of redeemable     shares             -          -        (50)            -              -                                Share-based     compensation[     17]                -          -         -              525            -                  Total     contributions     by and     distributions     to     shareholders      74         2,378     (50)           488            -                                   Balance at 31     March 2017       7,372      400,150    -              9,046          2,042                           See accompanying notes  

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY 

(table continued)

                               Retained                                      Earnings/                       Cross                       Currency                       Hedge                       Reserve        (Deficit)       Total                         (GBP000's)     (GBP000's)     (GBP000's)      Balance 1     January 2016        -              (130, 094)     289,033       Comprehensive     income for     the period     Net income     for the     period                -              5,067          5,067     Other     comprehensive     income                -              -              2,470     Total     comprehensive     income for     the period            -              5,067          7,537       Contributions     by and     distributions     to     shareholders:     Conversion of     debentures[17     ]                     -              -              44     Exercise of     common share     warrants[17]          -              -              191     Share-based     compensation[     17]                   -              -              298     Total     contributions     by and     distributions     to     shareholders          -              -              533       Balance at 31     March 2016            -              (125,027)      297,103       Balance at 1     January 2017          -              (170,737)      239,468      Comprehensive     income (loss)     for the     period     Net loss for     the period            -              (15,301)       (15,301)     Other     comprehensive     income                -              -              5,555     Loss on cross     currency     hedge reserve         (813)          -              (813)     Total     comprehensive     income (loss)     for the     period              (813)          (15,301)       (10,559)      Contributions     by and     distributions     to     shareholders:     Conversion of     debentures[17     ]                    -              -              2,112     Exercise of     options[17]          -              -              263     Cancellation     of redeemable     shares               -              -              (50)     Share-based     compensation[     17]                  -              -              525     Total     contributions     by and     distributions     to     shareholders         -              -              2,850       Balance at 31     March 2017        (813)          (186,038)      231,759  See accompanying notes  

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 

                                                                        Three months ended 31 March 2017 Three months ended 31 March 2016                                                                                         (GBP000's)                       (GBP000's)    Operating activities     Net (loss)/income for the year                                                        (15,301)                            5,067     Add (deduct) items not involving cash     Amortisation                                                                            13,749                           12,977     Share-based compensation expense[17]                                                       525                              298     Current tax provision                                                                      191                              281     Deferred tax recovery                                                                   (105)                             (82)     Interest expense, net[6]                                                                11,298                            8,349     Gain on sale of intangible assets                                                      (1,002)                                -     Fair value adjustments on contingent consideration[15]                                  12,856                            1,673     Realised/unrealised loss/(gain) on cross currency swap[10]                               3,534                          (4,030)     Foreign exchange loss                                                                    2,133                              521                                                                                             27,878                           25,054     Change in non-cash operating items     Trade and other receivables                                                                487                              237     Other long-term receivables                                                               (16)                               67     Accounts payable and accrued liabilities                                               (1,429)                              617     Other short-term payables                                                              (3,672)                              600     Cash provided by operating activities                                                   23,248                           26,575     Income taxes paid                                                                         (28)                                -     Incomes taxes received                                                                     102                                -     Total cash provided by operating activities                                             23,322                           26,575      Financing activities                                                                                                                                       Restriction of cash balances                                                                21                                -     Proceeds from exercise of warrants                                                           -                              191     Proceeds from exercise of options                                                          263                                -     Proceeds from cross currency swap settlement[10]                                        34,373                                -     Interest repayment                                                                     (7,550)                          (4,232)     Principal payments made on long-term debt[14]                                          (6,296)                          (5,923)     Total cash provided by/(used in) financing activities                                   20,811                          (9,964)       Investing activities     Purchase of tangible assets                                                              (511)     Purchase of intangible assets                                                            (549)                            (332)     Proceeds from sale of intangible assets                                                  1,002                                -     Total cash used in investing activities                                                   (58)                            (353)       Net increase in cash during the period                                                  44,075                           16,258     Cash, beginning of the period                                                           68,485                           31,762     Exchange loss on cash and cash equivalents                                               (263)                            2,601     Cash, end of the period                                                                112,297                           50,621  

See accompanying notes 

SUPPLEMENTARY NOTES FOR THREE MONTHS ENDED 31 MARCH 2017 

1.  Corporate Information 

Jackpotjoy plc is an online gaming holding company and the parent company of The Intertain Group Limited ("Intertain").  Jackpotjoy plc was incorporated pursuant to the Companies Act 2006 (England and Wales) on 29 July 2016. Jackpotjoy plc's registered office is located at 35 Great St. Helen's, London, United Kingdom.  Jackpotjoy plc became the parent company of Intertain on 25 January 2017, following a plan of arrangement transaction involving a one-for-one share exchange of all and the then outstanding common shares of Intertain shares for ordinary shares of Jackpotjoy plc.  Unless the context requires otherwise, use of the "Company" in these accompanying notes means Jackpotjoy plc and its subsidiaries, as applicable.

The Company currently offers bingo, casino and other games to its customers using the Jackpotjoy, Starspins, Botemania, Vera&John, Costa Bingo, InterCasino, and other brands. The Jackpotjoy, Starspins, and Botemania brands operate off proprietary software owned by the Gamesys group ("Gamesys"), the Company's B2B software and support provider. The Vera&John and InterCasino brands operate off proprietary software owned by the Company. The Mandalay segment's bingo offerings operate off the Dragonfish platform, a software service provided by the 888 group. Additionally, the Company receives fees for marketing services provided by its affiliate portal business.  

These Unaudited Interim Condensed Consolidated Financial Statements were authorized for issue by the Board of Directors of Jackpotjoy plc (the "Board of Directors") on 15 May 2017.

2.  Basis of Preparation 

Basis of presentation 

These Unaudited Interim Condensed Consolidated Financial Statements have been prepared by management on a going concern basis, are presented in compliance with International Accounting Standard 34 - Interim Financial Reporting, and have been prepared on a basis consistent with the accounting policies and methods used and disclosed in Intertain's 2016 annual consolidated financial statements for the year ended 31 December 2016 (the "Annual Financial Statements").  Certain information and disclosures normally included in the Annual Financial Statements prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union, which also complies with IFRS as issued by the International Accounting Standards Board, have been omitted or condensed.  

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

These Unaudited Interim Condensed Consolidated Financial Statements have been prepared under the historical cost convention, other than for the measurement at fair value of the Company's cross currency swap and contingent consideration.

This is the first set of Unaudited Interim Condensed Consolidated Financial Statements of Jackpotjoy plc.  Following Jackpotjoy plc becoming the parent company of the group (as detailed in note 1), these Unaudited Interim Condensed Consolidated Financial Statements have been prepared under the merger method of accounting as a continuation of the Intertain business. The result of the application is to present the Unaudited Interim Condensed Consolidated Financial Statements as if Jackpotjoy plc has always been the parent company and owned all of the subsidiaries, and the comparatives have also been prepared on that basis.  The adoption of the merger method of accounting had no impact on reported earnings per share.

The comparative financial information for the year ended 31 December 2016 in these Unaudited Interim Condensed Consolidated Financial Statements does not constitute statutory accounts for that year.  The auditors' report on the statutory accounts for the period ended 31 December 2016 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under sections 498(2) or 498(3) of the Companies Act 2006.

As at 31 March 2017, the Company has consolidated current assets and current liabilities of £145.0 million and £159.7 million, respectively, giving rise to a net current liability of £14.7 million. Cash generated through future operating activities in the next quarter is sufficient to cover the net current liability.  

Basis of consolidation 

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

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

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

3.  Summary of Significant Accounting Policies 

Change in presentation currency 

Effective from 1 January 2017, the Company changed its presentation currency from Canadian dollars ("CAD" or "$") to pounds sterling ("GBP" or "£"). Comparative information has been restated in pounds sterling in accordance with the guidance defined in IAS 21 - The Effects of Changes in Foreign Exchange Rates. The Q1 2016 Unaudited Interim Condensed Consolidated Financial Statements have been retranslated from Canadian dollars to pounds sterling using the procedures outlined below:

  • assets and liabilities were translated into pounds sterling at closing rates of exchange as at 31 December 2016 ($:£ - 0.6037). Income and expenses were translated into pounds sterling at average rates of exchange ($:£ - 0.5090). Differences resulting from the retranslation on the opening net assets and the results for the year have been taken to reserves; 
  • share capital and other reserves were translated at historic rates prevailing at the dates of transactions.

The balances in the Unaudited Interim Condensed Consolidated Statements of Cash Flows have been translated from CAD to GBP in accordance with IFRS, using a combination of quarterly average and spot rates in effect during the period ended 31 March 2016. Quarterly average exchange rates were used to convert changes in items not involving cash and cash provided by/(used in) operating activities, financing activities, and investing activities. Spot rates were used to convert cash balances, beginning of period and cash balances, end of period.  

As a result of this change, no retranslation movement will be recorded in the Statements of Comprehensive Income for subsidiaries, whose functional currency is GBP.  

4. Segment Information  

The following tables present selected financial results for each segment and the unallocated corporate costs:

Three months ended 31 March 2017: 

                                                    Unallocated                   Jackpotjoy Vera&John  Mandalay   Corporate Costs     Total                     (GBP000's) (GBP000's) (GBP000's) (GBP000's)          (GBP000's)     Total revenue 50,666     15,691     5,019      -                   71,376      Distribution     costs         20,543     7,648      3,011      42                  31,244     Amortisation     and     depreciation  9,690      2,368      1,593      98                  13,749     Compensation,     professional,     and general     and     administrativ     e expenses    4,161      3,660      285        3,358               11,464     Transaction     related costs -          -          -          1,315               1,315     Foreign     exchange      (18)       59         (2)        2,094               2,133     Gain on sale     of intangible     assets        -          (1,002)    -          -                   (1,002)     Financing,     net           -          (34)       1          27,721              27,688     Income/(loss)     for the     period before     taxes         16,290     2,992      131        (34,628)            (15,215)     Taxes         -          86         -           -                   86     Net     income/(loss)     for the     period        16,290     2,906      131        (34,628)            (15,301)     Net     income/(loss)     for the     period        16,290     2,906      131        (34,628)            (15,301)     Interest     expense, net  -          (34)       1           11,331            11,298     Taxes         -          86         -           -                 86     Amortisation     and     depreciation   9,690      2,368      1,593       98                13,749     EBITDA        25,980     5,326      1,725       (23,199)          9,832     Share-based     compensation  -          -          -            525               525     Fair value     adjustment on     contingent     consideration -          -          -           12,856            12,856     Loss on cross     currency swap -          -          -           3,534             3,534     Transaction     related costs -          -          -           1,315             1,315     Gain on sale     of intangible     assets        -          (1,002)    -           -                 (1,002)     Foreign     exchange      (18)       59         (2)         2,094             2,133     Adjusted     EBITDA        25,962     4,383      1,723      (2,875)            29,193   Net     income/(loss)     for the     period        16,290     2,906      131        (34,628)          (15,301)     Share-based     compensation  -          -          -          525               525     Fair value     adjustment on     contingent     consideration -          -          -          12,856            12,856     Loss on cross     currency swap -          -          -           3,534             3,534     Transaction     related costs -          -          -           1,315             1,315     Gain on sale     of intangible     assets        -          (1,002)    -           -                (1,002)     Foreign     exchange      (18)       59         (2)         2,094             2,133     Amortisation     of     acquisition     related     purchase     price     intangibles   9,690      2,107      1,593       -                 13,390     Accretion     -          -          -            3,389             3,389     Adjusted net     income/(loss) 25,962     4,070      1,722      (10,915)           20,839  

Three months ended 31 March 2016: 

                                                                   Unallocated                                                                 Corporate                                Jackpotjoy Vera&John  Mandalay   Costs       Total                                  (GBP000's) (GBP000's) (GBP000's) (GBP000's)  (GBP000's)     Total revenue and other     income                     44,456     15,135     5,821      -           65,412     Distribution costs         18,820     7,430      3,481      127         29,858     Amortisation and     depreciation               10,056     1,753      1,162      6           12,977     Compensation,     professional, and general     and administrative     expenses                   3,643      2,465      298        3,094       9,500     Transaction related costs  -          81         -          1,217       1,298     Foreign exchange           (149)      337        (31)       364         521     Financing, net             -          (22)       2          6,012       5,992     Income/(loss) for the     period before taxes        12,086     3,091      909        (10,820)    5,266     Taxes                      -          199        -          -           199     Net income/(loss) for the     period                     12,086     2,892      909        (10,820)    5,067  

          Net income/(loss) for the     period                     12,086     2,892      909        (10,820)   5,067     Interest expense, net      -          (22)       2           8,369     8,349     Taxes                      -          199        -           -         199     Amortisation and     depreciation               10,056     1,753     1,162        6         12,977     EBITDA                     22,142     4,822     2,073       (2,445)    26,592     Share-based compensation   -          -         -           298        298     Independent Committee     related expenses           -          -         -           1,693      1,693     Fair value adjustment on     contingent consideration   -          -         -           1,673      1,673     Gain on cross currency     swap                       -          -         -          (4,030)    (4,030)     Transaction related costs  -          81        -           1,217     1,298     Foreign exchange           (149)      337      (31)         364       521     Adjusted EBITDA            21,993     5,240     2,042      (1,230)    28,045 

          Net income/(loss) for the     period                     12,086    2,892     909         (10,820)   5,067     Share-based compensation   -         -         -           298        298     Independent Committee     related expenses           -         -         -           1,693      1,693     Fair value adjustment on     contingent consideration   -         -         -           1,673      1,673     Gain on cross currency     swap                       -         -         -          (4,030)    (4,030)     Transaction related costs  -         81        -          1,217       1,298     Foreign exchange           (149)     337      (31)        364         521     Amortisation of     acquisition related     purchase price intangibles 10,056   1,655    1,162         -         12,873     Accretion                  -         -         -           4,036      4,036     Adjusted net income/(loss) 21,993   4,965    2,040        (5,569)    23,429 

The following table presents net assets per segment and unallocated corporate costs as at 31 March 2017:

                                                                Unallocated                                                            Corporate                           Jackpotjoy Vera&John  Mandalay   Costs       Total                           (GBP000's) (GBP000's) (GBP000's) (GBP000's)  (GBP000's)     Current assets        15,751     44,453     6,656      78,168      145,028     Goodwill              224,348    55,081     16,612     -           296,041     Long-term assets      268,013    36,537     16,427     22,232      343,209     Total assets          508,112    136,071    39,695     100,400     784,278      Current liabilities   5,922      17,431     1,441      134,877     159,671     Long-term liabilities -          1,428      -          391,420     392,848     Total liabilities     5,922      18,859     1,441      526,297     552,519      Net assets            502,190    117,212    38,254     (425,897)   231,759 

The following table presents net assets per segment and unallocated corporate costs as at 31 December 2016:

                                                             Unallocated                                                            Corporate                           Jackpotjoy Vera&John  Mandalay   Costs       Total                           (GBP000's) (GBP000's) (GBP000's) (GBP000's)  (GBP000's)     Current assets        15,033     38,870     6,509      78,665      139,077     Goodwill              224,348    55,392     16,612     -           296,352     Long-term assets      277,702    38,163     18,020     22,064      355,949     Total assets          517,083    132,425    41,141     100,729     791,378      Current liabilities   5,790      16,711     1,483      130,876     154,860     Long-term liabilities -          1,897      -          395,153     397,050     Total liabilities     5,790      18,608     1,483      526,029     551,910      Net assets            511,293    113,817    39,658     (425,300)   239,468 

During the three months ended 31 March 2017 and 2016, substantially all of the revenue earned by the Company was in Europe. Non-current assets by geographical location as at 31 March 2017 were as follows: Europe £91.6 million (31 December 2016 - £93.6 million) and Americas £547.6 million (31 December 2016 - £558.7 million).

5.  Costs and Expenses 

                                                             Three Months     Three Months                                                     Ended            Ended                                                        31 March 2017    31 March 2016                                                        (GBP000's)       (GBP000's)     Distribution costs:     Selling and marketing                              9,603            9,232     Licensing fees                                     11,086           10,468     Gaming taxes                                       7,992            7,116     Processing fees                                    2,563            3,042                                                        31,244           29,858     Administrative costs:     Compensation and benefits                          8,075            5,885     Professional fees                                  1,208            2,293     General and administrative                         2,181            1,322     Tangible asset amortisation                        73               28     Intangible asset amortisation                      13,676           12,949                                                        25,213           22,477 

Transaction related costs consist of legal, professional, due diligence, and special committee fees; other direct costs/fees associated with transactions and acquisitions contemplated or completed; and costs associated with the UK strategic review undertaken by the board of directors of Intertain and implementing Intertain's UK-centered strategic initiatives.

6.  Interest Expense/Income  

                                                        Three Months Ended   Three Months Ended                                                    31 March 2017        31 March 2016                                                    (GBP000's)           (GBP000's)     Interest earned on cash held during the period 38                   29     Total interest income                          38                   29      Interest paid and accrued on long-term debt    7,925                4,232     Accretion of discount recognised on contingent     consideration                                  2,103                3,547     Interest paid and accrued on convertible     debentures                                     22                   110     Interest accretion recognised on convertible     debentures                                     18                   88     Interest accretion recognised on long-term     debt                                           783                  401     Interest accretion recognised on other     long-term liabilities                          485                  -     Total interest expense                         11,336               8,378 

7.  Earnings per Share 

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

                                                                                                                   Three Months Ended Three Months Ended                                              31 March 2017      31 March 2016                                              (GBP000's)         (GBP000's)     Numerator:     Net (loss)/income - basic                (15,301)           5,067     Net (loss)/income - diluted              (15,301)           5,173      Denominator:     Weighted average number of shares     outstanding - basic                      73,573             70,555      Instruments, which are anti-dilutive:     Weighted average effect of dilutive     share options                            454                815     Weighted average effect of convertible     debentures[2]                            487                2,828      Net (loss)/earnings per share[3],[4]     Basic                                    GBP(0.21)          GBP0.07     Diluted[1]                               GBP(0.21)          GBP0.07  

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

[2] An assumed conversion of convertible debentures had an anti-dilutive effect on loss per share for the three months ended 31 March 2017.  For the three months ended 31 March 2016, an assumed conversion of convertible debentures had a dilutive effect on income per share and was included in the calculation of diluted earnings per share for that period.

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

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

8.  Cash and Restricted Cash 

                                                            31 March 2017    31 December 2016                                                        (GBP000's)       (GBP000's)     Cash                                               77,374           33,558     Segregated cash*                                   34,923           34,927     Cash and cash equivalents                          112,297          68,485     Restricted cash - other                            282              253     Total cash balances                                112,579          68,738 

*    This balance consists of cash on deposit with payment service providers, as well as segregated funds held in accordance with the terms of the Jackpotjoy earn-out payment, where the Company is required to segregate 90% (April 2015 - March 2016 - 65%) of its excess cash flow, less mandatory repayments of the Company's long-term debt and earn-out payments, in a non-operational bank account.  £34.7 million was held in this account as at 31 March 2017 (£34.7 million as at 31 December 2016).  Segregated cash does not qualify as restricted cash and, as such, it is included in cash.

The restricted cash balance as at 31 March 2017 totalled £0.3 million and consisted of cash held as collateral on the Company's leased premises.

9.  Trade and Other Receivables 

Receivables consist of the following items:

                                                              31 March 2017   31 December 2016                                                         (GBP000's)      (GBP000's)     Due from the Gamesys group                          9,829           9,242     Due from the 888 group                              1,615           1,625     Affiliate revenue receivable                        1,294           1,766     Short-term loans receivable                         611             572     Swap-related receivable                             -               1,948     Prepaid expenses                                    2,409           967     Other                                               714             643                                                         16,472          16,763 

10.  Cross Currency Swap 

On 23 November 2015, the Company entered into a cross currency swap agreement (the "Currency Swap") in order to minimize the Company's exposure to exchange rate fluctuations between GBP and the US dollar ("USD") as cash generated from the Company's operations is largely in GBP, while a portion of the principal and interest payments on the Company's Credit Facilities (as defined below) are in USD. Under the Currency Swap, 90% of the Company's USD Term Loan (as defined below) interest and principal payments were swapped into GBP. The Company paid a fixed 7.81% interest in place of floating USD interest payments of LIBOR plus 6.5% (LIBOR floor of 1%). The interest and principal payments were made at a GBP/USD foreign exchange rate of 1.5135 on a USD notional amount of $293,962,500.

On 28 March 2017, the Company terminated the Currency Swap and realised total proceeds of approximately USD 42.6 million and subsequently entered into a new cross currency swap agreement (the "New Currency Swap"). Under the New Currency Swap, 50% of the Company's Term Loan interest and principal payments will be swapped into GBP. The Company will pay a fixed 7.4% interest in place of floating USD interest payments of LIBOR plus 6.5% (LIBOR floor of 1%). The interest and principal payments will be made at a GBP/USD foreign exchange rate of 1.2584 on a USD notional amount of $136,768,333. The New Currency Swap expires on 30 September 2019.  The agreement was entered into at no cost to the Company.

The fair value of the New Currency Swap liability as at 31 March 2017 is £0.8 million (31 December 2016 - asset of £38.2 million).

11.  Intangible Assets 

As at 31 March 2017 

                                          Customer                              Gaming     Relationsh                       Partnership Non-Compete                              Licenses   ips        Software   Brand      Agreements  Clauses     Goodwill   Total                              (GBP000's) (GBP000's) (GBP000's) (GBP000's) (GBP000's)  (GBP000's)  (GBP000's) (GBP000's)     Cost     Balance, 1 January 2017  94         340,927    21,670     70,054     12,900      20,434      317,829    783,908     Additions                -          -          549        -          -           -           -          549     Translation              (1)        (97)       23         (82)       -           -           (653)      (810)     Balance, 31 March 2017   93         340,830    22,242     69,972     12,900      20,434      317,176    783,647      Accumulated amortisation     Balance, 1 January 2017  34         96,811     7,414      6,523      2,824       -           21,477     135,083     Amortisation             4          11,254     1,133      876        409         -           -          13,676     Translation              11         (74)       (9)        (13)       -           -           (342)      (427)     Balance, 31 March 2017   49         107,991    8,538      7,386      3,233       -           21,135     148,332      Carrying value     Balance, 31 March 2017   44         232,839    13,704     62,586     9,667       20,434      296,041    635,315 

During the three months ended 31 March 2017, no amortisation charge was recognised on the additional non-compete clauses as the additional clauses do not come into effect until April 2017 (as described in note 16).

As at 31 December 2016 

                                               Customer                               Gaming     Relationsh            Revenue               Partnership                               Licenses   ips        Software   Guarantee  Brand      Agreements              Goodwill   Total                                                                                                  Non-Compete                                                                                                  Clauses                               (GBP000's) (GBP000's) (GBP000's) (GBP000's) (GBP000's) (GBP000's)  (GBP000's)  (GBP000's) (GBP000's)     Cost     Balance, 1 January 2016   76         337,502    17,175     4,010      68,284     12,900      -           306,295    746,242     Additions                 -          -          1,836      -          -          -           20,434      -          22,270     Translation               18         3,425      2,659      783        1,770      -           -           11,534     20,189     Expiry                    -          -          -          (4,793)    -          -           -           -          (4,793)     Balance, 31 December 2016 94         340,927    21,670     -          70,054     12,900      20,434      317,829    783,908      Accumulated amortisation     Balance, 1 January 2016   23         47,956     3,279      -          2,681      1,558       -           17,969     73,466     Amortisation              9          47,405     3,683      -          3,466      1,232       -           -          55,795     Translation               2          1,450      452        -          376        34          -           3,508      5,822     Balance, 31 December 2016 34         96,811     7,414      -          6,523      2,824       -           21,477     135,083      Carrying value     Balance, 31 December 2016 60         244,116    14,256     -          63,531     10,076      20,434      296,352    648,825 

12.  Accounts Payable and Accrued Liabilities 

Accounts payable and accrued liabilities consist of the following items:

                                                                 31 March 2017  31 December 2016                                                            (GBP000's)     (GBP000's)     Affiliate/marketing expenses payable                   3,366          3,058     Payable to game suppliers                              1,061          950     Compensation payable                                   2,353          2,989     Loyalty program payable                                252            260     Professional fees                                      1,058          349     Gaming tax payable                                     531            526     Other                                                  1,386          860                                                            10,007         8,992 

13.  Other Short-Term Payables 

Other short-term payables consist of:

                                                    31 March 2017         31 December 2016                                               (GBP000's)            (GBP000's)      Transaction related payables              3,649                 9,321     Current portion of other long-term     payables (Note 16)                        8,000                 6,000                                               11,649                15,321 

14.  Credit Facilities  

On 8 April 2015, the Company entered into a credit agreement (as amended and restated from time to time, including on 27 October 2016 and 16 December 2016, the "Credit Agreement") in respect of: (i) a seven-year USD 335.0 million first-lien term loan credit facility (the "Term Loan"); and (ii) a USD 17.5 million revolving credit facility (the "Revolving Facility", and together with the Term Loan, the "Credit Facilities").

On 27 October 2016, the Credit Agreement was amended to, among other things, permit the plan of arrangement. On 16 December 2016, the Credit Agreement was further amended and restated to, among other things, establish a £53,276,000 incremental first lien term loan facility and the €20 million first lien term loan facility under the Credit Agreement (collectively, the "Incremental First Lien Facility" and together with the Credit Facilities, the "First Lien Facilities"), permit the incurrence of a £90 million second lien term loan facility (the "Second Lien Facility") pursuant to a second lien credit agreement (the "Second Lien Credit Agreement"), and permit the Jackpotjoy and Starspins contingent consideration pre-payment of £150 million.

Below is the breakdown of the First Lien Facilities and the Second Lien Facility:

                                                            Incremental                                                       First Lien   Second Lien                                            Term Loan  Facility     Facility    Total                                              (GBP000's) (GBP000's)   (GBP000's)  (GBP000's)      Balance, 1 January 2016                207,158    -            -           207,158     Principal                              -          70,000       90,000      160,000     Repayment                              (26,906)   -            -           (26,906)     Transaction costs                      -          (2,482)      (6,792)     (9,274)     Accretion[1]                           1,868      16           35          1,919     Foreign exchange translation           37,896     -            -           37,896     Balance, 31 December 2016              220,016    67,534       83,243      370,793     Repayment                              (6,296)    -            -           (6,296)     Accretion[1]                           492        93           198         783     Foreign exchange translation           (3,780)    -            -           (3,780)     Balance, 31 March 2017                 210,432    67,627       83,441      361,500      Current portion                        26,270     -            -           26,270     Non-current portion                    184,162    67,627       83,441      335,230 

[1] Effective interest rates are as follows:  Term Loan - 8.69%, Incremental First Lien Facility - 8.32%, Second Lien Facility - 11.75%.

15.  Financial Instruments 

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

Financial assets 

                                                                   Loans and receivables                                                                                                                                       31 March 2017    31 December 2016                                                           (GBP000's)       (GBP000's)     Cash and restricted cash                              112,579          68,738     Trade and other receivables                           16,472           16,763     Other long-term receivables                           2,651            2,624     Customer deposits                                     8,296            8,573                                                           139,998          96,698 

Financial liabilities 

                                                                    Financial liabilities at                                                                    amortised cost                                                           31 March 2017   31 December 2016                                                             (GBP000's)      (GBP000's)     Accounts payable and accrued liabilities              10,007          8,992     Other long-term liabilities                           12,964          14,505     Other short-term payables                             11,649          15,321     Interest payable                                      681             633     Payable to customers                                  8,296           8,573     Convertible debentures                                1,188           3,266     Long-term debt                                        361,500         370,793                                                           406,285         422,083 

The carrying values of the financial instruments noted above, with the exception of convertible debentures, approximate their fair values.  The convertible debentures' fair value as at 31 March 2017 amounted to   £2.1 million.  Fair value was determined based on a quoted market price in an active market.

Financial instruments 

                                                           Financial instruments recognised at                                                      fair value through profit or loss -                                                                     assets (liabilities)                                                    31 March 2017      31 December 2016                                                    (GBP000's)         (GBP000's)     Cross currency swap                            (813)              38,171     Contingent consideration                       (135,146)          (120,187)                                                    (135,959)          (82,016) 

Fair value hierarchy 

The hierarchy of the Company's financial instruments carried at fair value is as follows:  

                                          Level 2                         Level 3                                                                                             31 March 2017  31 December 2016   1 March 2017  31 December 2016                            (GBP000's)       (GBP000's)       (GBP000's)     (GBP000's)     Cross currency swap    (813)            38,171           -              -     Contingent     consideration          -                -               (135,146)      (120,187) 

Cross currency swap balance represents the fair value of cash inflows/(outflows) under the Currency Swap or the New Currency Swap, as applicable.

Contingent consideration represents the fair value of the cash outflows under earn-out agreements that would result from the performance of acquired businesses. The key inputs into the fair value estimation of these liabilities include the forecast performance of the underlying businesses, the probability of achieving forecasted results and the discount rate applied in deriving a present value from those forecasts. Significant increase (decrease) in the business' performance would result in a higher (lower) fair value of the contingent consideration, while significant increase (decrease) in the discount rate would result in a lower (higher) fair value of the contingent consideration. Additionally, as earn-out periods draw closer to their completion, the range of probability factors will decrease.  

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

Without probability and discount factors, the fair value of the contingent consideration would be approximately 14% higher, than its value at 31 March 2017. This assumes that the financial performance of the Jackpotjoy operating segment remains in line with management's expectations.  

As at 31 March 2017, the entire contingent consideration balance related to the Jackpotjoy earn-out.

The movement in Level 3 financial instruments is detailed below:

                                                                               (GBP000's)      Contingent consideration, 1 January 2016                             209,625     Addition                                                             -     Fair value adjustments                                               49,382     Payments                                                             (156,308)     Accretion of discount                                                15,545     Foreign exchange translation                                         1,943     Contingent consideration, 31 December 2016                           120,187     Fair value adjustments                                               12,856     Accretion of discount                                                2,103     Contingent consideration, 31 March 2017                              135,146 

          Current portion                                                      93,635     Non-current portion                                                  41,511 

16.  Other Long-Term Payables 

The Company is required to pay the Gamesys group £24.0 million in equal monthly instalments in arrears over the period from April 2017 to April 2020, for additional non-compete clauses that came into effect in April 2017 and that expire in March 2019.  £8.0 million of this payable is included in current liabilities, with the discounted value of the remaining balance, being £13.0 million, included in other long-term payables.

17.  Share Capital  

As at 31 March 2017, Jackpotjoy plc's issued share capital consisted of 73,718,942 ordinary shares, each with a nominal value of £0.10.  Jackpotjoy plc does not hold any shares in treasury and there are no shares in Jackpotjoy plc's issued share capital that do not represent capital.

The share capital movements presented below for periods prior to the date of completion of the plan of arrangement discussed in note 1 are presented as if each common share of Intertain had the same nominal value as the ordinary shares of Jackpotjoy plc.

                                                                                Ordinary shares                                                           (GBP000's)      #      Balance, 1 January 2016                               7,051           70,511,493     Conversion of convertible debentures, net of costs    185             1,853,667     Exercise of options                                   58              577,492     Exercise of warrants                                  4               40,625     Balance, 31 December 2016                             7,298           72,983,277     Conversion of convertible debentures, net of costs    63              628,333     Exercise of options                                   11              107,332     Balance, 31 March 2017                                7,372           73,718,942 

Ordinary shares 

During the three months ended 31 March 2017, Jackpotjoy plc did not issue any additional ordinary shares.

Convertible debentures  

During the three months ended 31 March 2017 (and prior to completion of the plan of arrangement), debentures at undiscounted value of £2.3 million were converted into 628,333 common shares of Intertain.

Share options  

The share option plan (the "Share Option Plan") was approved by the Board of Directors on 5 September 2016. Upon completion of the plan of arrangement, all options over common shares of Intertain under Intertain's stock option plan were automatically exchanged for options of equivalent value over ordinary shares of Jackpotjoy plc on equivalent terms and subject to the same vesting conditions under Intertain's share option plan.  The strike price of each grant has been converted from Canadian dollars to pound sterling at the foreign exchange rate of 0.606, being the exchange rate at the date of the plan of arrangement. Following the grant of the replacement options, no further options were, or will be, granted under the Share Option Plan.

During the three months ended 31 March 2017, nil stock options were granted, 107,332 stock options were exercised, 4,809 stock options were forfeited, and nil stock options expired.

Share-based compensation expense 

For the three months ended 31 March 2017, the Company recorded £0.5 million (2016 - £0.3 million) in share-based compensation expense with a corresponding increase in share-based payment reserve.

18.  Contingent Liabilities 

Indirect taxation 

Jackpotjoy plc companies may be subject to indirect taxation on transactions that have been treated as exempt supplies of gambling, or on supplies that have been zero rated where legislation provides that the services are received or used and enjoyed in the country where the service provider is located. Revenues earned from customers located in any particular jurisdiction may give rise to further taxes in that jurisdiction. If such taxes are levied, either on the basis of current law or the current practice of any tax authority, or by reason of a change in the law or practice, then this may have a material adverse effect on the amount of tax payable by the Company or on its financial position. Where it is considered probable that a previously identified contingent liability will give rise to an actual outflow of funds, then a provision is made in respect of the relevant jurisdiction and period impacted. Where the likelihood of a liability arising is considered remote, or ! the possible contingency is not material to the financial position of the Company, the contingency is not recognised as a liability at the balance sheet date.  As at 31 March 2017, the Company had recognised £nil liability (31 December 2016 - £nil) related to potential contingent indirect taxation liabilities.


Enquiries
 
Jackpotjoy plc
  
Jason Holden 
Director of Investor Relations                
jholden@jackpotjoyplc.com                     
+44(0)207-016-9866  
+44(0)7812-142118 
 
Jackpotjoy Group 
Amanda Brewer
Vice President of Corporate Communications
amanda.brewer@jackpotjoygroup.com             
+1-416-720-8150 
 
Media Enquires

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


Company Codes: LSE:JPJ, Toronto:IT, Toronto:ITX, Bloomberg:JPJ@LN, RICS:JPJ.L, ISIN:GB00BZ14BX56
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