Probability plc : Trading Update: Q3 FY11/12

RNS - 16 January 2012

Probability plc 

("Probability" or "the Company")

Trading Update for Quarter 3 of year to 31 March 2012

Probability plc, the specialist mobile gambling provider and operator, is  updating investors on trading performance in the period from 1 October  to 31 December  2011 and prospects for future growth including in the United States.

Trading was strong in the 3rd quarter in all areas of the business, with continued growth in the core business-to-consumer "Lady Luck's" mobile gaming brand and strong performance from our business-to-business ("B2B") partnerships. December saw record player deposits and activity, with over £1m wagered on Christmas Eve alone.

In addition, the Company concluded new B2B and white label agreements with major gambling and betting operators during the quarter which are now being implemented.

Trading highlights for the three months from 1 October  to 31 December  2011 (unaudited):

• Net Gaming Revenue of £1,877,000, an increase of 27% from the same quarter last year.
• Total money deposited by customers into their gaming accounts with the Company during the quarter was 48% higher than the same quarter last year.
• The share of deposits coming from iPhone, Android and other Touch device users in this quarter increased again, to 55%.

Charles Cohen, Probability plc CEO, said:

"We are clearly seeing the benefits now of our increased and sustained investment in television advertising to  attract new players. Yields per player have continued to increase, due to continued product  investment and our market leading CRM capability. Net gaming revenues were not just better compared to last year, they were also 10% above July to September this year.

"As with the Christmas period last year players had a higher tendency to withdraw profits than usual, but we would expect our operating margins to return to normal and have seen improvements already in the first two weeks of January. Also in line with previous years, we expect January to be a slower month overall.

"As we discussed in our last update, we are evaluating an increase in investment in TV advertising to recruit new customers in the last quarter and beyond. A final decision will not be taken until later in January.

"The payback period on TV advertising remains around five to six months after the cost of the airtime is actually incurred. A significant investment in February and March 2012 would result in lower than forecast profitability in the short term because of this timing difference.  The Board is fully supportive of such a strategy as the most effective way to ensure we deliver long term shareholder value. We will continue to keep investors advised of our expansion plans as appropriate.

New Business to Business Agreements

"We also made strong progress in B2B this quarter. Although B2B remains a small part of our revenues, it has strategic value in diversifying our revenues and providing access to new markets which we would not necessarily wish to compete in as an operator ourselves. Our wider player base also benefits where these partners are plugged into our bingo network or progressive jackpot pools, meaning larger prizes and improved liquidity.

"We are very excited about the calibre and scale of the new clients with whom we have secured agreements in the past three months, and others where we are at a very late stage of negotiation. We will keep investors informed as appropriate.

International Activity: Mexico, Italy and USA

"We are also close to activating our service in Mexico with Caliente which we anticipate going live early in the final quarter of this financial year.

"We are still on hold in respect of Italy. The Italian regulator (AAMS) has yet to authorise the offering of slots games, without which we cannot offer a commercially viable service. AAMS has no fixed timetable for making a decision so we are unable to offer any additional guidance on when this might happen.

"We have noted with interest recent developments in the United States. The Department Of Justice has effectively given individual States the ability to determine their own regulations within their own borders.

"We are very excited by the prospect of individual states opening their local markets and already it seems that several are making plans to do just that.

"This is a perfect scenario for mobile gambling because mobile is the only platform where the location of the user can be assured with any degree of certainty at the time they place their bets. Over 109,000,000 Americans are already using apps on smartphones which are capable of running our games*.

"Probability has never taken wagers from US players and has always maintained a clean sheet as a responsible regulated operator generally. Without prior misdemeanours, we expect entry to the emerging US e-gaming and e-lottery market to be a realistic opportunity for us.

"We intend to actively pursue this opportunity and are already engaged in early stage discussions with several parties in the US to explore our options. We will report back to shareholders on our progress when appropriate."

ends

Note:

* Flurry Analytics, 23 Dec 2011.