World Gaming Results Up

5 Apr 2004

LONDON – (Press Release) -- World Gaming plc (OTC BB: WGMGY), a UK-based Internet-gaming software and e-business services group of companies (the "Group"), is pleased to report financial results for the three months and full year ended December 31, 2003.

Highlights

- Full year net profit of $2,958,000 or 7 cents per share vs. loss of $5,318,000 for the same period last year or a loss of 16 cents per share.

- Net profit for the quarter of $2,934,000 vs. loss of $593,000 for the same period last year.

- Full year profit before interest and related items and depreciation of $5,245,000 (12 cents per share) vs. loss of $2,197,000 (loss of 6 cents per share) for the same period last year.

- 33% increase in wagering volume in the quarter when compared to the same quarter last year.

- Royalty revenue grew 7 percent for the year ended December 31, 2003.

- Operating expenses including interest and depreciation down 34% for the year ended December 31, 2003.

- Settlement of certain legal claims and capital lease obligations.

- Working capital deficit reduced from $5,581,000 at December 31, 2002 to $126,000 at December 31, 2003.

- New Casino games and Virtual Games released during the year with further products scheduled for release.

Fiscal results

Total revenues for the quarter ended December 31, 2003 grew 22% to $7,357,000 compared to $6,043,000 for the same period last year. Together with a 33% year on year increase in the volume of wagers processed on our systems in the quarter, the increase is also attributable to royalties received as a result of the strong net win achieved by our licensees. Stable deposit processing gateways further assisted the increase in wagering volume for the quarter. The Group experienced a 9% increase in royalty revenues in the quarter when compared to the same period last year.

Total revenues for the year grew $921,000 or 5%. This growth was driven by a 7% or $1,056,000 increase in royalty revenue and a 56% or a $634,000 increase in transaction processing revenues. Revenues in respect of new license fees fell $658,000 as the Group did not seek to sign new licensees in the year. The increase in royalty revenues occurred despite the impact of losing a licensee in May, who at that time contributed 6% of total revenues. Increased transaction processing fees in the year represent the increase in revenues from on-charging higher processing costs from suppliers, charges that our licensees were finding increasingly difficult to sustain.

In February 2004, the Group closed transaction processing and customer service divisions of the business. This closure affected less than 6% of total deposit volume on behalf of licensees and is expected to contribute a further $600,000 in profits through shedding this ineffective and loss making aspect of the business.

There was no revenue from new licenses for the year as the Group continued to focus on existing licensees during the year. As the enhancement of its platform and product suite continues, the Group expects to widen its focus to once again include marketing to new licensees, but only to the extent the Group is in a position to fully support such licensees.

For the year ended December 31, 2003, total system-wide wagers grew 12% to $3.8 billion from $3.4 billion in the prior year.

Net profit for the quarter ended December 31, 2003 was $2,934,000 or 7 cents per share compared to a net loss of $593,000 or 2 cents loss per share. The increase in net profit in the quarter driven by increased revenues also reflected the results of restructuring that has brought the Group's cost base to more manageable levels.

Net profit for the year ended December 31, 2003 was $2,958,000 or 7 cents per share compared to a loss of $5,318,000 or a loss of 16 cents per share in the prior year.

The gross margin for the quarter was 87.9% as compared to 92.5% for the same period last year. For the full year, gross margin was 87.9% as compared to 89.9%. The decline in gross margin represents the heightened direct costs attributable to the transaction processing division of the business that was closed in February 2004.

Operating expenses including interest and depreciation decreased 42% to $3,551,000 during the fourth and final quarter of 2003 compared to $6,142,000 for the same period last year. This decline primarily consisted of a 95% reduction in bad debt write-offs or provisioning, a decline in professional fees and a decline in depreciation charges as many high-value assets became fully depreciated in the quarter.

For the full year ended December 31, 2003, operating expenses including interest and depreciation declined 34% to $13,421,000 compared to $20,483,000 for the same period last year. Efforts to reduce operating costs continued throughout the year with the primary contributors to this reduction being:

- Bad debts for the year ended December 31, 2003 decreased 90 percent or $3,056,000 compared to the same period last year. Last year the Group experienced significant write-offs in failed transaction processing routes. The failure of these routes typically occurred due to implementation of transaction processes that lacked transparency. Improved due diligence procedures and reinforcement of risk sharing policies with licensees has resulted in a significant reduction in this cost in the year ended December 31, 2003.

- Depreciation expense decreased 39% or $1,235,000 when compared to the same period last year. This reduction was the result of a number of significant assets becoming fully depreciated in the third quarter of 2003.

- Communication costs decreased 46% or $397,000 when compared to the same period last year as contracts with certain suppliers were cancelled or renegotiated and the use of voice-over IP telecommunication was utilized.

- Salaries and wages decreased 10% or $670,000 despite severance costs incurred on a number of senior employees in the year.

- Professional fees declined 22% or $390,000 as litigious matters requiring third party advice declined and other advisors were not utilized or changed.

- Other corporate overhead including occupancy costs, board expenses and travel declined 30% or $1,314,000 when compared to the same period last year through initiatives such as relocation or closure of offices and renegotiation or changes in certain supplier accounts.

As a result of settling a number of significant capital lease obligations in the year, the company derived other income of $981,000 through write-backs of amounts previously accrued in respect of these obligations. Operational update

In the lead-up to the winter sports calendar, the Group concentrated efforts in upgrading the Oracle Database and network infrastructure. This planning has maintained a more stable platform throughout the season with fewer system outages. In addition, on-line security risks through Denial of Service Attacks that were prevalent throughout the season have predominately been mitigated through the implementation of new filtering hardware and Internet traffic routing. Further security measures are being reviewed and implemented across the system with the key result to bring system outages to an absolute minimum.

During February 2004, the Group closed its transaction processing and customer service divisions. This decision formed an integral part of the overall business review that commenced in April 2003. The closure of these divisions allows the Group to concentrate on its core software development business while shedding divisions that we cannot efficiently administer.

In keeping with the Group's commitment to deliver an enhanced product suite, a new concept in on-line gaming called Virtual Games was released to our licensees in the fourth quarter of 2003. Performance of these games has met management's expectations and provides an enhanced dimension to the Group's product suite.

The Group's expanded horseracing product is in the final stages of testing with licensees and is expected to be released in April 2004. In addition, we plan to continue developing the horseracing product thus giving our licensees the ability to better manage their risk and enable improved yield on this product.

Multi-player poker remains a significant priority of the Group. Further stages of development have commenced under a partnership with a third-party supplier. The multi-player poker product is expected to add a significant revenue stream to our licensee's product suite and we expect to have this available in the third quarter of 2004.

Over the coming twelve months, we intend to invest further in our software platform to enable improved functionality. Together with a new development process, this is expected to deliver better quality products with a faster delivery timetable.

Daniel Moran, World Gaming's CEO commented:

"The Group has undergone a number of changes in the year including implementation of a new executive Board early in the year, restructuring of certain aspects of the business and closure of those areas that the Group could not effectively maintain or were inconsistent with our core software development business. This continued into the first quarter of 2004. Many of these changes have streamlined the business and enabled it to turnaround and produce the results that we see today."

"The Board's resolve remains that of growing the business through enhanced products and infrastructure as we continue to act in a culture of heightened fiscal responsibility. The benefits of this strategy are beginning to show as the Group's financial position begins to strengthen."

World Gaming Results Up is republished from CasinoCityTimes.com.

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	World Gaming Results Up 5 Apr 2004 <a href='https://ad.casinocity.com/adclick.php?n=a21efcd1'><img src='https://ad.casinocity.com/adview.php?what=-site:vendors/width:250/RON&n=a21efcd1' border='0' alt='' /></a> LONDON – (Press Release) -- World Gaming plc (OTC BB: WGMGY), a UK-based Internet-gaming software and e-business services group of companies (the "Group"), is pleased to report financial results for the three months and full year ended December 31, 2003. Highlights - Full year net profit of $2,958,000 or 7 cents per share vs. loss of $5,318,000 for the same period last year or a loss of 16 cents per share. - Net profit for the quarter of $2,934,000 vs. loss of $593,000 for the same period last year. - Full year profit before interest and related items and depreciation of $5,245,000 (12 cents per share) vs. loss of $2,197,000 (loss of 6 cents per share) for the same period last year. - 33% increase in wagering volume in the quarter when compared to the same quarter last year. - Royalty revenue grew 7 percent for the year ended December 31, 2003. - Operating expenses including interest and depreciation down 34% for the year ended December 31, 2003. - Settlement of certain legal claims and capital lease obligations. - Working capital deficit reduced from $5,581,000 at December 31, 2002 to $126,000 at December 31, 2003. - New Casino games and Virtual Games released during the year with further products scheduled for release. Fiscal results Total revenues for the quarter ended December 31, 2003 grew 22% to $7,357,000 compared to $6,043,000 for the same period last year. Together with a 33% year on year increase in the volume of wagers processed on our systems in the quarter, the increase is also attributable to royalties received as a result of the strong net win achieved by our licensees. Stable deposit processing gateways further assisted the increase in wagering volume for the quarter. The Group experienced a 9% increase in royalty revenues in the quarter when compared to the same period last year. Total revenues for the year grew $921,000 or 5%. This growth was driven by a 7% or $1,056,000 increase in royalty revenue and a 56% or a $634,000 increase in transaction processing revenues. Revenues in respect of new license fees fell $658,000 as the Group did not seek to sign new licensees in the year. The increase in royalty revenues occurred despite the impact of losing a licensee in May, who at that time contributed 6% of total revenues. Increased transaction processing fees in the year represent the increase in revenues from on-charging higher processing costs from suppliers, charges that our licensees were finding increasingly difficult to sustain. In February 2004, the Group closed transaction processing and customer service divisions of the business. This closure affected less than 6% of total deposit volume on behalf of licensees and is expected to contribute a further $600,000 in profits through shedding this ineffective and loss making aspect of the business. There was no revenue from new licenses for the year as the Group continued to focus on existing licensees during the year. As the enhancement of its platform and product suite continues, the Group expects to widen its focus to once again include marketing to new licensees, but only to the extent the Group is in a position to fully support such licensees. For the year ended December 31, 2003, total system-wide wagers grew 12% to $3.8 billion from $3.4 billion in the prior year. Net profit for the quarter ended December 31, 2003 was $2,934,000 or 7 cents per share compared to a net loss of $593,000 or 2 cents loss per share. The increase in net profit in the quarter driven by increased revenues also reflected the results of restructuring that has brought the Group's cost base to more manageable levels. Net profit for the year ended December 31, 2003 was $2,958,000 or 7 cents per share compared to a loss of $5,318,000 or a loss of 16 cents per share in the prior year. The gross margin for the quarter was 87.9% as compared to 92.5% for the same period last year. For the full year, gross margin was 87.9% as compared to 89.9%. The decline in gross margin represents the heightened direct costs attributable to the transaction processing division of the business that was closed in February 2004. Operating expenses including interest and depreciation decreased 42% to $3,551,000 during the fourth and final quarter of 2003 compared to $6,142,000 for the same period last year. This decline primarily consisted of a 95% reduction in bad debt write-offs or provisioning, a decline in professional fees and a decline in depreciation charges as many high-value assets became fully depreciated in the quarter. For the full year ended December 31, 2003, operating expenses including interest and depreciation declined 34% to $13,421,000 compared to $20,483,000 for the same period last year. Efforts to reduce operating costs continued throughout the year with the primary contributors to this reduction being: - Bad debts for the year ended December 31, 2003 decreased 90 percent or $3,056,000 compared to the same period last year. Last year the Group experienced significant write-offs in failed transaction processing routes. The failure of these routes typically occurred due to implementation of transaction processes that lacked transparency. Improved due diligence procedures and reinforcement of risk sharing policies with licensees has resulted in a significant reduction in this cost in the year ended December 31, 2003. - Depreciation expense decreased 39% or $1,235,000 when compared to the same period last year. This reduction was the result of a number of significant assets becoming fully depreciated in the third quarter of 2003. - Communication costs decreased 46% or $397,000 when compared to the same period last year as contracts with certain suppliers were cancelled or renegotiated and the use of voice-over IP telecommunication was utilized. - Salaries and wages decreased 10% or $670,000 despite severance costs incurred on a number of senior employees in the year. - Professional fees declined 22% or $390,000 as litigious matters requiring third party advice declined and other advisors were not utilized or changed. - Other corporate overhead including occupancy costs, board expenses and travel declined 30% or $1,314,000 when compared to the same period last year through initiatives such as relocation or closure of offices and renegotiation or changes in certain supplier accounts. As a result of settling a number of significant capital lease obligations in the year, the company derived other income of $981,000 through write-backs of amounts previously accrued in respect of these obligations. Operational update In the lead-up to the winter sports calendar, the Group concentrated efforts in upgrading the Oracle Database and network infrastructure. This planning has maintained a more stable platform throughout the season with fewer system outages. In addition, on-line security risks through Denial of Service Attacks that were prevalent throughout the season have predominately been mitigated through the implementation of new filtering hardware and Internet traffic routing. Further security measures are being reviewed and implemented across the system with the key result to bring system outages to an absolute minimum. During February 2004, the Group closed its transaction processing and customer service divisions. This decision formed an integral part of the overall business review that commenced in April 2003. The closure of these divisions allows the Group to concentrate on its core software development business while shedding divisions that we cannot efficiently administer. In keeping with the Group's commitment to deliver an enhanced product suite, a new concept in on-line gaming called Virtual Games was released to our licensees in the fourth quarter of 2003. Performance of these games has met management's expectations and provides an enhanced dimension to the Group's product suite. The Group's expanded horseracing product is in the final stages of testing with licensees and is expected to be released in April 2004. In addition, we plan to continue developing the horseracing product thus giving our licensees the ability to better manage their risk and enable improved yield on this product. Multi-player poker remains a significant priority of the Group. Further stages of development have commenced under a partnership with a third-party supplier. The multi-player poker product is expected to add a significant revenue stream to our licensee's product suite and we expect to have this available in the third quarter of 2004. Over the coming twelve months, we intend to invest further in our software platform to enable improved functionality. Together with a new development process, this is expected to deliver better quality products with a faster delivery timetable. Daniel Moran, World Gaming's CEO commented: "The Group has undergone a number of changes in the year including implementation of a new executive Board early in the year, restructuring of certain aspects of the business and closure of those areas that the Group could not effectively maintain or were inconsistent with our core software development business. This continued into the first quarter of 2004. Many of these changes have streamlined the business and enabled it to turnaround and produce the results that we see today." "The Board's resolve remains that of growing the business through enhanced products and infrastructure as we continue to act in a culture of heightened fiscal responsibility. The benefits of this strategy are beginning to show as the Group's financial position begins to strengthen." World Gaming Results Up is republished from CasinoCityTimes.com.