Probability plc : Interim Results to 30 September 2011

5 December 2011

Probability plc

('Probability' or 'the Company')

Interim Results to 30 September 2011

Continued strong revenue growth

Probability plc, the AIM quoted mobile gambling specialist, announces its unaudited interim results for the six months ended 30 September 2011 and advises on plans to accelerate revenue growth.

Financial Highlights for period from 1 April 2011 to 30 September 2011 (unaudited)

• Net gaming revenues up 41% and in line with expectations to £3,271,000 (6 months to 30 September 2010 revenues: £2,314,000).
• Cash deposits made by customers up 74% compared to the 6 months to 30 September 2010.

Operating highlights for the period

• Positive results from trial investment in television marketing for LadyLuck's mobile casino which started in March 2011 and continued during the period.
• Rapid growth of iPhone and Android smartphone usage to account for over 50% of monthly revenues by the end of the period, compared to 37% at the beginning of the period.
• Launch of new mobile Bingo! platform including iPhone and Android support, as well as "Loopy Lotto", a slot game with two progressive jackpots.
• Strong growth in business-to-business and whitelabel offering, including the launch of six new client brands on the Probability mobile gambling platform.

Charles Cohen, Chief Executive Officer of Probability commented:

 "This has been an excellent first half for Probability with strong momentum that has continued into the second half with record player deposits in October.

Revenue Growth

"During the first half we delivered revenue growth on or ahead of target in both our consumer and business-to-business services, with revenues from the latter increasing by 84% compared to the first half of FY2010.

"Our direct to consumer business has developed thanks to increased player recruitment and improved yields. In particular, we have deployed our mobile CRM systems to great effect this year, increasing per-player deposits by 65% in this six month period compared to the same period in the last financial year.

Advertising investment

"We particularly want to take the opportunity of this interim statement to share with investors the  results of some trial advertising campaigns for LadyLuck's (our core direct-to-mobile consumer brand) which ran on various UK television channels from March 2011 and continued during the first half.

"We think that these trials represent a real breakthrough in our marketing to new consumers, offering an attractive and scalable returns on investment.

"Importantly, our customer research has found that the majority of the players who are attracted to our low-stakes, direct-to-mobile offering are not existing users of PC based on-line gambling and betting services. They are looking for new types of entertainment through smartphones, which for many people is now their primary means of accessing the internet. With smartphone adoption continuing apace, this makes the opportunity very exciting indeed if we can reach it through TV.

"The trial campaigns have enabled us to develop a strategy for expanding this activity cost effectively in the second half and beyond.

"Television airtime tends to be paid for as it is used and we now know that it takes around five to six months to recoup that initial investment. This will inevitably impact profitability in the short term whilst that initial outlay is recovered. Indeed, this is exactly what happened in the first half, as we aired (and paid for) some test campaigns quite late in the period, turning what would have been a profit for the half year into the small loss reported today. However, we time these campaigns for when the marketing will have the best effect.

Corporate Development

"The Company is currently at advanced stages of negotiation over a number of new business-to-business agreements and we expect to be able to make further update announcements regarding these transactions in the near future.

Outlook

"We expect to deliver an underlying profit in this financial year before any additional marketing investment which may occur. Any such investment will nevertheless take priority in the period ahead where the Company sees such investment will deliver increased scale and longer term profit growth.

"We will of course keep investors informed as the second half progresses.

Graham Parr, Chairman of Probability plc, said:

"Probability has performed very well in this half and the Board is delighted with progress made in all areas of the business, technology and operations.

"We are particularly encouraged by the increase in revenues continuing to build from a stable fixed cost base, and the renewed emphasis on marketing to our core consumer operation.

"We continue to pursue business-to-business opportunities and white label services which we see as having long term strategic value and will enable us to enter markets where partnerships are the logical way forward. Our partnership with Caliente in Mexico is the first of these and we are excited by the possibilities which this offers in South America generally.

"The unsolicited takeover approach which we received from William Hill plc recently was, we feel, a validation of our leading position as a mobile developer and operator. It also  demonstrates the importance attached to mobile by those in the gambling industry who have their eye on the future and are smart enough to see where the technology is heading."

Charles Cohen (CEO)	Probability plc	Tel: [phone] @probabilityplc
Paul Shackleton (NOMAD)/James Felix	Daniel Stewart & Co. Plc	Tel: [phone]
David Bick/ Mark Longson	Square1 Consulting	Tel: [phone]

Consolidated Statement of Comprehensive Income
	Half year	Half year	Year ended
	30 September	30 September	31 March
	2011	2010	2011
	£'000	£'000	£'000
	(unaudited)	(unaudited)	(audited)
Continuing operations
Net gaming revenue	3,271	2,314	5,374
Operating expenses	(430)	(332)	(753)
Administrative expenses	(2,944)	(2,745)	(5,783)
Operating loss	(103)	(763)	(1,162)
Finance income	15	5	14
Loss before tax	(88)	(758)	(1,148)
Taxation	-	-	-
Loss after tax	(88)	(758)	(1,148)
Loss per share (pence)
Basic	(0.33p)	(3.50p)	(4.27p)
Diluted	(0.33p)	(3.50p)	(4.27p)

Consolidated Statement of Financial Position
	As at	As at	As at
	30 September	30 September	31 March
	2011	2010	2011
	£'000	£'000	£'000
	(unaudited)	(unaudited)	(audited)
Assets
Non-current assets
Property, plant and equipment	296	75	147
Current assets
Trade and other receivables	804	668	636
Cash and cash equivalents	2,230	876	2,848
Total assets	3,330	1,619	3,631
Current liabilities
Trade and other payables	465	567	702
Provisions	238	238	238
Total liabilities	703	805	940
Total net assets	2,627	814	2,691
Capital and reserves attributable to equity holders of the parent
Share capital	270	217	269
Share premium	7,430	5,240	7,430
Reverse acquisition reserve	1,380	1,380	1,380
Retained deficit	(6,453)	(6,023)	(6,388)
Total equity attributable to
equity holders of the parent	2,627	814	2,691

Consolidated Statement of Cash Flows
	Half Year	Half Year	Year Ended
	30 September	30 September	31 March
	2011	2010	2011
	£'000	£'000	£'000
	(unaudited)	(unaudited)	(audited)
Cash flows from operating activities
Loss before tax	(88)	(758)	(1,148)
Adjustments for:
Depreciation	35	28	53
Share based payments	23	13	38
Finance income	(15)	(5)	(14)
(Increase)/decrease in trade and other receivables	(168)	50	82
(Decrease)/increase in trade and other payables	(237)	(86)	49
Cash used in operations	(450)	(758)	(940)
Cash flow from investing activities
Capital expenditure	(184)	(16)	(113)
Finance income	15	5	14
Net cash generated from/(used in) investing activities	(169)	(11)	(99)
Cash flows from financing activities
Issue of shares	1	1	2,243
Net cash generated from financing activities	1	1	2,243
Net increase/(decrease) in cash and cash equivalents	(618)	(768)	1,204
Cash and cash equivalents at the beginning of the period	2,848	1,644	1,644
Cash and cash equivalents at the end of the period	2,230	876	2,848

Consolidated Statement of Changes in Equity

	Share capital	Share premium	Reverse acquisition reserve	Retained Earnings	Total
	£'000	£'000	£'000	£'000	£'000
	(unaudited)	(unaudited)	(unaudited)	(unaudited)	(unaudited)
Balance at 31 March 2011	269	7,430	1,380	(6,388)	2,691
Loss and total comprehensive income for the period				(88)	(88)
Ordinary Share Issue	1				1
Share based payments- credit to equity				23	23
Balance at 30 September 2011	270	7,430	1,380	(6,453)	2,627
Balance at 31 March 2010	216	5,240	1,380	(5,278)	1,558
Loss and total comprehensive income for the period				(758)	(758)
Ordinary Share Issue	1				1
Share based payments- credit to equity				13	13
Balance at 30 September 2010	217	5,240	1,380	(6,023)	814
Balance at 1 April 2010	216	5,240	1,380	(5,278)	1,558
Loss and total comprehensive income for the period	-	-	-	(1,148)	(1,148)
Ordinary Share Issue	53	2,190			2,243
Share based payments- credit to equity	-	-	-	38	38
Balance at 31 March 2011	269	7,430	1,380	(6,388)	2,691

General information

Probability is a public limited company incorporated in the United Kingdom under the Companies Act (Registration No. 5830059). The Company's registered address is Staple Court, 11 Staple Inn Buildings, London, WC1V 7QH. The company's ordinary shares are traded on the Alternative Investment Market ('AiM'). Copies of this report will be available to shareholders on the Company's website. Further copies of the report may be obtained from the above address or on the Investor Relations section of the Company's website at www.probabilityplc.com

Basis of Accounting

Basis of Preparation

These interim results has been prepared using the recognition and measurement principles of International Accounting Standards, International Financial Reporting Standards and Interpretations adopted for use in the European Union (collectively Adopted IFRSs).   The accounting policies adopted in these interim results have been consistently applied to all periods presented and are consistent with the policies used in the preparation of the statutory accounts for the period ended 31 March 2011.

The comparative financial information for the year ended 31 March 2011 included within these interim results does not constitute the full statutory accounts for that year. The Annual Report and Financial Statements for 2011 have been filed with the Registrar of Companies. The Independent Auditors' Report on that Annual Report and Financial Statements for 2011 was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

The financial information for the half years ended 30 September 2011 and 30 September 2010 is unaudited.

Net gaming revenue

Revenue is recognised to the extent that its probable economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is recognised in the accounting periods in which the transactions occur.

Revenue comprises net gaming revenue derived from mobile phone gambling operations.

Net gaming revenue is defined as the difference between the amount of bets placed by the players less amounts won by players. It is stated after deduction of certain bonuses and prizes granted to players.

Commission that is derived from the Group's "white label" operations (third party entities that use the Group's platform) and Poker is included within net gaming revenue.

Earnings/(Loss) per share

The basic earnings per ordinary share has been calculated using the loss for the financial period of

£88,000 (30 September 2010 - loss of £758,000 and 31 March 2011 - loss of £1,148,000) and weighted average number of ordinary shares of 26,916,000 (30September 2010- 21,681,000 and 31 March 2011- 26,914,103).

For the period ended 30 September 2011 the weighted average number of diluted shares used to calculate diluted EPS was 26,916,000.  As the Group made losses in other periods the loss per share has not been diluted for those periods.