Spettacolo
JPJ Group plc: Results for the Three and Nine Months Ended 30 September 2018
(£m)
(£m)
"We are pleased with the quarterly performance of JPJ Group given reported gaming revenue growth of 8% and an uplift in adjusted EBITDA of 13%. The Vera&John segment is once again the stand-out, with year-on-year revenue growth of 41% on a constant currency basis . The growth at Vera&John highlights our strategy of international diversification, with 44% of Group revenue generated outside the UK in Q3.
As part of our commitment to meeting the highest industry standards on responsible gambling, revenues at Jackpotjoy UK have been impacted by the responsible gambling measures we have implemented and the closure of a number of high value accounts. We expect that the impact of closed accounts will begin to annualise during H2 2019 and, provided there are no further regulatory challenges, the Jackpotjoy segment will return to revenue growth thereafter.
Overall, we remain confident in our outlook for the full year. We continue to enjoy a strong association with Gamesys in a relationship which provides mutual benefits and we are also excited by the significant growth opportunities that exist in both existing and new markets, where we are well-placed to take advantage of this promising backdrop."
Performance in the first nine months of the financial year has been solid as gaming revenue has grown 11% and adjusted EBITDA growth has accelerated over the past three months; the Board remains comfortable with market expectations for EBITDA for FY 2018.
The Group's ongoing strong free cash flow generation is enabling us to rapidly deleverage, with net debt reduction to below 2.5x net debt/EBITDA remaining a key strategic target and the point at which the Board can consider options to return cash to shareholders. As previously highlighted, the Board expects the impact of responsible gambling measures implemented this year to annualise from H2 2019 and provided there are no further regulatory changes impacting the Group's operations, for revenue growth to resume at Jackpotjoy UK thereafter.
The Group also notes that Sweden is currently undergoing a regulatory process that will result in licensed operators being subject to an 18% tax on Gross Gaming Revenues from January 2019 . The Group can confirm that it has applied for the required licences and, in line with other operators in the region, is awaiting confirmation of these approvals.
A conference call for analysts and investors will be held today at 1.00pm GMT / 8.00am ET . To participate, interested parties are asked to dial +44(0)20-3003-2666 or +1-800-608-0547, or for US shareholders +1-866-966-5335, 10 minutes prior to the scheduled start of the call using the reference "JPJ" when prompted.
A replay of the conference call will be available for 30 days by dialling +44(0)20-8196-1998 or +1-866-595-5357 and using reference 6608240#. A transcript will also be made available on JPJ Group plc's website at http://www.jpjgroup.com/investors.
The following non-IFRS definitions 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 recognised measures under IFRS, do not have standardised 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. Our method of calculating these measures may differ from the method used by other entities. Accordingly, our measures may not be comparable to similarly titled measures used by other entities or in other jurisdictions.
The Group's gaming revenue during the three months ended 30 September 2018 consisted of:
The Group's gaming revenue during the three months ended 30 September 2017 consisted of:
The increase in gaming revenue for the three months ended 30 September 2018 in comparison with the three months ended 30 September 2017 relates primarily to organic growth of the Vera&John segment, where gaming revenue increased by 40%.
The Group's gaming revenue during the nine months ended 30 September 2018 consisted of:
The Group's gaming revenue during the nine months ended 30 September 2017 consisted of:
30 September 2018
(£000's)
30 September 2017
(£000's)
30 September 2018
(£000's)
30 September 2017
(£000's)
30 September 2018
(£000's)
30 September 2017
(£000's)
30 September 2018
(£000's)
30 September 2017
(£000's)
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 Jackpotjoy segment to operate on its platforms and game suppliers' fees paid by both the Vera&John and Jackpotjoy segments. Gaming taxes largely consist of point of consumption taxes ('POC'), payable in the regulated jurisdictions that the Group operates in. Variance in gaming taxes from prior periods relates to a change in UK POC taxes where a 15% general betting duty on all free or discounted online bets ('POC2') was introduced in Q4 2017. 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 and nine months ended 30 September 2018 compared to the same periods in 2017 is mainly due to higher revenues achieved and increased selling and marketing spending, primarily in the Vera&John segment.
30 September 2017
(£000's)
30 September 2017
(£000's)
Compensation and benefits costs consist of salaries, wages, bonuses, directors' fees, benefits and share-based compensation expense. The decrease in these expenses for the three months ended 30 September 2018 compared to the same period in 2017 is due to lower operational bonus accruals. The increase in these expenses for the nine months ended 30 September 2018 compared to the same period in 2017 is due to additional staff hired in the period.
Professional fees consist mainly of legal, accounting and audit fees. The slight increase in professional fees in the three and nine months ended 30 September 2018 compared to the same periods in 2017 relates to additional gaming industry regulatory requirements that came into effect in the current period.
General and administrative expenses consist of items, such as rent and occupancy, travel and accommodation, insurance, listing authority fees, technology and development costs, and other office overhead charges. The increase in these costs for the three and nine months ended 30 September 2018 compared to the same periods in the prior year can be attributed to marginally higher travel, rent and overhead costs.
Amortisation and depreciation consist of amortisation of the Group's intangible assets and depreciation of the Group's tangible assets over their useful lives. The decrease in amortisation and depreciation for the three months ended 30 September 2018 is due to the fact that amortisation expense decreases with each passing year of the Group's intangible assets' lives as a result of the amortisation method used. The increase in amortisation and depreciation for the nine months ended 30 September 2018 is due to the non-compete clauses, for which amortisation started in Q2 2017.
Transaction related costs consist of legal, professional, due diligence, other direct costs/fees associated with transactions and acquisitions or disposals contemplated or completed, costs associated with the Group's Premium Listing and the refinancing of the Group's external debt. Q1 2017 transaction related costs also included costs associated with the UK strategic review and implementation of UK-centred strategic initiatives, including the listing of the Group on the London Stock Exchange.
Severance costs during the three and nine months ended 30 September 2018 relate to personnel redundancies resulting from internal restructuring.
Gaming revenue for the Jackpotjoy segment for the three months ended 30 September 2018 was 3% lower than in the same period in 2017 due to a decline in the Mandalay brands, which accounted for 5% of the segment's revenue. The decrease was partially offset by increases in the Starspins and Botemania brands, which collectively accounted for 27% of this segment's revenue.
Gaming revenue for the nine months ended 30 September 2018 was 2% higher than in the same period in 2017 due to organic growth led by increases in the Starspins and Botemania brands. Collectively, they accounted for 26% of this segment's revenue.
The decrease in distribution costs for the three months ended 30 September 2018 compared to the same period in 2017 is driven by a marginal reduction in UK marketing spend.
The increase in distribution costs for the nine months ended 30 September 2018 is driven by costs from the segment's TV marketing campaigns, as well as an incremental gaming tax expense, which relates to tax on bonuses through UK POC2 tax introduced in Q4 2017. The increase in administrative costs for the three and nine months ended 30 September 2018 compared to the same periods in 2017 was mainly driven by increases in administrative overhead costs.
Gaming revenue for the Vera&John segment for the three and nine months ended 30 September 2018 increased by 40% and 38%, respectively, compared to the same periods in 2017 due to organic growth . On a constant currency basis , revenue increased by 41% and 36% in the three and nine months ended 30 September 2018 compared to the same periods in 2017.
Distribution costs increased by 40% and 49%, respectively, for the three and nine months ended 30 September 2018 compared to the same periods in 2017 as a result of higher marketing spend in the current period. The increase was further driven by higher gaming tax due to increased revenue in regulated jurisdictions compared to the prior period.
The increase in administrative costs for the three and nine months ended 30 September 2018 compared to the same periods in 2017 was mainly driven by increases in personnel and administrative overhead costs as the segment continues to grow.
Adjusted EBITDA on Unallocated Corporate Costs increased from (£3.2) million to (£2.5) million in the three months ended 30 September 2018 as compared to the three months ended 30 September 2017 . The variance mainly relates to a £0.6 million decrease in compensation fees and a £0.2 million decrease in general administrative overhead costs, offset by an increase of £0.1 million in professional fees.
Adjusted EBITDA on Unallocated Corporate Costs increased from (£8.6) million to (£7.8) million in the nine months ended 30 September 2018 compared to the nine months ended 30 September 2017 . The variance mainly relates to a £0.1 million decrease in compensation fees, a £0.5 million decrease in general administrative overhead costs and a £0.1 million decrease in professional fees.
Net loss on Unallocated Corporate Costs decreased from £20.6 million to £8.4 million in the three months ended 30 September 2018 as compared to the three months ended 30 September 2017. This decrease is primarily related to a lower foreign exchange loss and lower interest expense incurred as a result of the debt refinance that took place in Q4 2017. The decrease in net loss can further be attributed to the fact that there were no fair value adjustments on contingent consideration in the current period as the final earn-out period ended in Q1 2018.
Net loss on Unallocated Corporate Costs decreased from £75.8 million to £38.6 million in the nine months ended 30 September 2018 as compared to the nine months ended 30 September 2017. This decrease is primarily related to a lower foreign exchange loss and lower interest expense incurred as a result of the debt refinance that took place in Q4 2017. The decrease in net loss can further be attributed to the fact that there were no fair value adjustments on contingent consideration in the second and third quarters of 2018 as the final earn-out period ended in Q1 2018.
Costs included in net loss which are excluded from the Adjusted EBITDA measure are discussed on page 4 of this release.
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 ('Average Active Customers') as being real money customers who have placed at least one bet in a given month. '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.
and are key performance indicators used by management to assess revenue earned from real money gaming operations of the business. The Group defines Total Real Money Gaming Revenue ('Total Real Money Gaming Revenue') as revenue less revenue earned from B2B websites. 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.
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 Total Real Money Gaming Revenue.
Monthly Real Money Gaming Revenue per Average Active Customer increased by 10% year-over-year which is in line with the Group's overall customer acquisition and retention strategy.
We have been engaged by the Company to review the condensed set of financial statements in the interim financial report for the three and nine months ended 30 September 2018 which comprises the Interim Condensed Consolidated Statements of Comprehensive Income, the Interim Condensed Consolidated Balance Sheets, the Interim Condensed Consolidated Statements of Changes in Equity, the Interim Condensed Consolidated Statement of Cash Flows and the related notes.
We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
The interim 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 IFRSs as adopted by the European Union. The condensed set of financial statements included in this interim 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 is to express to the Company a conclusion on the condensed set of financial statements in the interim 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.
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 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.
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the interim financial report for the three and nine months ended 30 September 2018 is not prepared, in all material respects, with International Accounting Standard 34 as issued by the International Accounting Standards Board and International Accounting Standard 34, as adopted by the European Union.
BDO LLP
Chartered Accountants
London
14 November 2018
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
30 September 2017
30 September 2017
JPJ Group plc, formerly Jackpotjoy plc, is an online gaming holding company that was incorporated under the Companies Act 2006 ( England and Wales ) on 29 July 2016. On 27 June 2018 , Jackpotjoy plc changed its name to JPJ Group plc. JPJ Group plc's registered office is located at 35 Great St. Helen's, London , United Kingdom. Unless the context requires otherwise, use of 'Group' in these accompanying notes means JPJ Group plc and its subsidiaries, as applicable.
The Group 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, the Group's principal B2B software and support provider. The Vera&John and InterCasino brands operate off proprietary software owned by the Group. The Costa Bingo and related brands operate off the Dragonfish platform, a software service provided by the 888 group.
These Unaudited Interim Condensed Consolidated Financial Statements were authorised for issue by the Board of Directors of JPJ Group plc on 14 November 2018 .
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 ('IAS') 34 – Interim Financial Reporting, and have been prepared on a basis consistent with the accounting policies and methods used and disclosed in JPJ Group plc's consolidated financial statements for the year ended 31 December 2017 (the 'Annual Financial Statements'), except as described below. 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, and in accordance 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 Group's Interest Rate Swap (as defined in note 11), contingent consideration, certain hedged loan instruments, and certain loans receivable.
On 1 February 2017 , having been approved in the High Court, the Group's share premium was cancelled. Accordingly, the balance has been reallocated within equity reserves to the Group's retained earnings account. This is now shown in the Unaudited Interim Condensed Consolidated Statements of Changes in Equity as an adjustment to the balances on the Group's equity reserves in the period ending 30 September 2017. There is no impact on the income statement, on earnings per share or on total equity.
The comparative financial information for the year ended 31 December 2017 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 year ended 31 December 2017 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.
For a description of the Group's significant accounting policies, critical accounting estimates and assumptions, and related information see note 3 to the Annual Financial Statements. Other than as described below, there have been no changes to the Group's significant accounting policies or critical accounting estimates and assumptions during the nine months ended 30 September 2018 .
Effective from 1 January 2018 , the Group adopted IFRS 9 – Financial Instruments: Recognition and Measurement ('IFRS 9'). In relation to the Gaming Realms Transaction (as defined in note 10), as a result, the Group no longer separates the embedded derivative from its host contract and the entire asset is measured at fair value through profit or loss. Also in relation to this transaction, the adoption of IFRS 9 resulted in balances shown as other long-term receivables and other long-term assets at 31 December 2017 being combined into a single figure and shown as other long-term receivables at 30 September 2018 .
The Group elected to use hedge accounting for the purposes of recognising realised and unrealised gains and losses associated with the Interest Rate Swap. IFRS 9 permits hedge accounting under certain circumstances provided that the hedging relationship is:
Based on the Group's analysis of the requirements outlined above, it was concluded that the Interest Rate Swap meets all the necessary criteria and qualifies for use of hedge accounting. The Interest Rate Swap was designated as a cash flow hedge.
In accordance with IFRS 9, the Group reviewed its impairment policy and concluded that no material impairment provision on its financial instruments, as discussed in note 16, is required. The Group uses the expected credit loss model to assess impairment.
Effective from 1 January 2018 , the Group adopted IFRS 15 – Revenue from Contracts with Customers ('IFRS 15'), which replaces IAS 18 – Revenue. Applying this standard did not impact the Group's financial information as the Group's policy was already in compliance with the key principles outlined in IFRS 15.
In March 2018 , the Group determined that its reportable operating segments had changed such that the Mandalay segment was aggregated with the Jackpotjoy segment with effect from 1 January 2018 , as Mandalay no longer met the criteria for a reportable operating segment, set out in IFRS 8 – Operating Segments. Mandalay was therefore aggregated with the Jackpotjoy segment, consistent with the Group's other third-party platform hosted operations. Additionally, as discussed in note 6, the Group sold its social gaming business in the current period. All current year-to-date and 2017 comparative segment figures have been restated accordingly.
The following tables present selected financial results for each segment and the Unallocated Corporate Costs:
Three months ended 30 September 2018 :
During the nine months ended 30 September 2018 and 2017, revenue was earned from customers located in the following locations: United Kingdom – 61% (nine months ended 30 September 2017 – 66%), Sweden – 8% (nine months ended 30 September 2017 – 11%), rest of Europe – 18% (nine months ended 30 September 2017 – 15%), rest of world – 13% (nine months ended 30 September 2017 – 8%).
During the nine months ended 30 September 2018 , the Group's affiliate and other B2B revenues comprised 2% (nine months ended 30 September 2017 – 2%) of total Group revenues. The remaining portion being revenues earned from B2C operations as described in note 1.
Non-current assets by geographical location as at 30 September 2018 were as follows:
Europe £84.6 million ( 31 December 2017 – £87.7 million) and Americas £449.2 million ( 31 December 2017 – £508.2 million).
As discussed in note 6, the Group sold its social gaming business in the current period. As a result, all current year-to-date and 2017 comparative figures have been restated accordingly.
(£000's)
30 September 2017
(£000's)
Administrative costs:
On 31 August 2018 , the Group completed the sale of its social gaming business for a cash consideration of £18.0 million, excluding working capital adjustments and costs of disposal paid by the Group. The social gaming business was not previously classified as held-for-sale or as a discontinued operation. The comparative consolidated statement of comprehensive income is presented below to show the discontinued operation separately from continuing operations. The results of the social gaming business have been excluded from notes 4 and 5 above.
(£000's)
30 September 2017
(£000's)
(£000's)
30 September 2017
(£000's)
Goodwill disposed of was allocated to the social gaming business on the basis of its earnings before interest, taxes, depreciation and amortisation, relative to that of the overall segment.
(£000's)
30 September 2017
(£000's)
The following table presents the calculation of basic and diluted earnings per share:
(£000's)
30 September 2017
(£000's)
Trade and other receivables consist of the following items:
On 29 November 2017 , the Group entered into a secured convertible loan and services agreement with Gaming Realms plc ('Gaming Realms') (the 'Gaming Realms Transaction').
Key terms of the Gaming Realms Transaction include: (a) five-year secured convertible loan to Gaming Realms in the principal amount of £3.5 million with an interest rate of 3 month UK LIBOR plus 5.5% per annum; (b) conversion option that allows the Group to convert some or all of the loan (in tranches of £0.5 million) into ordinary shares of Gaming Realms after 12 months; (c) a ten-year services agreement ('Services Agreement') for the supply by Gaming Realms of some of its content to websites of the Group's choosing free-of-charge. The value of the free-of-charge services provided under this Services Agreement will be capped at £3.5 million over the first five years of the agreement, at which point the provision of free-of-charge services will cease.
In connection with this transaction, the Group recognised a long-term receivable of £3.6 million for the secured convertible loan, in accordance with IFRS 9, based on the calculation of fair value at 30 September 2018 , as explained in note 16.
On 16 February 2018 , JPJ Group plc entered into an interest rate swap agreement (the 'Interest Rate Swap') in order to minimise the Group's exposure to interest rate fluctuations. The Interest Rate Swap has an effective date of 15 March 2018 (the 'Effective Date') and an expiry date of 15 March 2023. Under this agreement, JPJ Group plc will pay a fixed 6.439% rate of interest in place of floating GBP interest payments of GBP LIBOR plus 5.25%. The fixed interest rate will be paid on 60% of the GBP Term Facility (£150.0 million – the 'Notional Amount') to start. The Notional Amount will decrease by £30.0 million every 12 months from the Effective Date. The Interest Rate Swap was designated as a cash flow hedge, as described in note 3.
As at 30 September 2018 , the fair value of the Interest Rate Swap was a £0.2 million payable. The Group has included £0.1 million of this payable in current liabilities, as shown in note 14, with the value of the remaining balance, being £0.1 million, included in other long-term payables.
As at 30 September 2018
Accounts payable and accrued liabilities consist of the following items:
Other short-term payables consist of:
The principal financial instruments used by the Group are summarised below:
The carrying values of the financial instruments noted above approximate their fair values.
The hierarchy of the Group's financial instruments carried at fair value is as follows:
The Interest Rate Swap balance represents the fair value of expected cash outflows under the Interest Rate Swap agreement.
Other long-term receivables represent the fair value of the loan receivable from Gaming Realms. The key inputs into the fair value estimation of this balance include the share price of Gaming Realms on the date of cash transfer, a five-year risk-free interest rate of 1.386%, and an estimated share price return volatility rate of Gaming Realms of 48.3%.
A discounted cash flow valuation model was used to determine the value of the contingent consideration at 31 December 2017. The model considered the present value of the expected payments, discounted using a risk-adjusted discount rate of 7%. The expected payments were determined by considering the possible scenarios of forecast EBITDA, the amount to be paid under each scenario and the probability of each scenario.
On 15 June 2018 , the Group made a final earn-out payment of £58.5 million for the Botemania brand, its Spanish business within the Jackpotjoy segment and a £5.0 million milestone payment related to certain performance achievements within the Jackpotjoy segment. This final payment was met using existing cash resources.
As at 30 September 2018 , the entire contingent consideration balance relates to two remaining milestone payments for the Jackpotjoy segment.
The movement in Level 3 financial instruments is detailed below:
The Group 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. The Group has included £8.7 million of this payable in current liabilities, as shown in note 14 ( 31 December 2017 – £8.7 million), with the discounted value of the remaining balance, being £3.2 million ( 31 December 2017 – £8.2 million), included in other long-term payables. During the nine months ended 30 September 2018 , the Group has paid a total of £6.0 million (nine months ended 30 September 2017 – £3.3 million) in relation to the additional non-compete clauses.
As at 30 September 2018 , JPJ Group plc's issued share capital consisted of 74,328,930 ordinary shares, each with a nominal value of £0.10. JPJ Group plc does not hold any shares in treasury and there are no shares in JPJ Group plc's issued share capital that do not represent capital.
During the nine months ended 30 September 2018 , JPJ Group plc did not issue any additional ordinary shares, except as described below.
During the nine months ended 30 September 2018 , debentures at an undiscounted value of £0.2 million were converted into 56,499 ordinary shares of JPJ Group plc. The remaining convertible debentures were redeemed in full to the value of £0.1 million on 1 June 2018 .
During the nine months ended 30 September 2018 , nil share options were granted, 207,500 share options were exercised, nil share options were forfeited, and nil share options expired.
During the three and nine months ended 30 September 2018 , the Group recorded £0.1 million and £0.3 million, respectively (2017 – £0.3 million and £1.2 million), in share-based compensation expense relating to the share option plan with a corresponding increase in share-based payment reserve.
On 26 March 2018 , JPJ Group plc granted an equity-settled mirror award over ordinary shares of JPJ Group plc. The mirror award is on the same commercial terms as the Group's long-term incentive plan for key management personnel.
On 28 March 2018 , JPJ Group plc granted additional equity-settled awards over ordinary shares of JPJ Group plc under the Group's long-term incentive plan for key management personnel.
During the three and nine months ended 30 September 2018 , the Group recorded £0.1 million and £0.2 million, respectively (2017 – £0.1 million and £0.1 million), in share-based compensation expense relating to the long-term incentive plan with a corresponding increase in share-based payment reserve.
JPJ Group plc subsidiaries 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. Revenue 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 Group 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 Group, the contingency is not recognised as a liability at the balance sheet date. As at 30 September 2018 , the Group had recognised £nil ( 31 December 2017 – £nil) related to potential contingent indirect taxation liabilities.
Director of Investor Relations