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PCG Ent't confident of growth in China despite disputes

CPDC was in effect a reverse takeover in August of last year.

Picture of Chinese flag to illustrate company's area of operation
PCG sees significant opportunities in China

PCG Entertainment Plc (LON:PCGE) believes it is in a ‘very strong’ position in a debt dispute relating to its 2015 acquisition CPDC.

A supplier to CDPC is pursuing PCG for a unpaid debt of US$2.1mln, but the Asia- based online gaming and media group again stated it had a written agreement that relieved it of any obligations in connection with the debt.

Gaming software and games distributor CPDC was acquired in August last year, since when it had made good profits PCG said.

In addition, CDPC is being withheld US$1.2mln in a separate dispute with a major customer. Legal counsel had advised that its trading terms were clearly stated and cannot be altered.

Nick Bryant, PCG’s chief executive, said the company was in a very strong position to defend both the assignment letter and the contract and hoped to reach negotiated settlements in both in stances without recourse to legal action.

In addition to games, PCG also supplies sports (motor racing, snooker, football) and general media services. In all three areas, Bryant said the company expects significant expansion over the remainder of the year.  

New delivery platform set for launch 

“The company has selected what it believes to be a world-class games delivery platform that it intends to populate with games from a number of global developers.

“This will be backed up by a games management system that the directors believe will give the company a competitive advantage in the rapidly expanding markets in Asia.

This will become available in the third quarter.

Discussions are also underway for a number of broadcast programmes to be distributed in China including a snooker series; a reality TV 'Search for a Motor-Racing Star' and a horse racing tipping service.

Chief executive still upbeat on CPDC

CPDC was in effect a reverse takeover in August of last year.

To acquire the business PCGE will paid an initial consideration of US$9.59mln in shares, and a further US$10mln worth of shares may be payable in the futurehttp://images.intellitxt.com/ast/adTypes/icon1.png depending on CDPC’s performance over the next two years.

That maximum contingent payment will be payable if the unit achieves a US$29.13mln cumulative net profit, whereas no further payment will be due if cumulative net profit is below US$14.56mln.

CPDC brought customers in Asia access to established third-party gaming content. Its agency deals cover China, Taiwan, Macao, Hong Kong, Vietnam, Malaysia and Thailand.

Talking to Proactive, Bryant said it had carried out extensive due diligence before they bought CPDC and it is very clear that the debt remains with the previous owner (Kolarmy).

He added he expected that in both of the disputes a negotiated settlement can be reached, with a solution to each in the near future.

CDPC remained a very good business with good infrastructure in Asia, he added, and had been responsible for three quarters of growing profit at PCG, though it was not the whole business.

“We are a well-diversified media distribution business.

Growth strong before dispute

Group operating profit for the three months to March rose to around US$870,000 compared to net profit of US$ $820,000 in the previous quarter, it said.

Over the same period, gross profit rose by 21% and revenue by 16%, the company added.

“There are tremendous opportunities in China,” Bryant said.

In addition to the motor racing, snooker and horse race tipping products, there were also football projects in the pipeline, he said.

Shares today rose 2% to 0.536p.

 

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