(PTEC.L) Playtech Ltd Buy/Sell

RNS Number : 6999I
  Playtech Limited
  17 March 2010
   

 Playtech Ltd ("Playtech" or the "Company")  Audited full year results for the 12 months ended 31 December 2009 STRONG FINANCIAL PERFORMANCE, WELL POSITIONED FOR NEW REGULATED MARKETS

Playtech (AIM: PTEC), the international designer, developer and licensor of software for the online, mobile and land-based gaming industry, announces its audited full year results for the year ended 31 December 2009.

Financial highlights

·      Gross income* up 23% to EUR137.3 million (2008: EUR111.5 million), reflecting first time income from associate, William Hill Online

·      Adjusted EBITDA** increased by 25% to EUR93.7 million (2008: EUR74.7 million) reflecting margin of 82% from revenues and margin of 68% from gross income (2008: 67% for both measures)

·      Total revenues up by 3% to EUR114.8 million (2008: EUR111.5 million)

·      Like-for-like*** revenues up 8.4%

·      Net profit after tax of EUR69.5 million (2008: EUR40.7 million) an increase of 71%

·      Cash generated from operating activities and sums received from William Hill totalled EUR89.2 million (2008: EUR68.7 million) reflecting 95% of the Group's adjusted EBITDA** (2008: 92%) 

·      Adjusted basic EPS** of 37.4 EUR cents per share (2008:  34.5 EUR cents per share)   

·      Recommended Final Dividend of 9.4 EUR cents per share, an aggregate dividend for 2009 of 18.3 EUR cents per share (2008: 15.2 EUR cents per share), an increase of 20.4% on the previous year

(*) Gross income is defined as total revenue plus the Group's income from associate

(**) Adjusted EBITDA, adjusted EPS and adjusted Net Profit are calculated after adding back certain non-cash charges, and cash expenses relating to professional costs on post year end acquisition (see reconciliation in Financial and Operating Overview below) 

(***) Like-for-like excludes revenues from both William Hill (for 2009) and the licensee integrated into William Hill Online (for 2008)

Operational highlights

·      Integration of William Hill Online completed in October 2009

·      Acquisitions of GTS in December 2009 and Virtue Fusion in February 2010 positions Playtech as the leading supplier for both Bingo and Games platforms

·      Strategic partnerships announced since the year end with Scientific Games and Sportech position Playtech for growth in locally regulated markets 

·      Enhanced product offering: 

- significantly enhanced game portfolio

- major poker functionality upgrade, including multi-currency capabilities

- new sportsbook launch with its first licensee

·      Italian poker network grew strongly throughout year, now six licensees representing 16% of the Italian market 

·      Unique cross platform capability enhanced through multiplayer television gaming solution with NetPlayTV and web-based mobile, providing solution for Apple and Google smartphone operating systems

·      Videobet achieves critical mass through partnership with Global Draw, signed after the year end, including substantial UK element giving it a leading position in that market

Restructured development centres and workflow management delivering efficient and scalable R&D platform

Current Trading

Playtech has enjoyed a strong start to 2010. Following the acquisition of Virtue Fusion, daily average revenues for the first quarter are projected to increase by over 18% compared with Q4 2009 based on the current run-rate. To date, on a like-for-like basis, daily average revenues excluding the acquisition are up by over 8% compared to the already strong previous quarter, reflecting a recovery in activity across our licensee base.  Encouragingly, all products are performing in line with or ahead of budget.

We have invested considerably during 2009 - restructuring the business, entering new markets, acquiring new licensees and expanding our portfolio of new games. The Board believes that these developments mean that the Company can look forward to 2010 with great confidence.

Roger Withers, Non-executive Chairman, said: "This has been another significant year of growth for Playtech.  Excellent progress has been made both operationally and strategically. We have made good use of our substantial cash position to make a number of focused acquisitions and investments which should prove highly accretive in the medium to long term. Playtech is a growing profitable business with strong cash flows, high margins and an attractive dividend policy. Playtech continues to outperform the market and the Board looks forward to 2010 and beyond with great confidence." 

- Ends -

There will be a meeting and presentation for analysts today commencing at 9.30 am in the City Presentation Centre, 4 Chiswell Street, Finsbury Square, London, EC1Y 4UP. 

A live audio webcast and slide presentation of the analysts' meeting will be available at 09.30am today and can be found by following the link below:

http://streamstudio.world-television.com/CCUIv3/login.aspx?ticket=726-834-8256&t arget=en

For further information contact:

 Mor Weizer, CEO, Playtech Ltd                              +44 (0) 20 7861 3232
 Shuki Barak, CFO, Playtech Ltd                              
 Ross Hawley, Investor Relations, Playtech Ltd               
 c/o Pelham Bell Pottinger                                   
  
 Piers Coombs / Bruce Garrow                                +44 (0) 20 7523 8350
 Collins Stewart                                             
                                                             
 Mumtaz Naseem                                              +44 (0) 20 7545 8000
 Deutsche Bank                                               
                                                             
 David Rydell / Olly Scott / Samantha Boston                +44 (0) 20 7861 3232
 Pelham Bell Pottinger                                       
                                                             

Chairman's statement

It is very pleasing to be able to report impressive financial results for the year to the end of 2009. Our revenue share model ensures that the business is fully aligned with its licensees, focusing on continual product development to help them achieve their business objectives. This is the cornerstone of the Playtech business and delivers substantial benefits to our investors. 

Throughout our determination has been to provide the best possible range of gaming products to our licensees. Content is delivered on an operating platform which is the most sophisticated in the industry. This gives our licensees the range of tools needed to enhance playing experience and maximise player yields, factors that are core elements of their business objectives and critical in a year of economic downturn.

In 2009 we welcomed several new licensees ranging from specialist online sportsbooks such as Betfair, land-based operators such as Olympic, the Serbian state lottery, and entertainment brands such as SEGA and Virgin. This diverse licensee base reflects both the flexibility of Playtech's offering and an increasingly mainstream entertainment profile of the sector, which is attracting a number of new entrants.  It also reflects the fact that online gaming continues to be a truly exciting, fast paced and dynamic sector.  

In 2009 Playtech recorded total revenues of EUR114.8 million, up 3% on the prior year, whilst gross income, which includes the Group's share of profit before amortization for William Hill Online, grew by 23% to EUR137.3 million. The benefits of the high operational gearing of the business together with ongoing cost control has helped deliver 25% increase in adjusted EBITDA to EUR93.7 million.

Playtech is highly cash generative and recorded a net cash position at the year end of EUR59 million. Given this strong financial performance, the Board recommends payment of a final dividend of 9.4 EUR cents and which gives a total dividend of 18.3 EUR cents for the year.  The overall dividend reflects the confidence of the Company going forward and the attractive dividend policy we have which rewards shareholders for their continuing investment in Playtech.

It has been a year of significant consolidation for us and the wider industry as businesses look to achieve the scale necessary to compete for the significant opportunities as regulated markets open up. Internally, we have put in place a new operating structure and realigned certain business units to ensure greater efficiency in the development of new content and product enhancements.

This was achieved concurrently with the roll-out of over 90 casino games across flash and download formats, substantial enhancements to the iPoker network, and three upgrades to our operating platform. This success is testament to the immense efforts of all those involved at Playtech.

In October we completed our work on the integration of William Hill Online (WHO) through its migration to the Playtech casino platform, another significant achievement. This migration marked the end of over 12 months of very substantial work.   The share of profit from our 29% interest in this joint venture has had a positive impact on our financial results for the year and will do so going forward.

We have played an active part in the consolidation of the sector, acquiring the games platform developer Gaming Technology Solutions Limited ('GTS') in December 2009 and the leading Bingo network provider, Virtue Fusion after the year end, in February 2010.

Through these actions, Playtech is enhancing its position of being the world's leading B2B provider in online gaming. We are very well positioned to capitalise on the growth expected to come from the opening up of new locally regulated markets and improving economic conditions.

The announcement in November that Playtech had been accepted by the World Lottery Association as an associate member further reflects our growing reputation and profile on the global stage. This was reinforced in January 2010 by the announcement of a joint venture with the second largest global lottery operator, Scientific Games based in the US. 

The joint venture, Sciplay, will draw on our market-leading technology and their extensive experience of operating in locally regulated markets.  We believe Sciplay will be a powerful force in the emerging B2G segment, and place us in the best possible position to compete for new licensees in locally regulated markets.  This is a space where we see potential for very substantial growth in coming years, although both the timing and shape of each market will only become clear once regulation is put in place.

These transactions and the financial results for the year could not have been achieved without the determination and dynamism of the executive management team and the commitment of every employee. I would like to thank each one for the contribution they made this year.

In December I was very pleased to be invited to an employee party to celebrate Playtech's 10th anniversary in Tartu, Estonia, where the Company was founded. Attending the celebration brought home not only how international the Company is, spread across its five main office locations, but the great depth of expertise we draw on.  Over 800 employees took part, a number of whom had been with the Company since its earliest years.  This is in an industry which is only a few years older than our Company. 

In 2009, we committed to investors to enhance our corporate governance.  We appointed an experienced Company Secretary in April and in November we appointed our first Head of Investor Relations. More recently we announced a restructuring of the main board which has now achieved Combined Code Compliance in terms of best practice corporate governance.  This included the appointment of Barry Gibson, a highly experienced non-executive director who brings particularly relevant experience to the board at an exciting juncture in Playtech's development. 

At the same time my sincere thanks go to Tom Hall and Rafi Askhenazi who have made important contributions to Playtech's businesses in Asia and as COO respectively. I am pleased that each will continue to play a role for the Company.  We expect to make further Board appointments in the coming months, including a replacement Chief Financial Officer, where an extensive search is reaching its final stages.

After a year of considerable progress and corporate actions, we believe we are well positioned with a clear strategy and the means to capitalise on the exciting opportunities that we see ahead.  We are highly confident for the prospects of the Company going forward.

Roger Withers

Chairman

17 March 2010

CEO Report

Overview

Playtech's industry-leading software, diversified licensee base and strong reputation have served us very well in 2009.  We have delivered a robust financial performance during a year which has seen our industry operating in a tough economic environment.

It has also been a year of considerable change and development at Playtech, which places the Company in an excellent position to seize new opportunities in the fast moving and ever-evolving online gaming industry.    I am very pleased therefore that over the year Playtech has increased its gross income by 23% to EUR137.3 million, which includes the first time share of income before amortization of intangibles from our interest in William Hill Online of EUR22.5 million, and net revenues by 3% to EUR114.8 million (2008: EUR111.5 million).

I believe this performance demonstrates both the robustness of the business model and the benefits of being a pure B2B provider. One of the key attractions of the Group is the quality and breadth of its product portfolio, and our clarity of focus on innovation and product improvement.  There is continual progress through enhancements to our products and in developing new games and content to deliver to all our licensees across all market segments.  

The breadth and richness of our portfolio has enabled us in 2009 to attract many new licensees, including those added through acquisition. These licensees were drawn from a wide range of market segments. By these means we increasingly diversify our revenue streams by product, geography and licensee type and this is set to continue as more locally regulated markets open up.

In 2009 we also broadened the overall product offering, both organically with a new sportsbook offer that was soft launched towards the end of the year, and through the acquisition of both an open architecture games platform and the largest bingo network.  

What is now a comprehensive product suite is complemented by the further development of the delivery platforms, such as server-based gaming terminals, mobile and broadcast/TV.  All products and the cross-platform capability are supported by our unique Information Management System ("IMS") operating system, which is the most sophisticated in the industry.  

As a result, we enter our second decade with great optimism and anticipation for the opportunities that lie ahead. 

Products

Casino & Poker

The online market was impacted in the early part of the year by reduced levels of spend across the board in response to economic uncertainty.  We worked closely with our licensees to help them best attract and retain players, through the features available to them within the IMS.  A new bonus system gave operators greater ability to personalise player incentives and maximize player activity.  Through such efforts, our licensees showed great resilience in 2009 and this ultimately delivered relatively stable like-for-like revenues for the year.  
      

Our main revenue-line and our flagship product, remains our casino product.  In total we launched 90 new game variations across flash and download in 2009 including a new multi-player range of games, which commenced with a multi-player version of European Roulette. These were supported by four releases of the casino platform which incorporated a range of new operator features. Revenue growth was principally driven by new casino licensees including William Hill and Betfair, whose casino platforms became operational in the second half of the year.

In addition, to complement the main casino product, we launched a range of branded games which have proved extremely popular both online and in server-based format, and have attracted new players.  Further branded slots such as Pink Panther and Rocky from MGM are planned for 2010.

We further expanded our offering this year with a new European Live Dealers capability which provides state of the art software and a product that caters specifically to the tastes of European players.  It has enjoyed a growing following over the year.

Poker revenue growth in 2009 was driven largely by the success of our Italian poker network, which includes top regional operators such as Snai S.p.A, Sisal S.p.A, Eurobet Italia, Cogetech S.p.A and Gamenet, and has exceeded expectations.  The network has a 16% market share in what is a rapidly growing market.

Playtech is committed to continually innovating and developing its poker offering, so that our operators have all the tools they need in order to remain at the cutting-edge of the poker industry. At the end of 2009 we introduced material enhancements to the look and feel of the player lobby and a multi-currency capability to our poker software which has strengthened its appeal to players and operators alike.   We continually look to improve network management and analysis tools, as brands focus their budgets on effective marketing.  

Other products

Our other products, although they account for relatively less in comparison to casino and poker, have grown strongly.  In April we announced a new and improved version of our bingo software, including a range of enhancements and new features.  Since the year end, our market position in bingo has been transformed by the acquisition of the business and assets of Virtue Fusion, the leading developer and network operator of online bingo products. Virtue Fusion have one of the largest and most liquid networks together with experienced network management, and this acquisition has positioned Playtech as market leader in bingo.  

In addition, we recently launched our bingo network in the Italian market in a Play for Fun mode.  Playtech is also developing the bingo TV market, with a fully automated, presenter-led format, for broadcasting bingo games based on real-time statistics.  Following the acquisition of Virtue Fusion, we expect our bingo product to be a more significant part of our business and revenues will be reported separately.

The broadcast format is attracting increasing interest from players, particularly as interactive TV technology becomes more widespread.  In July, Playtech secured a five year exclusive licence with NetPlay TV Plc to provide the full range of Playtech's software including casino, poker, bingo, TV and mobile games, for NetPlay's leading TV gaming offering.  This deal positions Playtech as a market leader in TV gaming technology.  

Games

Games are also growing in importance, principally as a way to introduce players to a wider range of products and gaming opportunities. To enhance our capability, in December we announced the acquisition of GTS, an experienced games developer with a sophisticated open-architecture technology platform capable of hosting a wide range of 3rd party content. GTS is very well positioned at the forefront of this technology, which focuses on flash as opposed to download formats, and has the ability to be integrated into a very wide range of software platforms.  

GTS has a significant industry reputation as offering highly flexible open architecture to facilitate the hosting of products from the most innovative of games developers, in contrast with a number of its competitors. The ability to host such 3rd party content adds a new dimension to our offering, and has significant opportunities in regulated markets where local content looks set to play an important role.  

The acquisition also increases our combined portfolio of games to over 500 integrated fixed odds, virtual sports, table games and slot games. This makes Playtech the leading provider of such content to the on-line gaming industry, and is a segment which is experiencing very substantial growth as operators of all kinds look to provide highly tailored content to specific markets.  

Sports betting

Playtech's sportsbetting platform, went live with its first licensee at the end of 2009 and remains in trial phase.  It is an exciting product which has the capability to support any sport, region, league, event, or bet type required by the operator.  It has greater use of automated systems to manage hedging exposure which allows an operator to reduce the size of the trading team needed to support such a platform. The flexibility this affords also makes a comprehensive sports product viable for a much broader range of operators.  This allows us to penetrate various new markets, with a focus on regulated jurisdictions in which online sportsbetting is or will be allowed. 

Cross Platform - Videobet

Videobet, our server based gaming machine division, continued to grow during 2009.   In the UK our fixed odds betting ("FOBT") package enjoyed a successful launch across the UK with the introduction of packages of new games including the new Gladiator branded slot game being particularly successful.  

The strength of the Videobet offering has been demonstrated by our strategic technology partnership with The Global Draw, a subsidiary of Scientific Games, relating to both FOBT and video lottery ("VLT") gaming terminals and systems development.  This transaction, which was announced shortly after the year end, will initially involve the upgrading of 13,500 existing FOBT terminals in the UK to the Videobet platform and joint marketing in UK and overseas for VLT and FOBT terminals.  This is a very major step forward for Videobet and is just rewards for the very substantial efforts of the divisional management team over a number of years. 

When taken together, we have the most comprehensive product portfolio and unique cross-platform capability available, and one which licensees can fully integrate into the IMS operating system.  Players can now enjoy many of Playtech's cutting edge games at home, on the move, or in a land-based environment, and operators can focus on enhancing player yields through the tools provided by the IMS system.

William Hill Online

The William Hill Online (WHO) business, in which Playtech took a 29% interest in return for a contribution of assets at the end of 2008, commenced operations at the start of the year.  Playtech receives a share of profit and as its first full year contribution, this totalled EUR22.5 million, before amortization of intangibles.

During 2009, various on-line businesses, located in a number of different countries were integrated and the overall headquarters was established in Gibraltar.  In the second half of the year the William Hill sportsbook operations were also transferred to Gibraltar, and casino and poker operations migrated to the Playtech platform.  Against this backdrop of substantial integration and development, WHO acquired 665,000 new accounts, up 28%, and increased unique active players by 31% to 1.3 million.  

WHO's gaming products performed strongly in 2009, achieving on a like for like basis  net revenue growth of 11% with standout performance in casino and bingo/skill games, increasing net revenue by 14% and 37% respectively assisted by strong growth in new accounts, up 39% in casino and 63% in bingo. Net revenue from poker declined 14%, in part reflecting some player attrition as migration onto an integrated site took place. 

Exposure to the financial impact of a sportsbook operation is new for Playtech and in the middle of the year there was considerable volatility in football margins after a run of unusual results.  This reverted to historic norms by the final quarter and ultimately, sports book net revenue was flat over the year, while amounts wagered grew by 19% and customer accounts by 30%. 

I am confident that with an internationally focused platform and highly competitive product suite, the William Hill Online operations are now positioned for strong growth over the coming years.  In 2010, a World Cup football year, we expect to see the potential benefits of the transaction starting to be demonstrated as the WHO management team put their strategic plan into effect.    

New Licensees

Playtech has continued its strategic move into locally regulated markets in Europe and made good progress in Italy, Spain, Serbia and Estonia, as well as in the UK.  During the year, the Group signed agreements with 13 new licensees from a broad range of backgrounds, including state lottery operators such as the Serbian Lottery, land based casino operators such as Olympic, retail sports betting operators such as SNAI as well as on-line gaming specialists such as Betfair and leading entertainment brands such as Sega and Virgin.  

Our Italian poker network grew to six operators during the year, and together with our licensees, we are taking the opportunity to launch our bingo and casino software as the regulations in Italy allow these games to be offered by operators.  In Spain, we signed licence agreements with two leading operators.  

We were pleased to announce in September a strategic partnership with the Serbian State Lottery, the sole provider of online gaming in that country. The agreement was Playtech's first with a state lottery and one we hope to build on. In Estonia, preparation work took place in advance of the regulation of the market.  Olympic Casino received the first online gaming license in Estonia on 21 January 2010 and they launched their casino at the start of February.

In addition, we have signed a number of memorandum of understandings with leading French casino and gaming groups so as to take advantage of the new licensing regime that is anticipated to start operating in the summer of 2010.  The shape of the French market in the short term is yet to be determined and a number of our existing licensees are likely to evaluate the opportunity once the regulations and commercial opportunity become clearer. 

In the last year, the diversity of new entrants to the sector together with the very substantial focus on regulatory environments have been indicators of what is likely to come.  The timing and shape of each market will only be determined as legislation and regulation is put in place in each jurisdiction.  Playtech is positioning itself to be a major beneficiary of this new environment and I believe the progress made in 2009, both in terms of new licensees and strategic actions, will be fundamental to our long term success.

Strategic positioning 

We believe the attributes necessary to achieve material market share across locally regulated markets are very different from those of the global offshore market which has defined the sector for much of the past decade.  Consequently, we have taken a number of significant steps to secure our position at the forefront of our industry, which I am confident will help drive stronger growth going forward.  The acquisitions and enhancements to the product range described above reinforce our position as the leading independent B2B provider to the world-wide gaming industry.

Building on our successful experience in regulated markets such as the UK and Italy, we intend to focus our efforts where certain forms of on-line gaming are in the process of being regulated locally.  We believe that such markets hold significant long term growth opportunities for the Group, and the new licensees won in 2009 reflect the success in realising this strategic vision during the year.  

We believe our exclusive joint venture with Scientific Gaming, Sciplay announced in January 2010, will enable Playtech to capitalise on some of the most exciting opportunities in the sector.  It is a very substantial strategic initiative and we see excellent prospects for working with government monopolies and lottery providers as their markets open up for online gaming.  

Governments are increasingly exploring expanded gaming opportunities and in a number of newly regulated markets it is the incumbent lottery operator which is expected to be amongst the first to embrace new regulation, or even invited to be the sole provider.   Players of lottery and online gaming are also increasingly converging in terms of shared expectations of exciting interactive gaming entertainment. 

The 50:50 joint venture will utilise Playtech's technology capabilities together with Scientific Games' global infrastructure and experience with government gaming entities to deliver revenue-generating, responsible gaming solutions to the B2G sector. Scientific Games has an a presence across five continents and pre-eminent reputation for delivery of services in complex regulated markets, based on a track record of nearly 40 years.  

Partnering with such a well-established and reputable provider is crucial for Playtech in a segment where existing relationships with regulators and state operators, together with an on-ground presence can be as important a selection criteria as the products or technology offering itself.  

In markets such as the US which is felt to offer very substantial long term potential, Scientific Game's extensive relationships immediately delivers contacts decision makers within both lottery operators and regulators. In the US, Scientific Games holds contracts for instant tickets with more than 40 states and manages the lottery systems in 11 states. 

The joint venture is structured so as to maximize the ability to leverage off the capabilities of each partner, while maintaining high flexibility in both marketing effort and product offering.  Initially its resources will be a small dedicated marketing-focused team based in the US and Europe as these are geographies where we see real opportunities requiring immediate engagement.  Capex is not expected to be material until B2G contracts have been won and would be specific to that opportunity, which are typically multi-year contracts. 

Sciplay has the potential to deliver tailored solutions for lottery operators reflecting the regulatory environment in which they operate and the products permitted.  Playtech's full product range will enable an operator to build up its offering over time and as the regulatory landscape evolves, whilst immediately benefitting from the player management capabilities of the IMS system.

Where a full turnkey solution is requested, Scientific Games' global infrastructure can also be brought in to play.  This will greatly reduce the normal risks of setting up a new operation and minimizing the start-up costs and timeframe.

We view Sciplay as a long term partnership of two highly complementary B2B specialists, delivering a platform which enables both partners to achieve a very substantial position in a hugely exciting new segment. 

Also consistent with this approach to B2G markets has been our alliance with and investment in Sportech plc which recently acquired Scientific Games' pari-mutuel horse racing operations, Scientific Games Racing.  Horse racing is highly regulated and is a market where an online platform already exists in many jurisdictions. In a number of US states, pari-mutuel betting on horse racing is already permitted online.  We also intend to work with Sportech to offer a sports gaming product based on their pari-mutuel football pools, which has a substantial following and is developing internationally.

Playtech has therefore put in place significant partnerships which together give us the best chance to win market share in regulated markets as they open up.  Through our strategic partnerships we are now able to build meaningful relationships and expertise with both regulators and current participants.  

We will of course remain focused on our core competence of product development and technology innovation.

Other Developments

2009 was also a year of considerable development inside Playtech. We have taken the opportunity during the year to restructure certain development centre business units, implement a robust new operating model, focused on product based business units.  This gives ownership and work-flow management responsibility to the team on an end-to-end basis.  As a result we have increased resource in our development centres in Estonia and Bulgaria and closed down our facility in India.  

The board believes that this important re-allocation of resources reflects the Group's commitment to continuous product improvement, enhanced delivery and the quality of customer service, and will help drive stronger growth. 

Mor Weizer

Chief Executive Officer

17 March 2010

Financial and Operational Review

I am delighted to report on Playtech's financial results for the year ended 31 December 2009, which demonstrates the Company's strength and robust business model through this year's challenging economics conditions and in today's competitive gaming industry. This successful year of growth in trading performance is principally attributable to two main factors: the ability of the Group to continue to attract new business whilst supporting and maintaining growth from existing licensees; and the strong results of William Hill Online ("WHO") which, as expected, has significantly contributed to the Group's gross income.

Playtech has continued to be an active participant in the consolidation of the sector, and has undertaken a number of corporate transactions both in 2009 and after the year end which are expected to be additional drivers for revenue growth.  These will be reflected in the future financial statements of the Company. 

The influence of Playtech's investment in WHO on the Group's results for the year makes comparison with previous years more complicated. The transaction, which was completed at the end of 2008, resulted in the Group receiving a reduced royalty rate from the casino and poker assets injected into WHO and reducing Playtech's total revenue line.  In return, Playtech receives a 29% share of the profit of the entire WHO business, which comprises an enlarged combined casino and poker operations, together with WHO's existing online sportsbook.  As WHO is accounted for under IFRS as an investment in an associate, the share of profit is presented as income from associate. 

In accordance with accounting guidance, Playtech is recording 100% of the license fees received from WHO in its revenue line, with its income from associate being shown separately in the statement of comprehensive income. On that basis, gross income (total revenues and income from associate before amortization of intangibles) becomes the relevant measurement of the group's trading performance. 

Gross income for the year ended 31 December 2009, increased by 23% to EUR137.3 million (2008: EUR111.5 million), out of which, EUR22.5 million is related to Playtech's income from associates. 

Total revenues for the year were up 3% to EUR114.8 million (2008: EUR111.5 million). Casino revenues decreased by 3% to EUR76.8 million (2008: EUR79.4 million) and Poker revenues increased by 12% to EUR33.8 million (2008: EUR30.1 million).

Total revenues excluding revenues from WHO for the year were up 8.4% to EUR103.5 million (2008: EUR95.5 million excluding revenue from former customer). On the same basis Casino revenues were up 3.2% to EUR68.3 million (2008: EUR66.2 million) and Poker revenues up by 14.9% to EUR31.7 million (2008: EUR27.6 million).

Net profit for the year increased by 71% to EUR69.5 million (2008: EUR40.7 million). Earnings per share ('EPS') for the year were 29 EUR cents based on the weighted average number of shares (2008: 17.9 EUR cents). The fully-diluted EPS for the year were 28 EUR cents (2008: 17.3 EUR cents). 

The net profit figures, for the years ended 31 December 2009 and 2008, were achieved after charging professional costs on post year-end acquisition and after charging various non-cash charges relating to the investments in WHO, Tribeca, CY Foundation Group Limited and AsianLogic Limited, and the employee stock option plan. 

As is widely accepted practice, greater focus is placed on the performance excluding the majority of non-cash charges, and accordingly we set out below the key line items on an adjusted basis together with their reconciliation to the audited accounts. 

Adjusted Net Profit and Adjusted Earnings per Share

Management believes that adjusted net profit better presents the underlying performance of the Group and sets out below the basis on which these are calculated and reconciled to the Group's accounts. 

Adjusted net profit for the year totalled EUR89.6 million (2008: EUR78.6 million), an increase of 14%. Adjusted net profit margin (as a percentage of revenues) for the year was 78% (2008: 70%). The adjusted EPS for the year, based on the weighted average number of shares is 37.4 EUR cents (2008: 34.5 EUR cents).

Adjusted Net Profit and Adjusted Earnings per Share
                                                                  2009      2008
                                                                EUR000    EUR000
 Net profit                                                     69,511    40,691
 Amortization of intangibles on acquisition of WHO              10,513         -
 Decline in fair value of available for sale investment            399    16,698
 in CY Foundation and AsianLogic
 Discounting of deferred consideration for investments             418       748
 Amortization of customer list on acquisitions                   3,282     3,173
 Employee stock option expenses                                  5,150     4,125
 Professional costs on post year end acquisition                   360       -  
 Exchange differences relating to the investment in                -      13,126
 William Hill Online
 Adjusted net profit                                            89,633    78,561
 Adjusted net profit margin (as a % revenues)                      78%       70%
 Adjusted basic EPS (in Euro cents)                               37.4      34.5
 Adjusted diluted EPS (in Euro cents)                             36.1      33.4

Adjusted EBITDA

Adjusted EBITDA is calculated after adding the income from the associate (WHO), together with adding back expenses related to professional costs on post-year end acquisition and adding back certain non-cash expenses.  These relate to the investment in WHO, Tribeca, CY Foundation Group Limited and AsianLogic Limited, and the employee stock option plan. Adjusted EBITDA for the period year totaled EUR93.7 million (2008: EUR74.7 million), an increase of 25.4% over the same period in 2008. Adjusted EBITDA margin (as % revenue) in the year was 82% (2008: 67%).

Adjusted EBITDA
                                                                    2009    2008
                                                                  EUR000  EUR000
 Operating profit                                                 56,449  47,977
 Amortization & depreciation                                       8,778   5,912
 EBITDA                                                           65,227  53,889
 Share of profit of associates before amortization of             22,534       -
 intangibles
 Decline in fair value of available for sale investment in CY        399  16,698
 Foundation and AsianLogic
 Professional costs on post year end acquisition                     360       -
 Employee stock option expenses                                    5,150   4,125
 Adjusted EBITDA                                                  93,670  74,712
 Adjusted EBITDA margin (as % of revenues)                           82%     67%

Acquisition of Gaming Technology Solutions Limited

On 8 December 2009 the Group acquired 100% of the shares of Gaming Technology Solutions Limited, which owns 100% of the shares of VS Technology Limited and VS Gaming Limited ("GTS Group"). The GTS Group's principal activity is to provide cutting-edge software to operators in the gaming industry, and through the GTS Enhanced Gaming Engine ("EdGE") platform, to provide clients with access to soft and casino games, including from 3rd party developers ("GTS Business").

Playtech paid an initial consideration of EUR10.9 million on completion. Additional contingent consideration payments, capped at EUR21.6 million are dependent on the profitability of the GTS Business over a period of 2 years following completion, and are payable in the first quarters of 2011 and 2012.

Cash Flow

Playtech continues to be a highly cash generative business, and the dividend received from WHO has further increased the cash flow of the Company. The main uses for funds were dividend payments together with consideration payable for acquisitions undertaken.  As set out in 'Post Balance Sheet events' below, there were additional acquisitions made after the year end on which cash considerations have also been paid.

Cash and cash equivalents as at 31 December 2009 amounted to EUR58.7 million (2008: EUR31.6 million), representing 18% (2008: 11%) of the Group's total assets.

In the year ended 31 December 2009, the Group generated EUR89.2 million from its operating activities and from cash received from WHO as share of profit (2008: EUR68.7 million). The conversion ratio from adjusted EBITDA was 95% (2008: 92%)

The Group's net cash usage in investing activities, excluding cash received from WHO, was EUR25.9 million of which EUR11.3 million was for the acquisition of GTS group, and the remainder broadly split between software development costs and infrastructure (2008: EUR197.1 million, the majority of which was used for the investment in WHO).

The Group's net cash usage in its financing activity was EUR36.1 million for the year ended 31 December 2009, the majority of which was used for the payment of the final dividend of 2008 and the interim dividend of 2009 (2008: net cash generated of EUR105 million, including EUR138.1 million derived from proceeds of a public offering issued for the purpose of the investment in WHO).

Cost of Operations

The Group's ongoing revenues rely on continued development of existing products, as well as investment into new products. Such investment allows the Group to improve its overall product offering, penetrate new markets, facilitate future organic growth and increase the portfolio of its licensees and thereby gain additional market share and increase revenues.

The Group also continues to seek additional strategic acquisitions and investments in joint ventures. Such activities have resulted in an increase in administrative expenses. Professional costs for the year ended 31 December 2009 amounted to EUR360,000 and related to post year end acquisitions which have been completed.

Adjusted operating expenses for the year ended 31 December 2009, excluding the above mentioned non-cash charges and costs on post year end acquisitions totalling EUR14.7 million (2008: EUR26.7 million), were EUR43.6 million (2008: EUR36.7 million), representing an increase of 19% over 2008. The increase is mainly due to employee related costs, which represent 58% of the Adjusted operating expenses (2008: 52%) reflecting the growth in the number of employees in the year, together with related costs for additional offices rented, additional office maintenance and equipment expenses incurred.

Adjusted Operating Expenses
                                                                  2009      2008
                                                                EUR000    EUR000
 Operating Expenses                                             58,326    63,473
 Amortization & Depreciation                                   (8,778)   (5,912)
 Decline in fair value of available for sale investment in CY    (399)  (16,698)
 Foundation and AsianLogic
 Professional costs on post year end acquisition                 (360)         -
 Employee stock option expenses                                (5,150)   (4,125)
 Adjusted Operating Expenses                                    43,639    36,738

Financing Income and Tax

Cash is generally held in short-term deposits, which generated net finance income of EUR0.5 million in the year (2008: EUR4.7 million). The decrease is due to significantly lower interest rates in 2009 and large cash balances held in 2008 subsequent to the public offering. Financing income also includes EUR1.7 million received as a dividend from the investment in AsianLogic (2008: EUR0.2 million). 

The Company is tax registered, managed and controlled from the Isle of Man where the corporate tax rate is set at zero. The Group's subsidiaries are located in different jurisdictions and operate on a cost plus basis. The subsidiaries are taxed on their residual profit. Tax charges in 2009 totalled EUR0.8 million (2008: EUR0.8 million), resulting in a 1.2% effective tax rate (2008: 1.8%).

Balance Sheet

Cash and cash equivalents as at 31 December 2009 were EUR58.7 million (2008: EUR31.6 million).

The majority of the trade receivables balance as at 31 December 2009 was due to amounts payable by licensees for the month of December 2009 and which were paid in the consecutive month. 

Intangible assets as at 31 December 2009 totalled EUR65.5 million (2008: EUR43.1 million), the majority of which comprised: customer lists purchased from Tribeca and GTS; goodwill generated in the Tribeca and GTS acquisitions; patent and intellectual property rights; and development costs of products including new slot and Mahjong games, the new sports product and the mobile platform. 

Available for sale investments totaling EUR5.5 million (2008: EUR4.9 million) comprise the investments in both Foundation and AsianLogic.

Deferred consideration in the amount of EUR13.6 million (net of discount for deferred consideration of EUR0.4 million) as at 31 December 2009 (2008: EUR13.4 million (net of discount for deferred consideration of EUR0.8 million)) represents the present value of the remaining consideration to be paid for the investment in WHO.

Contingent consideration in the amount of EUR7.0 million (net of discount for deferred consideration of EUR0.4 million) as at 31 December 2009 represents the present value of the contingent consideration (based on management forecasts) to be paid for the investment in the GTS Group.

Investments in equity accounted associates relate to the investment in WHO totalled EUR170.4 million (2008: EUR181.1 million). The decrease from 2008 is due to the relevant portion of amortization of the intangibles on acquisition of WH Online.

Dividend

In October 2009, the Company distributed an interim dividend of 8.9EUR cents per share, totaling approximately EUR21.4 million.

On 16 March 2010, the Board recommended the distribution of a final dividend for 2009 of 9.4 EUR cents per share which represents a payment of approximately EUR22.5 million. This implies a total dividend of 18.3 EUR cents per share for the year.  Subject to approval by the shareholders at the Company's Annual General Meeting on 27 May 2010, the dividend will be paid on 3 June 2010 to the Shareholders and Depositary Interest holders on the record on 30 April 2010.

Post balance sheet events

Establishment of commercial partnership with Scientific Games

On 21 January 2010, the Company formed two strategic partnerships with New York-based Scientific Games Corporation to jointly develop and market next-generation internet and land-based gaming products and services to regulated gaming operators in the US and other countries. The strategic partnership includes:

·      An exclusive Joint Venture focused on the B2G online gaming market on a global basis, called 'Sciplay' that will utilize Playtech's technology capabilities together with Scientific Games' global infrastructure experience and reach to the B2G market. 

·      Exclusive agreements for Playtech's fully owned subsidiary Videobet to develop gaming terminal software and a next generation central monitoring system to be distributed by Scientific Games and its subsidiaries

Acquisition of a strategic stake in Sportech PLC.

On 27 January 2010, the Company acquired a 9.99% shareholding in Sportech PLC, the UK's leading pari-mutuel football gaming business, and owner of The New Football Pools, for a total consideration of EUR11.4 million as part of a capital raising by Sportech to fund its acquisition of Scientific Games Racing (the US-based pari-mutuel and venue management business division of Scientific Games Corporation) for up to $83 million. Playtech intends to provide its software products and services to the Sportech businesses, targeting their combined customer base. 

Assets purchase of Virtue Fusion Limited

On 12 February 2010, the Company entered into an assets purchase agreement with Virtue Fusion Limited, the leading developer and licensor of online bingo products. 

The Company purchased the Intellectual property rights, technology, customers list, brands, plant and equipment, 100% of the shares of the sellers' operating subsidiaries, and other assets, for an initial consideration of EUR22.7 million on completion, and an additional amount of up to EUR10.2 million payable within 30 days of completion. Additional contingent consideration of up to EUR8.0 million, may be payable in the first quarter of 2011 based on adjusted EBIT performance in 2010.

Shuki (Moshe) Barak

Chief Financial Officer

17 March 2010
 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
                                        For the year ended   For the year ended 
                                          31 December 2009           31 December
                                 Note                                       2008
  Revenues                                         114,775               111,450
                                  4

  Distribution costs                              (45,453)              (35,423)
  Administrative expenses                         (12,873)              (28,050)
 Total operating costs                            (58,326)              (63,473)

  Operating profit before the                       68,764                73,034
 following items:
  Professional expenses on post                      (360)                     -
 year end acquisition
  Employee stock option           9                (5,150)               (4,125)
 expenses
  Amortization of intangible      11               (6,406)               (4,234)
 assets
  Decline in fair value of        14                 (399)              (16,698)
 available for sale investments
  Total                                           (12,315)              (25,057)

  Operating profit                5                 56,449                47,977

  Financing income                6a                 2,380                 7,680

  Financing cost - discounting                       (418)                 (748)
 of deferred consideration 
  Financing cost - other                              (93)                 (330)
  Exchange rate differences -                            -              (13,126)
 Investments in equity            12
 accounted associates
  Total financing cost            6b                 (511)              (14,204)

  Income from associate                             22,534                     -
  Amortization of intangibles                     (10,513)                     -
 in  associate
  Share of profit of associate                      12,021                   -  

  Profit before taxation                            70,339                41,453

  Tax expense                     7                  (828)                 (762)
  Profit for the period                             69,511                40,691
 attributable to the equity
 holders of the parent
 Other comprehensive income for
 the year:
 Adjustments for change in fair                      1,025                 (196)
 value of available for sale
 equity instruments
 Total comprehensive income for                     70,536                40,495
 the year attributable to the
 equity holders of the parent

  Earnings per share (in cents)   8
  Basic                                               29.0                  17.9
  Diluted                                             28.0                  17.3
 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

                                   Additional Paid in         Available for sale   Retained earnings        Total
                                              Capital                    reserve
                                               EUR000                     EUR000              EUR000       EUR000
  For the year ended 31
 December, 2008
  Balance at 1 January 2008                    39,065                        196              40,870       80,131
  Changes in equity for the
 year
  Total comprehensive income                      -                        (196)              40,691       40,495
 for the year
  Dividend paid                                   -                          -              (35,893)     (35,893)
  Public offering proceeds                    140,989                        -                   -        140,989
  Share issue costs                           (2,874)                        -                   -        (2,874)
  Exercise of options                           2,917                        -                   -          2,917
  Employee stock option scheme                    -                          -                 4,441        4,441
  Balance at 31 December 2008                 180,097                        -                50,109      230,206

  For the year ended 31
 December, 2009
  Balance at 1 January 2009                   180,097                          -              50,109      230,206
  Changes in equity for the
 year
  Total comprehensive income                        -                      1,025              69,511       70,536
 for the year
  Dividend paid                                     -                          -            (39,562)     (39,562)
  Exercise of options                           3,466                          -                   -        3,466
  Employee stock option scheme                      -                          -               5,270        5,270
  Balance at 31 December 2009                 183,563                      1,025              85,328      269,916
 

CONSOLIDATED BALANCE SHEET

                                                      As of              As of    
                                           31 December 2009   31 December 2008
                                    Note             EUR000             EUR000    
  NON-CURRENT ASSETS                                                              
  Property, plant and equipment      10               8,395              4,823    
  Intangible assets                  11              65,459             43,082    
  Investments  in equity         12                 170,366            181,072    
 accounted associates
  Available for sale                41                5,513              4,887    
 investments
  Other non-current assets       15                   2,309              1,340    
                                                    252,042            235,204    
                                                                                  
  CURRENT ASSETS                                                                  
 Trade receivables               16                   6,994             10,082    
 Other receivables                17                 10,119              2,802    
  Cash and cash equivalents        18                58,700             31,558    
                                                     75,813             44,442    
  TOTAL ASSETS                                      327,855            279,646    
                                                                                  
  EQUITY                                                                          
  Additional paid in capital                        183,563            180,097    
 Available for sale reserve      14                   1,025                  -    
  Retained earnings                                  85,328             50,109    
  Equity attributable to equity  19                 269,916            230,206    
 holders of the parent
                                                                                  
  NON CURRENT LIABILITIES                                                         
  Other non-current liabilities  20                   1,168                184    
  Deferred revenues              14                  14,745             18,136    
 Deferred tax liability            22                 2,231                -      
 Contingent consideration        13                   6,983                  -    
  Deferred consideration         12                       -             13,378    
                                                     25,127             31,698    
                                                                                  
  CURRENT LIABILITIES                                                             
  Trade payables                    12               10,561              7,038    
  Tax liabilities                                     1,087                104    
  Deferred revenues              14                   3,441              3,352    
 Deferred consideration          12                  13,554                  -    
  Other payables                    23                4,169              7,248    
                                                     32,812             17,742    
  TOTAL EQUITY AND LIABILITIES                      327,855            279,646    
                                                                                  
  The financial statements were approved by the Board and authorised for issue on
 17 March 2010.
                                                                                  
  Mor Weizer                     Shuki (Moshe) Barak                              
  Chief Executive Officer        Chief Financial Officer                          

CONSOLIDATED STATEMENT OF CASH FLOWS
                                       For the year ended    For the year ended 
                                          31 December 2009      31 December 2008
                                                    EUR000                EUR000
  CASH FLOWS FROM OPERATING
 ACTIVITIES
  Profit before tax                                 70,339                41,453
  Tax                                                (828)                 (762)
  Adjustments to reconcile net                       1,176                28,051
 income to net cash provided by
 operating activities (see below)
  Net cash provided by operating                    70,687                68,742
 activities

  CASH FLOWS FROM INVESTING
 ACTIVITIES
  Long term deposits                                   172                 (391)
  Long term loan                                   (1,141)                 (692)
  Dividend received from                            18,528                   -  
 equity-accounted associates
  Acquisition of property, plant and               (5,886)               (3,389)
 equipment
  Proceeds from sale of available                      -                     311
 for sale investments
  Investments in equity-accounted                      -               (165,376)
 associates
  Acquisition of intangible assets                 (2,309)               (1,925)
  Acquisition of business                              -                (19,542)
  Acquisition of subsidiary, net of               (11,310)                   -  
 cash acquired (Note 13)
  Capitalised development costs                    (5,503)               (6,138)
  Net cash used in investing                       (7,449)             (197,142)
 activities

  CASH FLOWS FROM FINANCING
 ACTIVITIES
  Dividends paid                                  (39,562)              (35,893)
  Public offering proceeds                             -                 140,989
  Share issue costs                                    -                 (2,874)
  Exercise of options                                3,466                 2,917
  Net cash (used in)/provided by                  (36,096)               105,139
 financing activities

 INCREASE/(DECREASE) IN CASH AND                    27,142              (23,261)
 CASH EQUIVALENTS
  CASH AND CASH EQUIVALENTS AT                      31,558                54,819
 BEGINNING OF YEAR
  CASH AND CASH EQUIVALENTS AT END                  58,700                31,558
 OF YEAR

                                       For the year ended    For the year ended 
  
                                          31 December 2009      31 December 2008
                                                    EUR000                EUR000
  ADJUSTMENT TO RECONCILE NET INCOME
 TO NET CASH PROVIDED BY OPERATING
 ACTIVITIES
  Income and expenses not affecting operating cash flows:
  Depreciation                                       2,372                 1,678
  Amortisation                                       6,406                 4,234
 Income from associate                            (22,534)                   -  
 Amortization of intangibles in                     10,513
 associate
  Decline in fair value of available                   399                16,698
 for sale investment
  Employee stock option plan                         5,150                 4,125
 expenses
  Others                                              122                    (6)

  Changes in operating assets and
 liabilities:
  Decrease/(increase) in trade                       3,486               (2,159)
 receivables
 ( Increase)/decrease in other                     (3,076)                   758
 receivables
  Increase in trade payables                         3,097                 3,840
  (Decrease)/increase in other                     (1,457)                 2,514
 payables
  Decrease in deferred revenues                    (3,302)               (3,631)
                                                     1,176                28,051

 NOTE 1 - GENERAL

Playtech Limited (the "Company") was incorporated in the British Virgin Islands on 12 September, 2002 as an offshore company with limited liability. 

Playtech and its subsidiaries (the "Group") develop unified software platforms for the online and land based gambling industry, targeting online and land based operators. Playtech's gaming applications - online casino, poker and other P2P games, bingo, mobile, live gaming, land-based kiosk networks, land based terminal  and fixed-odds games - are fully inter-compatible and can be freely incorporated as stand-alone applications, accessed and funded by the operators' players through the same user account and managed by the operator by means of a single powerful management interface. 

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies followed in the preparation of the financial statements, on a consistent basis, are:
                                

A. Accounting principles

These financial statements have been prepared in accordance with International Financial Reporting Standards, International Accounting standards and interpretations (collectively IFRS) issued by the International Accounting Standards Board (IASB) as adopted by the European Union ("adopted IFRSs"). In the current year the Group has adopted all of the new and revised standards and interpretations issued by the IASB and the International Financial Reporting Interpretations Committee (IFRIC) of the IASB, as they have been adopted by the European Union, that are relevant to its operations and effective for accounting periods beginning on 1 January 2009. 

Changes in accounting policies

The adoption of the following new and revised standards and interpretations has not resulted in any significant changes to the Group's accounting policies nor have they had a material effect on the amounts reported for the current or prior years.

IFRS 8, Operating Segments (effective for accounting periods beginning on or after 1 January 2009). This standard sets out requirements for the disclosure of information about the group's operating segments and also about the group's products and services, the geographical areas in which it operates, and its major customers, based on the information reviewed by the 'chief operating decision maker'. As this is a disclosure standard it has had no impact on the results or net assets of the Group.

Amendments to IAS 1 Presentation of Financial Statements: A Revised Presentation: The revised Standard has introduced a number of terminology changes and has resulted in a number of changes in presentation and disclosure.  As a result of the application of this Amendment the Group has elected to present a single statement of comprehensive income. However, the revised Standard has had no impact on the reported results or financial position of the Group.

Improving Disclosures about Financial Instruments (Amendments to IFRS 7): The application of this Amendment has resulted in changes to the disclosures provided in respect of financial instruments, primarily in note 26 to the financial statements including an analysis of financial asset and financial liability that is measured at fair value in the statement of financial position, into a three level fair value measurement hierarchy. The Amendment does not change the recognition or measurement of transactions and balances in the financial statements.

The following new standards, interpretations and amendments, also effective for the first time from 1 January 2009, have not had a material effect on the financial statements:

* Amendment to IAS 23 Borrowing Costs

* Amendment to IFRS 2 Share-based Payment: Vesting Conditions and Cancellations

* Amendments to IAS 32 and IAS 1 Puttable Financial Instruments and Obligations Arising on    
      Liquidation

* Improvements to IFRSs (2008)

* IFRIC 15 Agreements for the Construction of Real Estate

* Embedded Derivatives (Amendments to IFRIC 9 and IAS 39)

Standards, amendments and interpretations not yet effective

Certain new standards, amendments and interpretations to existing standards have been published that are mandatory for the Group's accounting periods beginning on or after 1 January 2010 or later periods and which the Group has decided not to adopt early. These are:

IFRS 3 (revised), Business Combinations and complementary Amendments to IAS 27, Consolidated and separate financial statements (both effective for the group's accounting period beginning on 1 January 2010).  IFRS 3 (revised) includes certain very significant changes to the requirements of IFRS, and options available, in accounting for future business combinations, in particular all legal and professional fees are expensed immediately, and contingent consideration is assessed at fair value on the date of acquisition, with all subsequent changes being recognized in the income statement, and not goodwill.  It is expected that this Standard will have a significant impact on the Group given the acquisition already completed subsequent to the balance sheet date (see note 27).  Acquisition expenses incurred in respect of those acquisitions not completed at 31 December 2009 have been expensed during 2009 in line with the revised IFRS. 

The Amendment to IAS 27 is adopted at the same time as IFRS 3 (revised), and will affect in particular the acquisitions of subsidiaries achieved in stages and disposals of interests, with significant differences in the accounting depending on whether or not control is obtained as a result of the transaction, or where a transaction results only in a change in the percentage of a controlling interest.  Management is currently assessing the impact this standard might have on the Group.

IFRIC 17 Distributions of Non-cash Assets to Owners (effective for accounting periods beginning on or after 1 July 2009). IFRIC 17 is still to be endorsed by the EU. This IFRIC addresses distributions of non-cash assets to owners and clarifies that:
(a) A dividend payable should be recognized when the dividend is appropriately authorized and is no longer at the discretion of the entity.

(b) An entity should measure the dividend payable at the fair value of the net assets to be distributed.

(c) An entity should recognize the difference between the dividend paid and the carrying amount of the net assets distributed in profit or loss. 

It does not have retrospective application.

Amendment to IAS 39 Financial Instruments: Recognition and Measurement: Eligible Hedged Items.  This Amendment clarifies how the principles that determine whether a hedged risk or portion of cash flows is eligible for designation should be applied in the designation of a one-sided risk in a hedged item, and inflation in a financial hedged item.  Management does not expect this Amendment to have a significant impact on the Group, due to the absence of such arrangements.

IFRIC 18 Transfer of Assets from Customers (received on or after 1 July 2009; effective from accounting period beginning on or after 1 November 2009).  This Interpretation clarifies the treatment of agreements in which an entity receives from a customer an item of property, plant and equipment (or cash which must be used only to acquire or construct an item of property, plant and equipment) that the entity must then use either to connect the customer to a network or to provide the customer with ongoing access to a supply of goods or services.  Management is currently assessing the impact this Interpretation might have on the Group.

Improvements to IFRSs (2009) effectively for accounting periods beginning on or after 1 January 2010.  The Amendments take various forms, including the clarification of the requirements of IFRS and the elimination of inconsistencies between Standards.  Management is currently assessing the full impact of the Amendment on the accounts but those aspects that may be applicable are listed below:

Total assets for each reportable segment need only be disclosed when such information is regularly provided to the chief operating decision maker.

The Amendment changes IAS 38 to bring the guidance on the treatment of intangible assets acquired as part of a business combination in line with the requirements of IFRS 3 (revised) and to clarify the description of valuation techniques used in the absence of an active market.

Group Cash-settled Share-based Payment Transactions (Amendments to IFRS 2) This has yet to be endorsed by the EU.  This Amendment clarifies that, where a parent (or another group entity) has an obligation to make a cash-settled share-based payment to another group entity's employees or suppliers, the entity receiving the goods or services should account for the transaction as equity-settled.  Management is currently assessing the impact this Amendment might have on the Group.

Classification of Rights Issues (Amendment to IAS 32).  This Amendment addresses the accounting for rights issues (rights, options, or warrants) that are denominated in a currency other than the functional currency of the issuer.  Previously such rights were accounted for as derivative liabilities.  However, the Amendment requires that, provided the entity offers the rights, options or warrants pro rata to all of its existing owners of the same class of its own non-derivative equity instruments, such rights issues are classified as equity regardless of the currency in which the exercise price is denominated.  Management is currently assessing the impact this Amendment might have on the Group.

IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments.  This has yet to be endorsed by the EU.  This Interpretation addresses transactions in which an entity issues equity instruments to a creditor in return for the extinguishment of all or part of a financial liability.  Broadly, it applies to transactions where the two parties are acting only in their capacity as lender and borrower.  For transactions within its scope, where the whole liability is extinguished, the Interpretation requires the equity instruments issued to be measured at their fair value and the difference between the fair value and the carrying value of the financial liability extinguished to be recognized in profit or loss.  Management is currently assessing the impact this Interpretation might have on the Group.

Revised IAS 24 Related Party Disclosures.  This has yet to be endorsed by the EU.  The revision to IAS 24 provides for a partial exemption for government related entities, and a revised definition of a related party.  The structure of the definition of a related party has been simplified and inconsistencies eliminated.  The revised definition will mean that some entities will have more related parties for which disclosures will be required.  Management is currently assessing the impact this Revision might have on the Group. 

IFRS 9 Financial Instruments.  This has not been endorsed by the EU.  IFRS 9 will eventually replace IAS 39 in its entirety.

                The Group does not consider that any other standards or interpretations issued by the IASB, but   not yet applicable, will have significant impact on the financial statements. 

B.   Foreign currency

The financial statements of the Company and its subsidiaries are prepared in Euro (the functional currency), which is the currency that best reflects the economic substance of the underlying events and circumstances relevant to the Group Transactions and balances in foreign currencies are converted into Euro in accordance with the principles set forth by International Accounting Standard (IAS) 21 ("The Effects of Changes in Foreign Exchange Rates"). Accordingly, transactions and balances have been converted as follows: 

Monetary assets and liabilities - at the rate of exchange applicable at the balance sheet date; Income and expense items - at exchange rates applicable as of the date of recognition of those items. Non-monetary items are converted at the rate of exchange used to convert the related balance sheet items i.e. at the time of the transaction. Exchange gains and losses from the aforementioned conversion are recognized in the income statement.

C.   Basis of consolidation

Where the Company has the power, either directly or indirectly, to govern the financial and operating policies of another entity or business so as to obtain benefits from its activities, it is classified as a subsidiary. The consolidated financial statements present the results of the Company and its subsidiaries ("the Group") as if they formed a single entity. Intercompany transactions and balances between Group companies are therefore eliminated in full.

D.   Revenue recognition 

Royalty income receivable from contracting parties comprises a percentage of the revenue generated by the contracting party from use of the Group's intellectual property in online gaming activities and is recognized in the accounting periods in which the gaming transactions occur.  Royalty and other income receivable under fixed-term arrangements are recognized over the term of the agreement on a straight line basis.

E.   Distribution costs

Distribution costsrepresent the direct costs of the function of providing services to customers, costs of the development function and advertising costs.      

F.    Share-based payments

Certain employees participate in the Group's share option plan which commenced with effect from 1 December 2005.  The fair value of the options granted is charged to the Income Statement on a straight line basis over the vesting period and the credit is taken to equity, based on the Group's estimate of shares that will eventually vest.  Fair value is determined by the BlackScholes valuation model. The share options plan does not have any performance conditions other than continued service. 

G.   Income taxes and deferred taxation

Provision for income taxes is calculated in accordance with the tax legislations and applicable tax rates in force at the balance sheet date in the countries in which the Group companies have been incorporated. 

Deferred tax assets and liabilities are recognized where the carrying amount of an asset or liability in the consolidated balance sheet differs from its tax base, except for differences arising on:

·      the initial recognition of goodwill;

·      the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting or taxable profit; and

·      investments in subsidiaries and jointly controlled entities where the Group is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future.

The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the reporting date and are expected to apply when the deferred tax liabilities /(assets) are settled/(recovered)

Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either:

·      the same taxable group company; or

·      different group entities which intend either to settle current tax assets and liabilities on a net basis, or to realize the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are expected to be settled or recovered.

H.   Dividend distribution

Final dividends are recorded in the Group's financial statements in the period in which they are approved by the Group's shareholders.  Interim dividends are recognized when paid.

I.    Property, plant and equipment

Property, plant and equipment comprise computers, leasehold improvements, office furniture and equipment, and motor vehicles and are stated at cost less accumulated depreciation. Carrying amounts are reviewed on each balance sheet date for impairment. Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount.

Depreciation is calculated to write off the cost of fixed assets on a straight line basis over the expected useful lives of the assets concerned. The principal annual rates used for this purpose, which are consistent with those of the previous years, are: 
                                 %
 Computers                       33.33
 Office furniture and equipment  7.00-20.00
 Leasehold improvements          10.00, or over the length of the lease
 Motor vehicles                  15

Subsequent expenditures are included in the assets carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

Gains and losses on disposals are determined by comparing proceeds with carrying amount and are included in the income statement.

J.    Business combinations

The consolidated financial statements incorporate the results of business combinations using the purchase method. In the consolidated balance sheet, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognized at their fair values at the acquisition date. The results of acquired operations are included in the consolidated income statement from the date on which control is obtained. 

K.   Intangible assets

Intangible assets comprise externally acquired patents, domains, and customer lists. Intangible assets also include internally generated capitalized software development costs. All such intangible assets are stated at cost less accumulated amortization. Where intangible assets are acquired as part of a business combination they are recorded initially at their fair value. Carrying amounts are reviewed on each balance sheet date for impairment. Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down to its recoverable.

Amortization is calculated using the straight-line method at annual rates estimated to write off the costs of the assets over their expected useful lives and is charged to operating expenses from the point the asset is brought into use. The principal annual rates used for this purpose, which are consistent with those of the previous years, are: 

                                            %

 Domain names                               Nil
 Internally generated capitalized           33.33
 development costs
 Technology IP                              20-33.33
 Customer list                              12.5
 Patents                                    Over the expected useful lives 10-33

Intangible assets identified under the investment accounted for using equity method

                           %
 Software                 10
 Customer relationships   71
 Affiliate contracts      52
 WH Brands                 7
 Purchased assets brands  10
 Covenant not to compete  20

Management believes that the useful life of the domain names is indefinite. Domain names are reviewed for impairment annually.

Expenditure incurred on development activities including the Group's software development is capitalized only where the expenditure will lead to new or substantially improved products, the products are technically and commercially feasible and the Group has sufficient resources to complete development. 
Subsequent expenditure on capitalized intangible assets is capitalized only where it clearly increases the economic benefits to be derived from the asset to which it relates. All other expenditure, including that incurred in order to maintain an intangible assets current level of performance, is expensed as incurred.

L.   Goodwill

Goodwill on acquisition is initially measured at cost being the excess of the cost of the business combination over the acquirer's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities. Cost comprises the fair values of assets given, liabilities assumed and equity instruments issued, plus any direct costs of acquisition. Goodwill is capitalized as an intangible asset with any impairment in carrying value being charged to the consolidated income statement. Goodwill is not amortized and is reviewed for impairment, annually or more specifically if events or changes in circumstances indicate that the carrying value may be impaired.

M.  Impairment

Impairment tests on goodwill and other intangible assets with indefinite useful economic lives are undertaken annually at the financial year end.  Other non-financial assets are subject to annual impairment tests whenever events or changes in circumstances indicate that their carrying amount may not be recoverable.  Where the carrying value of an asset exceeds its recoverable amount (i.e. - the higher of value in use and fair value less costs to sell), the asset is written down accordingly.

Where it is not possible to establish the recoverable amount of an individual asset, the impairment test is carried out on the asset's cash generating unit (i.e. - the lowest group of assets in which the asset belongs for which there are separately identifiable cash flows).  Goodwill is allocated on initial recognition to each of the group's cash generating units that are expected to benefit from the synergies of the combination giving rise to the goodwill.

Impairment charges are included in the administrative expenses line item in the consolidated income statement, except to the extent they reverse gains previously recognized in the consolidated statement of recognized income and expense.  An impairment loss recognized for goodwill is not reversed.

N.   Associates

Where the Group has the power to participate in (but not control) the financial and operating policy decisions of another entity, it is classified as an associate. Associates are initially recognized in the consolidated balance sheet at their fair value. The Group's share of post-acquisition profits and losses is recognized in the consolidated income statement, except that losses in excess of the Group's investment in the associate are not recognized unless there is an obligation to make good those losses.

Profits and losses arising on transactions between the Group and its associates are recognized only to the extent of unrelated investors' interests in the associate. The investor's share in the associate's profits and losses resulting from these transactions is eliminated against the carrying value of the associate.

Any premium paid for an associate above the fair value of the Group's share of the identifiable assets, liabilities and contingent liabilities acquired is capitalized as goodwill and included in the carrying amount of the associate. The carrying amount of investment in associate is subject to impairment in the same way as goodwill arising on a business combination described above.

O.         Financial assets

The Group classifies its financial assets into one of the categories discussed below, depending on the purpose for which the asset was acquired. The Group has not classified any of its financial assets as held to maturity. 

Loans and receivables 

These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through the provision of services to customers (e.g. trade receivables), but also incorporate other types of contractual monetary asset. They are initially recognized at fair value plus transaction costs that are directly attributable to their acquisition or issue and are subsequently carried at amortized cost using the effective interest rate method, less provision for impairment.

The Group's receivables comprise trade and other receivables, cash and cash equivalents, and loans to customers in the balance sheet

Trade receivables which principally represent amounts due from licensees are carried at original invoice value less an estimate made for bad and doubtful debts based on a review of all outstanding amounts at the year-end. An estimate for doubtful debts is made when there is objective evidence that the Group will not be able to collect amounts due according to the original terms of receivables. Bad debts are written off when identified.

Cash and cash equivalents includes cash in hand, deposits held at call with banks and other short term highly liquid investments with original maturities of three months or less. 

Loans to customers are in respect of formal loan agreements entered into between the Group and its customer, which are carried at original advanced value less a provision for impairment.  They are classified between current and non-current assets in accordance with the contractual repayment terms of each loan agreement.

Available for sale financial assets

Non-derivative financial assets classified as available-for-sale comprise the Group's strategic investments in entities not qualifying as subsidiaries, associates or jointly controlled entities. They are carried at fair value with changes in fair value generally recognized in other comprehensive income and accumulated in the available for sale reserve. In accordance with IAS 39, a significant or prolonged decline in the fair value of an available-for-sale financial asset is recognized in the income statement. 

Purchases and sales of available for sale financial assets are recognized on settlement date with any change in fair value between trade date and settlement date being recognized in the available for sale reserve. On sale, the amount held in the available for sale reserve associated with that asset is removed from equity and recognized in the income statement.

P.   Share capital

Ordinary shares are classified as equity and are stated at the proceeds received net of direct issue costs.

         Q.   Financial liabilities

Trade payables and other short-term monetary liabilities are initially recognized at fair value and subsequently carried at amortized cost using the effective interest method.

R.   Fair value measurement hierarchy

IFRS 7 requires certain disclosure which require the classification of financial assets and financial liabilities measured at fair value using a fair value hierarchy that reflects the significance of the inputs used in making the fair value measurement (see note 26).  The fair value hierarchy has the following levels:

(a)  Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);

(b)  Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. - derived from prices) (Level 2); and

(c)  Inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3).

The level in the fair value hierarchy within which the financial asset or financial liability is categorized in determined on the basis of the lowest level input that is significant to the fair value measurement.  Financial assets and financial liabilities are classified in their entirety into only one of the three levels.

S.   Long term liabilities

Long term liabilities are those liabilities that are due for repayment or settlement in more than twelve months from balance sheet date.

T.   Provisions 

Provisions, which are liabilities of uncertain timing or amount, are recognized when the Group has a present obligation as a result of past events, if it is probable that an outflow of funds will be required to settle the obligation and a reliable estimate of the amount of the obligation can be made.

 NOTE 3 - CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

The areas requiring the use of estimates and critical judgements that may potentially have a significant impact on the Group's earnings and financial position are impairment of goodwill, the recognition and amortization of development costs and the useful life of property, plant and equipment, the fair value of financial instruments, share based payments, legal proceedings and contingent liabilities, determination of fair values of intangible assets acquired in business combinations and income tax.  

Estimates and assumptions

A.   Impairment of goodwill

The Group is required to test, on an annual basis, whether goodwill has suffered any impairment. The recoverable amount is determined based on value in use calculations. The use of this method requires the estimation of future cash flows and the choice of a discount rate in order to calculate the present value of the cash flows. Such estimates are based on management's experience of the business, but actual outcomes may vary. More details including carrying values are included in note 11.

B.   Recognition and amortization of development cost and other intangible assets and the useful life of property, plant and equipment

Intangible assets and property, plant and equipment are amortized or depreciated over their useful lives. Useful lives are based on management's estimates of the period that the assets will generate revenue, which are periodically reviewed for continued appropriateness. 

Changes to estimates can result in significant variations in the amounts charged to the consolidated income statement in specific periods. More details including carrying values are included in notes 10 and 11.

C.   Fair value of financial instruments

The Group determines the fair value of financial instruments that are not quoted using valuation techniques. Those techniques are significantly affected by the assumptions used, including discount rates and estimates for future cash flows. In that regard, the derived fair value estimates cannot always be substantiated by comparison with independent markets and, in many cases, may not be capable of being realized immediately. 

The methods and assumptions applied, and the valuation techniques used, are disclosed in note 26

D.   Share based payments

The Group has a share based remuneration scheme for employees. The fair value of share options is estimated by using the Black-Scholes model, on the date of grant based on certain assumptions. Those assumptions are described in note 9 and include, among others, the dividend growth rate, expected share price volatility, expected life of the options and number of options expected to vest. During 2008 the Group reassessed the fair value of the options granted, in order to provide reliable and more relevant information by taking into account historical forfeiture rates, relevant risk free interest rates and re-measurement of volatility per each grant.   During 2009, the Group made modifications to existing options which resulted in an incremental fair value charge in the current year.  Further details are provided in note 9 to the financial statements.

E.   Legal proceedings and contingent liabilities

Management regularly monitors the key risks affecting the Group, including the regulatory environment in which the Group operates. Provision will be made if it is probable that there will be an outflow of economic benefit. More details are included in note 28.

F.    Determination of fair value of intangible assets acquired 

The fair value of the intangible assets acquired is based on the discounted cash flows expected to be derived from the use of the asset.  Further information in relation to the determination of fair value of intangible assets acquired is given in note 12 and 13.

G.   Income taxes

The Group is subject to income tax in three jurisdictions and judgment is required in determining the provision for income taxes. During the ordinary course of business, there are transactions and calculations for which the ultimate tax determination is uncertain. As a result, the Group recognizes tax liabilities based on estimates of whether additional taxes and interest will be due. The Group believes that its accruals for tax liabilities are adequate for all open audit years based on its assessment of many factors including past experience and interpretations of tax law. More details are included in note 7.

The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of current events and actions, actual results ultimately may differ from those estimates.
NOTE 4 - SEGMENT INFORMATION

Management considers that the Group's activity as a provider of an online gaming software platform constitutes one operating and reporting segment, as defined under IFRS 8.  

Management review the performance of the Group by reference to group-wide profit measures and the revenues derived from 3 main product groupings: 

> poker 

> casino

> other

The group-wide profit measures are adjusted net profit (see note 8) and adjusted EBITDA. Management believes the adjusted profit measures represent more closely the underlying trading performance of the business.  No other differences exist between the basis of preparation of the performance measures used by management and the figures in the group financial statements.

There is no allocation of operating expenses, profit measures, assets and liabilities to individual product groupings.  Accordingly the disclosures below are provided on an entity-wide basis

Revenue by product
                 For the year ended
                    31 December,
                   2009      2008
                  EUR000    EUR000

 Casino             76,757   79,396
 Poker              33,813   30,073
 Other               4,205    1,981
 Total revenues    114,775  111,450

In the current year, there were 2 licensees who individually accounted for more than 10% of the total revenue of the group (2008 - 2 licensees). Revenue from these licensees in the current year totalled EUR44.8m (2008 - EUR50.7m)

Geographical analysis of revenues by jurisdiction of gaming license

Analysis by geographical regions is made according to the jurisdiction of the gaming license of the licensee. This does not reflect the region of the end users of the Group's licensees whose locations are worldwide.

                      For the year ended
                         31 December,
                        2009      2008
                       EUR000    EUR000

 Canada                  47,849   52,983
 Philippines              4,703    4,501
 Curacao and Antigua     33,925   28,884
 Rest of World           28,298   25,082
                       114, 775  111,450

Geographical analysis of non-current assets

                              As of
                           December 31,
                          2009     2008
                         EUR000   EUR000
 Estonia                   1,970    1,879
 Israel                      773      809
 Philippines                 421      391
 Isle of Man               1,849      110
 Bulgaria                    409      173
 Cyprus                    1,993      916
 UK                          295        -
 India                         -      403
 British Virgin Islands  244,332  230,523
                         252,042  235,204
    
NOTE 5 - OPERATING PROFIT

Operating profit is stated after charging:
                                           For the year ended  31 December,
                                                2009             2008
 Directors compensation                        EUR000           EUR000

 Short term benefits of directors                    1,233            1,597
 Share based benefits of directors                     980            1,130
 Bonuses to executive directors                        488              484
                                                     2,701            3,211

                                           For the year ended  31 December,
                                                2009             2008
                                               EUR000           EUR000
 Auditor's remuneration
 Audit services
 Parent company and Group audit                        160              168
 Audit of overseas subsidiaries                         40               46
 Total audit                                           200              214
 Non-audit services
 Other acquisition and assurance services              117              324
                                                       317              538

                                                For the year ended  31 December,
                                                     2009             2008
                                                    EUR000           EUR000

 Development costs recognized in the                      7,431            6,453
 consolidated statement of comprehensive
 income

NOTE 6 - FINANCING INCOME AND COSTS

                                                For the year ended  31 December,
                                                     2009             2008
                                                    EUR000           EUR000
 A. Finance income
 Bank interest received                                    508             4,676
 Dividend received from available for sale               1,729               163
 investments
      Exchange differences (net)                           143             2,841
                                                         2,380             7,680
 B. Finance cost
      Finance cost- discounting of deferred              (418)             (748)
 consideration  
      Exchange rate differences - Investments                -          (13,126)
 in equity accounted associates (note 12)
      Bank charges                                        (93)             (330)
                                                         (511)          (14,204)

 Net financing income/(expense)                          1,869           (6,524)

NOTE 7 - TAXATION

                                                For the year ended  31 December,
                                                     2009             2008
                                                    EUR000           EUR000
 Current income tax
 Income tax on profits of subsidiary                      1,345              762
 operations
 Deferred tax (note 22)                                   (517)                -
 Total tax charge                                           828              762

The group is tax registered, managed and controlled from the Isle of Man where the corporate tax rate is set to zero.  The majority of profits arise in the British Virgin Islands. No tax is assessed in the British Virgin Islands, the Company's country of incorporation. The Group's subsidiaries are located in different jurisdictions and are operating on a cost plus basis.  The subsidiaries are taxed on their residual profit.

The deferred tax is due to the reversal of temporary differences arising on the acquisition of the GTS group.

NOTE 8 - EARNINGS PER SHARE

A.        Earnings per share have been calculated using the weighted average number of shares in issue during the relevant financial periods.  The weighted average number of equity shares in issue and the earnings, being profit after tax are as follows:
                                           For the year ended  31 December,
                                                2009             2008
                                            In euro cents    In euro cents

 Basic                                                29.0             17.9
 Diluted                                              28.0             17.3

                                               EUR000           EUR000
  
 Profit for the year                                69,511           40,691
                                               Number           Number
 Denominator - basic
 Weighted average number of equity shares      239,476,501      227,696,037

 Denominator - Diluted
 Weighted average number of equity shares      239,476,501      227,696,037
 Weighted average number of option shares        8,562,031        7,413,260
 Weighted average number of shares             248,038,532      235,109,297

B.   Adjusted earnings per share

The adjusted earnings per share present the profit for the year before certain significant non cash expenses included in the consolidated statement of comprehensive income as the directors believe that the adjusted profit represents more closely the underlying trading performance of the business.

                                                 For the year ended December 31,
                                                      2009              2008
                                                    In cents          In cents

 Basic - adjusted                                           37.4            34.5
 Diluted - adjusted                                         36.1            33.4

                                                     EUR000            EUR000
 Profit for the year                                      69,511          40,691
 Decline in fair value of available for sale                 399          16,698
 investments
 Amortization on acquisitions                              3,282           3,173
 Amortization of intangibles in  associate                10,513               -
 Finance cost on discounting of deferred                     418             748
 consideration
 Employee stock option expense                             5,150           4,125
 Professional expenses on post year end                      360               -
 acquisition
 Exchange differences - Investments accounted                  -          13,126
 for using equity method
 Adjusted profit for the year                             89,633          78,561
  
  
                                                     Number            Number
 Denominator - basic
 Weighted average number of equity shares            239,476,501     227,696,037

 Denominator - diluted
 Weighted average number of equity shares            239,476,501     227,696,037
 Weighted average number of option shares              8,562,031       7,413,260
 Weighted average number of shares                   248,038,532     235,109,297
As at 31 December 2009, out of the entire share options outstanding, 2,952,991 (2008 - 4,821,327) are antidilutive and therefore not included in the above calculation.NOTE 9- EMPLOYEE BENEFITS                
                Total staff costs comprise the following:
                                        31 December,
                                        2009     2008
                                       EUR000   EUR000

 Salaries and employee related costs    29,628  25,191
 Employee stock option costs             5,270   4,441
                                        34,898  29,632
                                         31 December,
                                         2009    2008
                                        Number  Number
 Average number of employees
 Distribution                              743     674
 General and administration                 74      77
                                           817     751

                

The Group has an employee share option plan ("ESOP") for the granting of non transferable options to certain employees. Options granted under the plan vest on the first day on which they become exercisable which is typically between one to four years after grant date. The overall term of the ESOP is five years. These options are settled in equity once exercised. Option prices are either denominated in USD or GBP, depending on the option grant terms.

On 19 March 2009, the directors approved a repricing plan to convert options previously granted in USD to and equivalent GBP price.  The impact of the modification was to recognise an incremental fair value charge of EUR2.7m during the year.

At 31 December 2009, options under this scheme were outstanding over:

                                                             2009        2008
                                                            Number      Number
 Shares vested on 30 November 2008 at an exercise price      213,679   1,823,127
 of $2.5 per share
 Shares vested on 30 November 2008 at an exercise price      851,020           -
 of £1.45 per share
 Shares fully vested on 30 November 2008 at an exercise      133,334      66,668
 price of £2.32 ($4.00 before repricing) per share
 Shares vesting on 6 February 2009 at an exercise price      333,334   1,000,000
 of £1.45  ($4.50 before repricing) per share
 Shares vesting between 1 December 2006 and 6 February       919,712   1,279,712
 2009 at an exercise price of $4.50 per share
 Shares vesting between 1 December 2006 and 6 February       213,333           -
 2009 at an exercise price of £2.55 per share
 Shares vesting between 1 December 2006 and 1 December       200,000     200,000
 2009 at an exercise price of £2.49 ($4.00before
 repricing) per share
 Shares vesting between 28 March 2007 and 28 March 2009      200,000     200,000
 at an exercise price of £2.57 per share
 Shares vesting between 21 June 2007 and 21 June 2009 at      64,602     148,220
 an exercise price of $5.75 per share
 Shares vesting between 21 June 2007 and 21 June 2009 at      71,978           -
 an exercise price of £3.16 per share
 Shares vesting between 11 October 2007 and 11 October       833,334     900,000
 2009 at an exercise price of £1.72 ($3.24 before
 repricing) per share
 Shares vesting between 11 December 2007 and 11 December     520,902     990,805
 2009 at an exercise price of $4.35 per share
 Shares vesting between 11 December 2007 and 11 December     285,270           -
 2009 at an exercise price of £2.21 per share
 Shares vesting between 31 December 2007 and 31 October      325,000     550,000
 2010 at an exercise price of $7.48 per share
 Shares vesting between 16 May 2008 and 16 May 2010 at        40,000   1,413,000
 an exercise price of $7.50 per share
 Shares vesting between 16 May 2008 and 16 May 2010 at     1,163,000           -
 an exercise price of £3.79 per share
 Shares vesting between 18 June 2008 and 18 June 2010 at           -     372,327
 an exercise price of $7.79 per share
 Shares vesting between 18 June 2008 and 18 June 2010 at     153,388           -
 an exercise price of £3.96 per share
 Shares vesting between 18 June 2008 and 18 June 2010 at      10,000      10,000
 an exercise price of £3.30 ( $6.63 before repricing)
 per share
 Shares vesting between 3 October 2008 and 3 October         300,000     300,000
 2011 at an exercise price of $6.90 per share
 Shares vesting between 10 October 2008 and 10 October       150,000     350,000
 2011 at an exercise price of £3.51 ($7.12 before
 repricing) per share
 Shares vesting between 20 November 2008 and 20 November      30,000     230,000
 2011 at an exercise price of $7.19 per share
 Shares vesting between 20 November 2008 and 20 November      94,000           -
 2011 at an exercise price of £3.51 per share
 Shares vesting between 31 December 2008 and 31 December      28,500      86,000
 2010 at an exercise price of $7.68 per share
 Shares vesting between 31 December 2008 and 31 December      55,000           -
 2010 at an exercise price of £3.86 per share
 Shares vesting between 25 April 2009 and 25 April 2012       40,000   1,010,000
 at an exercise price of $8.61 per share
  
  
                                                             2009        2008
                                                            Number      Number
 Shares vesting between 25 April 2009 and 25 April 2012      666,500           -
 at an exercise price of £4.35 per share
 Shares vesting between 21 May 2009 and 21 May 2012 at       500,000     500,000
 an exercise price of £5.31 ($10.54 before repricing)
 per share
 Shares vesting between 28 November 2009 and 28 November   1,832,353   2,035,345
 2012 at an exercise price of £3.20 per share
 Shares vesting between 31 December 2008 and 31 December     200,000     200,000
 2011 at an exercise price of £3.1725 per share
 Shares fully vesting on 22 May 2012 at an exercise          805,000           -
 price of £4.155 per share
 Shares fully vesting on 22 May 2012 at an exercise           75,000           -
 price of £4.05 per share
 Shares fully vesting on 6 November 2012 at an exercise    1,386,000           -
 price of £3.7 per share
                                                          12,694,240  13,665,204

Total number of shares exercisable as of 31 December is 6,908,693 and 6,964,611 for 2009 and 2008 respectively.

The fair value of the options that were granted in respect of equity settled schemes for 2009 is EUR5.3m (2008 - EUR4.4m).  During 2009, EUR5.2m (2008 - EUR4.1m) has been recognized as an expense in the income statement and EUR0.1m (2008 - EUR0.3m) has been capitalized as part of development costs.

The following table illustrates the number and weighted average exercise prices of shares options for the ESOP.

                                             31 December,                             31 December,
                                       2009               2008                 2009                  2008
                                 Number of options  Number of options    Weighted average      Weighted average
                                                                          exercise price        exercise price
 Outstanding at the beginning           13,665,204         11,794,246          $5.56, £3.15          $4.82, £2.57
 of the year
 Granted during the year                 2,266,000          3,745,893                 £3.87           $9.25, £3.2
 Forfeited                             (1,517,208)          (573,845)          $7.47, £3.43           $5.01, £3.2
 Exercised                             (1,719,756)        (1,301,090)           $3.00,£1.70                 $3.43
 Outstanding at the end of the          12,694,240         13,665,204          $5.12, £3.20          $5.56, £3.15
 year

The weighted average share price at the date of exercise of options was £4.48 and £4.36 in 2009 and 2008 respectively.

The weighted average fair value of options granted during the year at the date of grant was £1.47 and £3.80 in 2009 and 2008 respectively.

Share options outstanding at the end of the year have the following exercise prices:

          Expiry date                       Exercise price                2009        2008
                                                                         Number      Number
 December 1  2010                Between $2.5 and $6.9 and between      2,129,970   2,889,795
                                 £1.45 and £2.55
 Between  February  6 2011 and   Between $3.24 and  $5.75 and between   3,010,528   3,718,737
 December 11  2011               £1.72 and £3.16
 Between 15 May 2012 and 31      Between $6.19 and $7.79 and between    2,048,889   3,311,327
 December 2012                   £3.3 and £3.96
 Between 25 April 2013 and 31    Between $8.61 and $10.54 and Between   3,238,853   3,745,345
 December 2013                   £3.1725 and £5.31
 Between 25 April 2013 and 31                                           2,266,000           -
 December 2013                   Between £3.7 and £4.155
                                                                       12,694,240  13,665,204

The fair value of the options granted under the ESOP is estimated as at the date of grant using the Black-Scholes model. The following table gives the assumptions made during the years ended 31 December 2008 and 2009:

 For options granted on 25 April 2008, 21 May 2008, 28 November 2008 and 31 December 2008
 Dividend yield (%)                                                                  2%
 Expected volatility (%)                                                             43.21 to 52.58%
 Risk free interest rate (%)                                                         2.64% to 3.26%
 Expected life of options (years)                                                    3 to 4.5
 Weighted average exercise price                                                     $9.25, £3.20

 For options granted on 22 May 2009, 6 November 2009 and 24 November 2009
 Dividend yield (%)                                                          2%-3.06%
 Expected volatility (%)                                                     56.1%-56.29%
 Risk free interest rate (%)                                                 2.06%-2.61%
 Expected life of options (years)                                            3 - 4.5
 Weighted average exercise price                                             £3.87

 For options modified as a result of the re-pricing on 19 March 2009
 Dividend yield (%)                                                    2%
 Expected volatility (%)                                               39.7%-56.4%
 Risk free interest rate (%)                                           1.24%-2.02%
 Expected life of options (years)                                      1 - 4
 Weighted average exercise price                                       £3.32

The volatility assumption, measured at the standard deviation of expected share price return, is based on a statistical analysis of daily share price over a period starting from the initial date of flotation through to the grant date.

NOTE 10 - PROPERTY, PLANT AND EQUIPMENT

                                            Office                                           
                                         furniture and     Motor         Leasehold           
                            Computers      equipment     vehicles       improvements      Total
  
                              EUR000        EUR000        EUR000           EUR000         EUR000
 Cost -
 As of 1 January, 2008           4,201              504         76                   261   5,042
 Reclassification                   63             (63)          -                     -       -
 Additions                       2,710              326          -                   235   3,271
 Disposals                           -                -        (4)                     -     (4)
 As of 31 December, 2008         6,974              767         72                   496   8,309

 Accumulated depreciation-
 As of 1 January, 2008           1,664               79         18                    51   1,812
 Reclassification                   20             (20)          -                     -       -
 Charge                          1,553               79         12                    34   1,678
 Disposals                           -                -        (4)                     -     (4)
 As of 31 December, 2008         3,237              138         26                    85   3,486

 Net Book Value -
 As of 31 December, 2008         3,737              629         46                   411   4,823

                                            Office                                           
                                         furniture and     Motor         Leasehold           
                            Computers      equipment     vehicles       improvements      Total
  
                              EUR000        EUR000        EUR000           EUR000         EUR000
 Cost -
 As of 1 January, 2009           6,974              767         72                   496   8,309
 Additions                       5,431              181         57                   217   5,886
 Acquired through business                                                                      
 combinations                       75               43          -                    48     166
 Disposals                       (412)             (14)          -                  (32)   (458)
 As of 31 December, 2009        12,068              977        129                   746  13,903

 Accumulated depreciation-
 As of 1 January, 2009           3,237              138         26                    85   3,486
 Charge                          2,087              208         16                    61   2,372
 Disposals                       (342)              (3)          -                   (5)   (350)
 As of 31 December, 2009         4,982              343         42                   158   5,508

 Net Book Value -
 As of 31 December, 2009         7,086              634         87                   588   8,395

NOTE 11 - INTANGIBLE ASSETS 
                                                                               Development costs                             
                                                                                  (internally                                
                                                     Domain   Technology IP        generated)       Customer                 
                                           Patents    names                                           list     Goodwill   Total

                                 EUR000              EUR000       EUR000             EUR000          EUR000     EUR000    EUR000
 Cost -
 As of 1 January, 2008                        2,218      121              63                 4,217     25,554     10,750  42,923
 Additions                                      803        -           1,122                 6,453          -          -   8,378
 Assets acquired on business combinations                                                                                       
                                                  -        -               -                     -          -         51      51
 As of 31 December, 2008                      3,021      121           1,185                10,670     25,554     10,801  51,352

 Accumulated amortization -
 As of 1 January, 2008                          358       51              63                   881      2,683          -   4,036
 Provision                                      209        -               -                   852      3,173          -   4,234
 As of 31 December, 2008                        567       51              63                 1,733      5,856          -   8,270

 Net Book Value -
 As of 31 December, 2008                      2,454       70           1,122                 8,937     19,698     10,801  43,082

                                                                     Development costs                             
                                                                        (internally                                
                                           Domain   Technology IP       generated)*       Customer                 
                                 Patents    names                                         list (*)   Goodwill   Total

                                  EUR000   EUR000       EUR000             EUR000          EUR000     EUR000    EUR000
 Cost -
 As of 1 January, 2009              3,021      121           1,185                10,670     25,554     10,801  51,352
 Additions                            620        -           1,689                 5,623          -          -   7,932
 Assets acquired on business          134        -           1,783                     -      8,032     10,902  20,851
 combinations
 As of 31 December, 2009            3,775      121           4,657                16,293     33,586     21,703  80,135

 Accumulated amortization -
 As of 1 January, 2009                567       51              63                 1,733      5,856          -   8,270
 Provision                            394        -              93                 2,660      3,259          -   6,406
 Assets acquired on business                                                                                          
 combinations                           -        -               -                     -          -          -       -
 As of 31 December, 2009              961       51             156                 4,393      9,115          -  14,676

 Net Book Value -
 As of 31 December, 2009            2,814       70           4,501                11,900     24,471     21,703  65,459

Management believes that Domain names are stated at fair value and have an indefinite life due to their nature.

Amortization of intangible assets is included in the distribution costs.  Included in the additions to development costs is EUR0.1m (2008 - EUR0.3m) in respect of share-based payments.

(*) The remaining amortization period for the customer list assets and internally generated development costs as of 31 December, 2009 is approximately 5 - 7 years, and 1-5 years respectively.

In accordance with IAS 36, the Group regularly monitors the carrying value of its intangible assets, including goodwill. Goodwill is allocated to 2 cash generating units ("CGU") which are related to the Tribeca transaction (hereinafter "Tribeca CGU") and the GTS business combination (hereinafter "GTS CGU") (see note 13). 

At 31 December 2009 the recoverable amount of the CGU's has been determined from value in use calculations based on cashflow projections from the formally approved budget for 2010 and detailed projections covering the periods as noted below. 

Key assumptions are as follows: 

For the Tribeca CGU: Discount rate of 16% which is based on the Group's WACC to reflect management's assessment of specific risks related to the goodwill.

Annual growth rate of 7% for 2010 and 5% for 2011-2013. Growth rates beyond the first four years are based on prudent estimates using historic growth rates.

For the GTS CGU: Discount rate of 19% which is based on the Group's WACC to reflect management's assessment of specific risks related to the goodwill. 

Annual growth rate of 19.5% for 2010, 15.7% for 2011, 4% for 2012, 3% for 2013 and 2% for the following years, based on the average forecasted GDP growth rate for the UK.

The results of the review indicated that there was no impairment of goodwill at 31 December 2009. Management has also reviewed the key assumptions and forecasts for the customer lists, applying the above same key assumptions. The results of the reviews indicated that there was no impairment of the intangible assets at 31 December 2009.

NOTE 12- INVESTMENTS IN EQUITY ACCOUNTED ASSOCIATES

On 19 October 2008, the Group entered into an agreement with William Hill Organization Limited, a subsidiary of William Hill PLC (hereinafter "WH"), a provider of fixed odds bookmaking services in the UK, for the establishment of two jointly owned entities (hereinafter "WH Online" or "JVCOs"), to facilitate the integration of the online businesses of WH together with the businesses and contracts (comprising of an affiliate marketing business, customer services operation with gaming brands and websites) which were purchased and then contributed by the Group. The transaction completed on 30 December 2008.

Immediately prior to the transaction, the Group acquired from a significant shareholder and other third parties, various online gaming businesses, marketing assets and contracts ("the Purchased Assets") for a total cash consideration of $250 million (EUR177.7 million). In consideration for the injection of the Purchased Assets into WH Online, the Group received a 29% interest in WH Online. The acquisition of the Purchased Assets by the Group was solely for the purpose of contributing them directly to WH Online in consideration for the Group's 29% interest therein, hence the Group treated the transaction as a single acquisition of a 29% interest in an associate. 

The investment in WH Online has been accounted for using the equity method in the consolidated financial statements and has been recognized initially at cost being the Group's 29% share of the fair value of the total net assets of the associate together with the goodwill on acquisition. In accordance with IAS 28, profits distributed to the Group in proportion of their respective shareholding have been recognized as share of profits of associates. Software license royalties fees charged to WH Online have been recognized as revenues in the Group accounts. 

WH has an option to acquire the Group's interest in WH Online on an independent fair value basis, exercisable after four or six years from completion of the transaction (the "Option"). Upon exercise of the Option, the Group has the right to receive a portion of the proceeds in WH shares, not exceeding 10% of WH's outstanding share capital at the time of issue.

Out of the total consideration of USD 250 million (EUR177.7 million), payable for the Purchased Assets (and hence the Group's interest in WH Online) USD 202.2 million (EUR143.8 million)  was paid to companies related to the Group's significant shareholder (hereinafter "Affiliates"), USD 40 million (EUR28.4 million)  was payable to the Group's former customer (out of which USD 20 million (EUR14.2 million) was paid in cash and the remaining amount is to be paid by 30 December 2010) and USD 0.3 million  (EUR0.2 million) was paid to a third party providing marketing services to the Affiliates in consideration for an option to purchase their business for a total cost of USD 7.5 million (EUR5.4 million). The option was exercised on 4 September 2009.

WH Online has also entered into a contract with the Group for a minimum term of five years for the provision of online gaming software for poker and casino. In addition, the Group provided advisory and consultancy services to WH Online until the businesses were fully integrated. 

The Group assessed the fair value of its interest in WH Online by reviewing the underlying identifiable tangible and intangible assets in WH Online and their value in use supported by the net present value of forecast cash flows, based on approved budgets and plans. These assets are being amortized in the Group's interest in WH Online over their estimated useful lives as follows:

                          Useful life
 Software                    10 years
 Customer relationships     17 months
 Affiliate contracts        23 months
 WH Brands                   15 years
 Purchased assets brands     10 years
 Covenant not to compete      5 years

                                                            EUR000
                                                                   
 Cash consideration to vendor of the purchased assets       161,209
 Deferred consideration                                      16,505
 Expenses paid in cash                                        4,167
 Total cash consideration                                   181,881
 Finance cost arising on discounting of cash consideration    (809)
 Present value of consideration including expenses          181,072
 Group share of fair value of net assets of WH Online:
  
 Customer relationships                                       5,114
 Affiliate contracts                                          2,177
 Brands                                                      40,104
 Software                                                     5,600
 Covenant not to compete                                     10,351
 Acquired net assets                                          2,823
                                                             66,169
 Goodwill                                                   114,903
 Present value of the consideration including expenses      181,072

Included in the above cash consideration is deferred consideration of EUR13.6 million (net of discount of EUR0.4 million) that is due for payment on 30 Dec 2010.

The main factors leading to the recognition of goodwill were the synergistic growth and revenues created by the combined highly complementary business activities and the strengthening of the Group's position in comparison to its competitors in the market. In accordance with IAS36, the Group regularly monitors the carrying value of its interest in WH Online.

The key assumptions used by management to determine the value in use of the brands, affiliate contracts and customer relationships within WH Online were as follows:

·              The income approach, in particular, the relief of royalty approach was applied for the valuation, considering projected revenues derived from the brands.

·              The royalty rate was based on a third party market participant assumption for use of the brands, considering age of the brands, market competition, market share, profitability and prevailing rates for similar properties.

·              The discount rate assumed was equivalent to the WACC plus 1% (15%) for the customer relationships and WACC plus 2% (16%) for the affiliate contracts

·              Annual growth rate of 8% for 2010, 10% for 2011, 8% for 2012-2013 and 2% for the following years. The attrition rates were based on market analysis.

Management has reviewed the key assumptions and forecasts for the above mentioned assets and the result of the review indicated that there was no impairment of the Group's investment in WH Online at 31 December 2009.

Due to the fact that the consideration for the acquisition of the Purchased Assets was in US dollars, the Group decided to hold the equivalent amount of the consideration in US dollars. This resulted in an exchange rate expense in the amount of EUR13.1 million that was reflected in the income statement for the year 2008.

Movements in the carrying value of the investment during the year are as follows:

                                                                 EUR000
                                                                        
 Investment in equity accounted associates at 1 January 2009     181,072
 Adjustment to expenses                                            (172)
 Investment accounted for using equity method                    180,900
 Income from associate                                            22,534
 Amortization of intangibles in associate                       (10,513)
 Dividend                                                       (22,555)
 Investment in equity accounted associates at 31 December 2009   170,366

Aggregated amounts relating to associates are as follows:

                     2009
                    EUR000
 Total assets       326,670
 Total liabilities   57,730
 Revenues           229,470
 Profit              74,450

NOTE 13 - ACQUISITIONS DURING THE YEAR

On 8 December 2009 the Group acquired 100% of the shares of Gaming Technology Solutions Limited, which owns 100% of the shares of VS Technology Limited and VS Gaming Limited (hereinafter "GTS Group"). The GTS Group principal activity is to provide cutting-edge software to the operators in the gaming industry, and through the GTS Enhanced Gaming Engine (EdGE) platform, provide clients with access to soft and casino games (hereinafter "GTS business").

An initial consideration of EUR10.85 million was paid in cash and additional contingent consideration of up to EUR10.8 million is payable in respect of the adjusted EBIT performance in 2010 and 2011 in the first quarters of 2011 and 2012 respectively.

Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill are as follows:
                                  Book value prior to   Adjustments         Fair value on
                                          acquisition                         acquisition
                                        EUR000               EUR000         EUR000
 Property, plant and equipment                    166             -                   166
 Intangible assets                                134         9,815                 9,949
 Trade receivables                                398             -                   398
 Other receivables                                214             -                   214
 Cash and cash equivalents                        169             -                   169
 Trade payables                                 (426)             -                 (426)
 Tax liabilities                                (103)             -                 (103)
 Other payable                                   (73)             -                  (73)
 Deferred tax liability                             -       (2,748)               (2,748)
 Net identified assets                            479         7,067                 7,546
 Goodwill                                                                          10,902
 Present value of consideration                                                    18,448

                                                                                 EUR000
 Cash consideration                                                               10,851
 Contingent consideration                                                          7,346
 Expenses paid in cash                                                               628
 Total cash consideration                                                         18,825
 Finance cost arising on discounting of contingent consideration                   (377)
 Present value of consideration                                                   18,448
 Cash purchased                                                                    (169)
 Net cash paid                                                                    18,279

The contingent consideration of EUR7.0 million (net of discount of EUR0.4 million) is dependent on profits generated by the GTS business over a period of 2 years following the date of acquisition. The amount included above represents the directors' current best estimate of the amount payable, which they consider is likely to be paid. 

Adjustments to fair value include the following:
                           Amount  Amortization
                           EUR000       %
 IP Technology              1,783            20
 Customer list              8,032          12.5
 Total intangible assets    9,815

The main factors leading to the recognition of goodwill are the synergistic growth and revenues expected to be created by the combined highly complementary business activities and the strengthening of the Group's position in comparison to its competitors in the market. In accordance with IAS36, the Group will regularly monitor the carrying value of its interest in GTS Group.

The key assumptions used by management to determine the value in use of the IP Technology and customer relationships within GTS Group are as follows:

·              The income approach, in particular, the relief of royalty approach was applied for the valuation, considering projected revenues derived from the business.

·              The royalty rate was based on a third party market participant assumption for use of the IP Technology, considering market competition, market share, profitability and prevailing rates for similar properties.

·              The discount rate assumed is equivalent to the WACC for the customer relationships and WACC plus 1% for the IP Technology.

·              The growth rates and attrition rates were based on market analysis

Management's impairment review as at 31 December 2009 of the carrying value of goodwill is disclosed in note 11.

Management have not disclosed GTS's contribution to group profit since the acquisition date nor have they disclosed the impact the acquisition would have had on the group's revenue and profits if it had occurred on 1 January 2009 , because the amounts are not material.

NOTE 14 - AVAILABLE FOR SALE INVESTMENTS    

                                              31 December,
                                              2009    2008
                                             EUR000  EUR000
 Available for sale investments comprise:
 A.  Investment in Foundation Group Limited   3,459   2,434
 B.  Investment in AsianLogic                 2,054   2,453
                                              5,513   4,887

                                                                  31 December,
                                                                  2009     2008
                                                                 EUR000   EUR000
 Change in fair value of available for sale investments during
 the year
 A.  Foundation Group Limited                                    (1,025)   9,240
 B.  AsianLogic                                                      399   7,458
                                                                   (626)  16,698

The fair value of quoted investments is based on published market prices.  The fair value of unquoted investments is based on the most recently available market price, less any provision for impairment.

In accordance with IAS 39, the increase in the investment in Foundation Group Limited of EUR1.0 million has been recognized as other comprehensive income in the available for sale reserve in equity.  The decline in the investment in AsianLogic of EUR0.4 million has been recognized as operating profit.

The maximum exposure to credit risk at the reporting date is the carrying value of the financial assets classified as available-for-sale.

As at 3 July 2009, ALL shares were delisted from AIM. At that date, the share price was £0.245. The Directors do not consider there to have been any further impairment in the investment since 3 July 2009. 

During 2009 the Group received a dividend of EUR1,729,000 that has been reflected in the income statement as finance income

Tom Hall, a non executive director of the Group, is also a director and shareholder of ESL, a wholly owned subsidiary of AsianLogic

Foundation Group Limited and AsianLogic entered into software license agreement as part of the shares acquisition in 2007. The directors considered that the fair value of the consideration received by way of discount to the market value represented deferred income of the software license agreement.  The revenues are being recognized over the remaining lifetime of the software license agreement, and as at 31 December 2009, the following amounts are included in deferred revenues:

                                   31 December,
                                   2009    2008
                                  EUR000  EUR000

 Deferred revenues - non-current

 Foundation Group Limited         12,150  14,093
 Asian Logic                       2,595   3,929
 Others                                -     114
                                  14,745  18,136

                               31 December,
                               2009    2008
                              EUR000  EUR000

 Deferred revenues - current

 Foundation Group Limited      1,943   1,943
 Asian Logic                   1,334   1,334
 Others                          164      75
                               3,441   3,352

NOTE 15 - OTHER NON-CURRENT ASSETS

                               31 December,
                               2009    2008
                              EUR000  EUR000

 Loan to customer              1,833     692
 Rent and car lease deposits     476     648
                               2,309   1,340
                

NOTE 16 - TRADE RECEIVABLES

                                      31 December,
                                      2009    2008
                                     EUR000  EUR000

 Customers                            4,726   9,805
 Related party receivable (note 24)   2,268     277
                                      6,994  10,082

NOTE 17 - OTHER RECEIVABLES

                                             31 December,
                                             2009    2008
                                            EUR000  EUR000

 Prepaid expenses                            2,139     523
 VAT and other taxes                         1,191     266
 Short term investment                          42      29
 Advances to suppliers                          70      71
 Funds receivable due to options exercised       -      38
 Related party receivable (note 24)          4,027     464
 Loan to customer                            1,822     966
 Other receivables                             827     445
                                            10,118   2,802

NOTE 18 - CASH AND CASH EQUIVALENTS
                
                31 December,
                2009    2008
               EUR000  EUR000
 Cash at bank  29,880  30,122
 Deposits      28,820   1,436
               58,700  31,558

The Group held cash balances which include monies held on behalf of operators in respect of operators' jackpot games and poker operation. The balances held at the year-end are set out below and the liability is included in trade payables:

                                31 December,
                                2009    2008
                               EUR000  EUR000
 Funds attributed to jackpots   1,068   1,429
 Poker security deposits          670      68
                                1,738   1,497

NOTE 19- SHAREHOLDERS EQUITY

                                                            31 December,
                                                         2009         2008
 A. Share Capital                                         Number of Shares

 Share capital is comprised of no par value shares
 as follows:
 Authorized                                                N/A(*)       N/A(*)
 Issued and paid up                                   240,204,579  238,483,378

(*)     The Group has no authorized share capital but is authorized under its memorandum and article of association to issue up to 1,000,000,000 shares of no par value.

Share issue

In June 2008, the Group raised additional cash of EUR140,989,000 by means of a share placing. The total number of shares issued amounted to 21,620,946 at a price of 520 pence per share.

Share option exercised

During the year 1,719,756 (2008 - 1,301,090) share options were exercised.

B.      Distribution of Dividend

In May 2009, the Group distributed EUR18,194,198 as a final dividend for 2008. 

In October 2009, the Group distributed EUR21,368,175 as an interim dividend for 2009.

No dividends were waived.

C.      Reserves

The following describes the nature and purpose of each reserve within owner's equity:

 Reserve                     Description and purpose
 Additional paid in capital  Share premium (i.e. amount subscribed for share
                             capital in excess of nominal value)
 Available for sale reserve  Changes in fair value of available for sale
                             investments (note 14)
 Retained earnings           Cumulative net gains and losses recognized in the
                             consolidated income statement
NOTE 20 - NON CURRENT LIABILITIES
                            31 December,
                            2009    2008
                           EUR000  EUR000

 Long term trade payables   1,038       -
 Severance pay                130     184
                            1,168     184
NOTE 21 - TRADE PAYABLES
                                             31 December,
                                             2009    2008
                                            EUR000  EUR000

 Suppliers                                   3,901   1,875
 Progressive and other operators' jackpots   1,068   1,429
 Customer in credit                            529      14
 Related parties (Note 24)                   4,323   3,615
 Poker security deposits                       670      68
 Other                                          70      37
                                            10,561   7,038
NOTE 22 - DEFERRED TAX LIABILITY

The deferred tax liability is due to temporary differences on the acquisition of the GTS group.

The movement on the deferred tax liability is as shown below:
                                                                       
                                                                 2009    2008
                                                                EUR000  EUR000

 At 1 January 2009                                                   -       -
 Arising on the acquisition of the GTS group                     2,748       -
 Reversal of temporary differences,recognizedin the              (517)       -
 consolidated statement of comprehensive income
                                                                 2,231       -
NOTE 23 - OTHER PAYABLES                                31 December,
                                2009    2008
                               EUR000  EUR000

 Payroll and related expenses   3,308   3,350
 Accrued expenses                 841   1,487
 Other payables                    20   2,411
                                4,169   7,248
NOTE 24 - RELATED PARTIES AND SHAREHOLDERS

Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party's making of financial or operational decisions, or if both parties are controlled by the same third party.

Tech Corporation, Oriental Support Services, Gamepark Trading Ltd, Euro Live Technologies Ltd, Netplay TV PLCand 800pay Ltd are related by virtue of a common significant shareholder. Emphasis Services Limited ("ESL"), AsianLogic Limited ("ALL"), S-tech Limited, Uniplay International Limited and Six Digits Trading Limited are related by virtue of the former chief executive officer and current director interest in those Companies. WH Online and Laserstorm Services Ltd are associates of the Group.

The following transactions arose with related parties:
                                                        31 December,
                                                        2009    2008
                                                       EUR000  EUR000
 Revenue including income from associate
 ESL                                                    4,507    2,925
 S-tech Ltd                                               259      173
 Netplay TV PLC                                            29        -
 WH Online                                             33,795        -

 Operating expenses
 Gamepark Trading Limited                                 267        -
 S-tech Ltd                                               249        -
 Tech Corporation                                          99
 Euro Live Technologies                                   207        -
 800pay Ltd                                                56        -
 ESL                                                    1,285    1,362
  
 Loans
 Laserstorm Services Ltd                                (464)      464
 ESL                                                        -    (634)

 Acquisition of assets from related parties (note 12)
 Six Digits Trading Limited                                 -  108,417
 Uniplay International Limited                              -   35,336

The following are year-end balances:
                                      31 December,
                                        2009    2008
                                     EUR000   EUR000

 Gamepark Trading Limited              4,185   3,578
 ESL                                       -      37
 Tech Corporation                         39       -
 Eurolive                                 54       -
 OSSI                                     36       -
 800pay Ltd                                9       -
 Deferred revenues - ESL (note 14)     3,935   5,263
 Total related party creditors         8,641   8,878

 ESL                                     384       -
  S tech Ltd.                             98     265
  Tech Corporation                         -      12
 Netplay TV PLC                           29       -
  WH Online                            5,784       -
  Laserstorm Services Ltd                  -     464
                                       6,295     741
 Total related party debtors
                                       2,054   2,453
  ALL (note 14)
 Total investment in related party     2,054   2,453

The details of key management compensation (being the remuneration of the directors) are set out in note 5.

NOTE 25 - SUBSIDIARIES 
Details of the Group's subsidiaries as at the end of the year are set out below:                                                       Proportion of voting   
                                 Country of            rights and ordinary    
 Name                            incorporation         share capital held    Nature of business
 Playtech Software Ltd           British Virgin                        100%  Main trading company of
                                 Islands                                     the Group, owns the
                                                                             intellectual property
                                                                             rights and licenses the
                                                                             software to customers.
 OU Playtech (Estonia)                        Estonia                  100%  Designs, develops and
                                                                             manufactures online
                                                                             software
 Techplay Marketing Ltd                        Israel                  100%  Marketing and
                                                                             advertising
 Video B Holding Ltd             British Virgin                        100%  Trading company for the
                                 Islands                                     Videobet software, owns
                                                                             the intellectual
                                                                             property rights of
                                                                             Videobet and licenses
                                                                             it to customers.
 OU Videobet                                  Estonia                  100%  Develops software for
                                                                             fixed odds betting
                                                                             terminals and casino
                                                                             machines (as opposed to
                                                                             online software)
 Playtech Bulgaria                           Bulgaria                  100%  Designs, develops and
                                                                             manufactures online
                                                                             software
 PTVB Management Ltd                      Isle of Man                  100%  Management
 Playtech (Cyprus) Ltd                         Cyprus                  100%  Dormant
 Playtech Live Ltd               British Virgin                        100%  Dormant
                                 Islands
 Networkland Ltd                 British Virgin                        100%  Dormant
                                 Islands
 Playtech Bingames Ltd           British Virgin                        100%  Technical support
                                 Islands
 Evermore Trading Ltd            British Virgin                        100%  Holder of convertible
                                 Islands                                     notes in Foundation
 Playtech Software India Ltd                    India                  100%  Designs, develops and
                                                                             manufactures online
                                                                             software
 Genuity Services Ltd            British Virgin                        100%  Holder of investment in
                                 Island                                      WH Online
 Playtech Services (Cyprus) Ltd                Cyprus                  100%  Activates the Italian
                                                                             ipoker Network
 VB (Video) Cyprus Ltd                         Cyprus                  100%  Trading company for the
                                                                             Videobet product to
                                                                             Romanian companies
 Guideview Trading Limited                     Cyprus                  100%  Licenses Software to
                                                                             companies
                                 British Virgin                               
 Playtech Sports Limited         Islands                               100%  Holds sports betting IP
 Regisol Holdings Limited                      Cyprus                  100%  Dormant
 Playtech Software Bulgaria                                                   
 EOOD                                        Bulgaria                  100%  Dormant
 Makemoreprofit Investments Ltd  British Virgin                               
                                 Islands                               100%  Holder of Guideview
                                                                             Trading Limited
 Techplay S.A. Software LTD                    Israel                  100%  Develops online
                                                                             software
 Technology Trading IOM Limited                                              Owns the intellectual
                                          Isle of Man                  100%  property rights of the
                                                                             GTS Business
 Gaming Technology Solutions                                                  
 Limited                                           UK                  100%  Holds VS Gaming and VS
                                                                             Technology
 VS Gaming Limited                                 UK                  100%  Develops soft and
                                                                             casino games
 VS Technology Limited                             UK                  100%  Develops EdGE platform

NOTE 26 - FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

The Group is exposed to a variety of financial risks, which result from its financing, operating and investing activities. The objective of financial risk management is to contain, where appropriate, exposures in these financial risks to limit any negative impact on the Group's financial performance and position. The Group's financial instruments are its cash, available-for-sale financial assets, trade receivables, loan receivables, accounts payable and accrued expenses. The main purpose of these financial instruments is to raise finance for the Group's operation. The Group actively measures, monitors and manages its financial risk exposures by various functions pursuant to the segregation of duties and principals. The risks arising from the Group's financial instruments are credit risks and market price risks, which include interest rate risk, currency risk and equity price risk. The risk management policies employed by the Group to manage these risks are discussed below. 

a.   Interest rate risk

Interest rate risk is the risk that the value of financial instruments will fluctuate due to changes in market interest rates. The Group's income and operating cash flows are substantially independent of changes in market interest changes. The management monitors interest rate fluctuations on a continuous basis and acts accordingly. 

Where the Group has generated a significant amount of cash, it will invest in higher earning interest deposit accounts. These deposit accounts are short term and the Group is not unduly exposed to market interest rate fluctuations.

During the year the group advanced loans to customers for a total amount of EUR2.0m (2008- EUR1.6m). The interest on the loans is between 5.5% to 7%. 

The loans are repayable in monthly installments.

A 1% change in deposit interest rates would impact on the profit before tax by between EUR100 thousands and EUR150 thousands.

b.   Credit risk

Credit risk arises when a failure by counterparties to discharge their obligations could reduce the amount of future cash inflows from financial assets on hand at the balance sheet date.

The Group closely monitors the activities of its counterparties and controls the access to its intellectual property which enables it to ensure the prompt collection of customers' balances.

The Group's main financial assets are cash and cash equivalents as well as trade and other receivables and represent the Group's maximum exposure to credit risk in connection with its financial assets. Trade and other receivables are carried on the balance sheet net of bad debt provisions estimated by the Directors based on prior year experience and an evaluation of prevailing economic circumstances.

Wherever possible and commercially practical the Group invests cash with major financial institutions that have a rating of A- as defined by Standard & Poors. The Group maintains monthly operational balances with banks that do not meet this credit rating in Estonia and the Philippines to meet local salaries and expenses. These balances are kept to a minimum and typically do not exceed EUR2 million at any time during the monthly payment cycle. During 2009 a few additional banks in which the Group holds approximately 50% of its funds were degraded to below A- rate.

                                 Financial institutes  Financial institutes
 In thousands of Euro    Total    with A- and above      below A- rating
                                        rating
 As at 31 December 2009  58,700         28,420                30,280
 As at 31 December 2008  31,558         30,467                1,091

The ageing of trade receivables that are past due but not impaired can be analyzed as follows:
                                               1-2 months overdue   More than 2 months
 In thousands of Euro    Total   Not past due                            past due
 As at 31 December 2009  7,140      6,168             714                  258
 As at 31 December 2008  10,175     8, 289           1,588                 298

The above balances relate to customers with no default history.

A provision for doubtful debtors is included within trade receivables that can be reconciled as follows:
                                            2009      2008
                                           EUR000    EUR000
 Provision at the beginning of the year      93       143
 Charged to income statement                154       784
 Utilized                                  (101)     (834)
 Provision at end of year                   146        93

Related party receivables included in note 17 of EUR4.0m (2008 - EUR0.5m) are not past due

c.    Currency risk

Currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates. 

Foreign exchange risk arises because the Group has operations located in various parts of the world.  However, the functional currency of those operations is the same as the Group's primary functional currency (Euro) and the Group is not substantially exposed to fluctuations in exchange rates in respect of assets held overseas.

Foreign exchange risk also arises when Group operations are entered into in currencies denominated in a currency other than the functional currency. During 2008, the Group reflected a foreign exchange loss in the income statement due to the cash held in US Dollars in relation to the consideration for the WH Online investment (note 12).

The Group's policy is not to enter into any currency hedging transactions.

d.   Equity price risk

The Group's balance sheet is exposed to market risk by way of holding some investments in other companies on a short term basis (note 14). Variations in market value over the life of these investments have or will have an impact on the balance sheet and the income statement.

The directors believe that the exposure to market price risk is acceptable in the Group's circumstances.

The Group's balance sheet at 31 December 2009 includes available for sale investments with a value of EUR3.5m which are subject to fluctuations in the underlying share price. 

A change of 1% in shares price will have an impact of EUR0.03m on the consolidated statement of comprehensive income and the fair value of the available for sale investments will change by the same amount.

e.   Capital risks

Given the Group's position with no borrowings and significant retained earnings, capital risk is not considered significant.

f.    Liquidity risk

Liquidity risk arises from the Group's management of working capital and the financial charges on its debt instruments. 

The Group's policy is to ensure that it will have sufficient cash to allow it to meet its liabilities when they become due. 

The following are the contractual maturities of the Group's financial liabilities:
                                                                           
 Year ended 31 December, 2009   Total   Within 1 year  1-2 years  More than 2 years
 In thousands of Euro
 Trade payables                 10,561     10,561          -              -
 Other accounts payable          4,169      4,169          -              -
 Deferred consideration         13,955     13,955
 Contingent consideration        7,346        -          7,346            -
 Other non-current liabilities   1,168        -          1,038           130
  
                                                                           
 Year ended 31 December, 2008   Total   Within 1 year  1-2 years  More than 2 years
 In thousands of Euro
 Trade payables                 7,038       7,038          -              -
 Other accounts payable          6,775          6,775          -                  -
 Deferred consideration         14,047              -     14,047                  -
 Other non-current liabilities     184              -        184                  -

g.   Total financial assets and liabilities

The fair value together with the carrying amount of the financial assets and liabilities shown in the balance sheet are as follows:

For the year ended
       31 December,
      2009      2008

EUR000    EUR000

                                 Fair Value  Carrying amount  Fair Value  Carrying amount
 Cash and cash equivalent          58,700        58,700         31,558        31,558
 Available for sale investments    5,513          5,513         4,887          4,887
 Other assets                      19,421        19,421         13,701        13,701
 Deferred consideration            13,955        13,955         14,047        14,047
 Contingent consideration          5,349          5,349           -              -
 Other liabilities                 15,898        15,898         13,997        13,997

Included in available for sale investments is EUR3.5m and EUR2.0m measured at fair value using level 1 and level 2 respectively.

NOTE 27 - POST BALANCE SHEET EVENTS

Establishment of commercial partnership with Scientific Games

On 21 January 2010, the Group formed two strategic partnerships with New York-based Scientific Games Corporation to jointly develop and market next-generation internet and land-based gaming products and services to regulated gaming operators in the US and other countries.

·      An exclusive Joint Venture focused on the B2G online gaming market on a global basis, called 'Sciplay' that will utilise Playtech's technology capabilities together with Scientific Games' global infrastructure and experience. Exclusive agreements for Playtech's Videobet to develop gaming terminal software for Scientific Games and its subsidiaryAcquisition of a strategic stake in Sportech PLC.

On 27 January 2010, the Group acquired a 9.99% stake in Sportech PLC, a UK's leading pari-mutuel football gaming business, and owner of The New Football Pools, for a total consideration of EUR11.4 million as part of a capital raising by Sportech to fund its acquisition of Scientific Games Racing (the US-based pari-mutuel and venue management business division of Scientific Games Corporation) for up to $83 million. Playtech intends to provide its software products and services to the Sportech businesses, targeting their combined customer base.

Acquisition of business and assets of Virtue Fusion Limited

On 12 February 2010 the Group entered into an assets purchase agreement with Virtue Fusion Limited, the leading developer and licensor of online bingo products. The Group purchased the IP Technology, customers list, brands, plant and equipment, other assets and 100% of the shares of Virtue Fusion Limited subsidiaries: Virtue Fusion CM Limited, Virtue Fusion (Alderney) Limited and Virtue Fusion NV.

The group paid an initial consideration of £20 million (EUR22.7 million) on completion. An amount of £9 million (EUR10.2 million) is subject to agreed working capital adjustments and payable within 30 days of completion and additional contingent consideration of up to £7 million (EUR8 million) is payable in the first quarter of 2011 based on adjusted EBIT performance in 2010.         

As of the approval date of the financial statements by the board, due to the short time period since the acquisition was announced, the Group had not completed the valuation of the fair value of the intangible assets and liabilities acquired, and accordingly these disclosures are not provided in the financial statements.

NOTE 28 - CONTINGENT LIABILITIES

The Group is not a gaming operator and does not provide gaming services to players.  As part of the Board's ongoing regulatory compliance process, the Board continues to monitor legal and regulatory developments and their potential impact on the Group.
    

Management is not aware of any contingencies that may have a significant impact on the financial position of the Group.

This information is provided by RNS
The company news service from the London Stock Exchange
 
  END 
 
FR EAADKFALEEAF

March 11 (Reuters) - Europe Gaming:

LONDON, March 10 (Reuters) - Playtech Ltd:

RNS Number : 3378I Playtech Limited 10 March 2010

Playtech Limited ("Playtech")

Appointment of Non-Executive Director

Board Restructuring to Meet Combined Code of Corporate Governance

Playtech Limited, (AIM:PTEC) the international software and content provider to the online and land-based gaming industry, is pleased to announce that it has appointed Barry Gibson as an additional independent Non-Executive Director.

Mr Gibson is an experienced non-executive director and has significant experience in the gaming industry, both as an executive and non-executive director. Until June 2009, he was Senior Independent Director at William Hill plc, where he served on their board for over seven years. Previously, he had been CEO of Littlewoods plc, which, at that time incorporated Littlewoods Pools and Bet Direct. He is also Chairman of Homeserve plc.

Concurrently, Playtech has restructured its Board of Directors (the "Board") and now meets the requirements, in terms of board composition and independence, of the Combined Code of Corporate Governance. Tom Hall, Non-Executive Director and former Chief Executive Officer, and Rafi Askhenazi, Executive Director and Chief Operating Officer, have resigned from the Board and will step down.

Mr Hall and Mr Askhenazi have served as Directors since Playtech's admission to the Alternative Investment Market in 2006.

Following these changes, the Board of Playtech will consist of:

Roger Withers (Non-Executive Chairman)
Mor Weizer (CEO)
Shuki Barak (Interim CFO)
Alan Jackson (Non-Executive and SID)
Barry Gibson (Non-Executive)

Commenting on these changes Playtech's Chairman, Roger Withers, said:

"I am delighted to welcome Barry to the Board of Playtech. He brings considerable experience both of the gaming industry and of the public markets.

"At the same time my sincere thanks go to Tom Hall and Rafi Askhenazi who have made important contributions to Playtech's businesses in Asia and as COO respectively. I am pleased that each will continue to play a role for the company.

"This restructuring is an important step for Playtech. Importantly, we now meet the required standards of corporate governance, something we have always looked to achieve. While the Board is now Combined Code compliant, we expect to make further Board appointments in the coming months, including a replacement Chief Financial Officer, where an extensive search is well underway."