Final Results

RNS Number : 6641C

Playtech Limited

10 March 2011

Playtech Ltd

("Playtech," "the Company" or "the Group")

Audited full year results for the 12 months ended 31 December 2010

STRONG FINANCIAL PERFORMANCE, SUBSTANTIAL PROGRESS IN 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 2010.

Financial highlights

§ Gross income* up 26% to €173.1 million (2009: €137.3 million)

§ Total revenues up by 24% to €142.3 million (2009: €114.8 million)

§ Adjusted EBITDA** increased by 10% to €103.1 million (2009: €93.7 million) reflecting a margin of 60% from gross income (2009: 67%)

§ Adjusted net profit €93.2 million (2009: €89.4 million)

§ Cash generated from operating activities and sums received from William Hill totalled €103.3 million (2009: €89.2 million) reflecting the Group's adjusted EBITDA** (2009: 95%)

§ Cash balances at year end of € 68.5 million (2009: €58.7 million)

§ Adjusted basic EPS** of 38.5 € cents per share (2009: 37.4 € cents per share)

§ Recommended final dividend of 9.6 € cents per share, an aggregate dividend for 2010 of 19.0 € cents per share (2009: 18.3 € cents per share), an increase of 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, cash expenses relating to professional costs on acquisitions and prior year taxes (see reconciliation in Financial and Operating Overview below)

Operational highlights

§ Playtech's acquisition of Virtue Fusion delivered a market leading bingo product and network

§ Strategic partnerships with Scientific Games and Sportech position Playtech for growth in locally regulated markets

§ Launch of licensees and networks in all four newly regulated European markets

§ Major new licensees include Betfair, RAY, Codere, Unibet and Buongiorno

§ Advanced suite of integrated responsible gaming tools developed for Finnish state monopoly, RAY

§ Diversifying product and licensee revenue streams:

§ 76 new casino games developed

§ Over 15 new licensees

§ Growing open platform capability with the industry's largest library of 500+ games

§ Increasing differentiation through unique cross platform capability:

§ Videobet rollout of over 20,000 FOBT machines in the UK now over halfway complete

§ Acquisition of Intelligent Gaming in January 2011 extends reach into land based casino

§ Launch of mobile iPoker platform in Q2 2011 to complement existing casino package

Update on move to Premium Listing

The UKLA has deemed Playtech to be currently ineligible for a Premium Listing on the London Stock Exchange due unfortunately to a lack of three year track record over 75% of its earnings. A key driver in this has been the strong growth of the William Hill Online joint venture that was formed at the beginning of 2009 contributing more than 25% to Playtech's earnings. Playtech is committed to attaining a Premium Listing in early 2012 when this earnings track record will be established

Current trading

Playtech has started the year well and continues to make good progress. Like-for-like growth in daily average revenues for the first nine weeks of 2011, excluding the impact of France and acquisitions, are up over 8% compared to the same period in 2010. The daily average revenues versus Q4 2010 are over 1% ahead.

Roger Withers, Non-executive Chairman, said:

"Playtech has had an extremely active year on many fronts, but we have never lost sight of our core business objectives, of delivering market-leading products, content and tools to our licensees. This has enabled us to enjoy strong growth in revenues and attracted a number of new major operators to our platform. The opportunities, particularly in newly regulating markets, are substantial and the Board is confident of the prospects for 2011 and on delivering on the Group's strategic objectives."

"Today we have separately announced the terms of the acquisition of a range of B2B service assets and businesses. These will enable us to deliver a full turnkey service to an increasing number of potential licensees in regulated and soon to be regulated markets who are looking for an outsourced solution. We see this as the gateway to our success in a number of substantial regulating markets, and fundamental to achieving a sustainable business model in what is a changing market dynamic."

"In 2010 we have also made major strides with the composition of our Board and corporate governance, with the appointment of experienced Non-Executive Directors, and a new head of compliance. We now have a very strong Non-Executive team and they will take a greater oversight role in the future. We have not yet concluded the appointment of a new CFO. We recognise that this is a key step we must deliver and discussions with potential candidates continue."

"I am extremely disappointed that the UKLA has deemed Playtech to be ineligible for a Premium Listing this year. However, I am confident that once the full three year track record is established we will be eligible for a Premium Listing and am committed to pursuing this as early as possible in 2012."

- Ends -

There will be a meeting and presentation for analysts commencing at 9.30 am on Thursday 10 March, 2011 at The Lincoln Centre, 18 Lincolns Inn Fields, London, WC2A 3ED.

A live video webcast and slide presentation of the analysts' meeting will commence at 9.30 am, which may be accessed through the following link:

http://www.axisto.com/webcasting/investis/playtech/2011-03-10-playtech/

A copy of the results presentation will be published on the Company's website at 8.30 am.

For further information contact:

Playtech Ltd

Ross Hawley, Director of Investor Relations

c/o Pelham Bell Pottinger

+44 (0) 20 7861 3232

Collins Stewart

Piers Coombs / Bruce Garrow

+44 (0) 20 7523 8350

Deutsche Bank

Mumtaz Naseem / Andrew Smith

+44 (0) 20 7545 8000

Pelham Bell Pottinger

David Rydell / Olly Scott / Guy Scarborough

+44 (0) 20 7861 3232

Overview

Playtech's strategic positioning and market presence has enabled another strong performance in 2010 and delivered continued growth across all financial and non-financial measures. Gross income and revenues were up strongly at 26% and 24% respectively.

On a like for like basis, revenues were up 12%, excluding acquisitions and the closure of the French market in June. Adjusted EBITDA grew 10% and cash generated from operating activities in the year totalled €71.0 million. Playtech's financial strength makes it an attractive B2B partner for operators and has enabled it to actively participate in the industry's ongoing consolidation.

Playtech has been extremely active in the development of new content and new products. Over 70 new casino games were launched in the year, and the acquisition of GTS in December 2009 delivered a library of over 500 games from third party providers. Meanwhile, the Company's acquisition of the leading bingo developer, Virtue Fusion, in February 2010 enabled it to establish a market leading position in an important product segment.

In total over 15 new licensees joined the Playtech platform or added new products, along with 20 new licensees who joined as part of the Virtue Fusion bingo acquisition. Major operators such as RAY, Betfair, Unibet, and Codere all launched on the platform and Buongiorno signed in advance of regulations permitting casino in Italy.

As a number of major European countries regulated their national markets, either for the first time or by permitting new products, Playtech's licensees launched in all four new markets, including Italy, France and Finland. The Company is developing a significant track record of helping its licensees operate in newly regulated environments and developing a range of market-specific responsible gaming tools.

Newly regulated markets continue to offer the most exciting opportunities for the online sector. Italy is expected to commence both casino and cash poker games in the coming few months. In Spain, where federal legislation is currently under review, Playtech is poised to launch casino and poker for Casino Gran Madrid for the already regulated Madrid region.

There are substantial opportunities in other major European gaming jurisdictions, such as Germany and Greece; and further afield as proposed legislation comes under review in several countries. In advance of these new territories moving towards regulation, Playtech has been highly active to ensure it is appropriately positioned.

In the UK, Videobet's agreement with Global Draw in January 2010 marked the start of a major rollout of server-based gaming, and delivered critical mass to this product line. The majority of the UK's leading betting operators now use Videobet's software to power some, or substantially all, of their FOBT network. This will be a significant profile and will prove invaluable in the Company's international marketing efforts. The Company expects to finish the deployment in the UK market later this year and intends to invest into other markets leveraging the proven track record of the Videobet technology in what is considered one of the most developed gaming markets.

Since the year end Playtech has acquired a UK-based developer of casino management systems, Intelligent Gaming. This further extends our product reach in the land-based arena, this time on to the casino floor. Playtech now has a comprehensive online and land-based capability with the most developed cross-platform capability in the market.

While there has been notable progress in 2010, Playtech expects that the next two years will see a fundamental structural shift in the global regulatory landscape, and Playtech has been positioning itself to be a substantial beneficiary.

Strategy

Playtech's strategic goals focus on positioning the Company to leverage from the substantial growth and structural changes that are being experienced in the gaming industry.

The Company has developed a robust and sustainable business model, where its values, strategic goals and resources are aligned with those of its licensees. It is this approach that enables Playtech to maintain and increase its leading industry position.

The main elements of Playtech's strategy comprise:

§ Targeting operators in newly regulating markets with a dynamic product suite and responsible gaming tools and services that fully comply with the evolving regulatory landscape;

§ Partnering with well established operators, giving them best of breed tools and content to maximise their player revenues;

§ Proactively leveraging Playtech's unique cross-platform capabilities, allowing operators to extend into different product areas and helping the online and land-based arenas converge;

§ Achieving scale and breadth across all products and networks, including delivering both Playtech and third party content on a single platform;

§ Securing strategic partnerships that bring global reach and extend or leverage the Company's own capabilities; and

§ Maintaining a flexibility of approach and being opportunistic in the continually evolving nature of the industry and technology.

Regulated markets

Playtech's focus on newly regulated markets is rooted in its belief that these territories are driving growth in player numbers and the number of operators looking to enter the market. Of the seven major European gaming countries by per capita spend, four have already regulated in some form and the remaining three are actively considering changes to their legislation.

Of these, Greece and Spain have recently taken their first legislative steps, while the German states are actively considering their next steps as the Interstate treaty which expires this year. Playtech's combined exposure to these markets is limited and less than 9%, with Greece and Spain each less than 2%. In contrast to the experience in France, there exist far more opportunities than threats in these markets as they move towards regulated form.

Italy permitted bingo to run alongside tournament poker in March. Shortly after the regulations were enacted, SISAL launched its bingo offering on Playtech's platform and was joined in the summer by SNAI, Cogetech, Eurobet and Codere. With Italian casino and cash poker games set for launch in the coming few months this market, together with the UK, remains perhaps the most attractive in Europe for operators.

In May, Playtech was awarded the contract to provide the technology platform and content for RAY, the Finnish slot machine operator, which was granted a monopoly on onshore casino and poker, having held the land-based monopoly for over 70 years. Finland is a highly active gaming market with six times as many gaming machines per head than in the UK. It is also a market with a longstanding history of responsible gaming and RAY's main criteria for selecting a partner rested on their ability to deliver advanced responsible gaming tools and standards.

RAY launched at the end of November, and within a month accrued over 60,000 registered players. It has been a notable success for Playtech and demonstrates the Company's capabilities in delivering highly complex integrated solutions within a regulated environment. Also in 2010, Estonia regulated both poker and casino, and Playtech was the first to launch these products with the market-leading Olympic Casino.

The regulation of the French market at the end of June had a substantial financial impact on the full year, equivalent to some €7.0 million of EBITDA (or €2.8 cents of diluted EPS) as it had been the Company's largest offshore continental Europe market by revenue. The French poker market remains a fiercely competitive environment as operators look to achieve critical mass in market share. While it will take some time for revenues in that market to recover, the Company believes it has secured the basis of a sustainable business, with a mix of local casino and international operators launched on its platform and growing revenues.

Licensees

Playtech's business model is focused on delivering premium content and tools to its licensee base, helping them grow their business organically, whilst attracting new licensees on to the platform to enlarge and diversify revenue streams. Both are key elements in the Company's strategy for maximising revenue growth.

Although the Football World Cup in June and July focused the spring marketing spend for many sportsbook-oriented licensees away from gaming, during 2010 most licensees experienced a partial recovery from the macro-economic challenges of 2009 and a return to organic growth of 12% on a like for like basis.

Playtech has also sought to provide existing licensees with greater product, format and content choice to encourage them to expand their product line-up on the platform. In 2010 a number of licensees expanded their product range, including bet365, Tain, SISAL, SNAI, Unibet and Betfair. The Company is actively working with its licensees to develop cross-selling opportunities, giving them the widest possible choice of content on a single integrated platform.

The announcement of a number of notable new licensee wins across the product range also included international gaming groups such as Codere and Unibet. As all the major new operators launched in the second half of the year they have yet to make a material impact on revenues, but their activity augers well for 2011 with potential across a number of markets. The pipeline also looks healthy, reflecting the considerable opportunities for Playtech in Europe and further afield.

Acquisitions

Playtech's acquisitions have delivered significant benefits in terms of product capability and licensee relationships, in addition to adding senior management expertise to the business.

In February 2010 the Company announced the acquisition of the business and assets of Virtue Fusion. This transformed Playtech into the market leader in bingo, with the largest independent online network. Virtue Fusion now has over 40,000 daily players and 9,500 concurrent players at peak periods, with over €115 million of stakes each month.

For Playtech, the acquisition significantly enhanced its own bingo offering, brought new licensees and strengthened its relationships with a number of existing customers. It also positioned Playtech as the leading supplier in all of the key gaming product segments, with substantial liquidity in each of its player networks.

The initial consideration paid was €33.4 million, together with an additional earn-out of up to €8.1 million based on Virtue Fusion's performance in 2010. Playtech recently paid the full capped amount, reflecting the strength of Virtue Fusion's ongoing growth trajectory, and reduced the historic acquisition multiple to below 5x given cost and revenue synergies. Whilst it is a dominant player in the UK, Virtue Fusion has only just started to penetrate the international markets. By leveraging Playtech's considerable expertise and relationships the Company expects Virtue Fusion's international expansion to develop throughout 2011 and beyond.

Playtech's games platform developer, GTS, has also had a very successful first year as part of the Group. Acquired in December 2009, the team brought a sophisticated open architecture platform and a substantial and third party content library. Their expertise in both open platform architecture and browser based formats has helped take Playtech's overall thinking forward in technologies which are growing in importance for the whole industry.

Since the year end, the acquisition of Intelligent Gaming was completed for an initial consideration of £2.5 million with further consideration capped at addition £3 million based on the performance of the company. Its suite of casino management tools will complement Videobet's capabilities and takes Playtech further into the land-based arena, as well as delivering relationships with a number of casino groups operating in the UK and internationally.

The Company will continue to be opportunistic in its approach to acquisitions and would expect to identify other attractive targets as it remains active in the consolidation of the sector.

Partnerships

Playtech looks for strategic partnerships that extend or leverage its own capabilities, or deliver exposure to new products or markets. In 2010 the Company added two new strategic partnerships, through agreements with the US-based lottery provider, Scientific Games and with pools betting provider, Sportech.

Playtech's relationship with Scientific Games has two elements. The first is a business development joint venture, called Sciplay, which has been set up to target opportunities in the B2G market. In 2010 Sciplay has been actively marketing to lotteries and other institutions looking to develop complementary gaming products. In line with the regulatory change, Sciplay is participating in various bid processes throughout Europe and North America.

The second is an agreement the Company's gaming machine division, Videobet has established with Scientific Games's subsidiary, Global Draw, which has delivered strongly on the Company's goal of establishing a market leading server-based gaming product. The roll-out of over 20,000 machines in the UK this year will provide a substantial demonstration of the partnership's capability and there are other exciting joint opportunities, particularly in the Americas.

Playtech's investment in Sportech, linked to the latter's acquisition of Scientific Games's pari-mutuel horse racing operations, is set to provide access to a segment where online betting is already regulated in many jurisdictions. Sportech's US regulatory approval process for this acquisition in three states, including New Jersey, took up much of 2010, ultimately receiving approval in October. It was an intensive exercise in which Playtech actively participated and was an important indicator of the scrutiny to be expected in the US.

In its second year of operation, WH Online achieved strong year-on-year growth, with reported net revenue rising 24% to £251.5m (2009: £203.5m) and operating profit 22% higher at £91.1m (£2009: £74.4m). This resulted in a non-controlling interest for Playtech of €30.8 million (£26.3m) (2009: €22.5m/ £20.1m).

WH Online strengthened its competitive position by expanding the breadth and depth of its sports-betting product range and by further enhancing its gaming experience. The result was underpinned by a strong Sportsbook performance, helped by the 2010 Football World Cup and an enhanced in-play offering.

Products

Playtech's licensees benefit from a highly flexible open architecture gaming platform and a best-of-breed product range which covers the core gaming products, together with substantial player liquidity on its networks.

Two thirds of the Company's full time employees work in research and development roles and Playtech continues to invest in improvements to its product suite and the development of new platforms, such as sports, mobile poker and lottery products.

Casino and poker

Casino revenues grew strongly in 2010, presenting a growth of 26%, comprising a mix of organic growth; new licensees; and the inclusion of revenues from the casino side games by players on the bingo network. Playtech has moved from a quarterly to monthly release cycle and produced 76 new games across download and browser-based formats, including 20 branded games, such as Pink Panther and Fantastic Four; and 21 exclusive games.

There were two releases of enhancements to the operating platform, delivering improvements to the player lobby and registration modules, along with a number of new tools and analytics. The live dealer facility in Riga has also been revamped and the Company has expanded its mobile offering.

GTS delivered 53 brand new games which were rolled out to customers in 360 different formats, such as differing languages and currency. As well as launching additional content, the GTS team has focused on integration into Playtech's IMS, and jointly developing Playtech's next generation browser-based platform. This is an important project as browser-based content often comprises a substantial portion of an operator's games offering.

On 24 December a player won over £3.9 million on the Cloverleaf progressive jackpot, as a bingo side game, which attracted extensive media coverage. The win highlights the advantages of being able to offer networked progressive jackpots. With prize money driven by player activity across the entire operator network, such jackpots bring advantages to the casino product similar to network player liquidity in poker, and bingo can be a valuable marketing tool.

In 2011 Playtech will continue the rate of product development, both in terms of branded content and further innovation to its historic top performing games. This work will focus on strengthening the web-based offering, both in terms of content and platform, and harnessing synergies across product areas which utilise the casino product as side games.

Poker revenues in 2010 were helped by ongoing strength in Italy and the launch of operations in Finland towards the end of the year. Overall, revenues were adversely affected by the closure of the French market and by substantial competition in the offshore segment, where all non-US facing operators suffered declines in market share.

Playtech believes that its focus on the recreational player best serves its licensees and invests heavily in providing them with superior functionality and community management tools. At the start of 2011 the Company announced the launch of an advanced mobile offering, providing access to the iPoker network based on the latest technology.

Future revenue growth in poker will come primarily from the regulated arena, and further incremental progress is expected from existing operations in Finland, Italy and France, together with emerging opportunities as other markets regulate.

Bingo

Bingo has been one of the stand-out successes of the year, largely due to the transformational acquisition of the business and assets of Virtue Fusion in February. Virtue Fusion combines the largest and most liquid networks together with experienced network management and content development. As well as enjoying strong underlying growth in the bingo market, licensees have benefitted from a programme of highly successful product launches such as Britain's Got Talent and Deal or No Deal, for which Virtue Fusion won one of its three awards in June for best bingo software and innovation.

The regulation in March of the bingo product in Italy allowed those operators already on Playtech's Italian platform to quickly add a complementary bingo product. SISAL launched its bingo offering in April and within three months had achieved a market share in excess of 15%. They were joined by major brands including SNAI, Cogetech, and Codere. Overall, Playtech's Italian licensees hold a market share close to 25%

New bingo licensees who launched in the first half included the Irish operators Boyle Sports and Rehab Bingo. Towards the end of the year, Virtue Fusion's growing international presence was solidified with the launch of two Scandinavian operators, Unibet and Nordic Gaming. There remain notable opportunities in both offshore and regulating markets for growing the bingo licensee base.

Cross platform

The live product underwent substantial development in 2010 with the introduction of new features such as side bets and integrated video, together with improved functionality such as automatic optimising of bandwidth for the highest-quality video streaming. Overall, revenues from the live product increased by over 20% from 2009, with roulette being the main table game played, followed by baccarat.

The broadcast format continues to grow and is attracting increasing interest from players, particularly as interactive TV technology becomes more widespread, together with enhanced functionality to allow games to be played on a variety of channels including web, voice telephony, SMS and mobile. In 2011 the Company aims to capitalise on opportunities in regulated markets, such as Italy, where TV game shows enjoy a substantial following.

For most operators, mobile gaming has principally remained a complementary channel to their online offering and is becoming more substantial revenue generator in its own right. Hence, Mobile will add considerable value in enhancing player value and longevity. Playtech's internal analysis indicates the potential for a three-fold increase in both player value and longevity where mobile gaming is integrated into a cross-platform casino offering, along with a suite of mobile-specific tools.

Playtech enjoyed an increase of over 20% in mobile revenues in 2010 and expects this to grow with the recent launch of the mobile poker product. This will connect players to the iPoker network through a browser-based HTML5 application that supports many of the latest handsets and tablets, including Apple and Android devices.

Videobet

Videobet, our land-based division, has undergone a transformational year. At the start of 2010 Videobet signed an exclusive agreement with The Global Draw, the UK's leading provider of server-based gaming terminals to upgrade its technology platform. This included an agreement to upgrade 13,500 Fixed Odds Betting Terminals (FOBTs) in the UK to the Videobet platform, including the estates of Gala Coral, William Hill and the Tote. This relationship was expanded in August when Ladbrokes selected this technology platform for approximately 7,600 of its gaming machines, nearly its entire estate.

Much of 2010 was spent preparing for the largest simultaneous software conversions ever undertaken in the gaming machine industry. As of 9 March 2011, over 12,000 machines had been converted and were operating successfully on the new platform and the migration is expected to be substantially complete within the coming few months.

Alongside the changing regulation for online gaming, many countries are also updating their gaming machine regulations. This opens up the potential for international growth across a range of international markets and the company is gearing up to take advantage of its leading position in the UK market as well as leverage its proven track record to establish itself in other markets.

Other products

Playtech's sports platform was operational throughout 2010 with a single licensee as the product was properly market tested, and additional features introduced, along with a mobile platform using HTML5. Operating in five languages, they enjoyed particular player interest in football, tennis and basketball.

Playtech is working to develop a new version of the sportsbetting software with a wide range of sport bets and bet types, including adding a number of mid-range sports, together with horseracing, which is key for the UK market. The Company sees growing opportunities for its sportsbook in markets such as Italy, France and South Africa, and would expect to bring two of three new licensees on to the platform as the product matures in 2011.

Subsequent to the joint venture with Scientific Games, Playtech has also developed a bespoke content set targeted at Lottery operators looking to provide a complementary gaming offering.

Eligibility for a Premium Listing

The UKLA is responsible for assessing eligibility for a Premium Listing and applies various tests to assess this. One of the key tests is that a company must have an audited track record covering at least 75% of its business for the past three years.

As the William Hill Online JV was only formed in late 2008, Playtech does not have an audited track record for this business for the whole of 2008. Due in part to the rapid growth of WHO, the JV business contributed over 25% of Playtech's profits in 2010 and therefore Playtech does not have the required audited track record covering at least 75% of its business for the past three years.

It has taken several months to finalise our discussions with the UKLA as there were several moving parts in ascertaining the contribution of WHO to Playtech's earnings being the performance of the "core" business, final numbers for PTTS and the growth of WHO. The acquisition of PTTS made it more likely that Playtech would be eligible as it reduced the percentage contribution of WHO to the group although, in the final analysis, WHO still contributed more than 25% and so the UKLA deemed Playtech currently ineligible.

By the end of 2011, Playtech will have established an audited track record for WHO for the period 2009 to 2011. Accordingly, Playtech is committed to attaining a Premium Listing in early 2012.

Outlook

The Company has made a good start to the year. With a number of licensees who launched in the second half of 2010 building out their operations, there is good revenue growth potential in the coming months. Playtech's ability to offer a full turnkey solution to licensees in newly regulated markets positions it well for what are changing market dynamics.

Financial and Operational Review

Playtech has again delivered a robust financial performance, with total income for the year rising by 26% to €173.1 million (2009: €137.3 million). Total income comprises of total revenues and Playtech's share of profit from its associate income in William Hill Online 'WH Online'. Total revenues for the year increased 24% to €142.3 million (2009: €114.8 million). €30.8 million (2009: €22.5 million) was generated by Playtech's share of profit from WH Online, up 37% on the prior year.

Casino revenues increased 26% to €96.7 million (2009: €76.8 million), poker revenues decreased 19% to €27.4 million (2009: €33.8 million) and bingo revenues totaled €10.9 million (2009: €0.2 million). Casino recorded strong increase in revenues helped both by the acquisitions and the further development of the branded games portfolio. A fall in poker revenues principally reflected increased competition in the marketplace.

Playtech benefitted from the launch of a number of licensees in the year and enjoyed a greatly enhanced bingo capability through the acquisition of Virtue Fusion in February. These were in part offset by the impact of the closure of the French offshore market in June, which had been Playtech's largest continental market. On a like-for-like basis (excluding the impact from acquisitions in the year and the closure of France), Playtech achieved 12% growth in revenues.

Adjusted EBITDA for the year totaled €103.1 million (2009: €93.7 million), an increase of 10% over the same period in 2009, producing an adjusted EBITDA margin from gross income of 60%, compared to 68% in 2009. This reduction, which had been anticipated, was principally due to the acquisitions of GTS and Virtue Fusion, both lower margin businesses close to the start of the year. The closure of France lowered the adjusted EBITDA in the second half by an estimated €7 million, equivalent to a reduction in EPS of €2.9 cents.

Playtech remains highly cash generative, with very high cash conversion of adjusted EBITDA and net cash balances of €68.5 million at the end of the year. Our funding capacity also improved in the year with two available facilities totaling €50 million put in place.

Reported net profit & EPS

Reported net profit for the year decreased by 7% to €64.7 million (2009: €69.5 million), principally due to cost items not relating to the core business of the group. These include certain cash and non-cash costs relating to current and historic acquisitions and fair value adjustments to investments (see Adjusted Net Profit table below).

Reported Earnings per share ('EPS') for the year were 26.7 € cents based on the weighted average number of shares of 242.0 million (2009: 29.0 € cents, 239.5 million). The diluted EPS for the year was 25.7 € cents based on 251.2 million shares (2009: 28.0 € cents, 248.0 million),

Adjusted EBITDA

Adjusted EBITDA is calculated after adding the income from Playtech's associate, WH Online, together with adding back expenses related to professional costs on acquisitions, and after charging various non-cash charges as detailed below. Management believes that these results, excluding such one-off items and non-cash items, best represent the underlying results of the Group.

Adjusted EBITDA

	2010	2009
	€000	€000
Operating profit	45,309	56,449
Amortization on acquisitions (not including amortization on investment in WHO)	7,516	3,282
Amortization of other intangibles (not including amortization on investment in WHO)	6,158	3,124
Depreciation	3,416	2,372
EBITDA	62,399	65,227
Share of profit of WH Online	30,792	22,534
Employee stock option expenses	5,855	5,150
Decline in fair value of available for sale investment in CY Foundation, AsianLogic and Sportech	2,223	399
Professional expenses on acquisition	1,802	360
Adjusted EBITDA	103,071	93,670
Adjusted EBITDA margin	60%	68%

Amortisation on acquisitions and amortization of other intangibles (not including amortization on investment in WH Online) totaled €13.7 million (2009: €6.4 million), the rise relating to a €4.3 million increase through the recent acquisitions of Virtue Fusion and GTS and from the amortization of capitalized development costs.

Other material items excluded comprise a €2.4 million decline in the fair value of the investment in Sportech PLC partly set off by €0.2 million increase in the fair value of Foundation in 2009, which was recognized as a result from the disposal of all Foundation shares in the year. Other material items also comprise of expenses relating to the employee share option scheme of €5.9 million (2009: €5.2 million), together with €1.8 million (2009: €0.4 million) of acquisition expenses.

Adjusted Net Profit and Adjusted Earnings per Share

	2010	2009
	€000	€000
Net profit	64,670	69,511
Amortization of investment in WH Online	8,266	10,513
Decline in fair value of available for sale investments	2,223	399
Amortization on acquisitions	7,516	3,282
Employee stock option expenses	5,855	5,150
Professional costs on acquisitions	1,802	360
Exchange differences on deferred consideration	1,200	(232)
One-off tax charge	939	-
Discounting of deferred consideration	736	418
Adjusted net profit	93,207	89,401
Adjusted net profit margin	54%	65%
Adjusted basic EPS (in Euro cents)	38.5	37.3
Adjusted diluted EPS (in Euro cents)	37.1	36.0

Costs relating to current year or historic acquisitions incurred in 2010 include: professional costs of €1.8 million; €1.2 million of exchange rate differences relating to the outstanding payment due for assets injected into WH Online and due to the contingent consideration relating to the acquisition of Virtue Fusion; and €0.7 million for the discounting of deferred consideration relating to the recent acquisitions of GTS and Virtue Fusion.

Amortisation on acquisitions of €7.5 million included amounts relating to Tribeca (€3.2 million); Virtue Fusion (€3.0 million); and GTS (€1.4 million).

The one-off tax charge of €0.9 million relates to a single transfer of software assets in 2006, following an agreement with the Israeli tax authorities.

Cost of Operations

Playtech's business model is centered around the ongoing development of its technology platform and of new games and products in response to demand from its licensees, and new opportunities particularly in regulated markets. This continual development process support revenue growth both organically from existing licensees, and through the addition of new licensees across a wide range of products and geographic markets.

Playtech has a diverse licensee base, with 29 licensees each generating over €1 million of revenues in 2010, and benefits from substantial economies of scale which support a significant software development capability. With a high proportion of fixed costs being principally employee-related, the revenue share model delivers the potential for substantial operational gearing.

Adjusted Operating Expenses costs for the year were €70.0 million (2009: €43.6 million), an anticipated increase of 60% over 2009. The increase is mainly due to employee-related costs, together with revenue-based fees payable to third parties. These two items made up 75% of Playtech's adjusted operating expenses.

Adjusted Operating Expenses
	2010	2009
	€000	€000
Operating expenses	96,985	58,326
Amortization and depreciation	17,090	8,778
Decline in fair value of available for sale investments	2,223	399
Professional costs on acquisitions	1,802	360
Employee stock option expenses	5,855	5,150
Adjusted Operating Expenses	70,015	43,639

Amortisation and depreciation costs of €17.1 million include depreciation of €3.4 million and amortization of €7.5 million related to business acquisitions, not including amortization relating to the investment in WH Online. Of the remaining €6.1 million, €4.7 million was from internally generated development costs and €1.4 million related to other intangibles.

Employee stock option expenses included €2.3 million relating to the extension of previously granted options from 5 years to 10 years duration, together with €0.7 million of new option grants.

Analysis of Costs & Expenses

Adjusted Operating expenses FY2010

In 2010, employee costs totaled €39.6 million (net of development cost capitalized) or 57% of adjusted operating expenses, an increase from €25.4 million (2009: 58%). This principally reflects the rise in headcount through the acquisitions of Virtue Fusion and GTS bringing over 300 employees. There has been a minor increase in organic headcount, partly helped by the use of contracted developers to assist with specific development projects. As a percentage of operating expenses, employee costs have remained stable.

Revenue driven costs comprise reseller fees and game patent license fees paid to third parties and are typically calculated as a share of the revenues generated from a particular game. These costs have risen with the increase in the popularity with players of branded games such as Pink Panther, Rocky and 'Deal or no Deal' for which license fees are payable, and the expansion of third party content games on Playtech's open games platform capability through GTS.

Playtech has maintained a careful focus on managing cost inflation across the business, and admin, office, travel and other operating costs have remained relatively steady.

Financial Income and Tax

Cash is principally held in short-term deposits, which generate interest income. Interest received in the year totaled €0.5 million (2009: €0.5 million). Financial income also includes €1.1 million received as dividend from the investment in AsianLogic Limited (2009: €1.7 million), but was offset by an FX charge of €1.2 million for exchange rate differences on deferred consideration in respect of the WH Online investment, and €0.7 million for the discounting of deferred consideration, relating to the recent acquisitions of GTS and Virtue Fusion.

The Group 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 are operating on a cost plus basis. The subsidiaries are taxed on their residual profit.

Tax charges in 2010 totaled €2.3 million (2009: €0.8 million), including a one-off prior year tax charge of €0.9 million relating to a single transfer of software assets in 2006, following an agreement with the Israeli tax authorities. The effective rate, excluding this charge, was 2.1% (2009: 1.2%). This increase is mainly due to the higher tax regimes in which the newly acquired GTS and Virtue Fusion operate.

Cash Flow

Playtech continues to be a highly cash generative business, and the dividend received from WH Online has further increased the cash flow of the company. The main uses for funds related to the considerations payable for acquisitions and investments undertaken in the year. Cash and cash equivalents as at 31 December 2010 amounted to €68.5 million (2009: €58.7 million), representing 18% (2009: 18%) of the Group's total assets.

In the year ended 31 December 2010, the Group generated €71.0 million from its operating activities (2009: €70.7 million), in addition to €32.3 million (2009: €18.5 million) of dividend payments received from WH Online, which are presented as cash generated from investing activities.

The Group's cash usage in investing activity was €21.7 million (2009: €7.4 million), principally due to the acquisition of Virtue Fusion assets and the investment in Sportech, netted-off by the dividend received from the investment in WH Online.Cash usage in financing activities was €39.5 million (2009: €36.1 million), being the payment of the final dividend of 2009 and the interim dividend of 2010 to shareholders.

Investment in Sciplay

On 21 January 2010, Playtech formed two strategic partnerships with 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. On 30 April 2010 the Group purchased 50% of the share capital issued for a consideration of €12,500. On 28 September 2010 the Group paid an additional capital contribution of €0.5 million.

§ Exclusive agreements for Playtech's Videobet subsidiary to develop gaming terminal software for Scientific Games and its subsidiary, The Global Draw. During the year the Group invested €2.4 million in gaming terminals.

Investment in Sportech

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 €11.3 million. The investment has been accounted for under IFRS as an available for sale investment and accordingly is recorded at fair value. The fair value of this investment reduced by €2.4 million in the year, as Sportech's share price declined.

Acquisition 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, brand, 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 (hereinafter VF business).

The group paid an initial consideration, including working capital adjustments, of €37.7m (£33.2m) in cash and additional contingent consideration of €8.1m (£7.0m) was paid in March 2011 based on adjusted EBIT performance in 2010.

Balance Sheet

Cash and cash equivalents as at 31 December 2010 were €68.5 million (2009: €58.7 million).

The majority of the trade receivables balance of €13.4 million as at 31 December 2010 (2009: €6.3 million) was due to amounts payable by licensees for the month of December, as these are principally paid one month in arrears.

Intangible assets as at 31 December 2010 totaled €100.4 million (2009: €65.5 million), the majority comprised of assets acquired from Tribeca, GTS and the VF business; goodwill that arose from those acquisitions; patent and intellectual property rights and development costs of products such as new slot games, Mahjong, and the mobile platform. The increase in intangible assets is mainly due to the VF acquisition.

Available for sale investments totaling €10.9 million (2009: €5.5 million) comprise investments in Sportech and AsianLogic, as the investment in Foundation was sold in the first half of 2010. Investments in equity-accounted associates relates to the investment in WH Online totaled €162.2 million (2009: €170.4 million).

Deferred consideration of €15.0 million as at 31 December 2010 (2009: €13.6 million (net of discount of €0.4 million)) represents the present value of the remaining consideration to be paid to a third party for assets acquired and then injected into the WH Online joint venture.

Contingent consideration in the amount of €16.5 million (net of discount of €0.1 million) as at 31 December 2010 represents the present value of the contingent consideration to be paid for the investment in GTS Group and the acquisition of the VF business (2009: €6.9 million (net of discount of €0.4 million) for the investment in GTS Group).

Dividend

In October 2010, the Group distributed an interim dividend of 9.4 € cents per share, totaling approximately €22.7 million.

On 9 March 2011, the Board recommended the distribution of a dividend of 9.6 € cents per share totaling approximately €23.3 million. For the full year, the total dividend increased by 4% to 19.0 € cents per share (2009: 18.3 € cents per share)

The dividend will be paid on 2 June 2011 to the Shareholders and Depositary Interest holders.

Shuki (Moshe) Barak

Chief Financial Officer

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

		For the year ended	For the year ended
	Note	31 December 2010 €'000	31 December 2009 €'000
Revenues	4	142,294	114,775

Distribution costs		(72,867)	(45,453)
Administrative expenses		(24,118)	(12,873)
Total operating costs		(96,985)	(58,326)

Operating profit before the following items:		68,863	68,764
Professional expenses on acquisition		(1,802)	(360)
Employee stock option expenses	9	(5,855)	(5,150)
Amortization of intangible assets	11	(13,674)	(6,406)
Decline in fair value of available for sale investments	15	(2,223)	(399)
Total		(23,554)	(12,315)

Operating profit	5	45,309	56,449

Financing income - other		1,690	2,148
Exchange rate differences - on deferred consideration	12	-	232
Financing income	6a	1,690	2,380

Financing cost - discounting of deferred consideration		(736)	(418)
Financing cost - other		(424)	(93)
Exchange rate differences - on deferred consideration	12	(1,200)	-
Total financing cost	6b	(2,360)	(511)

Income from associate	12	30,792	22,534
Amortization of intangibles in associate	12	(8,266)	(10,513)
Share of profit of associate		22,526	12,021

Share of loss in joint venture	12	(152)	-

Profit before taxation		67,013	70,339

Tax expense	7	(2,343)	(828)
Profit for the period attributable to the equity holders of the parent		64,670	69,511
Other comprehensive income for the year:
Transfer to profit and loss on sale		(1,025)	-
Adjustments for change in fair value of available for sale equity instruments		-	1,025
Total comprehensive income for the year attributable to the equity holders of the parent		63,645	70,536

Earnings per share (in cents)	8
Basic		26.7	29.0
Diluted		25.7	28.0

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

	Additional Paid in Capital	Available for sale reserve	Retained earnings	Total
	€000	€000	€000	€000
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 for the year	-	1,025	69,511	70,536
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

For the year ended 31 December, 2010
Balance at 1 January 2010	183,563	1,025	85,328	269,916
Changes in equity for the year
Total comprehensive income for the year	-	(1,025)	64,670	63,645
Dividend paid	-	-	(45,593)	(45,593)
Exercise of options	6,127	-	-	6,127
Employee stock option scheme	-	-	5,855	5,855
Balance at 31 December 2010	189,690	-	110,260	299,950

CONSOLIDATED BALANCE SHEET

		As of	As of
		31 December 2010	31 December 2009
	Note	€000	€000
NON-CURRENT ASSETS
Property, plant and equipment	10	12,876	8,395
Intangible assets	11	100,384	65,459
Investments in equity accounted associates & joint ventures	12	162,583	170,366
Available for sale investments	51	10,932	5,513
Other non-current assets	16	6,070	2,309
		292,845	252,042

CURRENT ASSETS
Trade receivables	17	13,385	6,324
Other receivables	18	9,364	10,119
Cash and cash equivalents	19	68,519	58,700
		91,268	75,143
TOTAL ASSETS		384,113	327,185

EQUITY
Additional paid in capital		189,690	183,563
Available for sale reserve	15	-	1,025
Retained earnings		110,260	85,328
Equity attributable to equity holders of the parent	20	299,950	269,916

NON CURRENT LIABILITIES
Other non-current liabilities	21	953	1,168
Deferred revenues	15	11,469	14,745
Deferred tax liability	23	1,950	2,231
Contingent consideration	14	5,474	6,983
		19,846	25,127

CURRENT LIABILITIES
Trade payables	22	13,013	8,823
Progressive and other operators' jackpots		12,847	1,068
Tax liabilities		1,499	1,087
Deferred revenues	15	3,644	3,441
Deferred consideration	12	15,001	13,554
Contingent consideration	13,14	11,059	-
Other payables	24	7,254	4,169
		64,317	32,142
TOTAL EQUITY AND LIABILITIES		384,113	327,185

The financial statements were approved by the Board and authorised for issue on 10 March 2011.

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 2010	31 December 2009
	€000	€000
CASH FLOWS FROM OPERATING ACTIVITIES
Profit after tax	64,670	69,511
Adjustments to reconcile net income to net cash provided by operating activities (see below)	8,924	2,017
Income taxes paid	(2,591)	(841)
Net cash provided by operating activities	71,003	70,687

CASH FLOWS FROM INVESTING ACTIVITIES
Long term deposits	(238)	172
Long term loan	(1,003)	(1,141)
Dividend received from equity-accounted associates	32,269	18,528
Acquisition of property, plant and equipment	(7,176)	(5,886)
Investment in available for sale investments (note 15c)	(11,332)	-
Proceeds from sale of available for sale investments	2,665	-
Investment in partnership (note 28b)	(2,430)	-
Investments in joint venture (note12)	(490)	-
Acquisition of intangible assets	(111)	(2,309)
Acquisition of subsidiary, net of cash acquired (note 13)	(26,136)	-
Acquisition of subsidiary, net of cash acquired (note 14)	-	(11,310)
Capitalised development costs	(7,793)	(5,503)
Proceeds from sale of property, plant and equipment	57	-
Net cash used in investing activities	(21,718)	(7,449)

CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid	(45,593)	(39,562)
Exercise of options	6,127	3,466
Net cash used in financing activities	(39,466)	(36,096)

INCREASE IN CASH AND CASH EQUIVALENTS	9,819	27,142
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	58,700	31,558
CASH AND CASH EQUIVALENTS AT END OF YEAR	68,519	58,700

	For the year ended	For the year ended
	31 December 2010	31 December 2009
	€000	€000
ADJUSTMENT TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES
Income and expenses not affecting operating cash flows:
Depreciation	3,416	2,372
Amortisation	13,674	6,406
Income from associate	(30,792)	(22,534)
Amortization of intangibles in associate	8,266	10,513
Share of loss in joint venture	152	-
Decline in fair value of available for sale investment	2,223	399
Employee stock option plan expenses	5,855	5,150
Income tax expense	2,343	828
Others	16	122

Changes in operating assets and liabilities:
(Increase)/decrease in trade receivables	(2,791)	4,156
Increase in other receivables	(176)	(3,076)
Increase in trade payables	1,933	2,788
Increase /(decrease) in progressive and other operators' jackpot	3,483	(361)
Increase /(decrease) in other payables	4,395	(1,444)
Decrease in deferred revenues	(3,073)	(3,302)
	8,924	2,017

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.

Except as described below, the full year results are prepared on the basis of the accounting policies stated in the Group's Annual Report 2009. The financial information does not constitute the Group's financial statements for the year ended 31 December 2010 or 31 December 2009, but is derived from those financial statements.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

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

A. Accounting principles

These financial information 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 2010.

Changes in accounting policies

a) New standards, interpretations and amendments effective from 1 January 2010

The following new standards, interpretations and amendments, applied for the first time from 1 January 2010, have had an effect on the financial information:

IFRS 3 (revised), Business Combinations - Much of the basic approach to business combinations accounting required under the previous version of IFRS 3 'Business combinations' has been retained in this revised version of the standard. However, in some respects the revised standard may result in very significant changes to the accounting treatments previously adopted, including: The requirement to write off all acquisition costs to profit or loss instead of including them in the cost of investment (which will have a consequent effect on the value of goodwill recognized); the requirement to recognize an intangible asset event if it cannot be reliably measured; and, an option to gross up the balance sheet for goodwill attributable to non-controlling interests (known formerly as 'minority interests' on a combination by combination basis. There are also some significant changes in the disclosure requirements of the revised standard. Contingent consideration in an IFRS 3(revised) business combination will also now fall within the scope of IAS 39 and be measured initially and subsequently at fair value with re-measurement differences being recognized in profit or loss unless the re-measurement relates to conditions which existed as at the date of acquisition, in which the differences would be recognized in goodwill. Changes in the value of contingent consideration in a business combination falling within the scope of the old IFRS 3 continue to be treated as adjustments to goodwill.

The revised standard does not require the restatement of previous business combinations and, in consequence, the group's acquisition of a 100% interest in Virtue Fusion is the first business combination to fall within the scope of IFRS 3 (revised). The principal effect of the adoption of IFRS 3 (revised) on that acquisition is the recognition of €0.7 million of acquisition expenses in 'administrative expenses' within the consolidated statement of comprehensive income; this had had an immaterial effect on the EPS calculation for the year.

Amendments to IAS 27 Consolidated and Separate Financial information - This Amendment affect in particular the treatment of non-wholly owned subsidiaries. Transactions which increase or decrease the group's interest in a subsidiary without altering control will no longer give rise to changes in the carrying value of the subsidiary's assets or liabilities (including its associated goodwill) and will not give rise to a gain or loss. Any difference between the consideration paid or received and the adjustment to the carrying value of the non-controlling interest will be recognized directly in equity. In addition, total comprehensive income must now be attributed to owners of the parent and to the non-controlling interest even if this results in the non-controlling interest having a deficit balance. Previously, unfunded losses in such subsidiaries would be attributed entirely to the group.

The Amendment does not require the restatement of previous transactions and has had no effect on the current financial year.

None of the other new standards, interpretations and amendments effective for the first time from 1 January 2010, have had a material effect on the financial information.

b) New standards, interpretations and amendments not yet effective

The following relevant interpretations were issued by the IASB or the IFRSC before the year end but were not effective for the 2010 year end:

IAS 32 (Amended) - Classification of Rights Issues (effective for annual periods beginning on or after 1 February 2010).

IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments (effective for annual periods beginning on or after 1 July 2010).

IAS 24 (Revised) - Related Party Disclosures (effective for annual periods beginning on or after 1 January 2011).

Improvements to IFRSs (2010) (effective for annual periods beginning on or after 1 January 2011).

IFRS 7 (Amended) - Transfers of Financial Assets (effective for annual periods beginning on or after 1 July 2011).

IFRS 9 Financial Instruments (effective for annual periods beginning on or after 1 January 2013). This has not yet been yet been endorsed by the EU.

The Group is currently assessing the impact, if any, that these standards will have on the presentation of its consolidated results.

None of the other new standards, interpretations and amendments, which are effective for periods beginning after 1 January 2010 and which have not been adopted early, are expected to have a material effect on the Group's future financial information.

B. Foreign currency

The financial information 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 information 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 plans 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 Black-Scholes and Binomial 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 information 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 and gaming machines	33.33
Office furniture and equipment	7.00-20.00
Building and Leasehold improvements	10.00-20.00, 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 information 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 development costs	33.33
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. Joint Ventures

The Group's investment in a jointly controlled entity is included in the financial information under the equity method of accounting. The group includes the assets it controls, its share of any income and the liabilities and expenses of jointly controlled operations and jointly controlled assets in accordance with the terms of the underlying contractual arrangement.

P. 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. The Group does not hold any financial assets at fair value through profit and loss.

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.

Q. Share capital

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

R. 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.

Several of the Group's licensees participate in progressive jackpot games. Each time a progressive jackpot game is played, a preset amount is added to a cumulative jackpot for that specific game. The accrual for the jackpot at the consolidated balance sheet date is included in progressive jackpot and other operator's jackpot liabilities.

S. 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 28). 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

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.

T. 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.

U. 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. 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 available for sale investments

The Group determines the fair value of available for sale investments 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 27.

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 2010, the Group made additional 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 information.

E. Legal proceedings and contingent liabilities

Management regularly monitors the key risks affecting the Group, including the regulatory environment in which the Group operates. A provision will be made where there is a present obligation from a past event, a transfer of economic benefits is probable and the amount of costs of the transfer can be estimated reliably. In instances where the criteria are not met, a contingent liability may be disclosed in the notes to the financial information. More details are included in note 29.

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 notes 12, 13 and 14.

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 information 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 information 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 4 main product groupings:

> Poker

> Casino

> Bingo

> 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 information.

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,
	2010	2009
	€000	€000

Casino	96,710	76,757
Poker	27,406	33,813
Bingo	10,853	235
Other	7,325	3,970
Total revenues	142,294	114,775

In the current year, there were 2 licensees who individually accounted for more than 10% of the total revenue of the group (2009 - 2 licensees). Revenue from these licensees in the current year totalled €44.3m (2009 - €44.8m)

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,
	2010	2009
	€000	€000

Gibraltar	44,149	12,340
Canada	42,809	47,849
Curacao	14,752	33,925
Philippines	9,855	4,703
Rest of World	30,730	15,958
	142,295	114,775

Geographical analysis of non-current assets

	As of
	December 31,
	2010	2009
	€000	€000

British Virgin Islands	220,399	225,462
Isle of Man	58,313	20,719
Cyprus	7,438	1,993
Estonia	4,222	1,970
Israel	1,049	773
Bulgaria	451	409
UK	378	295
Alderney	347	-
Malta	182	-
Philippines	66	421
	292,845	252,042

NOTE 5 - OPERATING PROFIT

Operating profit is stated after charging:

	For the year ended 31 December,
	2010	2009
Directors compensation	€000	€000

Short term benefits of directors	1,471	1,233
Share based benefits of directors	898	980
Bonuses to executive directors	528	488
	2,897	2,701

	For the year ended 31 December,
	2010	2009
	€000	€000
Auditor's remuneration
Audit services
Parent company and Group audit	144	160
Audit of overseas subsidiaries	125	40
Total audit	269	200
Non-audit services
Other acquisition and assurance services	355	117
Taxation compliance	46	-
	670	317

	For the year ended 31 December,
	2010	2009
	€000	€000
Development costs (including capitalized development cost)	14,720	7,431

NOTE 6 - FINANCING INCOME AND COSTS

	For the year ended 31 December,
	2010	2009
	€000	€000
A. Finance income
Interest received	492	508
Dividend received from available for sale investments	1,074	1,729
Exchange rate differences - on deferred consideration	-	232
Exchange differences	124	-
	1,690	2,469
B. Finance cost
Finance cost- discounting of deferred consideration	(736)	(418)
Exchange differences - on deferred consideration	(1,200)	-
Bank charges	(424)	(93)
	(2,360)	(511)

Net financing (expense) /income	(671)	1,869

NOTE 7 - TAXATION

	For the year ended 31 December,
	2010	2009
	€000	€000

Current income tax
Income tax on profits of subsidiary operations	1,685	1,345
Previous year taxes	939	-
Deferred tax (note 23)	(281)	(517)
Total tax charge	2,343	828

The tax charge for the year can be reconciled to accounting profit as follows:

	For the year ended 31 December,
	2010	2009
	€000	€000

Profit before tax	67,013	70,339

Tax at effective rate in Isle of Man	-	-
Higher rates of current income tax in overseas jurisdictions	1,685	1,345
Adjustments in respect of previous periods	939	-
Effect of deferred tax originating in overseas jurisdictions	(281)	(517)
	-	-
Total tax charge	2,343	828

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 previous year's taxes are due to the finalization of tax assessments relating to 2006.

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,
	2010	2009
	In euro cents	In euro cents

Basic	26.7	29.0
Diluted	25.7	28.0

	€000	€000
Profit for the year	64,670	69,511


	Number	Number
Denominator - basic
Weighted average number of equity shares	242,011,308	239,476,501

Denominator - Diluted
Weighted average number of equity shares	242,011,308	239,476,501
Weighted average number of option shares	9,173,326	8,562,031
Weighted average number of shares	251,184,634	248,038,532

B. Adjusted earnings per share

The adjusted earnings per share present the profit for the year before charging professional costs on acquisitions, previous year's taxes and after various non-cash charges relating to acquisitions and investments together with the employee stock option plan.The directors believe that the adjusted profit represents more closely the underlying trading performance of the business.

	For the year ended December 31,
	2010	2009
	In cents	In cents

Basic - adjusted	38.5	37.3
Diluted - adjusted	37.1	36.0

	€000	€000
Profit for the year	64,670	69,511
Decline in fair value of available for sale investments	2,223	399
Amortization on acquisitions	7,516	3,282
Amortization of intangibles in associate	8,266	10,513
Finance cost on discounting of deferred consideration	736	418
Employee stock option expense	5,855	5,150
Professional expenses on acquisition	1,802	360
Previous year taxes	939	-
Exchange differences - on deferred consideration	1,200	(232)
Adjusted profit for the year	93,207	89,401

	Number	Number
Denominator - basic
Weighted average number of equity shares	242,011,308	239,476,501

Denominator - diluted
Weighted average number of equity shares	242,011,308	239,476,501
Weighted average number of option shares	9,173,326	8,562,031
Weighted average number of shares	251,184,634	248,038,532

As at 31 December 2010, out of the entire share options outstanding, 2,089,468 (2009 - 2,952,991) have been excluded from the calculation of diluted EPS as their exercise price is greater than the weighted average share price during the year (i.e. - they are out of the money) and therefore it would not be advantageous for the holders to exercise those options. The total number of options in issue is disclosed in note 9.

NOTE 9- EMPLOYEE BENEFITS

Total staff costs comprise the following:

	31 December,
	2010		2009
	€000		€000

Salaries and employee related costs	47,732		29,628
Employee stock option costs	5,855		5,270
	53,587		34,898

	31 December,
	2010	2009
	Number	Number
Average number of employees
Distribution	913	743
General and administration	81	74
	994	817

The Group has the following employee share option plans ("ESOP") for the granting of non transferable options to certain employees:

§ Playtech 2005 Share Option Plan ("the Plan") and Israeli plans, options granted under the plans vest on the first day on which they become exercisable which is typically between one to four years after grant date.

§ GTS 2010 Company Share Option Plan ("CSOP"), options granted under the plan vest on the first day on which they become exercisable which is three years after grant date.

The overall term of the ESOP is five to ten 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 an equivalent GBP price. The impact of the modification was to recognise an incremental fair value charge of €0.2m during 2010 (2009- €2.7m).

On 1 July 2010, the directors approved amendment to the Plan, to extend the time during which options can be exercised from five years to ten years. The impact of the modification was to recognise an incremental fair value charge of €2.3m during the year.

At 31 December 2010, options under this scheme were outstanding over:

	2010	2009
	Number	Number
Shares vested on 30 November 2008 at an exercise price of $2.5 per share	141,067	213,679
Shares vested on 30 November 2008 at an exercise price of £1.45 per share	489,979	851,020
Shares fully vested on 30 November 2008 at an exercise price of £2.32 per share	133,334	133,334
Shares vesting on 6 February 2009 at an exercise price of £1.45 per share	-	333,334
Shares vesting between 1 December 2006 and 6 February 2009 at an exercise price of $4.50 per share	325,046	521,379
Shares vesting between 1 December 2006 and 6 February 2009 at an exercise price of £2.55 per share	611,666	611,666

	2010	2009
	Number	Number
Shares vesting between 1 December 2006 and 1 December 2009 at an exercise price of £2.29 per share	200,000	200,000
Shares vesting between 28 March 2007 and 28 March 2009 at an exercise price of £2.57 per share	200,000	200,000
Shares vesting between 21 June 2007 and 21 June 2009 at an exercise price of $5.75 per share	11,000	64,602
Shares vesting between 21 June 2007 and 21 June 2009 at an exercise price of £3.16 per share	60,334	71,978
Shares vesting between 11 October 2007 and 11 October 2009 at an exercise price of £1.72 per share	208,334	833,334
Shares vesting between 11 December 2007 and 11 December 2009 at an exercise price of $4.35 per share	65,000	520,902
Shares vesting between 11 December 2007 and 11 December 2009 at an exercise price of £2.21 per share	276,669	285,270
Shares vesting between 31 December 2007 and 31 October 2010 at an exercise price of £3.79 per share	250,000	250,000
Shares vesting between 31 December 2007 and 31 October 2010 at an exercise price of $7.48 per share	75,000	75,000
Shares vesting between 16 May 2008 and 16 May 2010 at an exercise price of $7.50 per share	20,000	40,000
Shares vesting between 16 May 2008 and 16 May 2010 at an exercise price of £3.79 per share	1,143,000	1,163,000
Shares vesting between 18 June 2008 and 18 June 2010 at an exercise price of $7.79 per share	9,468	9,468
Shares vesting between 18 June 2008 and 18 June 2010 at an exercise price of £3.96 per share	121,808	143,920
Shares vesting between 18 June 2008 and 18 June 2010 at an exercise price of £3.30 per share	10,000	10,000
Shares vesting between 3 October 2008 and 3 October 2011 at an exercise price of $6.90 per share	-	300,000
Shares vesting between 10 October 2008 and 10 October 2011 at an exercise price of £3.51 per share	112,500	150,000
Shares vesting between 20 November 2008 and 20 November 2011 at an exercise price of $7.19 per share	30,000	30,000
Shares vesting between 20 November 2008 and 20 November 2011 at an exercise price of £3.51 per share	55,500	94,000
Shares vesting between 31 December 2008 and 31 December 2010 at an exercise price of $7.68 per share	18,000	28,500
Shares vesting between 31 December 2008 and 31 December 2010 at an exercise price of £3.86 per share	49,500	55,000
Shares vesting between 25 April 2009 and 25 April 2012 at an exercise price of $8.61 per share	-	40,000
Shares vesting between 25 April 2009 and 25 April 2012 at an exercise price of £4.35 per share	569,667	666,500
Shares vesting between 21 May 2009 and 21 May 2012 at an exercise price of £5.31 per share	500,000	500,000
Shares vesting between 28 November 2009 and 28 November 2012 at an exercise price of £3.20 per share	1,674,210	1,832,353
Shares vesting between 31 December 2008 and 31 December 2011 at an exercise price of £3.1725 per share	200,000	200,000
Shares fully vesting on 22 May 2012 at an exercise price of £4.155 per share	765,000	805,000
Shares fully vesting on 22 May 2012 at an exercise price of £4.05 per share	75,000	75,000
Shares fully vesting on 6 November 2012 at an exercise price of £3.7 per share	1,260,000	1,386,000

	2010	2009
	Number	Number
Shares vesting between 3 June 2012 and 3 June 2013 at an exercise price of £4.84 per share	328,000	-
Shares vesting between 26 August 2012 and 26 August 2013 at an exercise price of £4.16 per share	288,670	-
Shares fully vesting on 26 August 2013 at an exercise price of £4.16 per share	216,330	-
	11,592,082	12,694,240

Total number of shares exercisable as of 31 December is 5,971,186 and 6,908,693 for 2010 and 2009 respectively.

The fair value of the options that were granted in respect of equity settled schemes for 2010 is €5.9m (2009 - €5.3m). During 2010, €3.8m (2009 - €5.2m) has been recognized as an expense in the income statement and €nil (2009 - €0.1m) 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,
	2010	2009	2010	2009
	Number of options	Number of options	Weighted average exercise price	Weighted average exercise price
Outstanding at the beginning of the year	12,694,240	13,665,204	$5.12, £3.20	$5.56, £3.15
Granted during the year	1,958,000	2,266,000	£4.82	£3.87
Forfeited	(665,718)	(1,517,208)	$6.61, £3.71	$7.47, £3.43
Exercised	(2,394,440)	(1,719,756)	$4.38, £1.92	$3.00, £1.70
Outstanding at the end of the year	11,592,082	12,694,240	$4.57, £3.62	$5.12, £3.20

The weighted average share price at the date of exercise of options was £5.08 and £4.48 in 2010 and 2009 respectively.

The weighted average fair value of options granted during the year at the date of grant was £1.67 and £1.47 in 2010 and 2009 respectively.

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

Expiry date	Exercise price	2010	2009
		Number	Number

December 1 2010	Between £1.45 and £2.55	-	2,129,970
Between February 6 2011 and December 11 2011	Between $4.35 and $5.75 and between £1.72 and £3.16	473,666	3,010,528
Between 15 May 2012 and 31 December 2012	Between £3.3 and £3.96	1,164,333	2,048,889
Between 25 April 2013 and 31 December 2013	$4.35 and £3.20	1,490,830	3,238,853
Between 22 May 2014 and 6 November 2014	Between £3.7 and £4.155	790,000	2,266,000
December 1 2015	$2.5and between £1.45 and £2.32	764,380	-
Between February 6 2016 and December 11 2016	Between $4.5 and $5.75 and between £1.72 and £3.16	1,484,383	-
Between 15 May 2017 and 31 December 2017	Between $7.19 and $7.79 and between £3.79 and £3.96	730,443	-
Between 25 April 2018 and 31 December 2018	$4.35 and between £3.1725 and £5.31	1,453,047	-
Between 22 May 2019 and 6 November 2019	Between £3.7 and £4.155	1,310,000	-
Between 18 April 2020 and 26 August 2020	Between £4.16 and £5.12	1,931,000	-
		11,592,082	12,694,240

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 2009 and 2010:

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

For options granted on 18 April 2010, 3 June 2010 and 24 August 2010
Dividend yield (%)	2.8%-2.85%
Expected volatility (%)	42.1% to 53.0%
Risk free interest rate (%)	1.30% to 2.63%
Expected life of options (years)	3.61 to 4.61
Weighted average exercise price	£4.82

The fair value of the amendment to Plan was estimated as at the date of grant using the Binomial model

For options modified as a result of the amendment to Plan on 1 July 2010
Dividend yield (%)	2.76%
Expected volatility (%)	52.9%
Risk free interest rate (%)	2.35%
Expected life of options to last exercise date (years)	5.42
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

	Computers and gaming machines	Office furniture and equipment	Motor vehicles	Leasehold improvements	Total
	€000	€000	€000	€000	€000
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	729	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	141	5,508

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

	Computers and gaming machines	Office furniture and equipment	Motor Vehicles	Building and Leasehold improvements	Total
	€000	€000	€000	€000	€000
Cost -
As of 1 January, 2010	12,068	977	129	729	13,903
Additions	4,553	178	37	2,408	7,176
Acquired through business combinations	847	39	-	-	886
Disposals	(412)	(63)	(12)	(97)	(584)
As of 31 December, 2010	17,056	1,131	154	3,040	21,381

Accumulated depreciation-
As of 1 January, 2010	4,982	343	42	141	5,508
Charge	3,045	176	30	165	3,416
Disposals	(289)	(24)	(9)	(97)	(419)
As of 31 December, 2010	7,738	495	63	209	8,505

Net Book Value -
As of 31 December, 2010	9,318	636	91	2,831	12,876

NOTE 11 - INTANGIBLE ASSETS

		Patents	Domain names	Technology IP	Development costs (internally generated)	Customer list	Goodwill	Total
	€000		€000	€000	€000	€000	€000	€000
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 combinations		134	-	1,783	-	8,032	10,902	20,851
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
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

		Patents	Domain names	Technology IP	Development costs (internally generated)	Customer list	Goodwill	Total
	€000		€000	€000	€000	€000	€000	€000
Cost -
As of 1 January, 2010		3,775	121	4,657	16,293	33,586	21,703	80,135
Additions		101	-	10	7,793	-	-	7,904
Assets acquired on previous year business combinations		-	-	-	-	-	1,182	1,182
Assets acquired on business combinations		3,900	-	3,035	-	18,828	13,750	39,513
As of 31 December, 2010		7,776	121	7,702	24,086	52,414	36,635	128,734

Accumulated amortization -
As of 1 January, 2010		961	51	156	4,393	9,115	-	14,676
Provision		845	-	1,830	4,720	6,279	-	13,674
As of 31 December, 2010		1,806	51	1,986	9,113	15,394	-	28,350

Net Book Value -
As of 31 December, 2010		5,970	70	5,716	14,973	37,020	36,635	100,384

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 distribution costs. Included in the additions to development costs is €nil (2009 - €0.1m) in respect of share-based payments.

In accordance with IAS 36, the Group regularly monitors the carrying value of its intangible assets, including goodwill. Goodwill is allocated to 3 cash generating units ("CGU"), and the carrying values are below:

At 31 December 2010 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 2011 and detailed projections covering the periods as noted below.

Key assumptions are as follows:

For the Tribeca CGU with carrying value of €23.9 million: 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 5% for 2011-2013. Growth rates beyond the first three years are based on prudent estimates using historic growth rates.

For the GTS CGU with carrying value of €20.4 million: 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 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.

For the VF CGU with carrying value of €36.6 million: 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 23% for 2011, 9.6% for 2012, 4% for 2013, 3% for 2014, 2.5% for 2015 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 2010. 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 2010.

NOTE 12- INVESTMENTS IN EQUITY ACCOUNTED ASSOCIATES & JOINT VENTURES

	2010	2009
	€000	€000
Investment in equity accounted associates and joint ventures comprise:

A. Investment in William Hill Online (associate)	162,245	170,366
B. Investment in Sciplay (joint venture)	338	-
	162,583	170,366

A. Investment in William Hill Online

The investment in WH Online has been accounted for using the equity method in the consolidated financial information 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 royalty 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.

WH has 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.

NOTE 12- INVESTMENTS IN EQUITY ACCOUNTED ASSOCIATES & JOINT VENTURES (Cont.)

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

	€000
Investment in equity accounted associates at 1 January 2009	181,072
Adjustment to expenses	(172)
	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
Income from associate	30,792
Amortization of intangibles in associate	(8,266)
Dividend	(30,647)
Investment in equity accounted associates at 31 December 2010	162,245

The deferred consideration as of 31 December 2010 of €15.0 million is payable in the beginning of 2011 due to an extension of payment terms granted by the vendor of the original purchased assets that were subsequently injected into William Hill Online at the time of the acquisition in 2008

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 2010.

The deferred consideration for the acquisition of the Purchased Assets is payable in US dollars. This caused an exchange rate expense in the amount of €1.2 million that was reflected in the income statement for 2010 (2009- income of €0.2 million).

Aggregated amounts relating to associates are as follows:

	2010	2009
	€000	€000
Total assets	116,584	98,385
Total liabilities	84,740	62,937
Revenues	295,200	229,470
Profit	105,519	74,450

B. Investment in Sciplay

On 21 January 2010, the Group formed a strategic partnership with 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.

Exclusive Joint Ventures focused on the B2G online gaming market on a global basis, called Sciplay International Sarl and Sciplay (Luxembourg) Sarl (hereinafter "Sciplay") will utilise Playtech's technology capabilities together with Scientific Games' global infrastructure and experience.

On 30 April 2010 each of the parties purchased 50% of the share capital issued of Sciplay for a total consideration of €13k.

In addition each of the parties contributed €100k share premium to Sciplay International Sarl and $150k to Sciplay (Luxembourg) Sarl by contribution in kind of intangible assets. The Group contributed an exclusive license to copyrighted software for interactive gaming activities and Scientific Games contributed the right to use the patented MAPS database, the implied utilization of the "Scientific Games" trademark in interaction with customers and in the development of the "SciPlay" trademark, and general expertise in the lottery business.

On 28 September 2010 each of the parties paid additional paid in capital of €477k (€227k to Sciplay International Sarl and €250k to Sciplay (Luxembourg) Sarl).

The Groups' share in the Sciplay loss for the period amounted to €368k has been recognized in the consolidated statement of comprehensive income.

	€000	€000
Cash consideration		13
Additional paid in capital		477
Contribution in kind	216
Share of loss in Sciplay	(368)
Total Share of loss in Sciplay		(152)
Investment in Sciplay as at 31 December 2010		338

Aggregated amounts relating to joint ventures are as follows:

	2010
	€000
Total assets	1,094
Total liabilities	(426)
Revenues	-
Loss	(736)

NOTE 13 - ACQUISITIONS DURING THE YEAR

The group paid an initial consideration, including working capital adjustments, of €37.7m (£33.2m) in cash and additional contingent consideration of €8.1m (£7.0m) is payable in the first quarter of 2011 based on adjusted EBIT performance in 2010.

Details of the fair value of identifiable assets and liabilities acquired from subsidiaries, purchase consideration and goodwill are as follows:

	Book value prior to acquisition	Adjustments	Fair value on acquisition
	€000	€000	€000
Property, plant and equipment	886	-	886
Intangible assets	-	25,763	25,763
Trade receivables	3,600	-	3,600
Other receivables	702	-	702
Cash and cash equivalents	11,610	-	11,610
Trade payables	(1,587)	-	(1,587)
Progressive and other operators' jackpot	(8,296)	-	(8,296)
Other payable	(702)	-	(702)
Net identified assets	6,213	25,763	31,976
Goodwill			13,750
Present value of consideration			45,726

		€000
Cash consideration		37,746
Contingent consideration		8,122
Total cash consideration		45,868
Finance cost arising on discounting of contingent consideration		(142)
Present value of consideration		45,726
Cash purchased		(11,610)
Net cash payable (of which €26.2m was paid in the year)		34,116

Adjustments to fair value include the following:

	Amount	Amortization
	€000	%
Customer list	18,828	12.5
IP Technology	3,035	10
Brand	3,900	10
Total intangible assets	25,763

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 the VF business.

The key assumptions used by management to determine the value in use of the IP Technology, customer relationships and Brands within VF business 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 and brand, considering market competition, quality, absolute and relative profitability.

§ The discount rate assumed is equivalent to the WACC for the brand, WACC plus 1% for the IP Technology and WACC plus 2% for the customer relationships.

§ The growth rates and attrition rates were based on market analysis.

The contingent consideration for the acquisition of the Purchased Assets is payable in GBP. This caused an exchange rate income in the amount of €0.3 million that was reflected in the income statement for 2010.

Since the acquisition date, VF has contributed €18.0 million and €5.5 million to group revenues and profits respectively. The Group has not disclosed the results of the Combined Group as if the VF acquisition had occurred on 1 January 2010 as they consider the amounts involved to be immaterial.

NOTE 14 - ACQUISITIONS IN PRIOR 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 €10.85 million was paid in cash and additional contingent consideration of up to €10.8 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 acquisition	Adjustments	Fair value on acquisition
	€000	€000	€000
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			12,307
Present value of consideration			19,853

		€000
Cash consideration		10,851
Non-current contingent consideration		5,474
Current contingent consideration		2,900
Expenses paid in cash		628
Total cash consideration		19,853
Finance cost arising on discounting of contingent consideration		(377)
Present value of consideration		19,476
Cash purchased		(169)
Net cash paid		19,307

As noted above, the contingent consideration is based on performance in 2010 and 2011. Management has re-assessed the fair value of the expected consideration to be paid in the future. Based on this review, the amount of contingent consideration has been increased from €7.0m (net of discount of €0.4m) to €8.4m (net of discount of €0.2m) as at 31 December 2010. As this was an acquisition in 2009 and accounted for under the old IFRS 3 rules, the adjustment has been recognised in goodwill in the financial information.

NOTE 14 - ACQUISITIONS IN PRIOR YEAR

Adjustments to fair value include the following:

	Amount	Amortization
	€000	%
IP Technology	1,783	20
Customer list	8,032	12.5
Total intangible assets	9,815

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:

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

B. 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.

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

D. The growth rates and attrition rates were based on market analysis

Management's impairment review as at 31 December 2010 of the carrying value of goodwill is disclosed in note 11.

NOTE 15 - AVAILABLE FOR SALE INVESTMENTS

	31 December,
	2010	2009
	€000	€000
Available for sale investments comprise:
A. Investment in Foundation Group Limited	-	3,459
B. Investment in AsianLogic	2,054	2,054
C. Investment in Sportech PLC	8,878	-
	10,932	5,513

	31 December,
	2010	2009
	€000	€000
Change in fair value of available for sale investments during the year
A. Foundation Group Limited	231	(1,025)
B. AsianLogic	-	399
C. Sportech PLC	(2,454)	-
	(2,223)	(626)

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.

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

A. During the year, the Group sold all of its shares in Foundation Group Limited. Prior to the sale of shares, the carrying value declined by €0.8 million which has been recognised in the consolidated statement of comprehensive income as an impairment. On disposal of the shares, the available for sale reserve at 31 December 2009 of €1,025k has been reclassified to profit and loss, resulting in a net credit of €0.2 million in the consolidated statement of comprehensive income.

B. As at 3 July 2009, AsianLogic 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 2010 the Group received a dividend of €1.1 million that has been reflected in the income statement as finance income.

C. 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 €11.3 million. As at 31 December the market value of this investment was €8,878k. The decline in market value of €2.5 million has been recognized as an impairment in the consolidated statement of comprehensive income.

Roger Withers, chairman of the Group during the year, was appointed as a Director of Sportech PLC in 2011

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 2010, the following amounts are included in deferred revenues:

	31 December,
	2010	2009
	€000	€000

Deferred revenues - non-current

Foundation Group Limited	10,207	12,150
AsianLogic	367	2,595
	11,469	14,745

	31 December,
	2010	2009
	€000	€000

Deferred revenues - current

Foundation Group Limited	1,943	1,943
AsianLogic	1,334	1,334
Others	367	164
	3,644	3,441

NOTE 16 - OTHER NON-CURRENT ASSETS

	31 December,
	2010	2009
	€000	€000

Loan to customer	2,836	1,833
Advance for partnership (note 28B)	2,430	-
Rent and car lease deposits	793	476
Other	11	-
	6,070	2,309

NOTE 17 - TRADE RECEIVABLES

	31 December,
	2010	2009
	€000	€000

Customers	10,974	3,828
Related party receivable (note 25)	2,411	2,496
	13,385	6,324

NOTE 18 - OTHER RECEIVABLES

	31 December,
	2010	2009
	€000	€000

Prepaid expenses	2,584	2,139
VAT and other taxes	1,197	1,191
Short term investment	47	42
Advances to suppliers	17	70
Related party receivable (note 25)	2,459	5,136
Loan to customer	1,116	713
Loan to affiliate	1,013	-
Other receivables	931	827
	9,364	10,118

NOTE 19 - CASH AND CASH EQUIVALENTS

	31 December,
	2010	2009
	€000	€000
Cash at bank	29,550	29,880
Deposits	38,969	28,820
	68,519	58,700

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,
	2010	2009
	€000	€000
Funds attributed to jackpots	12,847	1,068
Poker security deposits	1,447	670
Other	438	-
	14,732	1,738

NOTE 20- SHAREHOLDERS' EQUITY

	31 December,
	2010	2009
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	242,599,019	240,204,579

(*) 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 option exercised

During the year 2,394,440 (2009 - 1,719,756) share options were exercised.

B. Distribution of Dividend

In May 2010, the Group distributed €22,913,530 as a final dividend for 2009.

In October 2010, the Group distributed €22,679,613 as an interim dividend for 2010.

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 15)

Retained earnings	Cumulative net gains and losses recognized in the consolidated income statement

NOTE 21 - NON CURRENT LIABILITIES

	31 December,
	2010	2009
	€000	€000

Long term trade payables	767	1,038
Severance pay	186	130
	953	1,168

NOTE 22 - TRADE PAYABLES

	31 December,
	2010	2009
	€000	€000

Suppliers	3,986	3,901
Customer liabilities	7,971	529
Related parties (Note 25)	443	4,269
Other	613	124
	13,013	8,823

NOTE 23 - 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:


	2010	2009
	€000	€000

At 1 January 2010	2,231	-
Arising on the acquisition of the GTS group	-	2,748
Reversal of temporary differences, recognized in the consolidated statement of comprehensive income	( 281)	(517)
	1,950	2,231

NOTE 24 - OTHER PAYABLES

	31 December,
	2010	2009
	€000	€000

Payroll and related expenses	5,999	3,308
Accrued expenses	1,218	841
Other payables	37	20
	7,254	4,169

NOTE 25 - 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, Netplay TV PLC, Sceptre Leisure Plc and 800pay Ltd are related by virtue of a common significant shareholder. Emphasis Services Limited ("ESL"), AsianLogic Limited ("ALL") and S-tech Limited former chief executive officer was a director of the Group until 10 March 2010. Sportech PLC is related by virtue of acommon non executive Director. WH Online and Sciplay are associates of the Group.

The following transactions arose with related parties:

	31 December,
	2010	2009
	€000	€000
Revenue including income from associate
ESL	7,764	4,507
S-tech Ltd	51	259
Sceptre Leisure Plc	364	504
Netplay TV PLC	1,399	29
WH Online	46,398	33,795

Share of loss in joint venture- Sciplay	(152)	-

Operating expenses
Gamepark Trading Limited	211	267
S-tech Ltd	15	249
Tech Corporation	146	99
800pay Ltd	69	56
ESL	288	1,285

The following are year-end balances:

	31 December,
	2010	2009
	€000	€000

Gamepark Trading Limited	117	4,185
Tech Corporation	319	75
800pay Ltd	7	9
Total related party creditors	443	4,269

Netplay TV PLC	306	29
Sceptre Leisure Plc	-	1,337
WH Online	4,512	5,784
Sciplay	52	-
Total related party debtors	4,870	7,150
Sportech PLC (note 15c)	8,878	-
ALL (note 15b)		2,054
Total investment in related party	8,878	2,054

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

NOTE 26 - SUBSIDIARIES

Details of the Group's subsidiaries as at the end of the year are set out below:

Name	Country of incorporation	Proportion of voting rights and ordinary share capital held	Nature of business
Playtech Software Ltd	British Virgin Islands	100%	Main trading company of 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 Islands	100%	Trading company for the 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 Islands	100%	Dormant
Networkland Ltd	British Virgin Islands	100%	Dormant
Playtech Bingames Ltd	British Virgin Islands	100%	Technical support
Evermore Trading Ltd	British Virgin Islands	100%	Holder of convertible notes in Foundation
Playtech Software India Ltd	India	100%	Designs, develops and manufactures online software
Genuity Services Ltd	British Virgin Island	100%	Holder of investment in 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
Playtech Sports Limited	British Virgin 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	Isle of Man	100%	Owns the intellectual 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
Bandwick Investments Ltd	Cyprus	100%	Holds
Bancwick Investments OU	Estonia	100%	Owns a building
Virtue Fusion (Alderney) Limited	Alderney	100%	Shareholder of Bingo Networks (Alderney) Limited
VF Interactive Gaming Limited	Malta	100%	Dormant
Virtue Fusion CM Limited	UK	100%	Chat moderation services provider to end users of VF licensees
Playtech Services Romania S.R.L	Romania	100%	Providing customer support
VB CMS OU	Estonia	100%	Develops software for fixed odds betting terminals and casino machines
Playtech Software (Alderney) Ltd	Alderney	100%	To hold the company's Alderney Gaming license
Playtech Gaming SAS	France	100%	Dormant

NOTE 27 - 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 €1.0m (2009 - €2.0m). The interest on the loans is 5.5%.

The loans are repayable in monthly installments.

A 1% change in deposit interest rates would impact on the profit before tax by €40 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 Israel and in the Philippines to meet local salaries and expenses. These balances are kept to a minimum and typically do not exceed €1 million at any time during the monthly payment cycle. During 2010 and 2009 a few additional banks in which the Group holds approximately 26% of its funds (2009- 50%) were degraded to below A- rate.

In thousands of Euro

Total

Financial institutes with A- and above rating

Financial institutes below A- rating

As at 31 December 2010

68,519

49,714

18,805

As at 31 December 2009

58,700

28,420

30,280

The ageing of trade receivables that are past due but not impaired can be analyzed as follows:

In thousands of Euro

Total

Not past due

1-2 months overdue

More than 2 months past due

As at 31 December 2010

13,506

8,807

3,885

814

As at 31 December 2009

6,470

5,498

714

258

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:

	2010 €000	2009 €000
Provision at the beginning of the year	146	93
Charged to income statement	64	154
Utilized	(89)	(101)
Provision at end of year	121	146

Related party receivables included in note 17 of €2.4m (2009 - €2.3m) are not past due.

As at 31 December 2010 the Group holds undrawn credit facilities of €50.0 million.

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 the current year, the Group suffered a foreign exchange loss on the re-translation of a US Dollar and GBP denominated liability (deferred consideration) in respect of the WH Online and Virtue Fusion investments (note 12 and 13).

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 15). 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 2010 includes available for sale investments with a value of €8.9m which are subject to fluctuations in the underlying share price.

A change of 1% in shares price will have an impact of €0.09m 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, 2010 In thousands of Euro		Total		Within 1 year	1-2 years	More than 2 years
Trade payables		13,013		13,013	-	-
Other accounts payable		7,254		7,254	-	-
Progressive and other operators' jackpots		12,847		12,847	-	-
Deferred consideration		15,001		15,001
Contingent consideration		16,795		11,059	5,736	-
Other non-current liabilities		953		-	767	186
Year ended 31 December, 2009 In thousands of Euro	Total		Within 1 year		1-2 years	More than 2 years
Trade payables	8,823		8,823		-	-
Other accounts payable	4,169		4,169		-	-
Progressive and other operators' jackpots	1,068		1,068		-	-
Deferred consideration	13,955		13,955		-	-
Contingent consideration	7,346		-		7,346	-
Other non-current liabilities	1,168		-		1,038	130

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,

2010

2009

€000

	Fair Value	Carrying amount	Fair Value	Carrying amount
Cash and cash equivalent	68,519	68,519	58,700	58,700
Available for sale investments	10,932	10,932	5,513	5,513
Other assets	28,819	28,819	18,752	18,752
Deferred consideration	15,001	15,001	13,955	13,955
Contingent consideration	16,533	16,533	6,983	6,983
Other liabilities	34,067	34,067	15,228	15,228

Included in available for sale investments is €8.9m and €2.0m measured at fair value using level 1 and level 2 respectively. These are the Group's only financial assets which are measured at fair value.

NOTE 28 -POST BALANCE SHEET EVENTS

A. Acquisition of Intelligent gaming solutions (IGS) shares

On 26 January 2011, the Group acquired 100% of the shares of Intelligent Gaming Systems Limited (hereinafter "IGS"). IGS is a provider of software based casino management systems to land-based casinos.

An initial consideration of £2.5m was paid in cash and additional consideration of up to £3.0m is payable in respect of the adjusted PBT performance in 2011-2013 in the beginning of the following year.

As of the approval date of the financial information 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 information.

B. Partnership with Scientific Games

On 8 March 2011, the Group entered into an agreement with Scientific Games to form a partnership called International Terminal Leasing (hereinafter "ITL") which relates to the strategic partnership with Scientific Games Corporation (note 12b).

During 2010 the Group paid a total amount of €2.4 million as a contribution towards the purchase of gaming machines on behalf of the partnership. Upon incorporation of the above partnership, it is anticipated that those funds will be exchanged for equity in ITL and accounted for as an investment in joint ventures in the interim financial information for 2011.

C. Acquisition of business and assets of associated businesses

On 10 March 2011 the Group entered into an agreement to purchase 100% of the issued share capital of PT Turnkey Services limited, a company which owns various assets of associated businesses including certain companies related by virtue of a significant common shareholder, for an initial cash consideration of €140 million, to be spread over instalments during 30 months from completion which is expected to be in June 2011, plus certain other contingent consideration depending on performance of the acquired businesses through to end of 2014.

As of the approval date of the financial information, the Group had not completed the valuation of the fair values of the intangible assets and liabilities acquired and accordingly these disclosures are not provided in the financial information.

NOTE 29 - 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

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