Half Yearly Report

RNS Number : 4403Y

Playtech Limited

03 September 2009

 



Playtech Limited

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

Interim Results for the six months ending 30 June 2009

Playtech (AIM: PTEC), the international designer, developer and licensor of software for the online, mobile and land-based gaming industry, today announces its unaudited interim results for the six months ended 30 June 2009.

Financial Highlights

• Gross Income up by 29.8% to €66.9 million (2008: €51.6 million) 
• • Total revenues up by 9.8% to €56.7 million (2008: €51.6 million)
  • Casino revenues up by 2.2% to €37.6 million (2008: €36.8 million) 
  • Poker revenues up by 23.8% to €17.3 million (2008: €14.0 million)  
• Adjusted EBITDA up by 33.2% to €45.3 million (2008: €34.0 million)
• Adjusted EBITDA margin 80% (2008: 66%) - largely due to the impact of the share of income in William Hill Online 
• Adjusted net profit3 up by 19.0% to €43.0 million (2008: €36.2 million)
• Adjusted net profit margin of 76% (2008: 70%)
• Adjusted basic EPS up by 7.8% to 18.0 € cents per share (2008: 16.7 € cents per share)
• Strong cash position of €48.7million at 30 June 2009 
• Interim dividend up 17.1% to 8.9 € cents per share (2008:7.6 € cents per share) 

Operational Highlights

• Core royalty business performing strongly 

• Good progress in the extensive integration process of the William Hill businesses

• Major licensee developments including new agreements with Betfair and NetPlay TV

• Highly successful launch of the Italian poker network 

• Continuing advances in new regulated markets such as the Company's strategic partnership agreement with the Serbian State Lottery

• Announcing today agreement with Olympic Entertainment Group, a leading gaming operator in the Baltic states and Eastern Europe

• New Live-gaming facilities proving increasingly attractive to licensees and significantly enhancing player's experience

Corporate initiatives

• Initiated moves for Board to become Code Compliant

• Searches commenced for additional new independent non-executive directors and Investor Relations representative

• Permanent CFO to be appointed

1 Gross Income is defined as revenue plus the Company's share of income from William Hill Online before non-cash amortization of intangibles

2 Revenues include 100% of royalties received from William Hill Online, under IAS 28, as explained below

3 Adjusted EBITDA and adjusted net profit are calculated after adding back certain items in relation to the investments in William Hill Online , Tribeca, the CY Foundation Group Limited, AsianLogic Limited, and the exchange loss relating to the investment in William Hill Online, which are not part of the Group's core business, and the employee stock option plan

Mor Weizer, Chief Executive, commented:

'The first half of 2009 has seen Playtech's licensees operating in a challenging macro-economic environment, yet total revenues have increased by 9.8%. The underlying performance of Playtech's core royalty business continues to be resilient. I remain confident that our industry leading products and services, diversified licensee base and strong reputation, will mean that Playtech continues to perform strongly.'

- Ends -

For further information contact:

Mor Weizer, CEO, Playtech Ltd  Shuki Barak, CFO, Playtech Ltd c/o Bell Pottinger Corporate & Financial	[phone]
Piers Coombs / Bruce Garrow Collins Stewart	[phone]
Mumtaz Naseem Deutsche Bank	[phone]
David Rydell / Olly Scott / Samantha Boston Bell Pottinger Corporate & Financial	[phone]

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

Access number: [phone]

A combined audiocast and slide presentation of the meeting will be available on the Group's website later today.

About Playtech

Playtech develops unified software platforms for the online and land based gambling industry, primarily targeting existing online operators wanting to upgrade their system; sportsbooks looking to diversify and land-based operators making their online debut. Playtech gaming applications - online casino, poker, bingo, mobile gaming, live gaming, land-based kiosk networks and fixed-odds games - are fully inter-compatible and can be freely incorporated as stand-alone applications, accessed and funded by players through the same user account and managed by the operator by means of a single powerful management interface. Founded in 1999, Playtech has over 800 personnel distributed globally, around seventy five percent of whom are engaged in research and development of current and future gaming technologies.

www.playtech.com

  Chairman's report

Playtech's business has proved resilient and traded well during the first half of 2009 despite the gaming industry facing significant challenges. The Company has not been entirely unaffected by the prevailing economic conditions. Against this background I am pleased to present the Company's interim results which show strong revenue and profit growth over the period and a series of significant operational developments. These interim results demonstrate the Group's continued market-leading position and diversified business model, which auger well for the future. 

Playtech continues to enhance its position as the leading software provider to the online and land-based gaming industry, with market-leading products for casino, poker and bingo games. Management continues to invest in the Company's software offering to improve game functionality, add new games and improve back-end capabilities.

At the end of 2008 the Company completed its transaction with William Hill, establishing William Hill Online (WHO) into which Playtech placed a number of on-line gaming assets acquired for a cash consideration of €177.7 million in return for a 29% stake. Additionally, the Group receives a royalty for the provision of its software platform to the enlarged business. The level of contribution from WHO has been impacted by its slower-than-anticipated start in the first half of 2009. WHO has created exciting opportunities for Playtech and the Board remains very confident that the WHO transaction will prove to be transformational for the Company and make an important contribution to earnings in the full year of 2009 and beyond.  

The Group has successfully increased the number of well-established licensees and considerable opportunities to further increase and diversify the licensee base remain. Major licensee developments during the first half included our agreements with Betfair and NetPlay TV. The Group's strategy of focusing on regulated markets has continued to be successful with new opportunities secured in Italy and encouraging progress is being made in France and Spain. In addition, the Group has been successful in emerging regulated markets as demonstrated by the recently announced partnership with the Serbian State Lottery and agreement with Olympic Entertainment. 

Playtech is a profitable and strongly cash generative business and, notwithstanding the more challenging operating environment, the Board is confident that the Company will continue to perform strongly.  The Group enjoys a strong balance sheet, with cash reserves of €48.7 million as at the end of June 2009. The Board believes Playtech is in a strong position to grow significantly: with an industry leading software offering, diversified licensee base and strong reputation, it will continue to grow market share through existing and new licensees. Its strong cash position will allow Playtech to pursue acquisitions and other corporate transactions offering attractive growth opportunities for the Group. Playtech continues to actively evaluate opportunities that would enable it to enhance its range of games and strengthen its market position in bingo, sports betting, majhong, backgammon and other skill-based games.  

The Board has approved the payment of an interim dividend of 8.9 € cents per share (2008: 7.6 € cents per share) in line with the Company's dividend policy, which is payable on 23 October 2009 to all shareholders and holders of depository interests on the register as at 25 September, 2009. This payment recognises the Board's continued confidence in Playtech's business model.  

The Board is committed to achieving high standards of corporate governance and to strengthening the senior management team. A new Company Secretary was recruited in April this year, Paul Wright joined with a significant skill set derived from a FTSE 250 company. The Board has initiated a search to appoint additional non-executive directors to make the composition of the Board compliant with the Combined Code and widen the expertise available to the Board.  Following the departure of Guy Emodi, the post of Chief Financial Officer (CFO) has been filled by Executive Director Shuki Barak on an interim basis. The Board is moving forward with the appointment of a new permanent CFO, which is expected before the year end. I would like to take this opportunity on behalf of the Board to thank Shuki for filling this role in the meantime.  In addition we are looking to recruit an experienced investor relations strategist to continue the Company's development of shareholder and investment community communications.

These are excellent results which demonstrate the strength of the core business and its ability to grow even considering the challenging market environment. These results would not have been possible without Playtech's talented employees, management team and Directors; I thank them all for their continued loyalty, dedication and hard work. The Company continues to grow and is faced with a great many exciting opportunities; the Board is therefore confident that Playtech will make solid progress for the remainder of 2009 and beyond.

Roger Withers

Chairman

3 September 2009

Chief Executive Officers Report

Overview

Playtech's total revenue increased by a very creditable 9.8% in the period. Additionally, revenues generated from the Group's interest in William Hill Online, resulted in an increase in gross income of 29.8%.   The underlying performance of Playtech's business continues to be resilient. We continue to add new licensees in existing markets and to enter new markets which will provide impetus for further growth in the business over the long term.  I remain confident that our industry-leading products and services, diversified licensee base and strong reputation, will ensure that Playtech continues to perform strongly.  

Strategy

The Group's overall objective is to enhance its position as the leading software provider to the world-wide gaming industry with a keen focus on regulated markets.  The business has three growth drivers:

• Organic growth through existing and new licensees - adding new licensee contracts, new products and like for like income development

• William Hill Online - continuing contribution from both profit share and royalties 

• Bolt on acquisitions - the Company is acquisitive and continues to seek earnings enhancing acquisitions across a range of media and gaming products

We work closely with clients to identify the features they require to succeed in their target markets. Our philosophy is based on deep client engagement and partnership that enables us to fine tune our management reporting software and product lines to suit our licensees' specific requirements. We continue to invest strongly in improvements to our products and in the development of new platforms, such as mobile and TV, as well as new games to ensure that our products appeal to players in the various markets in which our clients operate. In addition, Playtech continues to focus on markets where certain forms of on-line gaming are being regulated. We believe that such markets hold significant growth opportunities for the Group, and I am pleased to report below on a number of successes in realising this strategic vision during the first half of the year.

Licensees and Regulated Markets

I am very pleased that during the period, we continued to deliver on our strategic vision by adding significant new licensees to our client base. In June, we announced that Betfair had signed a new licence agreement to receive casino and bingo products, which is expected to deliver additional royalties towards the end of 2009. More recently the Company signed an agreement with NetPlay TV Plc in the United Kingdom for a five year exclusive licence to provide the full range of Playtech's software including casino, poker, bingo, TV and mobile games, for NetPlay's leading TV gaming offering. This deal, which is following the acquisition of MixTV, positions Playtech as a market leader in TV gaming technology.

In line with our strategy of focusing on regulated markets that will provide opportunities for secure, long-term royalty income, I am pleased to report today that Playtech has signed a five year agreement with Olympic, the largest provider of casino entertainment in the Baltics and Eastern Europe and a member of the European Casino Association, to provide casino, poker, bingo and sportsbook software as soon as they are regulated in the markets where it operates.  

In March we entered the Spanish market when we signed an agreement to supply Casino Gran Madrid, one of the largest and most prestigious land-based casino operators in Europe, with our online casino and poker products. Subsequently, in July we announced a strategic partnership for the provision of Playtech's casino and poker product to the Serbian State Lottery, the sole provider of online gaming in that country. The agreement is a landmark for Playtech as it is the first agreement with a state lottery.

The Italian poker network is exceeding management's expectations and is now Italy's third largest poker network with a market share in excess of 15%. Gamenet, which joined the network in mid-August is the latest addition and strengthens our position as a key licensor in the regulated Italian market.  Several other operators have expressed an interest in developing new opportunities with Playtech in the Italian market and I am confident that these discussions will generate new licensees in the near future.  Importantly, the Company is continuing its work with licensees to exploit additional opportunities that are appearing in Italy, as the government moves to further liberalise online gaming.  

The Group is also pursuing a number of opportunities in the French market where progress is being made in addition to an agreement with Chillipoker, a strategic partner of Free, the country's second largest internet service provider. Playtech is also actively reviewing developments in other markets that will soon be regulated in order to take advantage of opportunities for licensing, which are expected to emerge once regulations are put in place.

William Hill

The extensive integration process for WHO is now making good progress and WHO is attracting a significant number of new on-line customers. William Hill recently announced that its Sportsbook operations will move offshore and will be integrated with the other activities of WHO in Gibraltar. I am very confident that the Group will see significant benefits from its interest in this venture that, with the benefit of the well-respected William Hill brand, is set to become a leading international online gaming business.

Developments

Playtech has one of the most comprehensive and exciting suites of games available in the market and the Company's development teams are continually striving to enhance its offering. The Board is excited by the opportunities provided by our licensing agreement with Marvel Entertainment Inc.,signed earlier this year. Playtech will launch a brand new games package comprised of 16 fresh games in the coming months. The release will include two new branded slot games based on iconic Marvel characters: The Incredible Hulk, and Iron Man, packed with a range of special features.  Branded games are becoming increasingly popular with players, and our Gladiator™ branded slot game has become the most popular game for our licensees.

Since the recent launch of our European Live Dealers offering from the Latvian capital of Riga, the demand from European players for Live Games has continued to rise. Playtech Live evokes the ambiance of a real land-based casino but with the ease of access that only online can offer.  We believe we have developed a state of the art offering and a product that caters specifically to the tastes of European players. The table games are tailored to the European player and the package incorporates the region's most popular games, such as Roulette, Roulette Pro, Baccarat and Blackjack.

During the period, Playtech has launched a number of initiatives to improve its product offering. In April, it announced a new and improved version of its Bingo software, comprising a range of enhancements and new features, including a super-sized embedded chat facility for players. The new release provides a cutting-edge look and feel that enhances the player experience, while the back-end management software has been improved to allow better reporting and enhanced statistical information.  Playtech is also penetrating the Bingo TV market, with a fully automated, presenter-led format, for broadcasting Bingo games based on real-time statistics.

Current trading

Revenues, excluding WHO/former customer, continue to remain ahead of 2008. Trading in July and August 2009 increased by 1.4% for the comparable months in 2008 despite the challenging market conditions. We anticipate improved performance for the remainder of the year as a number of new licensees start to make a positive contribution. Additionally, we have a strong pipe-line of opportunities to pursue and convert to licensees. Playtech remains highly cash-generative: gross income is significantly ahead of last year and the Company has maintained its EBITDA margins through careful management of its administrative and other expenses.  

William Hill Online has continued to make progress since the period end. Gaming activities have continued to perform in line with expectations, although as widely reported poor results have affected the sportsbook trading.  As more of the William Hill Online operations migrate to the Playtech platform, we expect to see a further contribution from that business by the end of the year and into 2010.  

I therefore remain confident that, with its industry leading software offering, diversified licensee base and strong reputation, Playtech will continue to perform strongly.

Mor Weizer.

Chief Executive Officer

Financial and Operational Review

I am pleased to present Playtech's financial results for the six months ended 30 June 2009, which demonstrate the Group's robust business model in today's challenging economic conditions. Playtech's diversified licensee base has allowed the Group to deliver a positive trading performance and achieve significant growth over the same period in 2008.

Playtech's investment in William Hill Online, which is accounted for under IFRS as an investment in an associate, has influenced the way the Group's results are reported and makes a comparison with previous periods more difficult.  IAS 28 is not specific about the appropriate approach to be followed for trading transactions between an investor and its associate.  Following recent guidance related to the accounting treatment for trading transactions between an investor and its associate, Playtech has recorded 100% of the licence fees received in its revenue line, with its income from associate being shown separately in the income statement. This approach is considered to give greater clarity to users of the financial statements of the ongoing business results. 

On that basis total revenues for the six months to 30 June were up 9.8% to €56.7 million, (2008:€51.6 million). Casino revenues rose 2.2% to €37.6 million, (2008:€36.8 million). Poker revenues increased by 23.8% to €17.3 million, (2008:€14.0 million).

Total gross income rose by 29.8% to €66.9 million, (2008: €51.6 million). In 2009 €10.3 million, out of the €66.9 million, is related to our income from associates. 

Net profit for the period increased 37.5% to €32.4 million, (2008: €23.6 million). EPS for the period were 13.6 € cents based on the weighted average number of shares, 10.8 € cents per share in the same period in 2008. The diluted EPS for the six months ended 30 June 2009 was 13.1 € cents, (2008: 10.3 € cents). The net profit figures were reached after charging various non-cash charges relating to the investments in William Hill Online, Tribeca, CY Foundation Group Limited and AsianLogic Limited, and the employee stock option plan.

Adjusted Net Profit and Adjusted Earnings per Share

Management believes that adjusted net profit better represents the underlying results of the Group. Adjusted net profit for the six months ended 30 June 2009 totaled €43.0 million (2008: €36.2 million), an increase of 19%. Adjusted net profit margin for the six month period was 76% (2008:70%). The adjusted EPS for the six month period is 18.0 € cents, (2008: 16.7 € cents).

Adjusted Net Profit and Adjusted Earnings per Share

	For the six months ended 30 June
	2009 €000	2008 €000
Net profit	32,387	23,552
Amortization of intangibles of WH Online	5,257	-
Decline in fair value of available for sale investment in CY Foundation and AsianLogic	72	7,944
Discounting of deferred consideration for investments	202	481
Amortization of customer list on acquisition of Tribeca	1,597	1,576
Employee stock option expenses	3,525	2,616
Adjusted net profit	43,040	36,169
Adjusted net profit margin	76%	70%
Adjusted basic EPS (in Euro cents)	18.0	16.7
Adjusted diluted EPS (in Euro cents)	17.4	15.9

Adjusted EBITDA

Adjusted EBITDA is calculated after adding the income from associate of William Hill Online, and after adding back certain non-cash expenses in relation to the investments in, CY Foundation Group Limited and AsianLogic Limited and the employee stock option plan. Adjusted EBITDA for the period ended 30 June 2009 totaled €45.3 million (2008: €34.0 million), an increase of 33.2% over the same period in 2008. Adjusted EBITDA margin in the six months period was 80% compared to 66% in the same period in 2008.

Adjusted EBITDA

	For the six months ended 30 June
	2009  €000	2008  €000
Operating Profit	27,561	20,787
Amortization	2,754	1,953
Depreciation	1,092	702
EBITDA	31,407	23,442
Income from associate before amortization of intangibles	10,286	-
Decline in fair value of available for sale investment in CY Foundation  and AsianLogic	72	7,944
Employee stock option expenses	3,525	2,616
Adjusted EBITDA	45,290	34,002
Adjusted EBITDA margin	80%	66%

Investment in William Hill Online

In October 2008, Playtech entered into an agreement with William Hill, for the establishment of two new jointly owned entities ('WHO' or 'JVCOs'), to facilitate the integration of the online businesses of William Hill and the businesses and contracts comprising an affiliate marketing business, customer services operation and gaming brands and websites ('the Purchased Assets') which were purchased by Playtech as detailed below. The transaction completed on 30 December 2008.

Immediately prior to the transaction, Playtech acquired from a significant shareholder and other third parties, various online gaming businesses, marketing assets and contracts for a total consideration of €177.7 million in cash. In consideration for the injection of such Purchased Assets into WHO, Playtech received a 29% interest in WHO. 

One of the assets purchased was the business of a Playtech licensee. After the transfer of this business to WHO the level of royalties paid have reduced in line with the agreed royalties payable in the enlarged WHO. This reduced level of royalties is compensated by profits from the WHO business and other charges that the Group made to WHO.

During the first half of 2009, while the William Hill Sportsbook and online fixed-odds games businesses were held in the UK, Playtech's ownership interest in the JVCO's was effectively set to 32%; following the transfer of these businesses in August 2009, Playtech's ownership interest has reverted to 29%.  The income from associate of WH Online for the period amounted to €10.3 million, which is encouraging despite the slower than anticipated start to the year, the prolonged integration period and challenging trading conditions. 

Cash Flow

Playtech continues to be a highly cash generative business, and the return on investment in WHO has increased the cash flow of the Company further. Cash and cash equivalents as at 30 June 2009 amounted to €48.7 million (2008: €206.9 million), representing 16.5% (2008: 75.0%) of the Group's total assets.  At the half-year in 2008, the Group was in receipt of the proceeds of the share placing carried out in June, which was subsequently used to acquire assets and businesses that were contributed to WHO.

In the first six months of 2009, the Group generated €27.1 million from its operating activities (2008: €38.3 million). This reduction is caused by dividend payments from WHO of €10.3 million (2008: €nil) being presented in the Cash Generated from Investing Activities line item.

The Group generated €5.9 million from its investing activities in the period (2008: cash usage was €13.0 million), the majority of which was derived from the dividend received from the investment in WH Online, netted-off by the capitalization of other development costs of €3.0 million (2008:€2.7 million).  The Group's cash outlay was €15.9 million, the majority of which was in payment of the final dividend for 2008 of €18.2 million (2008: €13.6 million) (2008: cash generated was €126.8 million, including €138.1 million deriving from proceeds of the public offering).

Cost of Operations

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

The Group also continues to seek additional strategic acquisitions and investments in joint ventures. Such activities have resulted in an increase in administrative expenses.

Total distribution costs for the period ended 30 June 2009, excluding the above mentioned non-cash charges of €3.3 million (2008: €3.3 million), were €18.7 million (2008: €14.1 million), representing an increase of 32.2% over 2008. The increase is mainly due to employee related costs where the prices at which share options are granted to employees were converted from US dollars to pounds, resulting in an increase in employee stock option expenses to €3.5million (2008: €2.6million). The average number of employees increased by 135, which represents an increase of 21.6% from the average in first six months of 2008. As a result of this increase, additional offices were rented and additional office maintenance and equipment expenses were incurred.

Total administrative expenses, excluding the above mentioned non-cash charges of €1.8 million (2008: €8.8 million), were €5.2 million (2008: €4.6 million), an increase of 15.2% over 2008. The increase was mainly due to employee related costs. The average number of administrative employees increased by 5 employees, representing an increase of 6% over the first six months of 2008. 

Financial Income and Tax

Cash is generally held in short-term deposits, which generated a financial income of €0.5 million in the first 6 months of 2009 compared to €3.8 million in the same period in 2008. The decrease is due to the change in the financial market conditions which resulted in significantly lower interest rates in 2009 compared to the same period in 2008.

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 for the first six months of 2009 of €0.4 million (2008: €0.5 million), resulting in a 1.3% effective tax rate (2008: 2.0%).

Balance Sheet

Cash and cash equivalents, as at 30 June 2009, were €48.7 million (2008: €206.9 million) the decrease largely due to proceeds of the public offering in June 2008), which, as explained above, were used to acquire assets contributed to WHO.

The majority of the trade receivables balance, as at 30 June 2009, was due to amounts payable by licensees for the month of June 2009.

Intangible assets, as at 30 June 2009, totaled €44.7 million (2008: €40.4 million), the majority of which comprised the customer list purchased from Tribeca, goodwill, patent and intellectual property rights and development costs of products including new slot games, Mahjong, and the mobile platform. 

Available for sale investments totalling €4.8 million (2008: €13.9 million) are due to the investments in both Foundation and AsianLogic..

Deferred consideration in the amount of €13.6 million (net of discount of €0.6 million) as at 30 June 2009 represents the present value of the remaining consideration to be paid for the businesses and assets contributed in the WHO transaction.

Investments accounted for using the equity method related to the investment in WHO totaled €175.6 million (2008: nil).

Dividend

In May 2009, the Group distributed a final dividend for the year ended 31 December 2008 of 7.6 € cents per share.  On 2 September 2009, the Board recommended the distribution of an interim dividend of 8.9 € cents per share.  The dividend will be paid on 23 October 2009 to the Shareholders and Depositary Interest holders on the record as at 25th September 2009.

Shuki (Moshe) Barak

Chief Financial Officer

         Financial Statements as of 30 June, 2009 (In thousands)

         Unaudited Consolidated Statement of Comprehensive Income 

	For the six months ended				For the year ended
	30 June 2009	30 June 2008*			31 December 2008
	€000	€000			€000
Revenues	56,654	51,588			111,450
Distribution costs	(22,032)	(17,423)			(35,423)
Administrative Expenses	(7,061)	(13,378)			(28,050)
	(29,093)	(30,801)			(63,473)
Operating profit before the following items:	33,912	33,300			73,034
Employee stock option expenses	(3,525)	(2,616)			(4,125)
Amortization of intangible assets	(2,754)	(1,953)			(4,234)
Decline in fair value of available for sale investment	(72)	(7,944)			(16,698)
Total	(6,351)	(12,513)			(25,057)
Operating profit	27,561	20,787			47,977
Financing income	466	3,788			7,680
Financing cost - discounting of deferred consideration	(202)	(481)			(748)
Financing cost - other	(38)	(61)			(330)
Exchange rate differences - Investments accounted for using equity method	0	0			(13,126)
Total financing cost	(240)	(542)			(14,204)
Income from associate	10,286	-			-
Amortization of intangibles in associate	(5,257)	-			-
Share of profit of associate	5,029	-			-
Profit before taxation	32,816	24,033			41,453
Tax expense	(429)	(481)			(762)
Profit for the period attributable to the equity holders of the parent	32,387	23,552			40,691
Other comprehensive income for the period: Adjustments for change in fair value of available for sale equity investments	-		(196)	(196)
Total comprehensive income for the period attributable to equity holders of the parent	32,387		23,356	40,495
Earnings per share (in cents)
Basic	13.6	10.8			17.9
Diluted	13.1	10.3			17.3
*   Details of changes in presentation to the consolidated income statement are given in note 2B1.

         Financial Statements as of 30 June, 2009 (In thousands)

         Unaudited Consolidated Statement of changes in Equity

	Additional Paid in Capital	Available for sale reserve	Retained earnings*	Total
	€000	€000	€000	€000
For the six months ended 30 June, 2009
Balance at 1 January 2009	180,097	-	50,109	230,206
Changes in equity for the period
Total comprehensive income for the period			32,387	32,387
Dividend paid			(18,194)	(18,194)
Exercise of options	2,341	-	-	2,341
Employee stock option scheme	-	-	3,603	3,603
Balance at 30 June 2009	182,438	-	67,905	250,343
For the six months ended 30 June, 2008
Balance at 1 January 2008	39,065	196	40,870	80,131
Changes in equity for the period
Total comprehensive income for the period	-	(196)	23,552	23,356
Dividend paid	-	-	(13,570)	(13,570)
Public offering proceeds	140,989	-	-	140,989
Share issue costs	(2,874)	-	-	(2,874)
Exercise of options	2,223	-	-	2,223
Employee stock option scheme	-	-	2,861	2,861
Balance at 30 June 2008	179,403	-	53,713	233,116
For the year ended 31 December, 2008
Balance at 1 January 2008	39,065	196	40,870	80,131
Changes in equity for the year
Total comprehensive income for the year	-	(196)	40,691	40,495
Dividend paid	-	-	(35,893)	(35,893)
Public offering proceeds	140,989	-	-	140,989
Share issue costs	(2,874)	-	-	(2,874)
Exercise of options	2,917	-	-	2,917
Employee stock option scheme	-	-	4,441	4,441
Balance at 31 December 2008	180,097	-	50,109	230,206
* Details of changes in presentation to the consolidated statement of changes in equity are given in note 2B.

         Financial Statements as of 30 June, 2009 (In thousands)

         Unaudited Consolidated Balance Sheet

		June		As of		As of
		30 June 2009		30 June 2008*		31 December 2008
		€000		€000		€000
NON-CURRENT ASSETS
Property, plant and equipment		4,621		3,609		4,823
Intangible Assets		44,718		40,436		43,082
Investments accounted for using equity method		175,643		-		181,072
Available for sale investments		4,815		-		4,887
Other non-current assets		1,546		547		1,340
		231,343		44,592		235,204
CURRENT ASSETS
Trade Receivables		9,125		7,867		10,082
Other Receivables		5,437		2,531		2,802
Available for sale investments		-		13,946		-
Cash and cash equivalents		48,725		206,852		31,558
		63,287		231,196		44,442
Total Assets		294,630		275,788		279,646
EQUITY
Additional paid in Capital		182,438		179,403		180,097
Retained earnings		67,905		53,713		50,109
Equity attributable to equity holders of the parent		250,343		233,116		230,206
NON CURRENT LIABILITIES
Deferred consideration		13,580		-		13,378
Deferred revenues		16,438		19,745		18,136
Other Non Current Liabilities		1,220		102		184
		31,238		19,847		31,698
CURRENT LIABILITIES
Trade Payables		5,101		4,328		7,038
Tax liabilities		18		482		104
Deferred revenues		3,473		3,407		3,352
Other Accounts Payables		4,457		14,608		7,248
		13,049		22,825		17,742
Total Equity And Liabilities		294,630		275,788		279,646
* Details of changes in presentation to the consolidated balance sheet are given in note 2B.
The financial statements were approved by the Board and authorized for issue on 2 September 2009.
Mor Weizer		Shuki (Moshe) Barak
Chief Executive Officer		Chief Financial Officer

         Financial Statements as of 30 June, 2009 (In thousands)

         Unaudited Consolidated Statement of Cash Flow

	For the six months ended		For the year ended
	30 June 2009	30 June 2008*	31 December 2008
	€000	€000	€000
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax	32,816	24,033	41,453
Tax	(429)	(481)	(762)
Adjustments to reconcile net income to net cash provided by operating activities (see below)	(5,283)	14,739	28,051
Net cash provided by operating activities	27,104	38,291	68,742
CASH FLOWS FROM INVESTING ACTIVITIES
Long term deposits	191	(291)	(391)
Long term loan	(397)	-	(692)
Acquisition of property, plant and equipment	(890)	(1,081)	(3,389)
Proceeds from sale of available for sale investments	-	-	311
Investments in equity-accounted associates	-	-	(165,376)
Dividend received from equity-accounted associates	10,286	-	-
Acquisition of intangible assets	(310)	(532)	(1,925)
Acquisition of business	-	(8,397)	(19,542)
Capitalized development costs	(2,964)	(2,725)	(6,138)
Net cash (used in) provided by investing activities	5,916	(13,026)	(197,142)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid	(18,194)	(13,570)	(35,893)
Public offering proceeds	-	140,989	140,989
Share issue costs	-	(2,874)	(2,874)
Exercise of options	2,341	2,223	2,917
Net cash (used in) provided by financing activities	(15,853)	126,768	105,139
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	17,167	152,033	(23,261)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	31,558	54,819	54,819
CASH AND CASH EQUIVALENTS AT END OF PERIOD	48,725	206,852	31,558
* Details of changes in presentation to the consolidated statement of cash flows are given in note 2B.

         Financial Statements as of 30 June, 2009 (In thousands)

         Unaudited Consolidated Statement of Cash Flow continued

	For the six months ended		For the year ended
	30 June 2009	30 June 2008	31 December 2008
	€000	€000	€000
ADJUSTMENT TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES
Income and expenses not affecting operating cash flows:
Depreciation	1,092	702	1,678
Amortization	2,754	1,953	4,234
Income from associate	(10,286)	-	-
Amortization of intangibles of associate	5,257
Decline in fair value of available for sale investment	72	7,944	16,698
Employee stock option plan expenses	3,525	2,616	4,125
Others	-	55	(6)
Changes in operating assets and liabilities:
Decrease (Increase) in trade receivables	957	56	(2,159)
Decrease (Increase) in other receivables	(2,635)	1,029	758
(Decrease) Increase in trade payables	(1,937)	994	3,840
(Decrease) Increase in other payables	(2,505)	1,357	2,514
Decrease in deferred revenues	(1,577)	(1,967)	(3,631)
	(5,283)	14,739	28,051
Non-cash transactions
	For the six months ended		For the year ended
	30 June 2009	30 June 2008	31 December 2008
	€000	€000	€000
Intangible assets	(77)	-	(316)
Retained earnings	77	-	316

Note 1- General

A. 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.

B. The interim financial statements as at 30 June 2009, and 2008 and the six months then ended,

     respectively, have been reviewed by the Group's external auditors.

The financial statements for the year ended 31 December 2008, which were prepared under IFRS received an unqualified audit report. However, those financial statements included an emphasis of matter paragraph relating to contingent liabilities (see note 6). The financial information in respect of the year ended 31 December 2008 is derived from the Group's audited financial statements

The financial information for the periods ended 30 June 2009 and 30 June 2008 contained in this interim announcement is unaudited. 

Note 2- Significant accounting Policies

A. Accounting principles

The consolidated interim financial information has been prepared in accordance with the accounting policies that are expected to be adopted in the Group's full financial statements for the year ended 31 December 2009 which are not expected to be significantly different to those set out in Note 2 of the Group's audited financial statements for the year ended 31 December 2008. These are based on the recognition and measurement principles of IFRS in issue as adopted by the European Union (EU) and are effective at 31 December 2009 or are expected to be adopted and effective at 31 December 2009. The financial information has not been prepared (and is not required to be prepared) in accordance with IAS 34. The accounting policies have been applied consistently throughout the Group for the purposes of preparation of this financial information

In the current year, the Group will adopt the following standards and interpretations, issued by the International Accounting Standards Board or the IFRIC, for the first time with no significant impact on its consolidated results or financial position.

IFRS 8 - Operating Segments (effective for annual periods beginning on or after 1 January 2009). IFRS 8 is a disclosure Standard that has resulted in a redesignation of the Group's reportable segments, but has had no impact on the reported results or financial position of the Group. 

IAS 1 - (revised 2007) Presentation of Financial Statements (effective for annual periods beginning on or after 1 January 2009). The revised Standard has introduced a number of terminology changes (including revised titles for the condensed financial statements) and has resulted in a number of changes in presentation and disclosure. However, the revised Standard has had no impact on the reported results or financial position of the Group.

There has been no change in the nature of the critical accounting estimates and judgments as set out in Note 3 to the Group's audited financial statements for the year ended 31 December 2008.

B. Changes in presentation

B1. Changes in functional currency

During the second half of 2008, the majority of the Group's revenues and expenses were generated in Euros. With effect from 1 July 2008, the Group changed it functional currency from United States dollars to Euros .Therefore, the financial statements of the Company and its subsidiaries are prepared in Euro (the measurement currency), which is the currency that best reflects the economic substance of the underlying events and circumstances relevant to the Group.

Comparative numbers for primary statements, the balance sheet and the statement of comprehensive income for the period to 30 June 2008, were converted to Euros based on the EURO:USD rate as at 1 July 2008, being 1.57777

Starting from 1 July 2008 all subsidiaries of the Group are reporting in the Euro currency in line with the Group policy.

B2. Changes in income statement

During the second half of 2008 management decided to allocate its expenses presentation on the face of the income statement to comply with the Group's internal measurement of its business. The previously presented operating expenses, development costs and marketing expenses were combined into 'Distribution costs' while administrative expenses remained as presented before.

B3. Reclassification

In 2008, the employee stock options reserve was reclassified to retained earnings.

Note 3 - Investments Accounted for using the Equity Method

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

Immediately prior to the transaction, the Group acquired from a significant shareholder and other third parties, various online gaming businesses, marketing assets and contracts ('the Purchased Assets') for a total cash consideration of $250 million (€177.7 million). In consideration for the injection of the Purchased Assets into WH Online, the Group received 29% interest in WH Online. The Group's ownership interest can increase up to 32% depending on certain conditions relating to the integration of the activities as further detailed below. The acquisition of the Purchased Assets by the Group was solely for the purpose of contributing them directly to WH Online in consideration for the Group's 29% interest therein, hence the Group has treated the transaction as a single acquisition of a 29% interest in an associate. 

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

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

Out of the total consideration of USD 250 million (€177.7 million), payable for the Purchased Assets (and hence the Group's interest in WH Online) USD 202.2 million (€143.8 million) was paid to companies related to the Group's significant shareholder (hereinafter 'Affiliates'), USD 40 million (€28.4 million) was payable to the Group's former customer (out of which USD 20 million (€14.2 million) was paid in cash and the remaining amount is to be paid by 30 December 2010) and USD 0.3 million (€0.2 million) was paid to a third party providing marketing services to the Affiliates in consideration for an option to purchase their business for a total cost of USD 7.5 million (€5.4 million). The option is exercisable until 31 December 2009.

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

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

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

	€000
Cash consideration to vendor of the purchased assets	161,209
Deferred consideration	16,505
Expenses paid in cash	3,995
Total cash consideration	181,709
Finance cost arising on discounting of cash consideration	(809)
Present value of consideration including expenses	180,900
Group share of fair value of net assets of WH Online:
Customer relationships	5,114
Affiliate contracts	2,177
Brands	40,104
Software	5,600
Covenant not to compete	10,351
Acquired net assets	2,823
	66,169
Goodwill	114,731
Present value of the consideration including expenses	180,900

Included in the above cash consideration is deferred consideration of €13.4 million (net of discount of €0.8 million) that is due for payment on 30 Dec 2010.

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

	€000
Investments accounted for using equity method at 1 January 2009	181,072
Adjustment to expenses	(172)
Investments accounted for using equity method	180,900
Income from associate	10,286
Amortization	(5,257)
Dividend	(10,286)
Investments accounted for using equity method as of 30 June 2009	175,643

Note 4 - 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 six months ended 30 June,				For the year ended 31 December,
	2009		2008		2008
	In euro cents		In euro cents		In euro cents
Basic	13.6		10.8		17.9
Diluted	13.1		10.3		17.3
	€000		€000		€000
Profit for the year	32,387		23,552		40,691
	Number		Number		Number
Denominator - basic
Weighted average number of equity shares	238,752,966		216,953,130		227,696,037
Denominator - diluted
Weighted average number of equity shares	238,752,966		216,953,130		227,696,037
Weighted average number of option shares	9,221,383		11,187,957		7,413,260
Weighted average number of shares	247,974,349		228,141,087		235,109,297

B. Adjusted earnings per share

The adjusted earnings per share present the profit for the year before certain significant non cash expenses included in the income statement, being the decline in fair value of available for sale investments, the amortization of the customer list on acquisition, the finance cost on discounting of deferred consideration, the employee stock option expense and the exchange rate differences related to the investment in associates using the equity method, as the directors believe that the adjusted profit represents more closely the underlying trading performance of the business.

	For the six months ended 30 June,				For the year ended 31 December,
	2009		2008		2008
	In euro cents		In euro cents		In euro cents
Basic- Adjusted EPS	18.0		16.7		34.5
Diluted- Adjusted EPS	17.4		15.9		33.4
	€000		€000		€000
Profit for the year	32,387		23,552		40,691
Decline in fair value of available for sale investments	72		7,944		16,698
Amortization on acquisition	1,597		1,576		3,173
Amortization of investment accounted for using the equity method	5,257		-		-
Finance cost on discounting of deferred consideration	202		481		748
Employee stock option expense	3,525		2,616		4,125
Exchange differences - Investments accounted for using equity method	-		-		13,126
Adjusted profit	43,040		36,169		78,561

Note 5- Shareholders Equity

A. Share capital

		Number of shares
		30 June,		30 June,		31 December,
		2009		2008		2008
Authorized		N/A(*)		N/A(*)		N/A(*)
Issued and fully paid		239,869,226		238,256,223		238,483,378

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

B. Share options exercised

During the period 1,385,848 share options were exercised.

C. Distribution of Dividend

In May 2009, the Company distributed €18,194,198 as final dividend to its existing shareholders for the year ended 31 December 2008.

Note 6 - Contingent Liabilities

A. The Group is not a gaming operator and does not provide gaming services to players.
     From 13 October, 2006, following the approval by the US President of the Unlawful Internet Gambling

     Enforcement Act 2006 (the 'UIGEA'), the Group requested all of its licensees to cease their US facing

     activity. Such request was accepted and implemented by all licensees. The directors believe that the

     Group has taken all measures necessary to be in full compliance with the UIGEA. 

The directors are aware of activity by certain regulatory authorities creating uncertainty as to further actions that may occur, if any. Accordingly, the directors have considered any residual risk arising in an indirect manner from the Group's activities and the potential impact on the financial statements, and no provision has been made in the financial statements in respect of the likelihood of any adverse impact that may arise from such activities.

B.  Other

Management is not aware of any contingencies that may have a significant impact on the financial position of the Group in addition to the above mentioned. Management is not aware of any additional material, actual, pending or threatened claims against the Group.

Independent Review Report to Playtech Limited 

Introduction

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2009 which comprises the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Changes in Equity, the Consolidated Balance Sheet, the Consolidated Statement of Cash Flow, and the related explanatory notes 1 to 6.

We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The interim report, including the financial information contained therein, is the responsibility of and has been approved by the directors. The directors are responsible for preparing the interim report in accordance with the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market which require that the half-yearly report be presented and prepared in a form consistent with that which will be adopted in the company's annual accounts having regard to the accounting standards applicable to such annual accounts.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Our report has been prepared in accordance with the terms of our engagement to assist the company in meeting the requirements of the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, ''Review of Interim Financial Information Performed by the Independent Auditor of the Entity'', issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

    Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2009 is not prepared, in all material respects, in accordance with the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market.

Emphasis of matter

In forming our review conclusion, which is not qualified, we have considered the adequacy of, and draw attention to, the disclosures made in note 6 to the financial information concerning the uncertainty over the actions, if any, that certain regulatory authorities may take. Further information is set out in note 6, which states that the Directors consider that no provision is necessary in respect of this matter.

BDO Stoy Hayward LLP

Chartered Accountants and Registered Auditors

London

3 September 2009

 

END

 

 

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