Interim Results
Playtech Limited
04 September 2007
Playtech Limited
('Playtech' or 'the Group')
Interim Results for the Six Months Ended 30 June 2007
Financial Highlights*
• Total Revenues up by 80% to $44.0 million (2006 - $24.5 million)
o Casino revenues up by 53% to $32.6 million (2006 - $21.3 million)
o Poker revenues up by 275% to $10.5 million (2006 - $2.8 million)
• Current monthly royalty run rate now back to pre-October 2006 peak levels
• EBITDA (earnings before interest, tax, depreciation and amortisation), up
by 2% to US$30.7 million (2006 - $30.2 million including US revenues)
• Basic EPS of 13.5 cents (2006 - 14.7 cents including US revenues)
• Interim dividend of 6.1 cents per share equating to approximately US$13
million to be paid on 19 October 2006.
*Unless otherwise stated revenue numbers are excluding US. (See reconciliation
table included in financial review section below)
Operational Highlights
• Acquired Tribeca assets fully integrated making Playtech the world's
largest independent online poker network (www.pokersitescout.com)
• 12 new licensees added (8 migrated from Tribeca) catering to European and
Asian markets
• New Indian and Philippines development centres now successfully integrated
and new Bulgarian subsidiary is operating well
• Strong pipeline of new products aimed specifically at Asian and European
markets
• Further investment in development, and pre and post sale resources bringing
the total number of Playtech employees to over 550
• Land-based subsidiary Videobet expanding potential market through the
introduction of unique switchable technology encompassing both server based
and stand alone machine technology
Mor Weizer, Chief Executive, commented:
'This has been another highly successful first half for Playtech and we continue
to enhance our position as the world's leading software solution provider to the
gaming industry. The Group has further strengthened its foothold through the
development of its relationship with existing licensees and through gaining
additional licensees, as well as developing products specifically aimed at the
Asian markets. We are also focusing on cross selling opportunities to existing
licensees through the addition of supplementary gaming products. Playtech has a
very healthy pipeline of new business for the second half of the year and we look
forward to making continuing strong progress.'
For further information:
Mor Weizer, CEO, Playtech Ltd
c/o Bell Pottinger
Tel: 020 7861 3232
www.playtech.com
David Rydell / Peter Otero
Bell Pottinger Corporate & Financial
Tel. 020 786 3232
Chairman's Statement
It gives me great pleasure to present very strong interim results for Playtech
Limited. The Group revenues for the period have barely been affected by the
withdrawal of our licensees from the US market. In the six months under review
the Group has made outstanding progress in all key areas of performance. Total
revenues (in 2006 excluding US) for the period increased 80% to $44.0 million
with casino revenues increasing 53% to $32.6 million and poker revenues
increasing 275% to $10.5 million, boosted by the migration of the Tribeca
licensees onto Playtech's platform. This now makes Playtech the world's largest
independent online poker network.
The business has grown significantly in terms of revenues generated from
existing licensees and, in addition, it has also won new, high quality clients.
In the period, 12 new licensees have been added to the portfolio, strengthening
Playtech's position as one of the world's leading software providers to the
gaming industry.
It has been Playtech's long standing commitment to diversify its business
portfolio, in terms of both geography and product, and I am pleased to report
that excellent progress continues to be made in this area. The Group has seen
further penetration into the exciting Asian markets through its agreement with
Foundation Group Ltd and potential new licensees. Software improvements aimed
specifically at the Asian market, such as the revamped live gaming software and
specific backend tools have been recently released and several P2P games are
currently under pilot. Videobet, the Group's subsidiary for land-based products,
continues to build momentum. Furthermore, the Group has successfully integrated
its new Indian and Philippines development centres and its Bulgarian subsidiary
is operating successfully.
Playtech's total commitment to the constant development of new products and
solutions for the dynamic gaming industry is reflected in its investment in
development and technical support resources, bringing the total number of
Playtech employees to over 550. Indeed the figures presented today are a credit
to the Group's employees and management team and I thank them for their
considerable efforts.
In summary, the Board is very pleased with Playtech's progress in the first half
of this year and looks forward to a strong second half.
Roger Withers
Chairman
Chief Executive Officer's Report
I am pleased to announce a very successful first half performance for 2007. The
Group has reacted decisively to the changed regulatory environment in which it
now operates and has focused during the first half of the year on the
integration of the acquired Tribeca assets. In addition it has continued to
build its licensee portfolio in the European and Asian markets in line with the
Group's geographical diversification strategy. As a result Playtech has become
the world's largest independent poker network and has further consolidated its
market leading position in the online gaming software industry as a whole. The
Group continues to enjoy and take advantage of its market leading position.
Strategy
The Group's goal is to enhance its position as the world's leading software
solution provider to the gaming industry. We will achieve this by providing
market leading unified systems to our licensees and allowing them to target
specific markets to take advantage of the various cross selling opportunities
and through this, additional revenue generation. In the last six months
Playtech's poker network has become the world's largest independent network. The
Group, being one of the few software providers that is able to provide a full
range of state of the art gaming and management products, continues to attract
high quality licensees. In order to stay at the forefront of product
development, the Group continues to put considerable resources into this area.
In addition the Group is focusing on markets which are in the process of
regulating certain forms of online gaming and we believe that such markets hold
significant growth opportunities for the Group.
An example of this is our investment in Foundation Group, a group that holds a
licence to offer P2P games for the emerging Chinese market, and with whom we now
hold a ten year software licence agreement and an equity stake.
Product Development
During the first half of 2007, the Group successfully integrated its new
development centres in India and the Philippines and has now firmly established
its Bulgarian subsidiary, which together have significantly extended the Group's
development capabilities. The addition of these development centres will greatly
improve the time to market of Playtech's products and will allow the Group to
further concentrate on the development of new games to support its future growth
in diversified markets.
The Casino product remains Playtech's flagship offering and it continues to show
impressive growth. The Group intends to further develop this product to comply
with the needs of the various licensees throughout the world. During the first
half of 2007, the Group focused on converting the majority of its downloadable
casino games into flash technology, which is the preferred format in certain
European markets. As a result, our licensees have experienced strong growth
during the period.
During the last six months, the Bulgarian centre completed the development of an
updated version of the downloadable Bingo product and a new Bingo flash version.
Both Bingo versions have been added by several licensees and have seen
significant growth since their introduction.
The Group continues to make progress in the development of its land-based
product through its subsidiary Videobet. During the second quarter of 2007,
Videobet received a certificate of approval for Videobet's Random Number
Generator (RNG) from Gaming Laboratories International (GLI), which will allow
the company to offer its products in certain regulated markets. In the same
period it has also introduced unique switchable technology allowing Videobet's
stand-alone terminals to be upgraded to a full server-based configuration
effortlessly and with no additional cost. This will enable the company to
introduce its technology in those markets where server based gaming is not yet
approved or which are in the process of regulatory changes and offer the
operator a very cost effective option to switch to Videobet's server based
capabilities when regulations permit. Videobet is continuing to invest in
expanding its games portfolio to accommodate the requirements of the European,
Asian and South American land-based gaming markets.
Licensees
In the first six months of 2007, Playtech signed up a total of 12 new software
licensees - eight of which migrated from Tribeca - a level which historically
has only been achieved over the course of an entire year. All of these licensees
are operators which cater to the European and Asian markets and this is
therefore in line with the Group's geographical diversification strategy. These
licensees are an important addition to Playtech's future growth, both
organically and through the cross selling opportunities to other gaming
products. This has been clearly demonstrated by the cross selling of Playtech's
additional casino side games to all the former Tribeca poker licensees and the
addition of a complete online casino suite to one of the migrated licensees.
Outlook and Current Trading
Playtech has a very healthy pipeline of new business for the second half of the
year consisting of both the release of new products to existing licensees and
through the addition of new licensees, for which it is in various stages of
negotiations with several European and Asian groups. The Group expects that it
will be in a position to launch a new Asian P2P network and to make a
significant addition to its poker network in the near future. In addition, the
Group is focusing on the cross selling opportunities to existing licensees
through the addition of supplementary gaming products. The Group sees further
progress in the introduction of regulation in various jurisdictions and expects
that once such changes are made it will open up considerable opportunities for
Playtech.
Financial Review
Total revenues in the period amounted to $44.0 million (2006: $46.2 million,
including the US revenues). The decline in revenues is fully attributable to our
licensees' withdrawal from the US market.
The following table analyses the revenues for 2007 and 2006:
Poker Casino Total
-------------------------------- -------------------------------- --------------------------------
30 June Change 30 June Change 30 June Change
------------------ ------------------- -------------------
2007 2006 2007 2006 2007 2006
$M $M $M $M $M $M
--------- -------- ------------- --------- --------- ------------ --------- --------- ---------
Q1 non US 4.2 1.2 257% 15.2 9.4 62% 19.8 10.7 85%
Q2 non US 6.3 1.6 288% 17.4 11.9 46% 24.2 13.8 76%
Total non US 10.5 2.8 275% 32.6 21.3 53% 44.0 24.5 80%
US revenues - 2.0 - - 19.1 - - 21.7
Total revenues 10.5 4.8 119% 32.6 40.4 (19%) 44.0 46.2 (5%)
Total revenues for the period were $44.0 million, which represents an increase
of 80% on the $24.5 million (excluding US revenues) achieved in the same period
last year. On the same basis, casino revenues for the period totalled $32.6
million, an increase of 53% from $21.3 million in 2006 and poker revenues for
the period totalled $10.5 million, an increase of 275% from the $2.8 million in
2006. Total revenues include other income of $0.9 million (2006: $1.0 million).
During the second quarter of 2007, total revenues were $24.2 million,
representing an increase of 22% on the $19.8 million achieved in Q1 2007 and an
increase of 76% on the $13.8 million in Q2 2006 (excluding US revenues). On the
same basis, casino revenues totalled $17.4 million, an increase of 15% from
$15.2 million in Q1 2007 and an increase of 46% from $11.9 million in Q2 2006;
and poker revenues totalled $6.3 million, an increase of 50% from $4.2 million
in Q1 2007 and an increase of 288% from $1.6 million in Q2 2006.
The Group's operating profit for the period was $24.6 million, a decrease of 17%
over the same period in 2006 (actual numbers including US revenues). The
decrease is partially as a result of the withdrawal from the US on the one hand
and also the recruitment of additional of new staff to further enhance our
service, speed to market and in investment into new products and games. As a
result, the operating margin for the period was 56% compared to 64% in the same
period in 2006 (actual numbers including US revenues).
EBITDA, which is defined as earnings before interest, tax, depreciation and
amortisation, for the period was $30.7 million, an increase of 2% over the same
period in 2006 (actual numbers including US revenues).
Reconciliation of EBITDA to profit before taxation
Six months to 30 June 2007 2006
$m $m
EBITDA 30.7 30.2
Depreciation (0.7) (0.2)
Amortisation (2.1) (0.3)
Finance income 2.3 1.1
Finance cost (0.8) (0.1)
------------ -----------
Profit before tax 29.4 30.7
============ ===========
Net profit after tax for the period was $29.0 million, a decrease of 5% from the
same period in 2006 (actual numbers including US revenues). EPS for the period
is 13.5c per share compared to 14.7c per share in the first half of 2006 (actual
numbers including US revenues). Diluted EPS for the period was 13.0c per share
compared to 14.2c per share in 2006 (actual numbers including US revenues).
Cost of Operations
Playtech's strong recovery from the withdrawal by its licensees from the US
market is due to the increased resources made available to its licensees,
allowing them to penetrate new markets and alter their business objectives in a
short space of time. In addition, during the period the Group added 12 new
licensees and completed the Tribeca acquisition, while revenues attributed to
such additional licensees will impact in full the Group's results in the second
half of 2007. The cost of operations during the period was $19.4 million
compared to $16.5 million (including a charge of $6.6 million for the founder's
cash contribution) in 2006.
Operating activity is conducted through the Company's operations in Estonia,
Bulgaria and the Philippines. Operating expenses were $8.6 million, representing
an increase of 164% from 2006. 80% of this increase is attributable to
employees' cost, depreciation and amortisation (mainly in respect of the Tribeca
acquisition amounting to $1.7 million).
Sales and Marketing expenses were $5.9 million, representing an increase of 56%
over 2006. This was mainly as a result of increased costs attributable to the
recruitment of pre and post sales staff to support the increased number of
licensees during the period.
Development costs were $0.8 million, which is an increase of 95% from the
previous period. These costs are associated with investment into the improvement
of existing revenue generating products. The cost of new products under
development are capitalised and amortised as part of the operating expenses.
During the period the Group has capitalised costs in the amount of $1.6 million
(2006: $1.0 million).
Administrative expenses were $4.2 million, a decrease of 54% from 2006. This
decrease is mainly as a result of the $6.6 million charge relating to the
founders' cash contributions to employees recorded in 2006.
Financial Income and Taxation
The Group holds its cash reserves in short-term US dollar deposits. Such
deposits have generated in the period a financial income of $2.3 million.
Only the Bulgarian and Israeli subsidiaries have generated taxable income, which
is charged on a cost plus basis.
Cash Flow
The Group generated $27.4 million of cash in the period from operating
activities (2006: $39.1 million).
The Group's investment activities amounted to $38.2 million (2006: $2.5
million). This was mainly accounted for by the Tribeca acquisition ($21.1
million) and the investments into Foundation Group Limited shares ($7.5 million)
and a joint venture in Copernicus Trading Limited ($6.5 million).
Tribeca Transaction
In November 2006, Playtech signed an agreement with Tribeca Tables Europe
Limited in respect of certain non-US assets.
The consideration for this acquisition is calculated according to a formula
based on Playtech's future earnings from the acquired assets. The conditions
required to acquire control and complete the agreement were satisfied in January
2007. The total cash payable, including expenses is estimated to be $59.5
million. The cash payable has been allocated in the following way: $41.1 million
to the identifiable intangible assets, $15.8 million for goodwill and $2.6
million to finance cost. Out of the $41.1 million, $40.3 million has been
allocated to the migrated licensees which is being amortised over the estimated
useful life of 8 years.
Foundation Transaction
The Group entered into a 10 year software licence agreement with Foundation
Group Limited, which during March 2007 re-listed on the Hong Kong Stock Exchange
at a price of HK$1.28 ('Flotation Price'). In connection with the agreement the
Group also entered into the following agreements in respect of ordinary shares
in Foundation:
• a share sale and purchase agreement with Luck Continent Limited for $7.5
million to acquire 53,750,000 ordinary shares of HK$0.001 each in
Foundation at a 15% discount to the Flotation Price;
• a share sale and purchase agreement with Emphasis Services Limited ('ESL')
for $6.5 million to purchase 50% of the ordinary shares in Copernicus
Trading Limited ('Copernicus'). Copernicus' only asset is a convertible
note convertible into 400,000,000 shares in Foundation.
The Group has evaluated the benefit arising from the above investments and has
recorded deferred revenues of $27.6 million which was calculated as the
difference between the purchase price and the fair value at such time being the
Flotation Price. Once royalty revenues commence under the Foundation software
license agreement, the deferred revenues will be realised as income over the
life time of the software licence agreement.
As at 31 August 2007, the closing price of Foundation shares was HK$0.83
compared to HK$1.41 as at 30 June 2007. As a result the carrying value of the
total available for sale equity shareholding and investment in the joint venture
has decreased to $24.2 million. This reduction in value is a non-adjusting post
balance sheet event and has not therefore been accounted for as at 30 June 2007.
Dividend
On 4 September 2007, the Board declared an interim dividend of 6.1 cents per
share (approximately $13 million). The dividend will be paid on 19 October 2007
to those Shareholders and Depositary Interest holders on the register on 21
September 2007. The ex-dividend date will be 19 September 2007. Shareholders and
Depositary Interest holders may elect to receive the equivalent dividend amount
in pounds sterling.
CONSOLIDATED INCOME STATEMENT
For the six months For the
ended year ended
-------------------------------- --------------
30 June, 30 June, 31 December,
------------ ---------------- ------------
2007 2006 2006
------------ ---------------- ------------
US$000 US$000 US$000
------------ ---------------- ------------
(Unaudited) (Unaudited) (Audited)
Revenues 43,966 46,178 90,078
Operating expenses (8,553) (3,237) (9,247)
Sales & marketing expenses (5,859) (3,746) (8,941)
Development costs (769) (395) (1,567)
Administrative expenses (4,222) (9,132) (13,101)
-------------- ---------- -------------
(19,403) (16,510) (32,856)
-------------- ---------- -------------
--------------------------------------------------------------------------------------------
Operating profit before charges related to
founders' cash contributions to employees,
loss on disposal of available for sale
investment and employee stock option
expenses 26,233 36,464 64,491
Charge related to founders' cash
contributions to employees - (6,566) (6,566)
Loss on disposal of available for sale
investment (note 4) (654) - -
Employee stock option expense (1,016) (230) (703)
-------------- ---------- -------------
Total (1,670) (6,796) (7,269)
--------------------------------------------------------------------------------------------
Operating profit 24,563 29,668 57,222
Finance income 2,314 1,144 3,638
Finance cost (808) (68) (101)
Share of profit in joint venture (note 4) 3,300 - -
-------------- ---------- -------------
Profit before taxation 29,369 30,744 60,759
Tax expenses (387) (254) (345)
-------------- ---------- -------------
Profit for the period attributable to the
equity holders of the parent 28,982 30,490 60,414
============== ========== ==============
Earnings per share (in Cents)
Basic 13.5 14.7 28.7
Diluted 13.0 14.2 27.7
CONSOLIDATED BALANCE SHEET
As of 30 As of 30 As of 31
June, June, December,
------------ -------------- -------------
2007 2006 2006
------------ ------------- --------------
US$000 US$000 US$000
------------ ------------- --------------
(Unaudited) (Unaudited) (Audited)
NON-CURRENT ASSETS
Property, plant and equipment 3,805 1,460 3,015
Intangible assets 61,584 2,778 4,355
Other non-current assets 136 108 127
------------ ------------- --------------
65,525 4,346 7,497
------------ ------------- --------------
CURRENT ASSETS
Trade receivables- other 8,884 5,769 6,257
Trade receivables- related parties 1,472 - -
Other receivables 1,779 683 1,280
Other receivables- related parties (note 4) 3,750 - -
Investment in joint venture (note 4) 36,070 - -
Available for sale investments (note 4) 4,847 - -
Cash and cash equivalents 78,554 89,587 101,403
------------ ------------- --------------
135,356 96,039 108,940
------------ ------------- --------------
TOTAL ASSETS 200,881 100,385 116,437
============ ============= ==============
SHAREHOLDERS EQUITY
Additional paid in capital 59,341 55,637 56,370
Capital reserve (note 4) 444 - -
Employee stock option reserve 1,741 252 725
Retained earnings 61,685 36,308 47,731
------------ ------------- --------------
Equity attributable to equity holders
of the parent 123,211 92,197 104,826
------------ ------------- --------------
NON-CURRENT LIABILITIES
Other non-current liabilities 66 24 46
------------ ------------- --------------
CURRENT LIABILITIES
Trade payables- other 6,955 889 4,576
Trade payables - related parties 1,632 413 1,091
Other payables (note 3) 39,433 3,512 3,080
Deferred revenues (note 4) 29,584 3,350 2,818
------------ ------------- --------------
77,604 8,164 11,565
------------ ------------- --------------
TOTAL EQUITY AND LIABILITIES 200,881 100,385 116,437
============ ============= ==============
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Employee
Additional stock
Share Paid in Capital options Retained
capital Capital reserve reserve earnings Total
-------- ---------- ------- --------- -------- --------
US$000 US$000 US$000 US$000 US$000 US$000
-------- ---------- ------- --------- -------- --------
FOR THE SIX MONTHS ENDED 30 JUNE,
2007
Balance at 1 January 2007 - 56,370 - 725 47,731 104,826
Changes in equity for the period
Profit for the period - - - - 28,982 28,982
-------- ---------- ------- --------- -------- --------
Total recognized income and - - - - 28,982 28,982
expense for the period
Dividend paid - - - -(15,028) (15,028)
Adjustments for change in fair
value of available for sale equity
investments (note 4) - - 444 - - 444
Exercise of options - 2,971 - - - 2,971
Employee stock option scheme - - - 1,016 - 1,016
-------- ---------- ------- --------- -------- --------
Balance at 30 June 2007 - 59,341 444 1,741 61,685 123,211
======== ========== ======= ========= ======== =========
FOR THE SIX MONTHS ENDED 30 JUNE,
2006
Balance at 1 January 2006 10 100 - 22 19,587 19,719
Changes in equity for the period
Profit for the period - - - - 30,490 30,490
-------- ---------- ------- --------- -------- --------
Total recognized income and - - - - 30,490 30,490
expense for the period
Dividend paid - - - -(21,000) (21,000)
Initial Public Offering proceeds - 59,862 - - - 59,862
Share issue costs - (4,335) - - 665 (3,670)
Cancellation of issued shares (10) 10 - - - -
Founders' cash contribution to
employees - - - - 6,566 6,566
Employee stock option scheme - - - 230 - 230
-------- ---------- ------- --------- -------- --------
Balance at 30 June 2006 - 55,637 - 252 36,308 92,197
======== ========== ======= ========= ======== =========
FOR THE YEAR ENDED 31 DECEMBER,
2006
Balance at 1 January 2006 10 100 - 22 19,587 19,719
Changes in equity for the period
Profit for the year - - - - 60,414 60,414
-------- ---------- ------- --------- -------- --------
Total recognized income and - - - - 60,414 60,414
expense for the period
Dividend paid - - - -(39,500) (39,500)
Initial Public Offering proceeds - 59,862 - - - 59,862
Share issue costs - (4,335) - - 664 (3,671)
Cancellation of issued shares (10) 10 - - - -
Founders' cash contribution to
employees - - - - 6,566 6,566
Exercise of options - 733 - - - 733
Employee stock option scheme - - - 703 - 703
-------- ---------- ------- --------- -------- --------
Balance at 31 December 2006 - 56,370 - 725 47,731 104,826
======== ========== ======= ========= ======== =========
CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months ended For the
year ended
30 June, 31 December,
-------------------------- -------------
2007 2006 2006
------------- ------------ -------------
US$000 US$000 US$000
------------- ------------ -------------
(Unaudited) (Unaudited) (Audited)
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax 29,369 30,744 60,759
Tax (387) (254) (345)
Net cash provided by operating activities (see
below) (1,543) 8,652 12,213
------------- ------------ -------------
Net cash provided by operating activities 27,439 39,142 72,627
------------- ------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Long term deposits (9) (117) (135)
Acquisition of property, plant and equipment (1,484) (768) (2,747)
Proceeds from sale of equipment 5 - -
Acquisition of intangible assets (note 3) (21,149) (645) (1,738)
Capitalized development costs (1,616) (1,007) (1,835)
Investment in available for sale equity
shareholding (note 4) (7,500) - -
Investment in joint venture (note 4) (6,478) - -
------------- ------------ -------------
Net cash used in investing activities (38,231) (2,537) (6,455)
------------- ------------ -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Related parties and shareholders - (205) (205)
Dividends paid (15,028) (21,000) (39,500)
Initial Public Offering proceeds - 59,862 59,862
Exercise of options 2,971 - 733
Share issue costs - (3,670) (3,671)
Others - - 17
------------- ------------ -------------
Net cash (used in)/provided by financing activities (12,057) 34,987 17,236
------------- ------------ -------------
(DECREASE)/ INCREASE IN CASH AND CASH EQUIVALENTS (22,849) 71,592 83,408
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 101,403 17,995 17,995
------------- ------------ -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD 78,554 89,587 101,403
============= ============ ============
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
For the
For the six months ended year ended
30 June, 31 December,
2007 2006 2006
------------ ----------- ------------
US$000 US$000 US$000
------------ ----------- ------------
(Unaudited) (Unaudited) (Audited)
Income and expenses not affecting operating cash
flows:
Depreciation 692 241 666
Amortization 2,148 262 606
Impairment loss (note 3) 275 - -
Founders' cash contribution to employees - 6,566 6,566
Employee stock option plan expenses 1,016 230 703
Share of profit of joint venture (note 4) (3,300) - -
Loss on disposal on available for sale investment
(note 4) 654 - -
Finance income (1,506) (1,076) (3,537)
Others 16 11 18
Changes in operating assets and liabilities:
Increase in trade receivables (4,099) (1,580) (2,068)
Decrease in other receivables 1,008 731 2,594
Increase in trade payables 2,920 952 4,785
(Decrease)/increase in other payables (534) 3,278 3,745
Decrease in deferred revenues (833) (963) (1,865)
------------ ----------- ------------
(1,543) 8,652 12,213
============ =========== ============
NON-CASH TRANSACTIONS
For the year
For the six months ended 30 ended 31
June, December,
---------------------------- ------------
2007 2006 2006
------------ ----------- ------------
US$000 US$000 US$000
------------ ----------- ------------
(Unaudited) (Unaudited) (Audited)
Intangible assets (note 3) (36,887) - -
============ ========== ===========
Other payables (note 3) 36,887 - -
============ ========== ===========
Investments (note 4) (24,293) - -
============ ========== ===========
Trade receivables (note 4) (3,750)
============ ========== ===========
Deferred revenues (note 4) 27,599 - -
============ ========== ===========
Capital reserve (note 4) 444 - -
============ ========== ===========
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 develops 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 consolidated financial statements include the accounts of the
Company and all its subsidiaries which together are referred to as the
'Group'.
C. The interim financial statements as at 30 June 2007, and 2006 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 2006, 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 7).
The financial information for the periods ended 30 June 2006 and 30 June
2007 contained in this interim announcement is unaudited.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The consolidated interim financial information of the Group has been
prepared in accordance with International Financial Reporting Standards,
including International Accounting Standards ('IAS') and interpretations
(collectively IFRS) adopted by the International Accounting Standards Board
('IASB') and endorsed for use by companies listed on an EU regulated
market.
These results have been prepared on the basis of accounting policies
expected to be adopted in the Group's full financial statements for the
year ended 31 December 2007 which are not expected to be significantly
different to those set out in Note 2 to the Group's audited financial
statements for the year ended 31 December 2006, except for the following
accounting policies adopted for the first time:
Joint Ventures
The Group's investment in a jointly controlled entity is included in the
financial statements 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.
Available- for- sale financial asset
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 recognized directly in equity.
Where a decline in the fair value of an available- for- sale financial
asset constitutes objective evidence of impairment, the amount of the loss
is removed from equity and recognized in the income statement.
The financial information is presented in U.S. dollars because that is the
currency the Group primarily operates in.
NOTE 3 - ACQUISITION
In November 2006, the Company signed an asset purchase agreement with
Tribeca Tables Europe Limited ('Tribeca') in respect of certain non US
assets.
The contingent consideration for the acquisition has been calculated
according to a formula based on the future earnings of the acquired assets.
The conditions required to acquire control and complete the agreement were
satisfied in January 2007. Therefore the agreement has been accounted for
as a business combination under IFRS 3 in this reporting period. Management
estimates that the final consideration will be $58,227 thousands.
The value of the assets in the Tribeca books was not disclosed to the
company. Accordingly, the book value on acquisition is unknown. The fair
value of the net assets acquired is as below.
The intangible assets relate to the recognition of the customer lists and
other intangibles acquired as part of the acquisition. These intangibles
are being amortised over their estimated useful lives of 8 years. The
directors have reassessed the fair value of the assets acquired based on
their present use and as a result the software valued at $275 thousands on
acquisition has been charged to the income statement as an impairment.
$'000
Cash consideration to Tribeca 58,227
Expenses 1,267
---------------
Total cash consideration 59,494
Finance cost arising on discounting of cash consideration (2,590)
---------------
Present value of consideration including expenses 56,904
===============
Fair value of assets acquired 41,121
Goodwill 15,783
---------------
Present value of the consideration including expenses 56,904
===============
The payment of the consideration to Tribeca is by way of cash in four
instalments on 9 March 2007, 13 August 2007, 13 May 2008 and 13 November
2008, and has been discounted back to present values. As at 30 June 2007,
unpaid consideration amounted to $39,477 thousands.
NOTE 4 - INVESTMENTS
During the period the Group entered into a 10 year software licence
agreement with Foundation Group Limited ('Foundation'), a company
incorporated in Bermuda which during March 2007 re-listed on the Hong Kong
Stock Exchange at a price of HK$1.28 ('Flotation Price'). In connection
with the software licence agreement the Group also entered into the
following agreements in respect of ordinary shares in Foundation:
• a share sale and purchase agreement with Luck Continent Limited to
acquire 53,750,000 ordinary shares of HK$0.001 each in Foundation;
• a share sale and purchase agreement with Emphasis Services Limited
('ESL') to purchase 50% of the ordinary shares in Copernicus Trading
Limited ('Copernicus'), a private company incorporated in the British
Virgin Islands. Copernicus' only asset is a convertible note
convertible into 400,000,000 shares in Foundation.
The 53,750,000 shares in Foundation were acquired for $7,500 thousands,
which represented an aggregate discount of 15% to the Flotation Price.
These shares have been classified as an available for sale asset. The Group
also entered into an agreement to sell 50% of the 53,750,000 shares it
acquired in Foundation to ESL for a consideration of $3,750 thousands
payable in September 2007. As a consequence, the loss from the disposal of
$654 thousands has been reflected in the income statement for the period.
The fair value of 50% of the shares at time of acquisition was $4,403
thousands. The fair value at 30 June 2007 amounted to $4,847. The increase
in value of $444 thousands has been classified as a capital reserve.
The Group acquired the shares in Copernicus for a consideration of $6,478
thousands. Based on Foundation's share price at this time, the underlying
value of the Group's interest in the convertible note amounted to $32,770
thousands. The Group's interest in the Copernicus shares has been equity
accounted for as an investment in a joint venture. The Group's interest at
30 June 2007 was $36,070 thousands. The increase in value from the time of
acquisition to 30 June 2007 of $3,300 thousands has been reflected in the
income statement for the period.
The Directors consider the fair value of the consideration received by way
of discount to the market value of the 53,750,000 Foundation shares of
$1,307 thousands and the fair value of the Copernicus joint venture in
excess of consideration paid of $26,292 thousands, to represent deferred
income of the software licence agreement. As a consequence, $27,599
thousands have been included in deferred revenues. Once royalty revenues
commence under this software license agreement the deferred revenues will
be realised as income over the life time of the software licence agreement.
As at 31 August 2007, the closing price of Foundation shares was HK$ 0.83
compared to HK$ 1.41 as at 30 June 2007. This has resulted in the fair
value of the total available for sale equity shareholding and investment in
the joint venture decreasing by $16,767 thousands to $24,150 thousands.
This reduction in value is a non-adjusting post balance sheet event and has
not therefore been accounted for as at 30 June 2007.
A director of the Company, Tom Hall, is also a director and shareholder of
ESL.
NOTE 5 - EARNINGS PER SHARE
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
For the six months ended 30 ended 31
June, December,
--------------------------- ------------
2007 2006 2006
------------ -------------- ------------
In cents In cents In cents
Basic 13.5 14.7 28.7
Diluted 13.0 14.2 27.7
US$000 US$000 US$000
------------ -------------- ------------
Profit for the year 28,982 30,490 60,414
============ ============== ============
Number Number Number
Denominator - basic
Weighted average number of equity shares 213,911,016 206,924,493 210,168,682
------------ -------------- ------------
Denominator - diluted
Weighted average number of equity shares 213,911,016 206,924,493 210,168,682
Weighted average number of option shares 9,665,864 7,747,512 7,962,839
------------ -------------- ------------
Weighted average number of shares 223,576,880 214,672,005 218,131,521
============ ============== ============
NOTE 6 - SHAREHOLDERS EQUITY
A. Share capital
Number of shares
----------------------------------------------------------
30 June, 30 June, 31 December,
------------ -------------- ------------
2007 2006 2006
------------ -------------- ------------
Authorized N/A(*) N/A(*) N/A(*)
------------ -------------- ------------
Issued and fully paid 214,760,618 213,333,333 213,741,096
------------ -------------- ------------
(*) 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. Distribution of Dividend
On 29 May 2007, the Company distributed $15,028 thousands as a dividend to
its existing shareholders.
NOTE 7 - CONTINGENT LIABILITIES
The Company 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 Company requested all of its licensees to cease their US
facing activity. Such request was accepted and implemented by all licensees
and the Company stopped collecting royalties deriving from the licensees'
US facing activity. The directors believe that the Company has taken all
measures necessary to be in full compliance with UIGEA. The directors are
aware of activity by certain regulatory authorities in the US, creating
uncertainty as to further actions that may occur, if any. Accordingly, the
directors have considered any residual risk arising from the Company's
activities and no provision has been made in the financial statements in
respect of the possibility of any adverse impact that may arise from such
activities.
Independent review report to the shareholders of Playtech limited
Introduction
We have been instructed by the Company to review the financial information for
the six months ended 30 June 2007 which comprises the Consolidated Income
Statement, the Consolidated Balance Sheet, the Consolidated Cash Flow Statement,
the Consolidated Statement of Changes in Equity and related notes 1 to 7. We
have read the other information contained within the financial information and
considered whether it contains any apparent misstatements or material
inconsistencies with the financial information.
Our report has been prepared in accordance with the terms of our engagement to
assist the Company in meeting the requirements of the terms of our engagement
letter 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. 8 Directors'
responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
have accepted responsibility for preparing the interim report in accordance with
the Listing Rules of the Financial Services Authority for companies trading
securities on the Alternative Investment Market which require that the
accounting policies and presentation applied to the financial information should
be consistent with those applied in preparing the annual accounts except where
any changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom. A review
consists principally of making enquiries of management and applying analytical
procedures to the financial information and underlying financial data and based
thereon, assessing whether the accounting policies and presentation have been
consistently applied unless otherwise disclosed. A review excludes audit
procedures such as tests of controls and verification of assets, liabilities and
transactions. It is substantially less in scope than an audit performed in
accordance with International Standards on Auditing (UK and Ireland) and
therefore provides a lower level of assurance than an audit. Accordingly, we do
not express an audit opinion on the financial information.
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 7 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
7, which states that the Directors consider that no provision is necessary in
respect of this matter.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2007.
BDO Stoy Hayward LLP
Chartered Accountants
8 Baker Street
London WIU 3LL
United Kingdom
4 September 2007
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