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Final Results

28th Feb 2007 07:04

Playtech Limited28 February 2007 Playtech Limited ("Playtech" or "the Company" or "the Group") Maiden preliminary results for the year ended 31 December 2006 A strong performance in challenging market conditions Playtech (AIM: PTEC), the designer, developer and licensor of software for thegaming industry, is pleased to announce its maiden preliminary results for theyear ended 31 December 2006. Financial Highlights: •Total revenues for the year up 89% to $90.1 million (2005: $47.6 million) •Casino revenues up 81% to $77.2 million (2005: $42.7 million) •Poker revenues up 309% to $10.9 million (2005: $2.7 million) •Pro forma revenues for the year, which exclude royalty contributions from the US, increased 143% to $55.6 million (2005: $22.8 million): •Casino revenues up 131% to $47.3 million (2005: $20.5 million) •Poker revenues up 386% to $7.4 million (2005: $1.5 million) •Adjusted net profit* after tax up 90% to $67.7 million (2005: $35.7 million) •Adjusted basic EPS* up 78% to 32 cents per share (2005: 18 cents per share) •Recommended Final Dividend of 7.0 cents per share giving a total of approximately 15.7 cents per share for 2006 •Strong trading for January 2007: •Total royalties up 10% to $5.9 million (December 2006: $5.4 million) •Casino royalties up 9% to $4.8 million (December 2006: $4.4 million) •Poker royalties up 15% to $1.0 million (December 2006: $0.9 million) *In 2006 - excluding one time founders' cash contribution and employee stockoption expenses of $7.3 million. Operational Highlights: •Acquisition of certain non-US assets of Tribeca Tables Europe Limited in November 2006- migration on track •Fast expansion of development capabilities to support strong product pipeline and future growth of the Group: •Expansion of Estonian centre •Establishment of development centre in Bulgaria •Investment in the India and Philippines centres acquired from Tribeca •Substantial expansion into Asia - major software licensing agreement signed with China's largest corporate retail gaming network, Sino Strategic International, coupled with new products for the Asian market •Expansion into land based gaming progressing well - licensing agreement signed with leading Mexican casino operator Entretenimiento De Mexico S.A. De C.V. Avigur Zmora, Chief Executive of Playtech, said: "We look forward into 2007 with great enthusiasm and expect it to be a year offurther growth. Geographical expansion will be completed and supported by thedevelopment and improvement of our product portfolio, resulting in an increasein the number of revenue streams available to the Group. Our continuingcommitment to our employees, who are the driving force behind Playtech'ssuccess, will help increase the Group's momentum and to further establish itsposition as the world's leading supplier of software to the international gamingindustry." - ends - For further information: Avigur Zmora, Chief Executive Officer, Playtech Limitedc/o Bell Pottinger Tel: 020 7861 3232 www.playtech.com David Rydell / Peter Otero / Amy RajendranBell Pottinger Corporate & Financial Tel. 020 7861 3232 Chairman's Statement As we approach the end of our first year as a publicly traded listed company, itgives me great pleasure to present the maiden set of preliminary results forPlaytech Limited. The year has been filled with considerable challenges but theGroup has risen to these challenges to prove the robustness and flexibility ofits business model. The figures presented today are a credit to the managementteam and all those who work for the Company. The results were impacted in the fourth quarter by the Group's licensees'complete withdrawal from the United States. Notwithstanding this action, I ampleased to announce that Playtech's total revenues for the year were $90.1million. This represents an increase of 89% on the $47.6 million achieved in2005. Excluding contributions from the US, revenue for the year totalled $55.6million, representing an increase of 143% on the $22.8 million in 2005. As aresult of the strong performance, the Board is pleased to recommend a finaldividend of 7.0 cents per share which will give a total dividend for the year ofapproximately 15.7 cents per share. The passing of the US Unlawful Internet Gambling Enforcement Act 2006 was awatershed moment for the online gaming industry, forcing many gaming operatorsto make fundamental changes to their business models. The Group's broadinternational portfolio of clients, especially in Asia and Europe, meant thatthe impact of the prompt withdrawal by its licensees from the US market wasgreatly reduced. Excellent progress has been made in developing Playtech's strategy ofdiversifying its business portfolio - both geographically and by product. TheCompany announced two important deals during the year. The acquisition ofcertain non-US assets of Tribeca Tables Europe Limited ('Tribeca') pursuant tothe conditional agreement signed in November 2006 is expected to transform theGroup into the world's leading poker network and the landmark five-year softwarelicensing agreement with Chinese based Sino Strategic International ('SSI') inDecember 2006, gives Playtech invaluable access to the huge Chinese gamingmarket. Playtech's subsidiary, Videobet, also announced a long-term licensingcontract to supply the Mexican land based gaming market through Mexican casinooperator, Entretenimiento De Mexico S.A. De C.V. ('Emex') in January 2007. The Group is also increasing the number of platforms through which its softwarecan be delivered and both mobile phone gaming and Server Based Gaming (SBG)terminal products were added to its portfolio during the year. In terms ofsoftware product development, Pachinko and Mahjong were added to cater for theAsian market and a significant number of new gaming products are expected to belaunched during 2007. Playtech's total commitment to the constant development of new products andsolutions for the dynamic gaming industry is of central importance to today'sleading operators. The quality of Playtech's products and the professional wayin which it conducts its business was further demonstrated by the signing of anew four year software licensing agreement with PartyGaming plc at the beginningof this year. It is the Board's firm view that there remains great potential for growth in theinternational gaming market and this sentiment is clearly reflected inPlaytech's continued commitment to expanding its employee base. Playtech hasincreased the numbers employed at its main software development and support basein Estonia, has opened a new development centre in Bulgaria and is developingthe newly acquired Tribeca operations in India and the Philippines. This willbring the Group's total headcount to just under 450 employees. In summary, the Board is very pleased with how Playtech has responded to thechallenges and opportunities that it has been presented with over the past year.The Board looks forward to announcing further progress in newly entered growthmarkets and other areas, over the following year. The development of multidistribution channels will also help the Group access more traditional gamingsectors, such as land based operators, in addition to offering considerablecross selling opportunities. In summary, progress made during 2006 is very encouraging and trading in Januarythis year is up 10% on December 2006. As a result, the Board looks forward tothe coming year with both eagerness and confidence. Roger WithersChairman Chief Executive Officer's Statement I take great pleasure in delivering Playtech's first set of annual results sincethe Company floated on the London Stock Exchange Alternative Investment Marketin March 2006. It has been a year of both significant progress and change butoverall I feel that this year has shown Playtech to be both a strong andadaptable Company with an outstanding business model. 2006 was a critical year for Playtech and the passing of the US UnlawfulInternet Gambling Enforcement Act 2006 materially changed the landscape of theindustry. Whilst it forced many gaming operators to radically change theirbusiness model to survive in the new international environment, it highlightedthe great strength of Playtech as a software provider to the wider gamingindustry and clearly vindicated the Board's strategic decision made over threeyears ago to concentrate on geographical diversification. The Board's promptreaction to the changing US legal landscape has clearly illustrated Playtech'sability to react quickly and effectively to changes in our dynamic industry.Playtech will continue to strengthen its portfolio through a highly active newproduct pipeline throughout 2007, coupled with a move into more internationallocations. Review of Operations During last year Playtech's casino business grew by 81% (131% ex-US) and ourpoker business by 309% (386% ex-US). Stripping out US players, in 2006, 34% ofPlaytech's player base came from Asia-Pacific and 52% from Europe, representingyear on year growth rates of 102% and 178% respectively. While the casino and poker streams of business remain our main revenuegenerator, Playtech continues to be committed to the development of its productportfolio. Mobile gaming and Server Based Gaming (SBG) terminals were added tothe Company's delivery platforms whilst Pachinko and initial versions of Mahjongwere added to its games portfolio. The mobile product that is already running on Playtech's online platforms,offers players access to Playtech's popular casino platform through their mobilephones and we expect that this will be a particularly successful cross sellingopportunity for our existing licensees. Although online gaming has been enjoying extraordinary growth over the past fewyears, the more established land-based operators still hold approximately 95% oftotal global gaming activity. Playtech is well positioned to penetrate the SBGmarket as terminals become of growing importance to land-based operators. Whiletraditional terminal suppliers will need to make significant investment to adaptto this new demand, Playtech has applied the technology used in its awardwinning online products to the SBG market and is now considered to be one of themarket leaders in this arena. All Playtech products are designed to allow the best cross selling opportunitiesin the market. Cross selling between land-based, online and mobile is easilydone utilising a single account offering and a unified back office system. Weexpect it to be the main selling point of Playtech and Videobet products in thefuture. Such cross selling capabilities will result in better revenues for bothPlaytech and its licensees. Contract Wins and Strategic Goals During the final quarter of 2006, Playtech announced two very significantagreements, the first of which was the acquisition of certain non-US assets ofTribeca Tables Europe Limited ('Tribeca'), announced in November 2006 and thesecond was a landmark five-year software licensing agreement with Chinese basedSino Strategic International ('SSI') announced in December 2006. The migration of the Tribeca poker network onto the Playtech platform isexpected to create the world's largest shared liquidity pool in poker gaming andwill, therefore, provide outstanding growth opportunities for the Group and itslicensees. We expect the full completion of this deal, including the fullintegration of Tribeca's highly skilled staff based in the Philippines andIndia, by the end of March 2007. From this date the acquisition is expected tobe earnings enhancing and is in line with our strategy to be the leadingsoftware provider of all the products that we offer. The Board is excited by the prospects for the Asian gaming market and is,therefore, fully committed to the development of its Asian games portfolio.Playtech's license agreement with SSI will deliver its Peer to Peer (P2P) gamesto approximately 600 SSI gaming outlets throughout China. This is a significantdeal for Playtech and provides the Company with an important gateway into a hugedeveloping market. Coupled with our long-term focus to provide the rightproducts to the Asian market, this agreement also further diversifies theGroup's geographical reach. On 2 January 2007, Playtech announced a new long-term software licensingagreement with PartyGaming plc ('PartyGaming'). Under the terms of the four-yearagreement, Playtech will license its software to several PartyGaming brandedwebsites on an exclusive basis. The Board sees this as an opportunity and is afurther endorsement of the Playtech product. We believe that Playtech's softwarewill compliment PartyGaming's existing products whilst providing an additionalroute to further revenue enhancement. We look forward to a long and successfulpartnership with PartyGaming. On 23 January 2007, Playtech's wholly owned subsidiary, Videobet entered into along-term licensing contract with leading Mexican casino operator,Entretenimiento De Mexico, S.A. De C.V. ('EMex'). Under the terms of thethree-year contract, EMex will add the Videobet server based gaming product toits existing and future gaming estates. This deal is the first significant stepfor Playtech's land-based offering, and is consistent with the Company'sstrategy to leverage its expertise into the lucrative land-based market. Site Development and Expansion Playtech is fully committed to the development and delivery of market leadingsoftware products to the international gaming sector. In order to achieve this,the Company is continually strengthening its development capabilities and as aresult improving delivery time to market. In addition to the development centrein Estonia, which is the centre for casino, poker and SBG products, Playtech hasopened a new development centre in Bulgaria that will be primarily focused onthe Company's bingo products. The agreement with Tribeca provides Playtech with an opportunity to developTribeca's centres in India and the Philippines. This will not only offer theclear geographic advantage of delivery into the fast growing Asian markets butwill also help in the production and development of Asian specific gamingproducts that are increasingly being demanded by our licensees. We extend a warmwelcome to our new employees and look forward to working with them to supply theAsian market with the best and most relevant products. A review of the successes achieved this year would not be complete withoutmentioning the outstanding contribution made by our employees. Playtech'sreputation is built on the quality of its people and while the sector as a wholewas forced to reduce manpower due to changes in the US landscape, Playtechcontinued to expand its workforce. This has allowed the Company to maintain theflexibility for which it has become renowned and to meet with licenseerequirements, product development and client production. We passionately believein investing in our people and this commitment will ensure our growth throughout2007. On behalf of the Board, I would like to extend my thanks to all our employeesfor their tremendous efforts throughout 2006 and look forward to making 2007 aneven better year for Playtech. Current Trading and Outlook The 2007 year has started strongly, with January royalties up 10% to $5.9million on the previous month. Of this, casino royalties are up 9% to $4.8million and poker royalties are up 15% to $1.0 million. In the first half of 2007, Playtech is on track to launch a number of P2P gamesexclusively for the Asian market, including Cho Dai Di and Do Di Dzho. Thesewill be added to our existing suite of poker games and will help the Groupfurther build its presence in Asia. With Playtech increasing the ways in which it can deliver its gaming software,through, for example mobile phones and terminals, further growth can be expectedthrough the cross selling opportunities that this presents. We have quickly established a market leading position in the SBG market, thetechnology of which is based on Playtech's outstanding online gaming software.All evidence points towards the fact that SBG will play an increasinglyimportant role in the international gaming market and Playtech is in an idealposition to take advantage of the growth opportunities that this offers. Thedeal with EMex illustrates this well and other similar deals will no doubtfollow this year. Playtech is also developing its centre in Bulgaria as a dedicated resource forthe development of its exciting Bingo product. Previously, this game did notrepresent an important part of Playtech's gaming portfolio but our researchsuggests that an improved Bingo product, coupled with the right level of supportwill create a revenue stream that is much more meaningful to the Group. We look forward into 2007 with great enthusiasm and expect it to be a year offurther growth, both geographically and through new product development. Ourcontinuing commitment to our employees, who are the driving force behindPlaytech's success, will help increase the Group's momentum and furtherestablish its position as the world's leading supplier of software to theinternational gaming industry. Avigur ZmoraChief Executive Officer Financial Review Playtech is pleased to announce the financial results for the year ended 31December 2006, our maiden set of preliminary results as a publicly quotedcompany. Given the challenges faced by the Group, Playtech has registered anextremely robust performance. This was despite the results in the final quarterof the year being affected by the complete and immediate withdrawal from theUnited States following the passing of the US Unlawful Internet GamblingEnforcement Act 2006. Total revenues for the year were $90.1 million which represented an increase of89% on the $47.6 million achieved in 2005. Casino revenues for the year totalled$77.2 million, an increase of 81% from $42.7 million in 2005. Poker revenues forthe year totalled $10.9 million, an increase of 309% from the $2.7 million in2005. On a pro forma basis, which excludes contributions from the US, revenues for theyear totalled $55.6 million, representing an increase of 143% on the $22.8million in 2005. On the same basis, casino revenues for the year totalled $47.3million, an increase of 131% from the $20.5 million in 2005. Poker revenues forthe year totalled $7.4 million, an increase of 386% from the $1.5 million in2005. The last quarter of 2006, which is traditionally a strong quarter, wasmaterially affected by the complete and immediate withdrawal from the UnitedStates. Total revenue were $17.4 million which represented an increased of 13%on the $15.3 million in the last quarter of 2005. Casino revenues for Q4 2006totalled $14.3 million, an increase of 5% from $13.5 million in Q4 2005. Pokerrevenues for the year totalled $2.7 million, an increase of 116% from the $1.2million in Q4 2005. Excluding contributions from the US, revenue for Q4 2006 totalled $16.3 million,representing an increase of 110% on the $7.8 million in Q4 2005. On the samebasis, casino revenues for Q4 2006 totalled $13.4 million, an increase of 98%from the $6.8 million in Q4 2005. Poker revenues for Q4 2006 totalled $2.6million, an increase of 239% from the $0.8 million in Q4 2005. Net profit after tax for 2006 was $60.4 million, an increase of 69% over 2005.Adjusted net profit* after tax, for 2006 was $67.7 million, an increase of 90%over 2005. The adjusted EPS* for the year, based on weighted average sharesoutstanding of 210,168,682, is 32 cents per share compared to the prior yearwhich was 18 cents per share. Fully diluted EPS* for 2006 was 31 cents per sharecompared to 18 cents per share in 2005. The Group's operating profit margin was influenced by the provision of aone-time cash contribution from the founders of the Company to Playtech'semployees in the first half of the year, amounting to $6.6 million and employeestock option expenses amounting to $0.7 million. The provision for this wasaccounted for in accordance with generally accepted accounting principles anddid not have any cash impact on the Company. In addition, the operating profitwas influenced by the reduction in revenue contribution from our licensees' USplayers in the fourth quarter of 2006. Excluding cash contribution and employeestock option expenses, the operating profit margin decreased to 72% from 75% in2005. *In 2006 - excluding one time founders cash contribution and employee stockoption expenses of $7.3 million. Cost of Operations As Playtech's business has grown, the Group has significantly increased itsnumber of employees, which included further hiring by our Estonian and Israelioperations and the formation of a new R&D subsidiary in Bulgaria. Furthermore,we have incurred additional cost associated with becoming a publicly tradedcompany. As a result, cost of operations during 2006, excluding the founders'cash contribution and employee stock option expenses, increased by 112% to $25.6million compared to $12.1 million in 2005. Given the Board's expectation about the Company's prospects in 2007, thewithdrawal of Playtech's licensees from all their US facing activity had littleor no impact on costs nor did it require any restructuring of the cost base. Operating activity is mainly conducted in Estonia through two of oursubsidiaries. Operating expenses were $9.1 million, representing an increase of94% over 2005, although, operating costs remained at the same percentage ofrevenue as 2005. Sales and Marketing expenses were $8.8 million, representing an increase of 62%on 2005. This was mainly as a result of salary increases attributable to therecruitment of sales staff, an increase in reseller fees that are paid as apercentage of revenue and an increase in the number of trade shows attendedduring the year. Development costs increased by 46% on the previous year to $1.5 million. Thesecosts are associated with investment into the improvement of existing products.The cost of new products are capitalised and amortised as part of the operatingexpenses when they are launched. General and administrative expenses, before the founders' one time cashcontribution to employees, were $6.3 million, an increase of 568% over 2005. In line with generally accepted accounting principles, the founders' one timecash contribution to employees of $6.6 million is included as a one-time expenseunder General and Administrative expenses. Due to the fact that thiscontribution is fully payable by the founders' trust directly to employees,there is no cash impact on the Group. Employee stock option expenses in 2006amounted to $0.7 million. Financial Income and Taxation Cash is generally held in short-term US dollar deposits. Such deposits havegenerated in 2006 a financial income of $3.6 million. Only the Bulgarian and Israeli subsidiaries have a taxable income, which ischarged on a cost plus basis. Following an agreement signed with the Israeli TaxAuthorities during 2006, the Israeli subsidiary paid $0.2 million in back taxes. Dividend The Board has recommended a final divided of 7.0 cents per share. Once approvedand paid, this will give an aggregate dividend for the 2006 year ofapproximately $33.5 million or approximately 15.7 cents per share. During 2006 the Company paid dividends to the amount of $39.5 million, of which$21 million was paid prior to the admission onto the Alternative InvestmentMarket as a final dividend for 2005. $18.5 million was paid as an interimdividend in October 2006. Balance Sheet Cash and cash equivalents as at 31 December 2006 amount to $101.4 million,representing 87% of the balance sheet (2005: 72%) The trade receivables balance as at 31 December 2006 represents mainly amountsdue by licensees for the month of December 2006. Intangible assets mainly consist of patent and intellectual property rights anddevelopment costs of new products such as the Poker platform, mobile platform,and the Videobet product. The development of Mahjong and other Asian games isalso included under this section. Cash Flow The Group generated cash of $72.6 million of cash in 2006 from operatingactivities (2005: $35.2 million). The Group's cash usage in investing activities was $6.5 million (2005: $1.0million), which was mainly accounted for capitalised development costscapitalised relating to the Videobet, mobile and Mahjong products and theacquisition of fixed assets. The Group's financing activities generated $17.2 million from net IPO proceedsof $56.2 million, less the dividend payment to shareholders of $39.5 million. In2005 the usage amounted to $27.5 million that mainly related to the repayment ofshareholders' loans and dividend payment. Acquisition In November 2006 Playtech signed an agreement to acquire certain non-US assetsand undertakings of Tribeca Tables Europe Limited ('Tribeca'). The considerationfor this acquisition is calculated according to a formula based on Playtech'searnings from the acquired assets. For example if the annualised revenuegenerated from this acquisition, over the measurement period is $16.0 million,the consideration to be paid to Tribeca will be approximately $75.0 million. Thefinal consideration will be adjusted upon Playtech's realised revenues. Themaximum consideration that the Company will be liable to pay is $139.0 million,which will be paid in the event that the annualised revenue generated from theacquisition, over the measurement period, exceeds $29 million. The considerationis not subject to any minimum amount. The Tribeca assets acquisition will beaccounted for in the financial statements of 2007. Shuki BarakChief Financial Officer CONSOLIDATED INCOME STATEMENT For the year ended 31 December, ------------------------- 2006 2005 ------------------------- US$000 US$000 ------------------------- (Unaudited) (Audited) Revenues 90,078 47,596 Operating expenses (9,247) (4,676) Sales & marketing expenses (8,941) (5,421) Development costs (1,567) (1,021) General & administrative expenses (13,101) (936) ------------------------ (32,856) (12,054) ------------------------ ----------------------------------------------------------------------- Operating profit before charges related to founders' cash contributions to employees and employee stock option expenses 64,491 35,564 Charge related to founders' cash contributions to employees (6,566) - Employee stock option expense (703) (22) ------------------------ Total benefit charges (7,269) (22) ----------------------------------------------------------------------- Operating profit 57,222 35,542 Financing income 3,638 295 Financing cost (101) (146) ------------------------ Profit before taxation 60,759 35,691 Tax expenses (345) (22) ------------------------ Profit for the year attributable to the equity holders of the parent 60,414 35,669 ======================== Earnings per share (in Cents) Basic 29 18 Diluted 28 18 CONSOLIDATED BALANCE SHEET As of 31 December, ------------------------ 2006 2005 ------------------------ US$000 US$000 ------------------------ (Unaudited) (Audited) NON-CURRENT ASSETS Intangible assets 4,355 1,388 Property, plant and equipment 3,015 934 Other non-current assets 127 60 ------------------------ 7,497 2,382 ------------------------ CURRENT ASSETS Cash and cash equivalents 101,403 17,995 Trade receivables 6,257 4,189 Other accounts receivables 1,280 337 ------------------------ 108,940 22,521 ------------------------ TOTAL ASSETS 116,437 24,903 ======================== EQUITY AND LIABILITIES Share capital - 10 Additional paid in capital 56,370 100 Employee stock option reserve 725 22 Retained earnings 47,731 19,587 ------------------------ Equity attributable to equity holders of the parent 104,826 19,719 ------------------------ NON-CURRENT LIABILITIES Other non-current liabilities 46 82 ------------------------ CURRENT LIABILITIES Trade payables 7,394 2,987 Related parties 1,091 918 Other accounts payables 3,080 1,197 ------------------------ 11,565 5,102 ------------------------ TOTAL EQUITY AND LIABILITIES 116,437 24,903 ======================== CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Employee Additional stock Share Paid in options Retained capital Capital reserve earnings Total ------------------------------------------------------------- US$000 US$000 US$000 US$000 US$000 ------------------------------------------------------------- (Audited) (Audited) (Audited) (Audited) (Audited) Balance at 1 January 2005 10 100 - 25,583 25,693Changes in equity for the periodProfit for the year - - - 35,669 35,669 -------------------------------------------------------------Total recognized income andexpense for the period - - - 35,669 35,669Dividend paid - - - (41,000) (41,000)Share issue costs - - - (665) (665)Employee stock option scheme - - 22 - 22 -------------------------------------------------------------Balance at 1 January 2006 10 100 22 19,587 19,719 ============================================================= (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) Changes in equity for theperiodProfit for the year - - - 60,414 60,414 --------------------------------------------------------------Total recognized income andexpense for the period - - - 60,414 60,414Dividend paid - - - (39,500) (39,500)Initial Public Offering proceeds - 59,862 - - 59,862Share issue costs - (4,335) - 664 (3,671)Cancellation of issued shares (10) 10 - - -Founders' cash contribution to employees - - - 6,566 6,566Exercise of options - 733 - - 733Employee stock option scheme - - 703 - 703 --------------------------------------------------------------Balance at 31 December 2006 - 56,370 725 47,731 104,826 ============================================================== CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended 31 December, ---------------------- 2006 2005 ---------------------- US$000 US$000 ---------------------- (Unadited) (Audited) CASH FLOWS FROM OPERATING ACTIVITIES Profit before tax 60,759 35,696 Tax (345) (22) Net cash provided by (used in) operating activities (see below) 12,213 (436) ---------------------- Net cash provided by operating activities 72,627 35,238 ---------------------- CASH FLOWS FROM INVESTING ACTIVITIES Loss from disposal of investment - (5) Cash acquired with subsidiary - 51 Long term deposits (135) - Acquisition of fixed assets (2,747) (696) Acquisition of intangible assets (1,738) (12) Capitalized development costs (1,835) (356) ---------------------- Net cash used in investing activities (6,455) (1,018) ---------------------- CASH FLOWS FROM FINANCING ACTIVITIES Loan to shareholders - (15,087) Related parties and shareholders (205) 1,094 Dividends paid (39,500) (12,890) Initial Public Offering proceeds 59,862 - Exercise of options 733 - Share issue costs (3,671) (665) Others 17 25 ---------------------- Net cash provided by (used in) financing activities 17,236 (27,523) ---------------------- INCREASE IN CASH AND CASH EQUIVALENTS 83,408 6,697 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 17,995 11,298 ---------------------- CASH AND CASH EQUIVALENTS AT END OF YEAR 101,403 17,995 ====================== ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Income and expenses not affecting operating cash flows: ------------------------------------------------------- Depreciation 666 313 Amortization 606 122 Founders' cash contribution to employees 6,566 - Employee stock option plan expenses 703 22 Others 18 7 Changes in operating assets and liabilities: -------------------------------------------- Increase in trade receivables (2,068) (2,341) Decrease in related parties 377 7 Increase in other receivables (943) (173) Increase in trade payables 4,408 1,287 Increase in other payables 1,880 320 --------------------- 12,213 (436) ===================== NON CASH TRANSACTIONSIn 2005 a loan to shareholders of 27,905 was cleared by a dividend 1. Basis of preparation The preliminary results do not constitute statutory accounts. The financialinformation for the year ended 31 December 2006 is extracted from the Group'sunaudited financial statements to that date. The financial information for theyear ended 31 December 2005 is extracted from the Group's statutory financialstatements to that date, which received an unqualified audit report. 2 . Accounting policies The preliminary results of Playtech Limited and all its subsidiaries have beenprepared in accordance with International Financial Reporting Standards (IFRSs).These preliminary results have been prepared on the basis of accounting policiesfollowed in the preparation of the Group's annual financial statements for theyear ended 31 December 2005. 3. Earnings per share Earnings per share have been calculated using the weighted average number ofshares in issue during the relevant financial periods. The weighted averagenumber of equity shares in issue and the earnings, being profit after tax are asfollows: For the year ended 31 December, ------------------------------- 2006 2005 ------------------------------- In cents In cents Basic 29 18Diluted 28 18 US$000 US$000 ------------------------------- Profit for the year 60,414 35,669 =============================== Number NumberDenominator - basicWeighted average number of equity shares 210,168,682 200,000,000 =============================== Denominator - DilutedWeighted average number of equity shares 210,168,682 200,000,000Weighted average number of option shares 7,962,839 510,542 -------------------------------Weighted average number of shares 218,131,521 200,510,542 =============================== 4. Founders cash contribution to employees In June 2006, following the IPO, the founders of the Company haveallocated $6,566,000, of their own personal funds, into a trust fund to thebenefit of the Company's employees. Earnings per share before founders cashcontribution to employees (in Cents): For the year For the year ended ended --------------------------- 31 December 31 December --------------------------- 2006 2005 --------------------------- In cents In cents --------------------------- Basic - adjusted 32 18Diluted - adjusted 31 18 US$000 US$000 --------------------------- Profit for the year 60,414 35,669Charges related to founders cash contribution 6,566 - ---------------------------Profit for the period before founders cash contribution to employees 66,980 35,669 =========================== Denominator - basicWeighted average number of equity shares 210,168,682 200,000,000 --------------------------- Number NumberDenominator - dilutedWeighted average number of equity shares 210,168,682 200,000,000Weighted average number of option shares 7,962,839 510,542 ---------------------------Weighted average number of shares 218,131,521 200,510,542 =========================== 5. Capital commitment On 13 November 2006, the Company signed a non US asset purchase agreement withTribeca Tables Europe Limited ("Tribeca"), a software designer that provides apoker network solution to a number of the world's most respected online pokeroperators. According to the agreement, the entire Tribeca network will cease itsoperations in six months from the date of the agreement, by which time themigration of the online poker operators to Playtech's platform is planned to becomplete. The consideration for the acquisition is calculated according to aformula based on the future earnings from the acquired assets. The finalconsideration will be adjusted upon Playtech's realized revenues. The maximumconsideration that the Company will be liable to pay is $139 million, which willbe paid in the event that the annualised revenue generated from thisacquisition, over the measurement period, exceeds $29 million. The Company willpay the consideration in cash in four instalments. The first is payable uponsatisfaction of specific conditions. The second, third and fourth payments areto be made on the 9th, 18th and 24th month intervals, after the date of theagreement, respectively. As of the date of this report the conditions have notyet been satisfied and the Company has not accounted for this acquisition in theyear ended 31 December 2006. This information is provided by RNS The company news service from the London Stock Exchange

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Playtech
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