8th Apr 2008 07:01
888 Holdings plc08 April 2008 Part 2 Notes to the Consolidated Financial Statements 1 General information Company description and activities 888 Holdings Public Limited Company (the "Company") and its subsidiaries(together the "Group") was founded in 1997 and originally operated as a holdingcompany domiciled in the British Virgin Islands. On 12 January 2000, theCompany was continued in Antigua and Barbuda as a corporation under theInternational Business Corporation Act 1982 with registered number 12512. On 17December 2003, the Company redomiciled in Gibraltar with the Company number90099. On 4 October 2005, the Company listed on the London Stock Exchange. The Group has developed and is the owner of innovative proprietary softwareapplications solutions for virtual Casinos, for Poker rooms, e-commerce,credit-card clearing services and online advertising methodologies. The Groupalso offers Sports betting, Bingo games and Backgammon to end users as well asbusiness partners. Cassava Enterprises (Gibraltar) Limited and Brigend Limited (both subsidiaries)carried out the operations of the Group during the year, principally under thename www.888.com under the terms of a gaming license issued in Gibraltar. Definitions In these financial statements: The Company 888 Holdings Public Limited Company.The Group 888 Holdings Public Limited Company and its subsidiaries.Subsidiaries Companies over which the Company has control (as defined in International Accounting Standard 27 "Consolidated and Separate Financial Statements" and whose accounts are consolidated with those of the Company.)Related parties As defined in International Accounting Standard 24 - "Related Party Disclosures". Emerging Comprises of the group's offering of Bingo games to end users and business partners,Offerings Backgammon and betting exchange. 2 Significant accounting policies The significant accounting policies applied in the preparation of the financialstatements are as follows: Basis of preparation The consolidated financial statements of the Group have been prepared inaccordance with International Financial Reporting Standards, includingInternational Accounting Standards ("IAS") and Interpretations, adopted by theInternational Accounting Standards Board ("IASB") and endorsed for use bycompanies listed on an EU regulated market. The significant accounting policies applied in the financial statements of theGroup in the prior years are applied consistently in these financial statements. The financial statements are presented in thousands of US dollars (US$'000)because that is the currency the Group primarily operates in. The consolidated financial statements comply with the Gibraltar Companies(Accounts) Act 1999, the Gibraltar Companies (Consolidated Accounts) Act 1999and the Gibraltar Companies Act 1930. Statutory accounts for the year ended 31 December 2007 will be made availablefollowing the Company's Annual General Meeting. The auditors have reported onthose accounts and their report was unqualified and did not contain statementsunder section 10(2) of the Gibraltar Companies (Accounts) Act 1999 or section182(1) (a) of the Gibraltar Companies Act. Statutory accounts for the yearended 31 December 2006 have been delivered to the Registrar of Companies inGibraltar together with a report under section 10 of the Gibraltar Companies(Accounts) Act 1999. The audit report for both 2006 and 2007, withoutqualifying the opinion therein, draws attention to the issue set out in note 24on Contingent Liabilities in the financial information. The following standards and interpretations, issued by the IASB or theInternational Financial Reporting Interpretations Committee (IFRIC), areeffective for the first time in the current financial year and have been adoptedby the Group with no significant impact on its consolidated results or financialposition: IFRS 7 - Financial instruments disclosure (effective for accounting periodsbeginning on or after 1 January 2007). Additional disclosure has been includedin the Financial statements to comply with this standard. IFRIC 7 - Applying the restatement approach under IAS 29 - Financial reportingin hyperinflationary economies (effective for annual periods beginning on orafter 1 March 2006). IFRIC 8 - Scope of IFRS 2 - Accounting for share-based payments (effective forannual periods beginning on or after 1 May 2006). IFRIC 9 - Reassessment of embedded derivatives (effective for annual periodsbeginning on or after 1 June 2006). IFRIC 10 - Interim financial reporting and impairment (effective for annualperiods beginning on or after 1 November 2006). Notes to the Consolidated Financial Statements 2 Significant accounting policies continued The following standards and interpretations, issued by the IASB or IFRIC, havenot been adopted by the Group as these were not effective for the year 2007. TheGroup is currently assessing the impact these standards and interpretations willhave on the presentation of its consolidated results in future periods: IAS 1 (Amendment) - Presentation of Financial Statements (effective for annualperiods beginning on or after 1 January 2009) - IAS 1 has not been endorsed foruse in the EU. IFRIC 11 IFRS 2- Group and treasury share transactions (effective for annualperiods beginning on or after 1 March 2007). IFRIC 11 has been endorsed for usein the EU. IFRIC 12 - Service concession arrangements (effective for annual periodsbeginning on or after 1 January 2008). IFRIC 12 has not been endorsed for use inthe EU. IFRIC 13 - Customer Loyalty Programmes (effective for annual periods beginningon or after 1 July 2008). IFRIC 13 has not been endorsed for use in the EU. IFRIC 14- The Limit on a Defined Benefit Asset Minimum Funding Requirements andtheir Interaction (effective for annual periods beginning on or after 1 January2008). IFRIC 19 has not been endorsed for use in the EU. IAS 23 (Amendment) - Borrowing costs (effective for annual periods beginning onor after 1 January 2009). IAS 23 has not been endorsed for use in the EU. IAS 27 - Consolidated and separate financial statements (effective for periodsbeginning on or after 1 July 2009). IAS 27 has not been endorsed for use in theEU. IFRS 2 (Amendment) - Vesting conditions and cancellations (effective foraccounting periods beginning on or after 1 January 2009). IFRS2 (Amendment) hasnot yet been endorsed for use in the EU. IFRS 3 (Revised) - Business combinations (effective for accounting periodsbeginning on or after 1 January 2009). IFRS 3 (Revised) has not yet beenendorsed for use in the EU. IFRS 8 - Operating segments (effective for annual periods beginning on or after1 January 2009) contains requirements for the disclosure of information about anentity's operating segments and also about the entity's products and services,the geographical areas in which it operates, and its major customers. Thestandard is concerned only with disclosure and replaces IAS 14 - Segmentreporting. IFRS 8 has been endorsed for use in the EU. Amendments to IAS 32 Financial Instruments: Presentation and IAS 1 Presentationof Financial Statements - Puttable Financial Instruments and Obligations arisingon Liquidation (effective for accounting periods beginning on or after 1 January2009).These amendments have not been endorsed for use in the EU. Critical accounting policies, estimates and judgments The preparation of consolidated financial statements under IFRS requires theGroup to make estimates and judgments that affect the application of policiesand reported amounts. Estimates and judgments are continually evaluated and arebased on historical experience and other factors including expectations offuture events that are believed to be reasonable under the circumstances. Actualresults may differ from these estimates. Included in this note are accounting policies which cover areas that theDirectors consider require estimates and assumptions which have a significantrisk of causing a material adjustment to the carrying amount of assets andliabilities within the next financial year. These policies together withreferences to the related notes to the financial statements can be found below: Taxation Note 6Intangible assets acquired Note 9Impairment of Goodwill Note 10Consolidation on the basis of control Note 18Share-based payments Note 19Regulatory compliance and contingent liabilities Note 24 Notes to the Consolidated Financial Statements 2 Significant accounting policies continued Presentation of continuing and discontinued operations As a result of enactment of the Unlawful Internet Gambling Enforcement Act ("UIGEA") in October 2006, the Group withdrew from offering real-money activity tothe US facing market. Although the Group did not operate the US facing business as a separatebusiness, it was a separate geographical segment of the Group's business and inaccordance with IFRS 5 - "Non-Current Assets Held for Sale and DiscontinuedOperations" the income statement and related notes are required to showcontinued and discontinued operations separately. Net Gaming Revenue and certain direct costs associated with the discontinuedoperations, which are of distinct nature, were allocated accordingly. Othercosts (such as R&D expenses, IT expenses, Share benefit charges, office rent andassociated cost, depreciation of fixed assets, gaming duty, Directors andOfficers insurance, Directors' fees and tax), which are not distinguishable,were all allocated to the continuing operations and not to the discontinuedbusiness. In allocating the rest of the costs of the Group between the twooperations, management has applied reasonable estimates in accordance withapplicable accounting standards. However, as estimates have necessarily beenused in disclosing a geographical segment as discontinued operations, theresults do not necessarily reflect the financial performance which would havebeen achieved had the discontinued operations been managed as a stand-alonebusiness. The matters described above mainly refer to the year ended 31 December 2006, asduring 2007 any cost associated with the discontinued operations was clearlydistinguishable. Basis of consolidation The consolidated financial statements include the accounts of the Company andits subsidiaries. The subsidiaries are companies controlled by 888 HoldingsPublic Limited Company. Control exists where the Company has the power togovern the financial and operating policies of an entity so as to obtainbenefits from its activities. Subsidiaries are consolidated from the date theparent gained control until such time as control ceases. The financial statements of the subsidiaries are included in the consolidatedfinancial statements using the purchase method of accounting. On the date ofthe acquisition, the assets and liabilities of a subsidiary are measured attheir fair values and any excess of the fair value of the consideration over thefair values of the identifiable net assets acquired is recognised as goodwill. Inter-company transactions and balances are eliminated on consolidation. The financial statements of subsidiaries are prepared for the same reportingperiod as the parent company and using consistent accounting policies. Net Gaming Revenue Revenue is recognised to the extent that it is probable that economic benefitswill flow to the Group and the revenue can be reliably measured. Revenue isrecognised in the accounting periods in which the gaming transactions occurred. Net Gaming Revenue is defined as follows: Casino Casino winnings that are the differences between the amounts of bets placed bymembers less amounts won by members. Poker Ring games: Rake, which is the commission charged from each winning hand played. Tournaments: Entry fees charged for participation in Poker tournaments are recognized when the tournament has concluded. Emerging Offerings Net Gaming Revenue from Emerging Offerings is defined as the commission chargedfrom winnings or entry fees charged for participation in a tournament. In thecase of white label activity, Revenue is the net commission charged. Casino winnings, revenues from the Poker business and Emerging Offerings arestated after deduction of certain bonuses granted to members. Other operating income Other operating income consists mainly of revenue generated from processingcustomers' cross currency deposits and withdrawals, effectively reducing costsassociated with payment service providers. Notes to the Consolidated Financial Statements 2 Significant accounting policies continued Foreign currency Monetary assets and liabilities denominated in non-US dollar currencies aretranslated into US dollar equivalents using year-end spot foreign exchangerates. Non-monetary assets and liabilities are translated using exchange ratesprevailing at the dates of the transactions. Exchange rate differences onforeign currency transactions are included in administrative expenses. The results and financial position of all Group entities that have a functionalcurrency different from US dollars are translated into the presentation currencyas follows: (i) monetary assets and liabilities for each balance sheet presented aretranslated at the closing rate at the date of that balance sheet; (ii) income and expenses for each income statement are translated at anaverage exchange rate (unless this average is not a reasonable approximation ofthe cumulative effect of the rates prevailing on the transaction dates, in whichcase income and expenses are translated at the dates of the transactions); and (iii) exchange rate differences on translation of Group entities that havefunctional currencies different from US dollars are included in administrativeexpenses. Taxation The tax expense represents tax payable for the year based on currentlyapplicable tax rates. Deferred tax assets and liabilities are recognised where the carrying amount ofan asset or liability in the balance sheet differs from its tax base.Recognition of deferred tax assets is restricted to those instances where it isprobable that taxable profit will be available against which the difference canbe utilised. The amount of the asset or liability is determined using tax ratesthat have been enacted or substantively enacted by the balance sheet date andare expected to apply when the deferred tax liabilities/assets are settled/recovered. Research and development costs Research and development expenditure is charged to the statement of income asincurred. IAS 38 "Intangible Assets" requires capitalisation of certainsoftware development costs, subsequent to technological and commercialfeasibility being established and the Group having sufficient resources tocomplete development. Based on the Group's product-development process,technological feasibility and therefore the creation of substantially improvedproduct, is only established upon the completion of a working model. The Groupgenerally does not incur any significant costs between the completion of theworking model and the point at which the product is ready for general release. Intangible assets Identifiable assets, liabilities and contingent liabilities that meet theconditions for recognition under IFRS 3 are recognised at their fair value atthe acquisition date. The identified intangibles are amortised over the usefuleconomic life of the assets. For acquisitions during the year 2007, the usefuleconomic life of the intangible assets acquired is estimated to be between threemonths and four years. Intangible assets are reviewed annually for evidence ofimpairment. Goodwill Goodwill represents the excess of the cost of a business combination over theinterest in the fair value of the identifiable assets, liabilities andcontingent liabilities acquired. Cost comprises the fair value of any assetsgiven, liabilities assumed and equity instruments issued, plus any direct costsof acquisition. Goodwill is capitalised as an intangible asset with any impairment in carryingvalue being charged to the consolidated income statement. Where the fair valueof identifiable assets, liabilities and contingent liabilities exceed the fairvalue of consideration paid, the excess is credited in full to the consolidatedincome statement on the acquisition. Property, plant and equipment Property, plant and equipment is stated at historic cost less accumulateddepreciation. Carrying amounts are reviewedat each balance sheet date for impairment. Depreciation is calculated using the straight-line method, at annual ratesestimated to write off the cost of the assets less their estimated residualvalues over their expected useful lives. The annual depreciation rates are asfollows: IT equipment 33%Office furniture and equipment 7-15%Motor vehicles 15%Leasehold improvements Over the shorter of the term of the lease or useful lives Notes to the Consolidated Financial Statements 2 Significant accounting policies continued Impairment of non-financial assets Impairment tests on goodwill and other intangible assets with indefinite usefuleconomic lives are undertaken annually on31 December. Other non-financial assets are subject to impairment testswhenever events or changes in circumstances indicate that their carrying amountmay not be recoverable. Where the carrying value of an asset exceeds itsrecoverable amount (i.e. the higher of value in use and fair value less costs tosell), the asset is written down accordingly. Where it is not possible to estimate the recoverable amount of an individualasset, the impairment test is carried out onthe asset's cash generating unit (i.e. the lowest group of assets in which theasset belongs for which there are separately identifiable cash flows). Financial instruments The Group does not hold or issue derivative financial instruments for tradingpurposes Trade receivables Trade receivables are recognised at fair value and carried at amortised cost andprincipally comprise amounts due from the credit-card companies and frome-payment companies. An estimate for doubtful debts is made when collection ofthe full amount is no longer probable. Bad debts are written off whenidentified. Cash and cash equivalents Cash comprises cash in hand and balances with banks. Cash equivalents are shortterm, highly liquid investments that are readily convertible to known amounts ofcash. They include short-term bank deposits originally purchased withmaturitiesof three months or less. Equity Equity issued by the Company is recorded as the proceeds received, net of directissue costs. Trade and other payables Trade and other payables are recognised at fair value and carried at amortisedcost. Member deposits Member deposits are the amounts that clients place in the Group's electronic "wallet" or bankroll, including provision for bonuses granted by the Group, lessmanagement fees and charges applied to member accounts, along with fullprovision for Casino jackpots. These amounts are repayable on demand inaccordance with the applicable terms and conditions. Available for sale financial assets Available for sale financial assets comprise non-derivative financial assets notincluded in any of the above financial categories, are classified as availablefor sale and comprise principally the Group's investments in entities notqualifying as subsidiaries. They are carried at fair value with changes in fairvalue recognised directly in a separate component of equity. Where there is asignificant decline in the fair value of an available for sale financial assetthe full amount of the impairment, including any amount previously charged toequity, is recognised in the income statement Chargebacks and returned e-cheques The cost of chargebacks and returned e-cheques is included in operatingexpenses. Leases Leases are classified as finance leases wherever the terms of the lease transfersubstantially all the risks and rewards of ownership to the Group. All otherleases are classified as operating leases and rentals payable are charged toincome on a straight-line basis over the term of the lease. Provisions Provisions are recognised when the Group has a present or constructiveobligation as a result of a past event from whichit is probable that it will result in an outflow of economic benefits that canbe reasonably estimated. Segment information A business segment is a distinguishable component of the Group that is engagedin providing an individual product or service or a Group of related products orservices and that is subject to risks and returns that are different from thoseof other business segments. A geographical segment is a distinguishablecomponent of the Group that is engaged in providing products or services withina particular environment and that is subject to risks and returns that aredifferent from those of components operating in other economic environments. The Group operates in the following online gaming segments: • Casino • Poker • Emerging Offering is a new segment added during the year which comprises mainly of the newly acquired Bingo business and 888's Backgammon offering. Notes to the Consolidated Financial Statements 2 Significant accounting policies continued Dividends Dividends are recognised when they become legally payable. In the case ofinterim dividends this is when paid. In the case of final dividends, this iswhen approved by the shareholders at the Annual General Meeting. Share based payments Where the Company grant its employees or contractors shares or market valueoptions, the fair value at the date of grant is charged to the income statementover the vesting period. Non-market performance conditions are taken intoaccount by adjusting the number of instruments expected to vest at each balancesheet date so that, ultimately, the cumulative amount recognized over thevesting period is based on the number of instruments that eventually vest. 3 Segment information Business segments Year ended 31 December 2007 Casino Poker Emerging Consolidated offerings US$'000 US$'000 US$'000 US$'000Net Gaming Revenue 118,120 80,817 14,446 213,383Other operating income 2,111 1,452 3,563Total operating income 120,231 82,269 14,446 216,946 Result 74,061 41,814 5,547 121,422 Segment resultUnallocated corporate expenses1 88,393Operating Profit 33,029Finance income 4,957Tax expense (3,199)Profit for the year - continuing operations 34,787Profit for the year - discontinued operations (Note (552)23a)Profit for the year 34,235AssetsUnallocated corporate assets 182,181Total assets 182,181LiabilitiesSegment liabilities - Poker2 20,013Segment liabilities - Casino2 5,533Segment liabilities - Emerging Offerings 868Deferred acquisition liability - Emerging Offerings 25,145Unallocated corporate liabilities 37,895Total liabilities 89,454 1 Including share benefit charges of US$7,800,000. 2 Included in segment liabilities are amounts owed in respect of discontinued operations. Poker US$82,000 and Casino US$13,000. Notes to the Consolidated Financial Statements 3 Segment information continued Year ended 31 December 2006 Casino Poker Consolidated US$'000 US$'000 US$'000Net Gaming Revenue 88,760 68,240 157,000Other operating income - - -Total operating income 88,760 68,240 157,000 Result 52,101 41,374 93,475 Segment resultUnallocated corporate expenses1 84,994Operating profit 8,481Finance income 4,883Tax expense (3,117)Loss for the year - continuing operations 10,247Profit for the year - discontinued operations (Note 23a) 64,254Profit for the year 74,501AssetsUnallocated corporate assets 137,604Total assets 137,604LiabilitiesSegment liabilities - Poker2 15,445Segment liabilities - Casino2 7,226Unallocated corporate liabilities 27,931Total liabilities 50,602 1 Including share benefit charges of US$8,829,000. 2 Included in segment liabilities are amounts owed in respect of discontinued operations. Poker US$1,627,000 and Casino US$573,000. Other than where amounts are allocated specifically to the Casino, Poker andEmerging Offerings segments above, the expenses, assets and liabilities relatejointly to all segments. Any allocation of these items would be arbitrary. Geographical segments The Group's performance can also be reviewed by considering the geographicalmarkets and geographical locations within which the Group operates. Thisinformation is outlined below: Total operating income by geographical market Other Total Total operating operating Net Gaming income income operating Revenue income Year ended Year ended Year ended Year ended 31 December 31 December 31 December 31 December 2007 2007 2007 2006 US$'000 US$'000 US$'000 US$'000UK 91,404 1,597 93,001 70,562Europe 88,445 1,622 90,067 57,056Americas (excluding USA) 17,684 344 18,028 17,601Rest of World 15,850 - 15,850 11,781Total operating income - Continuing operations 213,383 3,563 216,946 157,000Total operating income - Discontinued operations ( Note - - - 132,90723a )Total operating income 213,383 3,563 216,946 289,907 Notes to the Consolidated Financial Statements 3. Segment information continued Assets by geographical location Carrying amount Additions to of segment assets property, plant by location and equipment Year ended Year ended Year ended Year ended 31 December 31 December 31 December 31 December 2007 2006 2007 2006 US$'000 US$'000 US$'000 US$'000Caribbean 454 357 51 281Europe 161,168 121,008 2,546 1,832Rest of World 20,559 16,239 5,058 6,508 182,181 137,604 7,655 8,621 4 Administrative expenses Year ended Year ended 31 December 31 December 2007 2006 US$'000 US$'000Share benefit charges - all equity settled 7,800 8,829Other administrative expenses 16,860 19,824Administrative expenses - Continuing operations 24,660 28,653Administrative expenses - Discontinued operations 552 7,284Administrative expenses 25,212 35,937 5 Operating profit Year ended Year ended 31 December 31 December 2007 2006 US$'000 US$'000Operating profit is stated after charging:Staff costs 61,301 52,131Audit fees 349 434Other fees paid to auditors in respect of taxation services 26 179Depreciation 4,192 3,801Amortisation 1,550 -Chargebacks and returned e-cheques 2,846 2,507Exchange gains (1,117) (4,742)Payment service providers' commissions 13,359 9,140Share benefit charges - all equity settled 7,800 8,829 In the income statement total staff costs, excluding share benefit charge ofUS$7,800,000 (2006: US$8,829,000), are included within the following expenditurecategories. 2007 2006 US$'000 US$'000Operating expenses 30,967 23,810Research and development expenses 18,672 14,467Administrative expenses 11,662 13,854 61,301 52,131 At 31 December 2007 the Company employed 805 (2006: 736) staff. Notes to the Consolidated Financial Statements 6 Taxation Corporate taxes Year ended Year ended 31 December 31 December 2007 2006 US$'000 US$'000Current tax 3,190 3,302Deferred tax 9 (185)Taxation expense 3,199 3,117 Analysis of current tax for the year Year ended Year ended 31 December 31 December 2007 2006 US$'000 US$'000Profit before taxation 37,434 77,618Current tax at the effective tax rate for the year 3,190 3,302Deferred tax 9 (185)Taxation expense 3,199 3,117 Current tax is calculated with reference to the profit of the Company and itssubsidiaries in their respective countries of operation: Gibraltar -The Company and its Gibraltar registered subsidiaries are subject tothe provisions of the Gibraltar Companies (Taxation and Concessions) Act (the "CTCA") as a tax-exempt company. Subject to a change of ownership or activity ofa tax-exempt company, the grandfathering of tax-exempt benefits in respect ofexisting tax-exempt companies will extend up to 31 December 2010. Domesticcorporate tax in Gibraltar is 33% (2006: 35%). Gibraltar's Chief Minister hasannounced further reductions in anticipation of the introduction of a flat lowtax rate of between 10% and 12% in 2010. A consultation is in place with respectto the new tax regime in Gibraltar. Israel - 888's operations in Israel have entered into separate transfer pricingagreements on an arm's-length basis with the Israeli Income Tax Commissioner.The agreement in respect of Random Logic Limited is effective until the end of2010. The agreement in respect of the Israeli branch of Intersafe Global Limitedwas effective until the end of 2007. The Group is in the process ofdiscontinuing the use of this branch and so does not intend to enter into a newagreement. Domestic corporate tax in Israel is 29% (2006: 31%). UK - 888's subsidiary in the UK pays corporate tax in the UK at the applicablerate of 30% (2006: 30%). 7 Earnings per share Basic earnings per share from continuing operations Basic earnings per share have been calculated by dividing the profitattributable to ordinary shareholders by the weighted average number of sharesin issue during the year. Diluted earnings per share In accordance with IAS 33, "Earnings per share", the weighted average number ofshares for diluted earnings per share takes into account all potentiallydilutive shares and share options granted, which are not included in the numberof shares for basic earnings per share. In addition, certain employee optionshave also been excluded from the calculation of diluted EPS as their exerciseprice is greater than the weighted averaged share price during the year and itwould not be advantageous for the holders to exercise the option. The number ofoptions excluded from the diluted EPS calculation is 4,765,036 (2006:3,230,182). Notes to the Consolidated Financial Statements 7. Earnings per share continued Year ended Year ended 31 December 31 December 2007 2006 US$'000 US$'000Profit from continuing operations attributable to ordinary shareholders 34,787 10,247Weighted average number of Ordinary Shares in issue 338,837,328 337,223,724Weighted average number of dilutive Ordinary Shares 346,069,425 341,834,214 Continuing operationsBasic 10.3c 3.0cDiluted 10.1c 3.0cDiscontinued operations (Note 23e)Basic (0.2)c 19.1cDiluted (0.2)c 18.8cTotalBasic 10.1c 22.1cDiluted 9.9c 21.8c Earnings per share excluding share benefit charges Reconciliation of profit to profit excluding share benefit charges: Year ended Year ended 31 December 31 December 2007 2006 US$'000 US$'000Profit from continuing operations attributable to ordinary shareholders 34,787 10,247Share benefit charges 7,800 8,829Profit excluding share benefit charges 42,587 19,076Weighted average number of Ordinary Shares in issue 338,837,328 337,223,724Weighted average number of dilutive Ordinary Shares 346,069,425 341,834,214 Continuing operationsBasic earnings per share excluding share benefit charges 12.6c 5.7cDiluted earnings per share excluding share benefit charges 12.3c 5.6cDiscontinued operations (Note 23e)Basic earnings per share excluding share benefit charges (0.2)c 19.1cDiluted earnings per share excluding share benefit charges (0.2)c 18.8cTotalBasic earnings per share excluding share benefit charges 12.4c 24.8cDiluted earnings per share excluding share benefit charges 12.1c 24.4c 8 Dividends Year ended Year ended 31 December 31 December 2007 2006 US$'000 US$'000Dividends paid 36,205 28,658 The Board of Directors will recommend to the Shareholders a final divided inrespect of the year ended 31 December 2007, of 5c. Notes to the Consolidated Financial Statements 9. Acquisitions made during the year Online Bingo business On 16 May 2007 the Group acquired the assets comprising the online Bingobusiness of Globalcom Limited ("Bingo Business") for an all cash consideration. In calculating the goodwill arising on acquisition, the fair value of the netassets of the Bingo business has been valued by a professional valuation firmand recognised in accordance with IFRS 3 and adjustments from book value havebeen made where necessary. These adjustments are summarized as follows: Book Value on Fair value Fair Value acquisition adjustments US$'000 US$'000 US$'000 Property, plant and equipment 1 81 - 81Intangible assets2 200 4,114 4,314 Net assets 281 4,114 4,395 1 See note 112 See note 10 The fair value relates to the recognition of customer lists (US$888,000),royalty agreements (US$1,113,000), licensing agreements (US$2,113,000) and otherintangible assets (US$200,000) acquired as part of the acquisition. Theseintangibles are being amortised over their estimated useful economic lives ofbetween three months and four years. All intangible assets on acquisition havebeen identified and fair valued. The remaining goodwill represents the access tofuture trade with the Bingo customers. US$'000Fair value of net assets acquired 4,395Goodwill 37,892Fair value of consideration including expenses 42,287 Which is represented by:Cash consideration to Globalcom Limited 10,723Deferred cash consideration to Globalcom Limited (paid during the year) 5,398Deferred cash consideration to Globalcom Limited (included with other payables) 16,095Earn-out payment (included with other payables) 1 9,050Expenses & other costs 1,021Total cash consideration 42,287 1 A further earn-out payment of US$9.05 million is payable in cash 12 monthsfrom completion on the basis of actual performance during financial year 2007,which was accomplished. The revenue and operating profit generated from this acquisition in thepost-acquisition period to 31 December 2007 were $14.4 million and $5.2 million,respectively. Had the business been owned for the entire year, the revenue andoperating profit would have been $20.2 million and $8.3 million respectively. 10 Intangible assets Other intangibles Goodwill Total US$'000 US$'000 US$'000Cost or valuationAt 1 January 2007 - - -Acquisitions 4,314 37,892 42,206 At 31 December 2007 4,314 37,892 42,206Amortisation and impairment lossesAt 1 January 2007 - - -Charge for the year 1,550 - 1,550Impairments - - -At 31 December 2007 1,550 - 1,550Carrying amountsAt 31 December 2007 2,764 37,892 40,656At 31 December 2006 - - - Notes to the Consolidated Financial Statements 10. Intangible assets continued The other intangible assets relate to the recognition of customer lists, royaltyagreements, licensing agreements and certain software developed and acquired aspart of the acquisition of the assets comprising the online Bingo business ofGlobalcom Limited. These intangibles are being amortised over their estimateduseful economic lives of between three months and four years. The intangibleassets have been identified and valued using third part professional valuers,and are based on their value in use to the business.Goodwill is associated withthe cash generating online Bingo business acquired during the year. In accordance with IAS 36 and IFRS 3, the Group regularly monitors the carryingvalue of its goodwill. A review was undertaken at 31 December 2007 to assesswhether the carrying value of goodwill is supported by the net present value offuture cash flows generated by these assets using cash flow estimates for 4years. The discount rate used for purposes of the review is the company specificweighted average cost of capital percentage of 19%. In estimating the futurecash flows the Group has used very prudent estimates in respect of revenuesgenerated and costs incurred. The result of the review undertaken at 31 December 2007 was that no impairmentis required and the carrying value of the intangible assets is appropriate. 11 Property, plant and equipment Office furniture and Motor Leasehold equipment improvements IT equipment vehicles Total US$'000 US$'000 US$'000 US$'000 US$'000CostAt 1 January 2006 10,614 2,077 459 5,202 18,352Additions 3,163 254 - 5,204 8,621Disposals - - (163) - (163)At 31 December 2006 13,777 2,331 296 10,406 26,810Additions 4,156 105 110 3,203 7,574 Acquisitions 81 - - - 81Disposals (1) - - - (1)At 31 December 2007 18,013 2,436 406 13,609 34,464 Accumulated depreciationAt 1 January 2006 7,576 618 61 1,756 10,011Charge for the year 2,085 208 128 1,380 3,801Disposals - - (35) - (35)At 31 December 2006 9,661 826 154 3,136 13,777Charge for the year 2,845 230 49 1,068 4,192Disposals (1) - - - (1)At 31 December 2007 12,505 1,056 203 4,204 17,968 Depreciated costAt 31 December 2007 5,508 1,380 203 9,405 16,496At 31 December 2006 4,116 1,505 142 7,270 13,033 12 Financial Assets 31 December 31 December 2007 2006 US$'000 US$'000Opening balance at the beginning of the year - -Acquisition of available for sale assets during the year 759 -Adjustment to market price at year end (105) - 654 - There were no disposals or impairment provisions on available for sale financialassets. Available for sale assets are quoted equity securities, the fair value of whichis based on their published market price. Notes to the Consolidated Financial Statements 13 Deferred taxes Deferred income taxes reflect the net tax effects of temporary differencesbetween the carrying amounts of assets and liabilities for financial reportingpurposes and the amounts used for income tax purposes. The Group's deferred taxassets resulting from temporary differences are as follows: 31 December 31 December 2007 2006 US$'000 US$'000Accrued severance pay 38 141Provision for share option charge 181 176Provision for vacation 300 213Provision for convalescence 18 16 537 546 14 Cash and cash equivalents 31 December 31 December 2007 2006 US$'000 US$'000Cash and cash equivalents 103,505 106,811Restricted cash 803 7,545 104,308 114,356 Restricted cash primarily relates to deposits held by banks for guarantees. 15 Trade and other receivables 31 December 31 December 2007 2006 US$'000 US$'000Trade receivables 13,430 6,189Other receivables and prepayments 6,100 3,480 19,530 9,669 The carrying value of trade and other receivables approximates to their fairvalue. Notes to the Consolidated Financial Statements 16 Share capital Share capital comprises the following: Authorised 31 December 31 December 31 December 31 December 2007 2006 2007 2006 Number Number US$'000 US$'000Ordinary Shares of £0.005 each 426,387,500 426,387,500 3,880 3,880 426,387,500 426,387,500 3,880 3,880 Allotted, called up and fully paid 31 December 31 December 31 December 31 December 2007 2006 2007 2006 Number Number US$'000 US$'000Ordinary Shares of £0.005 each 337,618,820 337,096,320 3,073 3,068Issue of ordinary shares of £0.005 each 2,489,215 522,500 24 5 340,108,035 337,618,820 3,097 3,073 On 16 April 2007, the company issued 138,403 ordinary shares of £0.005each in respect of shares exercised and nil cost options exercised as part ofthe company's employee share option plan (see note 19). On 4 May 2007, the company issued 1,002,169 ordinary shares of £0.005each in respect of shares exercised and nil cost options exercised as part ofthe company's employee share option plan (see note 19). On 5 July 2007, the company issued 475,941 ordinary shares of £0.005each in respect of shares exercised as part of the company's employee shareoption plan (see note 19). On 20 September 2007, the company issued 212,174 ordinary shares of £0.005 each in respect of shares exercised and nil cost options exercised as partof the company's employee share option plan (see note 19). On 4 October 2007, the company issued 649,777 ordinary shares of £0.005each in respect of shares exercised and nil cost options exercised as part ofthe company's employee share option plan (see note 19). On 10 October 2007, the company issued 10,751 ordinary shares of £0.005each in respect of shares exercised as part of the company's employee shareoption plan (see note 19). Shares issued are converted into US$ at the exchange rate prevailing on the dateof issue. The issued and fully paid share capital of the Group amounts toUS$3,098,000 (2006: US$3,073,000) and is split into 340,108,035 (2006:337,618,820) ordinary shares. The share capital in UK Sterling (GBP) is£1,700,540 (2006: £1,688,094) and translates at an average exchange rate ofUS$1.82 (2006: $1.82) to GBP. 17 Trade and other payables 31 December 31 December 2007 2006 US$'000 US$'000Trade payables 5,297 3,111Corporate taxes 1,131 1,016Other payables and accrued expenses 31,467 23,804Deferred acquisition liability 25,145 - 63,040 27,931 The carrying value of trade and other payables approximates to their fair value. Notes to the Consolidated Financial Statements 18 Investments in subsidiaries Percentage Percentage of equity of equity interest interest Country of 2007 2006 IncorporationName % % Nature of businessIntersafe Global Limited Gibraltar 100 100 Payment processorCassava Enterprises Limited Antigua 100 100 Member call centre operatorVirtual Services Limited BVI 100 100 AdvertisingVirtual Holdings Management Services Gibraltar 100 100 Operates Group(Gibraltar) Limited headquartersIntersafe Global (Europe) Limited Gibraltar 100 100 Payment processorCassava Enterprises (Gibraltar) Limited Gibraltar 100 100 Gaming web site operatorVirtual Marketing Services (UK) Limited UK 100 100 AdvertisingCassava Sports Limited Gibraltar 100 100 Domain site owner through which a third party operates a betting exchangeActive Media Limited BVI 100 100 Member call centre employerVirtual Marketing Services (Gibraltar) Gibraltar 100 100 Marketing acquisitionLimitedDixie Operation Limited Antigua 100 100 Member call centre operatorRandom Logic Limited Israel 100 100 Research, development and marketingBrigend Limited Gibraltar 100 - Bingo business operatorACTeCASH Limited 1 Gibraltar - - e-Wallet service 1 On 20 December 2005, the Group took responsibility for the management ofACTeCASH Limited, a company with common shareholders. From this date ACTeCASHwas managed as a unit of the Group and utilised staff employed by the Group. Inaccordance with IAS 27 "Consolidated and Separate Financial Statements", theGroup is deemed to have control of ACTeCASH by virtue of the fact it has thepower to govern the financial and operating policies of this company and deriveseconomic benefit from doing so. As such ACTeCASH has been consolidated as partof the Group. 19 Share-based payment Prior to flotation, the Company adopted two equity-settled employee shareincentive plans - the 888 All-Employee Share Plan and the Long Term IncentivePlan. Awards have been granted under the 888 All-Employee Share Plan conditionalupon flotation. The 888 All-Employee Share Plan is open to all employees andExecutive Directors of the Group who are not within six months of their normalretirement age at the discretion of the Remuneration Committee. Awards underthis scheme will vest in instalments over a fixed period of up to four years. The Company grants awards to certain executive directors and members of itssenior management. These awards are subject to performance conditions imposed bythe Remuneration Committee at the dates of grant. Details of Shares and Share Options granted as part of the 888 All-EmployeeShare Plan and shares granted vesting immediately on IPO and thereafter: Share options granted 31 December 31 December 2007 2006 Number NumberOutstanding at the beginning of the year 4,204,919 3,578,287Market value options granted during the year 2,004,880 2,224,131Market value options lapsed during the year (1,121,352) (1,597,499)Outstanding at the end of the year1,2 5,088,447 4,204,919Weighted average exercise price for options outstanding at the end £1.49 £1.67of the yearWeighted average exercise price for options lapsed during the year £1.64 £1.72 1 Of the total number of options outstanding at the end of the year 1,321,145had vested and were exercisable at the end of the year (2006: 784,491). 2 Range of exercise price for options outstanding at the end of the year is£1.14 - £1.80 (2006: £1.44 - £1.80). Notes to the Consolidated Financial Statements 19. Earnings per share continued Shares granted 31 December 31 December 2007 2006 Number NumberOutstanding at the beginning of the year 8,316,639 5,247,214Shares granted - future vesting 5,218,255 5,595,219Lapsed future vesting shares (1,243,019) (2,003,294)Shares issued during the year (2,489,215) (522,500)Outstanding at the end of the year 9,802,660 8,316,639 The following information is relevant in the determination of the fair value ofoptions granted during the year under the equity-settled the 888 All-EmployeeShare Plan: Valuation information 2007 2006Option pricing model used Monte Carlo Monte CarloWeighted average share price at grant date £1.18 £1.61Weighted exercise price £1.19 £1.67Risk free interest rate range 4.82-5.40% 4.30-4.70%Expected volatility of the price of the underlying share 37-78% 53-67% Exercise period of the market value options is from vesting until expiry of 10years after grant date. Monte Carlo model is taking into account all the minimum requirements set byIFRS 2 such as: the exercise price of the option, the current price of theunderlying share, the expected volatility of the price of the underlying share,the expected dividend on the underlying share, the expected term of the optionboth contractual term and employees' expected behaviour and the risk-freeinterest rate for the expected term of the option. In accordance with International Financial Reporting Standards a charge to theincome statement in respect of any shares or options granted under the aboveschemes will be recognised and spread over the vesting period of the shares oroptions based on the fair value of the shares or options at the date at grant,adjusted for changes in vesting conditions at each balance sheet date. Thischarge has no cash impact. Share benefit charges Year ended Year ended 31 December 31 December 2007 2006 US$'000 US$'000Charges in respect of share and option awards granted this year 1,756 2,527Charges in respect of share and option awards granted in 6,044 6,302previous yearsCharge for the year 7,800 8,829 20 Related party transactions During the year the Group paid US$290,401 (2006: US$212,464) in respect of rentand office expenses to companies of which Mr John Anderson is a Director. At 31December 2007 the amount owed to those companies was US$nil (2006: US$nil). Remuneration paid to the Directors in the year totaled US$4,328,000 (2006:US$9,258,000). Share benefit charge in respect of awards granted to the Directors totaledUS$3,163,000 (2006: US$4,544,000). 21 Commitments Lease commitments Future minimum lease commitments under property operating leases for the yearended 31 December 2007 are as follows: 31 December 31 December 2007 2006Leases expiring within US$'000 US$'000One year 2,278 3,060Two to five years 7,533 8,204 9,811 11,264 The amount paid in the year was US$ 2,745,000 (2006: US$2,620,000). Lease commitments on the Group's property are shown to the date of the firstbreak clause. Notes to the Consolidated Financial Statements 22 Financial risk management The Group is exposed through its operations to risks that arise from use of itsfinancial instruments.. Policies and procedures for managing these risks areset by the Board following recommendations from the Chief Financial Officer. TheBoard reviews the effectiveness of these procedures and, if required, approvesspecific policies and procedures in order to mitigate these risks. The main financial instruments used by the Group, on which financial riskarises, are as follows: • Cash and cash equivalents • Restricted cash • Trade and other receivables • Available for sale financial assets • Trade and other payables • Member deposits Detailed analysis of these financial instruments is as follows: 31 December 31 December 2007 2006Financial assets US$'000 US$'000Trade receivables 13,430 6,189Other receivables 6,100 3,480Cash and cash equivalents 103,505 106,811Restricted cash 803 7,545Available for sale financial asset 654 - 124,492 124,025 In accordance with IFRS 7 with the exception of available for sale assets, allfinancial assets are classified as loans and receivables. 31 December 31 December 2007 2006Financial liabilities US$'000 US$'000Trade payables 5,297 3,111Other payables and accrued expenses 31,467 23,804Deferred acquisition liability 25,145 -Member deposits 26,414 22,671 88,323 49,586 In accordance with IFRS 7 all financial liabilities are held at amortised cost. At 31 December 2007 and 2006, the fair value and the book value of the Group'sfinancial assets and liabilities were materially the same. Capital The Capital employed by the Group is comprised of equity attributable toshareholders. The primary objective of the Group is maximizing shareholders'value, which, from the capital perspective, is achieved by maintaining thecapital structure most suited to the Group's size, strategy, and underlyingbusiness risk. Other than disclosed elsewhere in note 22 there are no demands orrestrictions on the Group's capital. The main financial risk areas are as follows: Credit risk Trade receivables The Group's credit risk is primarily attributable to trade receivables who arethe Group's payment service providers ("PSP"). These are third party companiesthat facilitate deposits and withdrawal of funds to and from the members'virtual wallet with the Group. These are mainly intermediaries that transact onbehalf of the main credit card companies. The risk is that a PSP would fail to discharge its obligation with regard to thebalance owed to the Group. The Group reduces this credit risk by: • Monitoring those balances on a regular basis • Arranging for the shortest possible cash settlements intervals • Replacing rolling reserve requirements, where they exist, with a Letter of Credit by a reputable financial institution. • Ensuring a new PSP is contracted following various due diligence and "Know Your Customer" procedures. • Ensuring policies are in place to reduce dependency on specific PSP's. The Group believes that based on the above and on extensive past experience, itis not required to provide for any potential bad debts arising from a PSPfailing to discharge its obligation. None of the balances owed by the various PSP are overdue or impaired. Notes to the Consolidated Financial Statements 22. Financial risk management continued An additional credit risk the Group faces relates to members disputing chargesmade to their credit cards ("chargebacks") or any other funding method they haveused in respect of the services provided by the Group. Members may fail tofulfil their obligation to pay which will result in funds not being collected.These chargebacks and uncollected deposits (or returned e-cheques), whenoccurring will be deducted at source by the PSP's from any amount due to theGroup. As such the Group provides for these eventualities by way of a provisionbased on analysis of past transactions and estimated trends. This provision isnetted off from the trade receivables balance and at 31 December 2007 was$845,000 (2006: $500,000). The Group's in house Fraud and Risk Management department carefully monitorsdeposits and withdrawals by following prevention and verification proceduresusing internally developed bespoke systems integrated with commerciallyavailable third party measures. Cash and cash equivalents The Group controls its cash position out of its Gibraltar headquarters.Subsidiaries in its other locations (Israel, Antigua and London) maintainminimum cash balances which are deemed required for their operations. Cash settlement proceeds from PSP's as described above, are paid into bankaccounts controlled by the finance function in Gibraltar. The Group segregates funds due to members and holds these funds in separate bankaccounts. These funds are not used to fund activity other than that directlyrelated to members. The Group maintains its funds with highly reputable financial institutions andwill not hold funds with financial institutions with a credit rating lower thanA (based on Standard & Poor's rating). The Group maintains its cash reserve in highly liquid deposits and regularlymonitors rates in order to maximize yield. Restricted cash The group may be required to deposit cash collateral to secure a letter ofcredit that substitutes reserves required to be held by a PSP. Such deposit willbe with a reputable financial institution instead of with the individual PSP.This decreases the cash balance with the PSP and therefore exposure. As at 31December 2006, most of the restricted cash was of this nature. During the year2007, the Group was able to substantially reduce those requirements and as at 31December 2007, restricted cash is mainly attributed to a deposit in respect ofthe Group's obligation with the developer of the offices of its subsidiary inIsrael. The Group's maximum exposure to credit risk by type of financial instrument issummarized below: 31 December 2007 31 December 2006 Carrying Maximum Carrying Maximum exposure exposure value value US$'000 US$'000 US$'000 US$'000Trade receivables 13,430 13,430 6,189 6,189Other receivables 6,100 6,100 3,480 3,480Cash and cash equivalents 103,505 103,505 106,811 106,811Restricted cash 803 803 7,545 7,545Available for sale financial asset 654 654 - - 124,492 124,492 124,025 124,025 Liquidity risk Liquidity risk exists in the case where the Group will encounter difficulties inmeeting its financial obligations as they become due. The Group monitors its liquidity in order to ensure that sufficient liquidresources are available to allow it to meet its obligations. In the case of the Group's liability to its members, the Group maintains thesedeposits in separate bank accounts which are not used for its day to dayoperations. As at 31 December 2007, the Group had a deferred acquisition liability ofUS$25,145,000 in respect of the acquisition of the online Bingo business ofGlobalcom Limited. The Group maintain sufficient funds to meet this liabilitywhich is due between April and May 2008. In addition the Group has assured thatcash earmarked to fund its final dividend payment for 2007, is in place. The Group expects to have sufficient liquidity to meet all of its financialobligations under all reasonably expected circumstances and will not need toresort to any debt borrowing. Notes to the Consolidated Financial Statements 22. Financial risk management continued The following table details the contractual maturity analysis of the Group'sfinancial liabilities: 31 December 2007 Deferred acquisition Trade Other liability Member payables payables1 deposits Total US$'000 US$'000 US$'000 US$'000 US$'000On demand 1,047 5,612 - 26,414 33,073In 3 months 3,669 23,562 - - 27,231Between 3 months and 1 year 581 1,835 25,145 - 27,561More than 1 year - 458 - - 458 5,297 31,467 25,145 26,414 88,323 1 Includes other payables, accrued expenses and provisions. 31 December 2006 Deferred acquisition Trade Other liability Member payables payables1 deposits Total US$'000 US$'000 US$'000 US$'000 US$'000On demand 390 6,647 - 22,671 29,708In 3 months 2,148 12,919 - - 15,067Between 3 months and 1 year 573 3,174 - - 3,747More than 1 year - 1,064 - - 1,064 3,111 23,804 - 22,671 49,586 1 Includes other payables, accrued expenses and provisions. Market risk Interest rate risk The Group's exposure to interest rate risk is limited to the interest bearingdeposits in which the Group invests surplus funds. The Group's policy is to invest surplus funds in low risk money market funds oron call over night facilities. The Group also arranged with its principalbankers that excess funds are swept automatically across its accounts, everynight, in order to maximize availability of funds for investments. Downside interest rate risk is minimal as the Group has no borrowings. A 0.5%movement in bank interest rates would not have a significant impact on financeincome for the year or the prior year. Currency risk The Group's overall financial risk arising from exchange rate fluctuations is aresult of a miss-match between receipts which are denominated is US$ andexpenses part of which are denominated in foreign currencies , of which to benoted are the British Pound Sterling (GBP), the Euro (EUR) and the New IsraeliShekel (ILS). The Group continually monitors the foreign currency risk and takessteps to ensure that the net exposure is kept to an acceptable level, inter aliaby using foreign exchange forward contracts designed to fix the economic impactof known liabilities. At 31 December 2007 and 31 December 2006, there were nooutstanding forward contracts. There were no significant fair value movements onthese contracts during the year. The Group further mitigates that risk by way of natural hedging whereby acertain portion of funds collected from the PSP are settled in either GBP or EURin order to fund its expenses denominated in these currencies. Notes to the Consolidated Financial Statements 23 Discontinued Operations As a result of the matters fully described in note 24, the Group incurred legalexpenses in assessing the extent of any contingent liability, if any. (a) Consolidated Income Statement Year ended Year ended 31 December 31 December 2006 2007 US$'000 US$'000Net Gaming Revenue - 132,907Operating expenses - 28,086Research and development expenses - -Selling and marketing expenses - 33,283Administrative expenses 552 7,284 Operating (loss)/profit before reorganization costs (552) 68,287 Charges in respect of reorganization costs - 4,033 Operating (loss)/profit (552) 64,254Finance income - -(Loss)/profit from discontinued operations (552) 64,254 (b) Segment information Business segments Year ended 31 December 2007 Casino Poker Consolidated US$'000 US$'000 US$'000 Net Gaming Revenue - - -Result - - - Segment resultUnallocated corporate expenses (552)Operating loss (552)Net loss for the year - - (552) Year ended 31 December 2006 Casino Poker Consolidated US$'000 US$'000 US$'000Net Gaming Revenue 71,972 60,935 132,907Result 40,186 37,678 77,864 Segment resultUnallocated corporate expenses 13,610Operating Profit 64,254Net Profit for the year 64,254 Other than where amounts are allocated specifically to the Casino and Pokersegments above, the expenses relate jointly to both segments. Any allocation ofthese items would be arbitrary. Notes to the Consolidated Financial Statements 23 Discontinued Operations continued Geographical segments Net Gaming Revenue by geographical market Year ended Year ended 31 December 31 December 2007 2006 US$'000 US$'000USA - 132,907 - 132,907 (c) Profit from discontinued operations Year ended Year ended 31 December 31 December 2007 2006 US$'000 US$'000Profit from discontinued operations is stated after charging: -Staff costs - 6,638Chargebacks and returned e-cheques - 15,465Payment service providers' commissions - 5,821 In note 23(c) total staff costs, are included within the following expenditurecategories: 2007 2006 US$'000 US$'000Operating expenses - 5,842Administrative expenses - 796 - 6,638 (d) Cash flows from discontinued operations Year ended Year ended 31 December 31 December 2007 2006 US$'000 US$''000Net cash (used)/generated in operating activities (552) 53,506Net cash generated from investing activities - 2,244Net cash used in financing activities - (14,951)Net increase in cash and cash equivalents (552) 40,799 (e) Earnings per share Year ended Year ended 31 December 31 December 2007 2006 US$'000 US$'000(Loss) Profit from discontinued operations attributable to ordinary (552) 64,254shareholdersWeighted average number of Ordinary Shares in issue 338,873,328 337,223,724Weighted average number of dilutive Ordinary Shares 346,069,425 341,834,214Basic (Losses) earnings per share (0.2)c 19.1cDiluted (Losses) earnings per share (0.2)c 18.8c Notes to the Consolidated Financial Statements 24 Contingent liabilities From time to time the Group is subject to legal claims and actions against it. The Group takes legal advice as to the likelihood of success of such claims and actions. Regulatory issues As part of the Board's ongoing regulatory compliance and operational riskassessment process, the Board continues to monitor legal and regulatorydevelopments, and their potential impact on the business, and continues to takeappropriate advice in respect of these developments. Following the enactment of the UIGEA on 13 October 2006, the Group stoppedtaking any deposits from customers in the US and barred such customers fromwagering real-money on all of the Group's sites. Notwithstanding this, there remains a residual risk of an adverse impact arisingfrom the Group having had customers in the US prior to the enactment of theUIGEA. The Board is not able to identify reliably at this stage what if anyliability may arise and accordingly no provision has been made. On 5 June 2007 the Group announced that it has initiated preliminary discussionswith the United States Attorney's Office for the Southern District of New York.It is too early to assess any particular outcome of these discussions. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
888.L