Playtech KPIs Exceed Expectations

Gambling software developer Playtech's financial report for its second full year of trading as a public company shows that all key performance indicators exceeded targets. Revenue grew to $103.6 million, net profits improved to $70 million, and some very impressive feats were accomplished in 2007.

Chairman Roger Withers says business growth was driven by two key factors, "geographical presence in growing markets" and "ability to deliver comprehensive best of breed solutions for our licensees."

"On a global scale, the online gaming market continues to grow across all major economic regions and as such still constitutes a young and growing marketplace," said Withers. "There is much to play for and Playtech's world leading position means it is ideally placed to further benefit from growth in all of its operations...With a strong balance sheet and cash resources, Playtech is well placed to make strategic acquisitions and will be opportunistic in its approach. The Group will continue to follow its successful strategy of organic and acquisitive growth."

Withers says that an important part of his company's success is that its relationship with licensees is "far more than a purely commercial one."

"We help to drive their growth by providing innovative products that meet their market demands. This is an evolving and never-ending process whereby Playtech is constantly developing, marketing and launching new products to ensure our partner customers maintain their competitive advantage in fast-moving markets."

2007 Activity

In 2007 Playtech completed its migration and integration of non-US assets of the Tribeca poker network into Playtech's iPoker platform. Withers says the acquisition of Tribeca "has been highly beneficial to the Group and has contributed greatly to Playtech's ongoing success."

Playtech gained 15 new licensees during the year. Eight of the new licensees are former Tribeca licensees. Mansion and CY Foundation, both of which focus on the Asian market, also began using Playtech's Internet gaming software in 2007.

CEO Mor Weizer says Playtech executed a geographical diversification strategy by developing products tailored to specific markets in 2007. "During the first half of 2007, the Group focused on converting the majority of its downloadable casino games into flash technology and introduced flash version of our bingo product, which is the preferred format in Europe and the UK sportsbook market in particular," he said. "In addition, we completed the upgrade of the live gaming software, a key offering for the Asian market. We also focused on the development of Asian P2P games, the first of which we expect to launch at the end of the first quarter of 2008."

In 2007 Playtech also completed a development center in Bulgaria and acquired development operations in India and the Philippines as part of the Tribeca transaction. Weizer says the company is truly multinational now that it has subsidiaries in Asia and Europe. "In all, the Group employs approximately 650 valued personnel," he said. "A key element of our success is the ability to offer existing and potential licensees market-leading research, development and production capabilities which allow them to achieve their strong organic growth, penetrate new markets rapidly and successfully launch new products."

Playtech also established strategic stakes in two Asian-facing licensees.

"The Group invested $10.2 million into CY Foundation, which as at 31 December 2007 was worth $18.9 million based on the closing share price of Foundation shares on the Hong Kong stock Exchange. This resulted in an unrealised economic benefit of approximately $8.7 million," explained Withers.

Playtech participated in the December IPO of operator AsianLogic. Playtech supplies software to AsianLogic and was allocated additional shares in the company as part of a license renewal agreement. "Accordingly its total cash investment in AsianLogic was 5.0 million, which on 31 December 2007 was worth 15.9 million based on the closing share price of AsianLogic shares on the London Stock Exchange. This has resulted in an unrealised economic gain of US$10.9 million," said Weizer.

Both CEO Mor Weizer and CFO Guy Emodi joined the company in 2007. Mor is a qualified chartered accountant and was a senior operational manager within Playtech for approximately two years prior to joining the Board. Withers says Weizer's "experience in managing customer relations, product delivery and technical support as Chief Executive Officer of Techplay Marketing Ltd, a Playtech subsidiary, provides the ideal grounding as the Group's Chief Executive Officer." Emodi "has more than 18 years of experience in international finance and brings a wealth of skills and expertise in his core competence of financial management of large companies."

Author's Note: Playtech also claims to have become "the world's largest independent online poker network" in 2007, but this is a difficult claim to verify.

As Reported:

Financial Highlights

Total Revenues up by 86% to $103.6 million (2006: $55.6 million)

Casino revenues up by 58% to $74.7 million (2006: $47.3 million)

Poker revenues up by 269% to $27.4 million (2006: $7.4 million)

Adjusted net profit before tax of $70 million (2006: $68 million, Including US)

Cash generated from operating activities of $62.6 million (2006: $72.6 million) was 95% of the Group's operating profit before non cash items

Recommended Final Dividend of 9.9 US cents per share, making a total of approximately $21.5 million. Once approved and paid, this will result in shareholders receiving an aggregate dividend for 2007 of 16.0 cents per share or approximately $34.6 million (2006: $33.5 million (15.7 cents per share))

Cash investment in CY Foundation of $10.25 million and the fair value of such investment on 31 December 2007 was $18.9 million. Deferred revenues of $27.6 million recorded in the balance sheet

Cash investment in AsianLogic of US$5.0 million and the fair value of investment on 31 December 2007 was US$15.9 million. Deferred revenues of $10.6 million recorded in the balance sheet

For ease of comparison all 2006 revenues exclude contributions from the US from where the Company's licensees withdrew more than a year ago.

Operational Highlights:

Playtech's iPoker network became the world's largest online poker network (according to

Successful completion of the migration and integration of the non US assets of the Tribeca poker network to the iPoker network

15 new licensees added (8 migrated from Tribeca) including new licensees in the rapidly expanding Asian and European markets

Further investment in development, and pre and post sale resources bringing the total number of Playtech employees to approximately 650

Enhanced product development including the conversion of the majority of the downloadable casino games into flash, introduction of flash Bingo and upgrade of the live gaming software

Completion of Videobet switchable technology which allows an operator to operate gaming machines on a stand alone basis and switch it to server-based, should they choose, without any additional cost or time

Joint venture agreement with Unicum, which will allow Videobet's software to be utilised in at least 500 stand alone gaming machines located in the Ukraine

In December the iPoker network held the European Championship of Online Poker ("ECOOP") which saw over 44,000 players participating for an aggregate of $2.85 million in prize money

Current Trading and Outlook:

Significant Growth in January with 14.4% growth in revenues over the monthly average revenues in the fourth quarter of 2007

6 new licence agreements already signed in 2008 in line with the Group's strategy to diversify geographically, focus on regulated markets and migrate licensees from competitors

Leading position attracts well established online and land based operators

Strong pipeline of potential additional licensees

Launch of new Asian P2P games, which are extremely popular in the Asian market, planned to the end of the first quarter of 2008

Acceleration of the development of new games including a large number of slot, table and card games and additional Asian P2P games

Following the success of the first ECOOP tournament, further tournaments are planned for this year including a second ECOOP tournament with an aggregate of more than $3.5 million in prize money