The 2008 results show excellent growth over the previous year in all areas of the business.
I am delighted to report another excellent year for Playtech. The Group made strong financial progress, again delivering record levels of revenue and profit. This year saw some important achievements, two of which I am particularly proud. The first was the equity placing in June 2008 to institutional investors in the Company which raised £112 million before expenses (€141 million). The second achievement was the transaction with William Hill which involved the acquisition by Playtech of online gaming marketing assets, businesses and contracts from affiliates and other third parties for a total consideration of US$250 million (€177.7 million) in cash and the immediate injection of those assets in return for a 29% interest in a new operation created with William Hill (‘William Hill Online’) which will operate on Playtech’s market leading software platform under a five year licence agreement. I am confident that William Hill Online will be highly successful and will bring financial benefits to both William Hill and Playtech.
There were several other notable achievements. Pursuant to our strategy to target regulated markets, in the last week of the year we launched our Italian poker network, of which SNAI, SISAL, Eurobet Italy and COGETECH are members. The network is already showing significant player growth despite only being in its early stages. We believe that regulated markets have a significant potential and anticipate that further markets will be opened up in the future. Accordingly, Playtech is focused on regulated markets and will continue to invest efforts and resources in them. We are closely monitoring the development of regulations within Europe and elsewhere and as demonstrated in Italy, we aim to be well placed to take advantage of any opportunities that present themselves in this area.
In 2008 we continued to attract well known and established operators to the Playtech stable, such as Betsson, Mansion Poker, Hollywood Poker and Genting Stanley. This will further enhance and strengthen Playtech’s diversification both in terms of revenue generation and geographic exposure. We continued our strategy of expanding the Group’s product portfolio by the acquisition of the assets of MixTV, a developer and provider of advanced user experience and quality live streaming products accessible via a unique combination of TV and internet media.
Playtech’s iPoker network strengthened its position as the world’s largest online poker network, providing our licensees with the liquidity and expertise to offer their poker players a best of breed product and experience.
The Group’s land based gaming division, Videobet, made significant progress during the year, executing an agreement with Sceptre Leisure for the deployment of 800 machines in the UK, obtaining AAMS approval of its machines in Italy and planning to deploy 300 machines in the country.
The 2008 results show excellent growth over the previous year in all areas of the business. As previously announced, the Group has moved to reporting in Euros. Revenues have grown to €111.5 million (2007: €65.7 million), adjusted net profit* was up to €78.6 million (2007: €43.9 million) and adjusted basic earnings per share* was 34.5 € cents (2007: 20.4 € cents). Playtech’s casino revenues increased by 68% and its poker revenues increased by 73%. In 2008, 80% of royalty revenues were derived from Europe, 10.7% from Asia, 2.3% from Africa and 7% from the rest of the world.
In 2008 Playtech’s poker network, iPoker, became the world’s largest poker network** and attracted several additional quality online poker operators such as Mansion and Boyles Sports. In December the iPoker network held the third European Championship of Online Poker (‘ECOOP III’) which saw over 27,000 players participating for an aggregate of $4.8 million in prize money.
During 2008, the Group undertook a review of its operations and processes. This has resulted in a move from a geographic based operational structure to a process based structure which the Company believes will allow faster delivery of products and services, and as a result a faster time to market. The Group currently employs approximately 800 talented and valued personnel around the world, the majority of which are focussed on product research and delivery.
We continue to focus on offering existing and potential licensees the products and tools which will allow them to optimise their ability to grow organically, penetrate new markets and successfully launch new products.
During 2008 the Group fully launched its Asian P2P Games with selected licensees together with an enhanced set of management tools specifically for use with the Asian markets. This will allow the Group to further strengthen its position in Asia through existing and new Asian focused licensees.
We also released a new version of the bingo product, which will provide better player experience and a greater set of management tools to the operators. This is the first phase of a continuing process to develop our bingo product and we expect that additional versions will be released in the second half of 2009.
* Adjusted EBITA and adjusted net profit are calculated after adding back certain items in relation to the investments in CY Foundation Group Limited, AsianLogic Limited, Tribeca and the exchange loss relating to the investment in William Hill Online which are not part of the Group’s core business and the employee stock option plan.
The Group’s live games product offering is being expanded to include a European branded product located in a new live games facility in Riga, Latvia operated by a third party. This facility will have live streaming of local dealers which we expect will widen the appeal of this innovative and popular product offering.
During the year, the Group also launched a flash version of its poker product and is now in the process of rolling it out to all licensees.
As previously announced in our 2008 interim statement, Playtech has established a dedicated new games software development unit which is focused on delivering an increased number of card, table and slots games to its licensees. This has already shown good results with the release of an increased number of new games. A further demonstration of the Group’s commitment was the four year exclusive licensing agreement with Paramount Digital Entertainment, as part of which the Group developed exciting new games featuring the well-known Paramount Pictures brand, ‘Gladiator’ for its licensees. The ‘Gladiator’ games are in the process of being released to licensees and we believe they will offer players an exciting and rewarding user experience.
We also continued to make improvements and enhancements to Playtech’s world leading back end system. This enables our licensees to have all the tools they need to maximise their revenues and provide their players with the best possible service.
The Board considers it prudent to monitor and be as close as possible to the regulatory environment in which the Group operates. Accordingly our in-house Legal and Regulatory Department undertakes this on a regular basis and from time to time and where necessary we also seek external legal advice from leading experts in the industry.
During 2008, the Group signed up 15 new licensees. These included well known names such as Betsson, Genting Stanley Alderney, Vista Global Limited, Poker Plex and Sun Poker as well as those operators who joined Playtech’s Italian poker network, SNAI, SISAL Eurobet Italy and COGETECH. On top of this the landmark transaction with William Hill was signed and completed whereby Playtech is to supply William Hill Online with casino, poker and other gaming software products on a phased basis and culminating in an exclusive relationship for casino and poker from 1 January 2010.
We will continue with our previous stated strategy of supporting the organic growth of our licensees through additional product developments as well as cross selling to existing licensees, new and existing products and acquiring new licensees in strategic geographic markets, with a particular emphasis on regulated markets. Playtech, as a public company, is ideally placed to take advantage of the opportunities that will present themselves as such markets are established. In addition we will also continue to look at acquiring complementary businesses which will enhance the Group’s ability to provide a full range of gambling products and services.
We are pleased to say that Playtech has a strong pipeline of new potential licensees.
The year has started positively with average daily overall earnings up by 8% compared to the fourth quarter of 2008. Revenues during the first 11 weeks of 2009 are up 2.3% against the average during the fourth quarter of 2008 (excluding revenues from William Hill Online and Playtech’s former customer, whose assets were injected into William Hill Online in Q1 09 and in Q4 08, respectively). The average daily income to the Group from the joint venture with William Hill (which is a combination of royalty revenue and a share of the profits of William Hill Online) during the first eight weeks of 2009 is approximately 40% greater than the daily average income Playtech generated from its former customer during the previous quarter. We are very pleased with the way that the integration is working and look forward to a profitable relationship with William Hill in the coming year and beyond.
We are pleased to say that Playtech has a strong pipeline of new potential licensees. New markets are opening up for the Company and operators in existing markets are approaching us to improve their product offering and business potential. Below we outline a number of new and exciting developments in the business.
We are delighted to be able to announce that the Company had finalised the terms of agreement for Gamenet S.P.A. to join its Italian poker network. Gamenet is owned by CRIGA, the third largest network provider for regulated slot machines in Italy. It is a leader in its core business of New Slot gaming and has a network of over 50,000 machines in approximately 20,000 public domains.
On 16 March 2009 we announced that Playtech had signed a new licence agreement to supply its market leading online casino and poker products to Casino Gran Madrid (‘CGM’), one of the largest and most prestigious land based gaming operators in Europe. Under the terms of the licence agreement, Playtech will provide CGM with its casino platform and poker product, through the iPoker network, as the operator launches its online operations.
We continue to make solid progress in other jurisdictions towards adding new countries to our stable of regulated markets. Playtech has been heavily active and has signed a number of MOUs with several leading operators in anticipation of regulatory developments and is encouraged by the progress it is making in the country.
Elsewhere around the world we continue to work industriously towards meeting the requirements of other regulated markets and will provide further updates as new opportunities develop.
We recently announced a landmark exclusive multi-year licensing agreement with Marvel Characters B.V., a wholly owned subsidiary of Marvel Entertainment, Inc., to use its motion picture brands. Under the terms of the licensing agreement, Playtech will have the right to use iconic Marvel film brands such as ‘The Incredible Hulk’, ‘Fantastic Four’, ‘X-Men’, ‘Iron Man’ and ‘Blade’, amongst others. We expect that the release of these new games, along with the recent release of the ‘Gladiator’ branded games, will enhance the player’s gaming experience, enabling our licensees to offer a wide variety of compelling games.
In a new development we are delighted to be able to announce a major, exclusive multi-year licensing agreement with MGM interactive Inc to use all of its ‘Rocky’ and ‘Pink Panther’ motion picture brands. Playtech will be able to use these brands across all of its gaming products, including casino, poker, bingo; and on all of its platforms – online, mobile and TV, as well as on stand-alone and server-based gaming terminals, via Videobet. The games will be developed to appeal to adult gamers in all age groups and across all geographical territories.
Another exciting new development which we announce today is our entry into an asset acquisition of sports betting and betting exchange software from Player2Players.
Under the terms of the agreement Player2Players’ software will be integrated into Playtech’s existing platforms and will be available to Playtech licensees. The important acquisition means that Playtech will now offer to its licensees a full suite of gaming products: casino, poker, bingo, mobile gaming, live gaming, sports betting and land based gaming. Sports betting offers important growth opportunities for Playtech in those regulated jurisdictions where it is permitted and we are confident that our entry into regulated sports betting markets will create new cross-selling opportunities, allow our licensees to diversify their businesses and enable us to attract new licensees.
We are all aware of the general conditions impacting the global economy, however we believe that Playtech’s diversified business model and market leading position will enable it to outperform and continue to create value for our shareholders.