Playtech plc

("Playtech," or the "Company," or the "Group")

Results for the year ended 31 December 2017

A position of strength: improved quality of earnings & strategic progress in key growth areas

Playtech (LSE: PTEC) today announces its results for the year ended 31 December 2017, together with a trading update for the period to 20 February 2018.

Financial summary

Group financial highlights

§ Total revenues up 14% vs 2016 on a reported basis:

-  18% revenue growth at constant currency

-  5% revenue growth excluding acquisitions and at constant currency

§ Improved quality of earnings resulted in 54% Group regulated revenue (2016: 48%)

§ Adjusted EBITDA up 7% on a reported basis and 11% at constant currency

§ Adjusted Group EBITDA margin of 40% (2016: 43%)

-  in line with guidance

-  B2B Gaming margin of 49% (2016: 50%)

§ Adjusted diluted EPS up 14% on a reported basis and 8% at constant currency

§ Gross cash at year end of €584 million (2016: €544.8 million) and €413 million when adjusted ⁴ (2016: €392 million)

§ Total dividend per share up 10%

§ Actively looking at material and bolt-on M&A targets in the Gaming division

§ Improved disclosure of revenue and EBITDA by verticals

Operational highlights

Gaming Division

§ Revenue grew by 17% at constant currency despite significant headwinds

§ Regulated Gaming revenues 49% (2016: 42%)

§ Integration of Playtech BGT Sports completed

-  37% growth in retail machine footprint

-  Landmark sportsbook clients HpyBet, Magic Betting and post period end SAS

§ Migration to Live Casino in Riga complete

§ Acquisition of BetBuddy consolidates Responsible Gaming offering

§ Sun Bingo revenue performance continues to improve; ongoing discussions with News UK

§ Pipeline strong across all key geographies

Financials Division

§ Momentum from 2016 continued with further improvement in KPIs, 29% revenue growth to €84.9m and 73% Adjusted EBITDA growth to €27.0m

§ Division well placed for incoming regulation with B2B operations set to benefit

§ B2B offering further enhanced with the acquisition of Alpha Capital Markets in H2

§ TradeTech Group brand launched to reflect the full B2B and B2C capabilities of the Financials Division

Current trading and outlook

§ Average daily revenue in the B2B Gaming division for the first 51 days of Q1 2018, was down 11% on Q1 2017 (down 8% excluding acquisitions and at constant currency) against strong comparatives in Asia in H1 2017

§ No change in Malaysia since our announcement in November

§ Excluding Asia, average daily revenue in the B2B Gaming division for the first 51 days of Q1 2018 was up 3% on Q1 2017 (4% excluding acquisitions and at constant currency)  

§ The B2C Gaming Division is performing in line with expectations with the Sun Bingo contract continuing to see revenue improvement

§ TradeTech Group has made a strong start to the year

§ Active discussions with material and bolt-on M&A targets in the Gaming division

§ Management confident of good growth in 2018 with improved quality of earnings

Alan Jackson, Chairman of Playtech, commented :

"Playtech delivered double digit revenue growth in 2017 despite headwinds in both regulated and unregulated operations. Playtech's performance continues to be converted into strong cash generation enabling a 10% increase to the full year dividend.

"Playtech's strategy to improve the quality of earnings for the Group, organically and through M&A, was evident in the increase in regulated revenue to 54%. The health of the core business coupled with the strength of the balance sheet means Playtech is strategically well placed to execute on M&A that will continue to drive this growth and further diversify Playtech's revenue base.   

"The completion of the Playtech BGT Sports integration and the completion of the new Live Casino studio in Riga are key operational milestones in the extension of Playtech's omni-channel offering and the quality of both offerings has already delivered new clients.

"Momentum in TradeTech Group continued with improvements across all KPIs. The division is strategically well positioned for the potential incoming regulations in the financial trading industry and 2017 saw TradeTech consolidate its B2B offering creating a full turnkey financial trading solution. 

"Management is confident 2017 has delivered a strong platform for strategic progress in 2018 through execution of organic opportunities and M&A."

- Ends -

For further information contact:

¹ Adjusted numbers relate to certain non-cash and one-off items including amortisation of intangibles on acquisitions, professional costs on acquisitions, finance costs on acquisitions, deferred tax on acquisitions and additional various non-cash charges. The Directors believe that the adjusted profit measures represent more closely the consistent trading performance of the business. A full reconciliation between the actual and adjusted results is provided in Note 5 of the financial statements

² Attributable to the owners

³ Constant currency numbers exclude the exchange rate impact on the results by using previous period relevant exchange rate and exclude the total cost/income of exchange rate differences recognised in the period

⁴   Adjusted gross cash is net of cash held on behalf of clients, progressive jackpots and security deposits  

Presentation and live webcast

A presentation for analysts and investors will be held today at 9.00 am in the offices of UBS, 5 Broadgate, London, EC2M 2QS.

The presentation will be webcast live and on-demand at the following website: 

http://www.investis-live.com/playtech/5a4f6924bc08d00c000a8a1a/fhh

The presentation will also be accessible via a live conference call or video link:

Dial-in no for UK: +44 20 3936 2999

Dial-in for all other locations: +44 20 3936 2999

Conference password: 16 19 89

There will also be a replay available for one week:

Dial-in no for UK: +44 20 8196 1998

Dial-in no for US: +1 866 597 7616

Dial-in no for all other locations: +44 20 8196 1998

Conference reference number: 549669 #

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

Forward looking statements

This announcement includes statements that are, or may be deemed to be, "forward-looking statements". By their nature, forward-looking statements involve risk and uncertainty since they relate to future events and circumstances. Actual results may, and often do, differ materially from any forward-looking statements.

Any forward-looking statements in this announcement reflect Playtech's view with respect to future events as at the date of this announcement. Save as required by law or by the Listing Rules of the UK Listing Authority, Playtech undertakes no obligation to publicly revise any forward-looking statements in this announcement following any change in its expectations or to reflect events or circumstances after the date of this announcement.

About Playtech

Playtech is a market leader in the gambling and financial trading industries. Founded in 1999 and listed on the Main Market of the London Stock Exchange (LEI code: 21380068TTB6Z9ZEU548), Playtech has c.5,000 employees in 17 countries.

Playtech is the gambling industry's leading software and services supplier to many of the world's leading regulated online, retail and mobile operators, land-based casino groups, government sponsored entities such as lotteries, and new entrants opening operations in newly-regulated markets. Its business intelligence-driven gambling software offering includes casino, live casino, bingo, poker and sports betting.

It is the pioneer of omni-channel gambling which, through Playtech ONE, offers operators and their customers, a seamless, anytime, anywhere experience across any product, any channel (online, mobile, retail) and any device using a single account and single wallet. It provides marketing expertise, sophisticated CRM solutions and other services for operators seeking a full turnkey solution. Playtech's Financials Division, named TradeTech Group, operates both on a B2C and B2B basis. Its B2C focused offering is an established and growing online CFDs broker, operating the brand markets.com. Its B2B offering includes the division's proprietary trading platform, CRM and back-office systems, as well as its liquidity technology platform which provides retail brokers with multi-asset execution, prime brokerage services, liquidity and complementary risk management tools.

Chairman's statement

The strength of Playtech's model reported at the interims in August was evident again in the second half of the year as the Group delivered double digit top line growth despite significant headwinds faced in the year.

One of the key pillars of Playtech' strategy has been its ability to continually improve the quality of earnings both organically and through acquiring strategically important targets in regulated and soon to be regulated markets. These acquisitions, such as BGT and ECM in 2016 have augmented the growth of regulated revenue by deepening the retail channel in Playtech's omni-channel offering and delivering new opportunities in the regulated and newly regulated markets. This strategy has delivered a consistent growth in the Company's regulated revenue which grew to 54% in 2017. As outlined at the trading update in November, the M&A pipeline is very strong and Management and the Board are confident it will continue to diversify Playtech's revenue base.

Operationally 2017 was another year of significant progress for Playtech as the Company continues to execute on its industry leading omni-channel solution. The integration of Playtech BGT Sports (PBS) is an important milestone for the Company and has created a fully integrated best-in-class sports technology solution. Integrated with the strength of the Casino vertical, via Playtech's single platform, we have already seen the Sports division win new landmark clients, including leading Portuguese operator SAS, post period end. Moreover, the completion of the migration to our new Live Casino facility in Riga gives Playtech a competitive advantage in a fast-growing part of the industry.

Momentum reported at the half year in TradeTech Group continued with improvements across all KPIs, including revenue and EBITDA growth. Given Playtech's experience in the Gaming industry the Financials Division has been an early adopter of regulation in its industry and is therefore strategically well positioned for the potential incoming ESMA measures. Moreover 2017 saw TradeTech consolidate its B2B offering creating a full turnkey financial trading solution which Management believe is strategically well placed to benefit from the consolidation further regulation will bring to the sector. 

To reflect the Board's confidence in the growth and cash generation of the business Playtech adopted a progressive dividend policy in 2016. One of the pillars of the Playtech model is its ability to convert its operational performance into strong cash generation and this has allowed a 10% increase in the full year dividend per share for 2017. 

Management is confident 2017 has delivered a strong platform for strategic progress in 2018 through both organic and inorganic opportunities.

Chief Executive Officer's review

Overview: A position of strength in the industry

I am pleased to report that Playtech enjoyed another year of operational success and as a result finds itself in a position of strength at the end of 2017. Despite headwinds in regulated revenue in H1 2017 and the disruptions in unregulated markets experienced in the second half of 2017, the strength of the underlying Playtech business was demonstrated by the 18% revenue growth for the Group at constant currency.

Moreover, given the operational progress in our Playtech ONE omni-channel offering reported in 2017 Playtech is in an important strategic position going in to 2018. The strength of the new Live and Sports offerings have delivered immediate results with new contract wins in Casino and Live and our first online sports book licensees for PBS following the restructuring of our sports division. Management believe that Playtech ONE is at equal strength across all key product verticals and will provide Playtech with a strategic advantage in winning new licensees in key regulated and regulating markets in coming years.

Importantly, the strength of our balance sheet and cashflows means Playtech can continue to invest in our proven approach in strategic, fast growing, markets in Europe and Latin America by delivering and running integrated online and retail solutions to the 'local heroes' in these markets. It is these land-based operators that are best placed to lead the growth of the new online markets. This will continue to drive the improvement in the quality of earnings we saw in 2017, with regulated revenue now reaching 54% of Group revenue in 2017 and set to continue to grow. Moreover, the growth of these important markets will also drive the geographical diversification of Playtech's revenue base, an important strategic objective for management in 2018.

Finally, we operate in a rapidly changing and dynamic industry and it is important that we continue to invest in the evolution of the Playtech technology and offering. The acquisition of BetBuddy in 2017 adds ever greater Responsible Gambling functionality to our platform, providing further support to licensees in developed markets that are facing increased responsibilities in compliance and regulation. Moreover, the launch of our new Gaming Platform as a Service (GPAS) and Marketplace represent the next stage of evolution of the Playtech platform, ensuring that it is Playtech's technology which remains the architecture of the industry. 

Regulation

Regulation continues to be one of the biggest influences in the gambling industry worldwide, shaping the growth in each territory. Playtech's strategy has been to invest in regulated markets, through organic growth and acquisitions and this resulted in regulated gaming revenue increasing to 49% in 2017 from 42% in 2016.

Given the growth experienced in mature regulated markets, such as the UK, Playtech's strategy is to focus on investing in fast growing newly regulated or regulating markets.  During the period, we concentrated on supporting the organic growth of our customers in Italy, Spain, Finland, Denmark, Mexico, Columbia and Romania. Moreover, our strategy of partnering with the leading retail brands in newly regulated markets continued as we became the first supplier to launch online casino in the Czech Republic with the expanding Fortuna brand in January 2017.

The Playtech One omni-channel offering is uniquely placed to support new and existing licensees in newly regulated markets. Playtech provides all the capabilities across the gambling value chain from software and services to direct customer acquisition and marketing capabilities, offering a seamless platform across all gambling verticals and with customer entry points in retail and online. This makes Playtech the partner of choice for the leading land based operators that are best placed to lead the newly regulating online markets.

This was demonstrated post period end in January 2018 when Playtech signed an agreement to provide Sociedade de Apostas Sociais (SAS) with its new online sports book and online casino platform, all integrated through Playtech's IMS player management system. SAS is majority owned by Santa Casa, Portugal's national lottery provider and the launch of an online casino and sports betting offering follows regulation of online gambling in Portugal in late 2016.

In the second half of 2017 the Company experienced a slowdown in Malaysia due to changing market conditions. Our strategic position on Asia is unchanged. We operate a risk based approach where our legal and compliance teams are consistently reviewing the regulatory environment to ensure that our presence is commercially beneficial to the Group. As outlined at the trading update in November 2017 the Board and Management is focused on continuing to diversify its revenue base by investing in fast growing regulated and regulating markets in Europe and Latin America through organic growth and M&A. This strategy will continue to drive the growth in Playtech's regulated revenue streams and will diversify the geographical make-up of our revenue base.

Future Markets

Between 2018 and 2019 licensing regimes are expected to be introduced in major European countries including The Netherlands, Sweden, Switzerland and some commentators expect significant steps forward in Germany. Playtech already has an agreement in place with national operator Holland Casino in the Netherlands and remains in discussions with potential customers in others.

Latin America remains a key growth territory for online gaming. Mexico is now one of Playtech's top five regulated markets, by player jurisdiction, following the growth of licensee Caliente. The strength of our operations in Latin America positions us well with the potential significant markets of Peru and Brazil currently reviewing regulations.

In the US, the outcome of the judicial review on sports betting could represent a milestone towards the regulation of sports betting at a federal level. Currently, the limited regulation of online casino does not present a commercially beneficial opportunity for Playtech. However, we believe that the potential movement in sports betting regulation would represent an attractive opportunity given the unique strength of our Playtech BGT Sports offering.

Playtech ONE

Although multi-channel approaches are common (same content across web, mobile and retail), Playtech's unique approach to omni-channel is based on one integrated CRM (the IMS). This single CRM across all product verticals and channels allows for a single customer profile, and therefore single customer experience. Central to this single customer experience is Playtech's ability to offer integrated products in each vertical. Not only are these products integrated from a branding point of view, (e.g the Age of the Gods suite available online and in retail across Live, Bingo and Casino), to drive player interaction across verticals, but also integrated in their use and collection of player data - allowing for more tailored, and successful, marketing and player cross-sell. Playtech is uniquely positioned given the scale of its platform, the capabilities and access to data that scale provides. Playtech ONE creates an eco-system for operators supporting a data driven offering that improves the engagement with customers significantly within the eco system maintaining their loyalty to operator brands.

Playtech believes that retail is one of the most powerful bet entry points for customers and our strategy in recent years has been to invest in industry leading retail software capabilities across all verticals.    IGS, retail casino software, ECM, the retail Bingo software and BGT as part of Playtech BGT Sports allow land-based operators to capture retail player traffic as part of the Playtech ONE eco-system.

IMS - The Playtech Platform

One of the most powerful elements of Playtech ONE is the use of the data collected across the breadth of the verticals and channels. Key to our strategy is the continued development of the functionality of the Playtech platform as we continue to utilise the player data and intelligence collated via the IMS.

As the gambling market continues to mature, the focus for operators in developed markets such as the UK continues to move beyond player acquisition to focus on player retention and ultimately increasing player life time value.   The platform allows for industry standard bonusing, together with more sophisticated mechanics, including automated cashback, free-spins, golden chip for table and card games and other types of bonuses. All these promotional methods can be controlled and configured by the operator, allowing for stringent liability and monetary control. Games Advisor is a real-time driven recommendation engine based on sophisticated real time algorithms that suggests other games the player might be interested in with high probability, dependent on many game-specific variables, including volatility, win hit frequency and win distribution. During the second half of 2017 we have seen the number of Tier One licensee active marketing campaigns managed through the Playtech Campaign Manager more than double to over 4,000 active campaigns with some managing hundreds in parallel.  

The acquisition of BetBuddy, the Responsible Gambling analytics solution provider represents a continuation of Playtech's strategy to acquire complimentary software that will utilise the big data collated via the IMS and add to the industry leading services available to operators on Playtech's platform. Furthermore in 2017 Playtech signed a strategic partnership with Featurespace to integrate its real-time gameplay fraud detection models into the IMS' already considerable player protection tool kit.

GPAS & Marketplace

GPAS (Gaming Platform as a Service) provides the next step in Playtech's relationship with licensees, content providers and developers. Third parties can use the Playtech's drag and drop maths engine to build high quality HTML5 games or submit their own existing content for distribution across Playtech's global network on any channel. GPAS content can be seamlessly developed for retail and online, whereas traditionally converting popular online games into retail games was expensive and inefficient involving two sets of technology and two sets of developers.

Management believe GPAS will provide a strategic advantage for Playtech's omni-channel approach in newly regulated fast growing markets, as integrated content across retail and online can help facilitate the player journey across channels and will also provide our customers with more flexibility allowing them to develop bespoke games to support their promotions.

Marketplace is Playtech's new content discovery platform where operators can access Playtech's portfolio of content. As new content providers or partners develop games on GPAS, they will be able to place their games onto the Marketplace, gaining immediate access to all Playtech's distribution network. Marketplace goal is to become a games store that is based and drive by data that will automatically determine the relevance of games to different customer's demographics.

Customer Concentration

The period saw revenue from the top ten licensees stand at 55% compared to 54% for full year 2016. Revenue from the top five licensees remained consistent on the full year period at 36% and 37% of revenue in 2016 and 2017 respectfully. This was the first full year period where the consolidation, and ultimately increased scale and growth, of key licensees such as Ladbrokes Coral was included. In addition, this was the first full year period where the large revenue contributing Sun Bingo related white-label contract was included.

M&A

As outlined above, the acquisition of BetBuddy for an undisclosed fee in October 2017 was an important acquisition. The integration of BetBuddy's behavioural identification and modification software into Playtech's powerful IMS player management system will enable Playtech to continue to lead the industry in the delivery of Responsible Gambling products and services.

In February 2017 Playtech completed the acquisition of Eyecon, a specialist supplier of online gaming soft slots and a bingo slots specialist software   for an initial consideration of £25 million (€29 million). The acquisition of Eyecon is a further example of Playtech executing its omni-channel solution through earnings accretive M&A.  Eyecon is a soft casino slot provider specialising in games for the Bingo market. Eyecon deepens the content offering in the Bingo vertical ultimately helping to drive revenue across verticals as well as allow us to also extend to retail. The acquisition strengthens Playtech's Bingo distribution network whilst offering industry leading games content.

Given the company position and strong balance sheet it remains opportunistic and acquisitive. It does however remains disciplined and take measured steps to ensure the opportunities are in line with our stated M&A strategy and present growth opportunities beyond cost synergies which are important but not the essence of our approach.

Gaming Division performance by vertical

Gaming B2B

The new presentation of Gaming revenue by vertical is explained fully in the CFO section. Gaming B2B includes software and services revenues, while Gaming B2C includes white-label gaming operations in regulated markets, such as Sun bingo and casual games.

Casino

Casino revenue grew 11% from 2016 to 2017 and 15% at constant currency. Despite the headwinds in Asia in H2 2017 the growth was driven by the organic growth of existing licensees with growth excluding acquisitions of 12% at constant currency.

The pillars of Playtech's future growth strategy are reflected in the operational achievements reported in our Casino vertical as we continued to support the organic growth of our core regulated markets in Europe in 2017 Playtech launched 45 new games in Italy, 75 in Spain, 90 in Czech Republic, 71 in Bulgaria and 51 in the UK. Importantly, following the 'de-coupling' of Playtech's Casino games from the platform that formed part of the platform overhaul reported at the interim results in August 2017, Playtech is now able to launch new content seamlessly across all regulated markets, allowing licensees to deliver global marketing campaigns for branded content.

In November Playtech announced the launch of exclusive online Casino agreement with leading Spanish operator Casino Barcelona, in addition to online casino the agreement saw Casino Barcelona join Playtech's Spanish iPoker.es network.

Content & Studios

In 2017 Playtech completed the unification of its games studios onto our agile games development platform content and distribution strategy. Playtech now operates eight games studios worldwide, all with proven pedigrees and collectively providing unparalleled knowledge and experience in online casino games creation. The studios are now applying the new Playtech content pillars to game production; Signature (individual style of the studio), Reach (relevance to market), Reliability (stable games and publication dates) and Value (largest Jackpots, bonusing tools, engagement tools). This unified approach to rapid omni-channel game deployment enables operators seeking differentiation and customisation to integrate bespoke games in record time and under budget.

Given the size and scale of Playtech's distribution platform we are in an unrivalled position to be able to develop branded content as a cornerstone of our portfolio of over 600 games. The first half of 2017 saw Playtech sign an industry first agreement with DC Comics to provide a full suite of DC branded games including the Man of Steel, Classic Superman and Batman and Suicide Squad slot titles. The DC agreement was the culmination of strategic project in the second half of 2016 designed to replace the Marvel studios content in the Playtech portfolio. Playtech had a long and successful relationship with Marvel studios and this ended in 2016 following Marvel's acquisition by Disney and a change of licensing approach from the acquirer.

The second half of 2017 saw Playtech complete an industry first for gaming content by completing the synchronised launch of the DC Justice League slot game in conjunction with the launch of the Hollywood film available to licensees across all regulated markets. Moreover 2017 saw Playtech further grow its portfolio of branded games by launching the American Dad, The Matrix, RoboCop, Monty Python's Holy Grail and Dirty Dancing titles.

In addition to the global branded content strategy for slot games the breadth of our games development capabilities allow Playtech to launch territory specific games and content. The second half of 2017 saw the successful launch of slot game Torrente for the Spanish market. Moreover, Playtech's own Age of the Gods suite of games continues to go from strength to strength with its games titles in the top rankings of popular games for all our licensees. The latest game in the series, God of Storms experienced a highly successful launch in 2017. The Age of the Gods suite is the end result of thorough research that was based on big data analysis designed to improve the probability of success of the games.

Live Casino

This year saw Playtech complete the full migration of existing Live Casino rooms to the new market leading facility in Riga. This has enabled Playtech to drive product innovation in Live with new concepts, games and features. Driven by the powerful Playtech IMS player management platform and data-driven business intelligence technology, Playtech Live Casino is fully integrated into the Playtech platform and Casino offering. Playtech Live Casino therefore delivers greater cross-sell opportunities through a seamless user experience from slots to Live table games in conjunction with industry first branded Live games and pooled jackpot experiences. Such as Age of Gods Live Roulette which delivers multi-level jackpots supported from the Casino network or Ladbrokes Coral Live content based Cheltenham roulette.

The quality of our Live Casino offering was reflected in the progress we made with licensees in the key vertical in 2017. The completion of the migration to the new Riga facility saw Playtech re-imagine and design all dedicated areas for our leading customers, this resulted in tier one Live Casino customers renewing existing agreements for long term deals, such as Sky in July 2017,  and increasing the number of dedicated tables hosted in our studio. Moreover, we saw new commitments for dedicated tables in the second half of the year from Betfred and BGO Entertainment and a launched new licensees Sports Interaction and Stoiximan in Greece at the end of 2017.

Importantly as part of the tier one renewal process, and in line with the Group's growth strategy, Playtech Live Casino secured new territory launches for tier one licensees including the launch of Live Casino on Sky Bet's 'Sky Italy' gaming sites. The sophistication and success of the new Live offering was reflected with Sky Bet's success in winning the eGaming Review Innovation in Casino award for its new Playtech supplied Live Casino. Sky Bet went live with its new state of the art dedicated Live Casino environment in April 2017 and won the award for offering players an enhanced omni-channel experience, product enhancements and richer gameplay.

Playtech BGT Sports (PBS)

Revenue in Sports for 2017 saw an increase on 2016 of 58% at constant currency. This was due to the contribution from BGT, the retail Sports software provider acquired by Playtech in July 2016. Underlying revenue excluding acquisitions at constant currency declined compared to 2016 mainly due to the absence the Mobenga contracts which came into effect at the end of H1 2016.

A key strategic milestone in 2017 has been the launch and the completion of the integration of Playtech BGT Sports (PBS). PBS brings together Playtech Sports companies BGT, Geneity, Mobenga, Unilogic and Playtech's internal Sports Trading team. In 2017 PBS completed a considered and strategic integration combining the best of technology and modules from the Playtech Sports companies and delivering the industry's first integrated retail and online sports betting platform. PBS will provide a 'bricks-to-clicks' fully integrated sports betting technology solution based on Playtech ONE, offering single-betting accounts across the web, mobile, self-service betting terminals (SSBTs) and over the counter (OTC) in retail betting shops.

PBS believes there is significant opportunity for SSBT growth globally and has seen the number of active retail machines increase 37% from c.27,000 in December 2016 to c.37,000 in December 2017. With the completion of the integration of the PBS retail software to the Playtech ONE platform the size of the retail machine footprint offers significant opportunities for the cross sell of PBS' integrated offering.

Along with the completion of the PBS integration the Sports division has concentrated on growing its retail and online customer base in the key fast growing markets in Europe and Latin America, in line with the Group level strategy. Early in the period PBS announced a three-year agreement with OPAP, the leading Greek betting and lottery operator, for the supply of SSBTs, relevant software and services, and the introduction of an OTC sports betting solution. The second half of 2017 saw PBS solution go live across the 4500 estate with over four thousand OTC tills and over 1500 SSBTs active by the end of the period.

In addition to OPAP, 2017 saw PBS launch SSBTs with customers in Malta, Romania, Spain, Czech Republic, Austria and Germany. As outlined at the interim results in August 2017, alongside Europe a key focus for the PBS SSBT product was growth in Latin America and the second half of 2017 saw PBS install a first phase SSBT programme in Columbia with Codere and Sportium.

The second half of 2017 also saw an important strategic milestone in the launch of PBS' first integrated online and retail sports book customers with German operator HpyBet and Belgian Magic Betting. In addition, the post period end signing of an integrated online sports book and casino platform with the biggest gambling brand in Portugal, SAS, was another important strategic win for the new sports division.

Key contracts have been renewed with Betfred and Paddy Power Betfair with both secured until at least 2020 and with Betfred taking another 500 terminals and Paddy Power shops installing a minimum of 800 new terminals over the next 12 months.  

Playtech's strategy in Sports is to continue to drive product development to retain operator and customer engagement with retail. In H1 2017, PBS launched its revolutionary Retail Mobile App named 'Bet Tracker'. Bet Tracker went live with Betfred in August 2017 and Jennings Bet, Boyles and Plucks will also followed later in 2017. The Bet Tracker product is leading the digitilisation of the retail sports experience, allowing customers to track their bets placed in store on their mobile phones without already having a mobile account, giving operators increased touch points with their customers. In addition, 2017 saw PBS become the first retail provider to deliver Lottoland's jackpot lotto betting products on SSBTs located in licenced betting shops.

Moreover, PBS' integration into Playtech's IMS platform has allowed PBS to build in the same data tools and functionality that is available across the Playtech ONE platform. In line with the Group's strategy to deliver Responsible Gambling tools to support licensees PBS has agreed a development roadmap with the UK Gambling Commission to deliver Anti Money Laundering and Fraud prevention identification tools across the retail and online platform.

Services

The increase in contribution from the white-label offering meant the transition in services from dot com to regulated revenue streams continued in the period resulting in a higher proportion of regulated revenues for this vertical.

As part of the natural transition from unregulated to regulated markets our services division is now focused on different partners in regulated markets where we see real momentum in activity. In Mexico, our partner Caliente is going from strength to strength and we continue to experience significant growth. In Spain, we see good momentum of our local partners and expect it to continue rapidly growing in the coming years. We also make real progress in other markets such as the UK, Italy and In line with our overall strategy and focus on regulated markets our services division will extend its reach into other regulated markets such as Portugal, Colombia and others.

Bingo

Following the acquisition of Bingo software and services supplier ECM in October 2016 the Bingo vertical saw a 47% increase in revenue at constant currency in 2017.

The Bingo vertical remains a key customer acquisition channel at the operator level. Playtech's Bingo offering allows licensees to offer seamless cross-sell and movement between channels and verticals, but more importantly Bingo slot and Casino integrated content. The integration of retail software and services supplier ECM, onto the Playtech Bingo platform has created an eco-system for licensees to retain players regardless of channel or vertical. Omni-channel, integrated content, such as Tiki Paradise, allows operators to drive player traffic to other verticals and importantly track the behavioral analytics across those channels and verticals. Post period end in January 2018 Playtech announced it had launched the popular online game Clover Rollover across 128 Gala Bingo UK retail sites meaning the game was now available online, in retail and on mobile.

Poker

Poker remains an important part of the complete Playtech ONE product offering and Playtech continues to offer the largest open and 'tappable' poker network in the industry. Although the wider online Poker market remains challenging Playtech's poker vertical returned to growth in 2017 with revenue increasing 7% at constant compared to 2016, this follows a consistent slowing of the decline in the last few years.

Other

Other revenues grew 48% to €26.4 million as our retail Casino software, the IGS land-based Casino system management system received new orders across the Rank estate and across the eight landmark Caesars Entertainment EMEA casino portfolio.

B2C Gaming

The new disclosure shows a new line item called B2C Gaming which include white-label, B2C and Casual.

White-label and B2C

The contract with News UK for Sun Bingo continues to see improvement revenue although remains challenging. As a reminder, although the migration of Sun Bingo in 2016 was successful from a technological perspective there were challenges migrating all of the VIPs. Changes were then made in Q2 2017 which has led to some improvement in KPIs and performance. However, given that Bingo is very much a UK business which is also seasonal, management believes that the full benefit of the changes made were offset by exceptionally good weather combined with the UK summer holidays. Sun Bingo revenue improved towards the end of the year with a successful promotion just before Christmas, with the start of 2018 showing some continued momentum. It is worth remembering that there is significant operating leverage within the Sun Bingo contract due to minimum guarantees payable to News UK which means that as revenues increase, the benefit will drop straight through to the bottom line. As stated above, despite the improvement, the Sun Bingo contract remains challenging. Playtech is in discussions with News UK following a thorough analysis of the issues encountered with the contract.

Revenue from other white-label and B2C contracts declined to €22.8m.

Casual

Casual games continued to enjoy revenue growth driven by the ongoing success of the Narcos branded game.

TradeTech Group - Playtech's financial division

TradeTech Group achieved key milestones in 2017, delivering both significant organic growth as well as successful acquisitions which together are providing the foundation for future growth, in line with the strategic vision at Playtech Group level. The strong financial results reflect the significant improvement and progress we have made last year.

The division reported significant growth on reported results and importantly when excluding acquisitions and on a proforma (assuming ACM assets acquired from beginning of financial year) basis, delivering Adjusted EBITDA growth across each of the different business segments, with organic growth in Adjusted EBITDA of 44% after excluding acquisitions, and an impressive 58% growth on a proforma basis, after considering all of the acquisitions during the period and their historic underlying performance.

As can be seen from the results, TradeTech has delivered significant margin improvement of the underlying business following efficiencies and cost reductions made toward the end of 2016 year and the beginning of 2017. In addition, results in 2017 were negatively impacted by the crypto 'hype' experienced in the year, predominantly in Q4, resulting in a total loss of $7.6m from our top line, affecting both the B2C segment as well as B2B.

Regulation in the financial trading sector

Playtech management and the Board believe that TradeTech is well placed to benefit from the potential regulatory changes the industry could experience in 2018. Management believe that TradeTech, has significant experience, governance procedures and balance sheet to continue to support regulation and remain both commercial and complaint. Our experience of new regulatory frameworks learned in the Gaming Division prompted TradeTech to be an early adopter of new regulation.

On January 18 2018, as part of its 'call for evidence' the European Securities and Markets Authority, ESMA, proposed measures to restrict the marketing, distribution and sale of CFDs to retail clients. While these are still proposals for changes in regulations, we believe TradeTech is well positioned in the market following implementation of such proposals or other changes as they may come into effect. It is important to note that some of the proposed changes are already implemented as part of our existing business model, including negative balance protection and restriction of use of bonuses and other incentives for trading.

Markets.com performance

Our B2C business operating our Markets.com brand, enjoyed significant growth on both first-time depositors and active customers, with 43% growth in actives and 93% in FTDs. This fundamental improvement and momentum in the B2C business is driven by a significant improvement in the cost per acquisition of $870 in 2017, on the back of continued development of our automated marketing capabilities.

As noted above, the crypto 'hype' in 2017 had a material impact on our B2C top line performance, which together with very low volatility on other asset classes in Q4 resulted in an overall underperforming fourth quarter. However, it is important to acknowledge the steady growth in actives which we believe will continue in 2018 and which will be translated into higher revenues and profits going forward. Outside the crypto 'hype' effect and low Q4 volatility, volume has remained relatively stable, on the back of regulatory changes related to default leverage limitation and elimination of incentive bonuses introduced at the beginning of 2017. Importantly 2017 saw strong continuity in our relationships with our B2C customers. Approximately 62% of revenue were generated from existing customers onboarded prior to 2017, further strengthened by the fact that the majority of revenues are generated from customers trading for more than 1 year, with 28% from customers trading for more than 2 years. These measures reflect the continuous investment in improving the quality of services we offer to our customers, with further development of 'decision support' tools and capabilities to aide customers in identifying trading opportunities. These include our real time "Trending now" feature, "Traders trends" live disclosure per asset, "Events & trade" financial calendar, "Market consensus" analysts integrated portal and more.

TradeTech Group B2B results

In the B2B business 2017 also saw significant growth on reported results, excluding acquisitions and on a proforma basis. TradeTech's B2B segment is now servicing over $1 trillion in volume from B2B customers, and over $1.3tn on a proforma basis after adding Alpha's pre-acquisition volumes in 2017. These results show a healthy link between revenues and volume, with a steady revenue generation on the back of increase in volume from customers from the three sub-segments of our B2B offering.

TradeTech management believe these results demonstrate the execution of Playtech's B2B strategy to become the provider of choice to brokers in the financial trading industry. The CFH and TradeTech Alpha acquisitions complimented our existing frontend and backend technology and enabled us to deliver an end to end solution for brokers, enabling them to enjoy a full suite of products from a unique trading platform and CRM systems, to liquidity control, risk management capabilities, real time risk applications and more. TradeTech's strategy is to continue to establish its capabilities across the entire value chain in the financial trading sector.

Chief Financial Officer's review

Presentation of results

The Directors believe that in order to best represent the trading performance and results of the Group, the reported numbers should exclude certain non-cash and one-off items including amortisation of intangibles on acquisitions, professional costs on acquisitions, additional consideration payable for  put/call options, one off employee related costs, finance costs and contingent consideration movement on acquisitions, impairment of available for sale investments, deferred tax on acquisitions, non-cash accrued interest and additional various non-cash charges.

The Directors believe therefore that Adjusted EBITDA and Adjusted Net Profit more accurately represent the trading performance of the business and are the key performance metrics used by the Board when assessing the Group's financial performance. A full reconciliation between the actual and adjusted results is provided in Note 5 of the financial statements below.

Given the significant fluctuations in exchange rates in the period, the underlying results are presented in respect of the above measures after excluding acquisitions and on a constant currency basis to best represent the trading performance and results of the Group.

Overview

Playtech delivered a good financial performance in 2017 driven by a combination of underlying growth and from the acquisitions made in 2016 and in 2017.

Total reported   revenue and Adjusted EBITDA increased 14% and 7% respectively compared to 2016. Reported Adjusted Net Profit increased 14% due to significant fluctuations in currency exchange rates, mainly in Sterling, impacting 2016 reported Adjusted Net Profit leading to high growth from 2016 to 2017. On a constant currency basis, revenue, Adjusted EBITDA and Adjusted Net Profit, increased by 18%, 11% and 8 % respectively.

This performance was achieved despite 2017 being an unusual year for headwinds faced, with so many combining including currency headwinds as well as issues in H2 in Asia and the expected loss of Marvel, certain Mobenga contracts and the contract with Poker Stars for Poker Strategy. At Adjusted EBITDA level, currency alone provided a €14m headwind with total EBITDA headwinds totalling €60m.

As discussed above, the Sun Bingo contract generated a significant adjusted EBITDA loss due to the levels of minimum guarantees payable to News UK. Playtech is in discussions with News UK following a thorough analysis of the issues encountered with the contract.

In line with the guidance provided at the 2016 full year results, the Group EBITDA margin fell from 43% in 2016 to 40% in 2017, principally due to a higher percentage contribution from lower margin parts of the business including white-label, specifically from the full year contribution from Sun Bingo, the Financials division and from Casual. The adjusted EBITDA margin in B2B Gaming remained broadly flat for the year at 49%.

Playtech continues to be highly cash generative and delivered net cash from operations up 22% to €306.7 million compared to €251.4m in 2016, representing 88% cash conversion from Adjusted EBITDA when excluding cash movements, which are not reflected in Adjusted EBITDA, such as movements in jackpot liabilities, customer security deposits and changes in client equity.

Playtech has a very strong balance sheet with cash and cash equivalents of €584.0 million or Adjusted Gross cash of €412.6 million (2016: €392.0 million) net of cash held on behalf of client funds, progressive jackpot and security deposits . Together with the Available-for-sale investments of €381.3 million (2016: 230.3 million), Playtech has considerable available resources to execute its strategy.
 

Changes to disclosure of revenue and adjusted EBITDA

Disclosure has been improved to assist with analysis, specifically the businesses with different margin profiles.

The new disclosure shows a new line item called B2C Gaming which includes white-label, B2C and Casual. Revenues and costs for these businesses are presented separately as they have fundamentally different margin profiles.

In addition, we have also re-categorised other cost line items including removing revenue driven costs, which contained a significant amount of the Sun Bingo contract and are now in B2C Gaming. Most importantly, R&D now has its own line item which serves to highlight the technology base of Playtech's B2B Gaming business.

Revenue

Total revenue increased by 14% to €807.1 million (2016: €708.6 million) and by 18% on a constant currency basis, with underlying growth of 5% (after excluding acquisitions at constant currency).

New presentation of Gaming revenues by vertical

The new presentation of Gaming revenue by vertical splits between the business to business ("B2B") element, which includes both software and services revenues and the business to customer ("B2C") element, which includes white-label gaming operations in regulated markets, such as Sun Bingo and casual games.

Casino, the biggest product vertical, increased by 11% in 2017 and by 15% on a constant currency basis and 12% when further excluding acquisitions. The growth in Casino is mainly generated from core casino activity , such as online slots and roulette, driven by Mobile casino revenue increased by 67% over 2016, which represents 50% growth in mobile penetration. The UK reached more than 50% in penetration, Asia more than doubled its mobile penetration compared to 2016 to 42% and non-UK Europe mobile casino revenues grew by 81% to reach a penetration of 36%.

Services revenue decreased by 16 % on a constant currency basis, whilst decreasing by 19% on a reported basis. The decrease in revenue is mainly due to revenues generated in .com markets, predominately from marketing services and the loss of the contract with Poker Stars for Pokerstrategy. Revenues from regulated markets grew by almost 46% led by increase in live services revenues, which enjoyed a double digit growth and from the structured agreements with Caliente and Marca.

As discussed above, the Sun Bingo contract generated a significant adjusted EBITDA loss due to the high levels of minimum guarantees payable to News UK. Playtech is in discussions with News UK following a thorough analysis of the issues encountered with the contract.

Sport revenue increased in 2017 by 58% on a constant currency basis and by 53% on a reported basis. The increase is due to the acquisition of BGT and when excluding acquisitions, on a constant currency basis, Sport revenue has decreased by 7%. The decrease, as previously indicated, is mainly due to the loss of three Mobenga contracts with UK licensees and when excluding the loss in revenues, underlying sport revenue has increased by 8% in 2017.

Bingo revenue increased by 47% on a constant currency basis and by 38% on a reported basis. When excluding the increase in revenue generated by the acquisition of ECM, Bingo revenue on a constant currency basis were down 6% compared to 2016. While macro events such as the effective increase in UK gaming tax has pressured the revenues down, the underlying performance of the bingo network has increased in 2017.

Poker reported revenue has increased by 5% compared to 2016 and by 7% on a constant currency basis. The increase in revenues, which is mainly driven by growth in regulated markets, although from a low base, is a positive sign after several consecutive years of decline and reflects the importance of this vertical in the operators' offering.

Other revenue grew by 48% mainly due to increase in revenues from new order of the IGS casino management system by Rank and other customers, Videobet machines sold in 2017, mainly to Elite Gaming and by increase in revenues from dedicated teams.

Revenue in Financials division

2017 revenue in the Financials division was €84.9m, up 29% versus 2016. When excluding the revenue generated by CFH and Alpha, acquired in November 2016 and October 2017 respectively, revenue decreased 3 % to €61.7m.

The momentum reported at the full year 2016 results has continued into 2017. The steps taken in 2016 to deliver an efficient, competitive and sustainable business model are bearing fruit in 2017, with growth in revenue and a 76% increase in adjusted EBITDA to €27.0 million in 2017.

Adjusted EBITDA & Adjusted EBITDA margin

Underlying adjusted EBITDA remained flat compared to 2016 with growth in many parts of the business offset by the significant headwinds discussed earlier.

Adjusted EBITDA for the Financials division was €27.0 million, against an adjusted EBITDA of €15.4 million in 2016.  The year-on-year improvement in adjusted EBITDA was a consequence of the business enhancements taken in 2016, both in terms of growing the, higher margin, B2B offering as well as optimising the underlying cost base to ensure the business is lean and efficient.

Cost of operations

New presentation of cost of operations

The new presentation of cost categories strips out the B2C and financial division costs, similar to the new presentation of revenue and therefore provides better margin analysis as well as clearly setting out the research and development cost.

* 2016 comparable numbers were reclassified to reflect year on year on a like for like basis

Research and development ("R&D") cost comprises of employee related costs, dedicated teams, their direct expenses and proportional office cost. Research and development cost decreased 2% in 2017 to €80.7 mainly as a result from increased capitalisation of development costs. In B2B gaming capitalised development cost as a percentage of total R&D cost increased from 26% to 35%. The development cost grew by 50% year on year with 25% of this growth coming from rent capitalisation introduced for the first time in 2017. On a like for like basis, excluding acquisitions and excluding office rent cost, the percentage has increased from 26% to 29%. This underlying increase in capitalised cost of 7% derives from the development of the GPAS and Marketplace projects as well as from a change done to the cost mode during 2017.

Operations cost includes mainly employee related cost and their direct expenses, operational marketing cost, hosting, license fees paid to third parties, branded content, terminal hardware cost & maintenance, feeds, chat moderators and proportional office cost. Operations cost increased by 14% from €146.7 million to €166.8 million in 2017. The main reason for the increase is the cost of terminals hardware which is in line with the increase in revenue from the sale of terminal hardware, increase in BGT terminal maintenance and feeds cost, as the cost for 2016 included only 6 months of BGT cost, from the date of its acquisition. Excluding acquisitions operations cost increased slightly by 1% where the increase in terminal hardware cost was offset by the reduction in the employee related cost.

Administrative cost increased by 19% mainly due to increase in employee related cost, legal fees, and compliance related cost.

Sales and marketing cost mainly include employee related cost, their direct expenses, marketing and exhibition costs. Sales and marketing cost increased by 42% to €17.6 million where most of the increase relates to acquisitions. Excluding acquisitions S&M cost increased by only 3%.

The 62% increase in B2C Gaming cost from €59.9 million in 2016 to €96.9 million in 2017 mainly relates to the additional cost of the Sun Bingo contract which was launched in September 2016. The B2C costs comprises brand fees, gaming taxes, operational marketing cost, employee related cost and processing fees. These fees are typically calculated as a share of the licensee revenue generated.

Cost of operations in the Financials division increased by €7.7 million in 2017.  However, 2017 includes the full year of operational costs for CFH (2016 included only one month) and three months of operational costs for Alpha.  Excluding acquisitions, operational costs in the Financials division decreased by €8.3 million, which is reflective of the aforementioned underlying cost optimisation undertaken during 2016 to ensure an efficient, robust and sustainable business mode,

Depreciation, amortisation, finance income, financial cost and tax

Depreciation increased in 2017 by 32% to €26.5 million. Excluding acquisitions, depreciation increased 10%.

Amortisation cost, excluding amortisation of intangibles on acquisition, has increased 17% to €36.0 million, in line with the increase in capitalised development cost.

Adjusted net finance cost was €5.0 million in the period compared to €37.2 million in 2016. The decrease is predominantly due to lower foreign exchange rate losses of €19.7 million during 2017, compared to a €44.7 million loss in 2016, together with higher dividends from the available for sale investment from Ladbrokes of € 5.9 million (2016: €3.7 million) and €11.2 million from Plus500 (2016: €8.2 million).

The Company is tax registered, managed and controlled from the Isle of Man, where the corporate tax rate is set at zero. The Group's main trading subsidiaries are registered either in the Isle of Man, Alderney or Cyprus, where effective tax rates are low or set at zero. Other subsidiaries, related to the Group's development centers are located in other jurisdictions and operate on a cost-plus basis, and are taxed on their residual profits. The tax charge in 2017 was €17.5 million (2016: €6.3 million). The increase is mainly due to acquired companies registered for taxation in higher tax jurisdictions as well profits being recognised in higher taxing territories increasing Playtech's effective tax rate.     

Adjusted profit and Adjusted EPS

Adjusted diluted EPS was up 14% and the underlying Adjusted diluted EPS on a constant currency basis excluding acquisition was 1% above 2016 . Adjusted diluted EPS is calculated on the basis of a weighted average number of shares in issue during 2017 of 348.5 million.

Cashflow

Playtech continues to be highly cash generative and once again delivered strong operating cash flows of € 306.7 million.

Cash conversion

Operating cash conversion from Adjusted EBITDA decreased slightly in line with the conversion level in 2016 when adjusted for jackpots, security deposits and client equity. Since the timing of cash inflows and outflows for jackpots, security deposits and client equity only affects the reported operating cashflow and not EBITDA, adjusting these cash fluctuations is essential to truly reflect the quality of revenue and cash collection.

Net cash outflows from investing activities totalled € 140.2 million in the period, of which €46.3 million (2016: €140.0 million) relates to acquisitions, mainly of Eyecon and Alpha. Cash outflows from financing activities included €104.7 million (2016: €245.7 million) of annual dividend payment.

Balance sheet and financing

As at 31 December 2017, cash and cash equivalents amounted to €584.0 million (2016: €544.8 million), with cash net of client funds, progressive jackpot and security deposit , being €412.6 million (2016: €392.0 million).

Total available-for-sale investments were €381.3 million, a 66% increase compared to the end of 2016, due to the appreciation in value of holdings in Plus500 and in Ladbrokes Coral.

Contingent consideration and redemption liability decreased to €157.7 million, mainly due to the write off of the Markets earn-out and earn-out payments, and comprise of:

The value of the contingent consideration relating to Markets.com in Playtech's balance is zero, as the threshold for achieving an additional earnout has not been met.

Dividend

To provide greater certainty and consistency of dividend payments, the Board adopted a progressive dividend policy in 2016 which allows the Board to reflect its confidence in the growth and cash generation of the business without being tied to a fixed percentage payout as one-off items can impact results, such as the impact from foreign exchange which we saw in 2016 and 2017.

Playtech's intention is to grow dividends from the current level in line with the underlying performance of the business on a smoothed basis and to continue to pay the dividend split approximately one-third as an interim dividend and two-thirds as a final dividend.

Accordingly, the Board has declared a final dividend of 23.9 €cents per share (2016: €21.7cents), an increase of 10% over 2016's final dividend, taking the 2017 full year dividend to 36.0 €cents per share, an increase of 10% over 2016.

For those shareholders wishing to receive their dividends in Sterling the last date for currency elections is 11 May 2018.

Dividend timetable:

Principal risks and uncertainties

The key risks, which will be discussed further including how they are being addressed in Playtech's 2017 Annual Report (which will be available in the investor relations section of the corporate website), are:

Risks relating to both the Gaming division and Financials division

§ Regulation - licensing requirements

Playtech holds several licences for its activities from regulators. The review and/or loss of all or any of these licences may adversely impact on the operations, revenues and/or reputation of the Group.

§ Regulation - Local requirements Technical Regulatory Requirements

Local regulators have their own specific requirements, which often vary on a country to country basis. In addition, new requirements may be imposed. For example, a requirement to locate significant technical infrastructure within the relevant territory or to establish and maintain real-time data interfaces with the regulator. Such conditions present operational challenges and may prohibit the ability of licensees to offer the full range of the Group's products.

§ Taxation

Given the environment in which the Group operates, the business is exposed to continuously evolving rules and practices governing the taxation of e-commerce activity in various jurisdictions. It is imperative to ensure compliance with all relevant tax

§ Economic Environment

A downturn in consumer discretionary spend or macroeconomic factors outside of Playtech's control could result in reduced spend by consumers on gambling and financial trading and the Group's revenues may fall.

§ Mergers and Acquisitions

Playtech has made a number of acquisitions over the years. Such acquisitions may not deliver the expected synergies and/or benefits and may destroy shareholder value.

§ Key Employees

The Group's future success depends in large part on the continued service of a broad leadership team including executive Directors, senior managers and key personnel. The development and retention of these employees along with the attraction and integration of new talent cannot be guaranteed.

§ IT Security

The risk of impairment to our operations for example through cyber and distributed denial of service (DDoS) attacks, technology failure or terrorist attack continues to be one that the Group considers to be significant. System failure could significantly affect the services offered to our licensees.

§ Regulatory - Data Protection

The requirements of the new EU General Data Protection Regulations (GDPR) will come into force in May 2018. This places onerous responsibilities on data controllers and processors who have users in the EU regardless of where the data is held or processed.

§ Regulatory - Preventing Financial Crime

Policymakers in the EU and at national levels have taken steps to strengthen financial crime legislation covering Anti-Money Laundering (AML), prevention of facilitation of tax evasion and Anti-Bribery and Corruption (ABC). Non-compliance could result in investigations, prosecutions, loss of licences and/or an adverse reputational impact.

§ Intellectual Property Rights

The Group's primary commercial activity is as a licensor of gambling software. The Group predominantly owns the intellectual property (IP) rights in that gambling software, including the IMS which is key to maintaining our competitive advantage. Any claim that the Group doesn't own its IP (by a licensee or a third party), or any copying of the Group's IP by a third party, could have a significant effect on revenues. In addition, the Group licenses intellectual property from third parties, including creation of very successful branded games. Any loss of such IP rights could lead to a decline in casino revenues.

§ Business Continuity Planning

Loss of revenue, reputational damage or breach of regulatory requirements may occur as a result of a business or location disruptive event.  

Additional risks relating to the Gaming division

§ Regulatory - Responsible Gambling

Responsible gambling is a material concern to society as well as a regulatory priority. Licensing requirements are regularly updated to ensure that companies in the sector provide a safe environment for consumers. Recent trends have seen an additional regulatory focus on treating customers fairly and conducting marketing and advertising in a responsible manner.

Additional risks relating to the Financials division

§ Market exposure

The fair value of financial assets and financial liabilities could adversely fluctuate due to movements in market prices of foreign exchange rates, commodity prices, equity and index prices.

§ Regulatory - Capital Adequacy

The requirement to maintain adequate regulatory capital may affect the Group's ability to conduct its business and may reduce profitability.

§ Trading volume

Low volatility within foreign exchange rates, commodity prices, equity and index prices may reduce profitability.

By order of the Board,

Directors' responsibility statement

We confirm to the best of our knowledge;

§ The Group and Company financial statements, which have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and Article 4 of the IAS Regulation, give a true and fair view of the assets, liabilities, financial position and profit of the Group and Company; and

§ The Annual Report includes a fair review of the development and performance of the business and the financial position of the Group and Company, together with a description of the principal risks and uncertainties that they face.

The directors of Playtech plc are listed in the Group's Annual Report and Accounts for the year ended 31 December 2016.  A list of current directors is maintained on Playtech's website, www.playtech.com

By order of the Board,

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2017     

* Adjusted numbers relate to certain non-cash and one-off items including amortisation of intangibles on acquisitions, professional costs on acquisitions, additional consideration payable for put/call options, one off employee related cost, finance costs and contingent consideration movement on acquisitions, impairment of available-for-sale investments, deferred tax on acquisition, non-cash accrued bond interest and additional various non-cash charges.  The directors believe that the adjusted profit measures represent more closely the consistent trading performance of the business.  A full reconciliation between the actual and adjusted results is provided in Note 5.