per share, subject to approval by the shareholders at the annual general meeting to be held on 29...

Registered Office:NetPlayTV plcBattersea Studios80 Silverthorne RoadLondon SW8 3HE

Tel: +44 (0)20 7819 9100Fax: +44 (0)20 7819 9199

www.netplaytvplc.com

NetP

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plc A

nnual report and financial statem

ents 2013

Registered Number: 3954744Stock code LON:NPT

NetPlayTV plc Annual report and financial statements 2013

ContentsOverviewHighlights 1Brands 2Strategic ReportChairman’s Statement 4Business Model 5Marketplace 6Strategic Priorities 8Strategy: Investment into Marketing 9Chief Executive’s Review 102013 in numbers 12Financial and Performance Review 14Principal Risks and Uncertainties 16

GovernanceBoard of Directors 20Corporate Governance 22Directors’ Report 24Directors’ Responsibilities 25Independent Auditor’s Report to the Members of NetPlayTV Plc 26

Financial statements and other informationConsolidated statement of comprehensive income 27Consolidated statement of financial position 28Consolidated statement of cash flows 29Consolidated statement of changes in equity 30Company statement of financial position 31Company statement of cash flows 32Company statement of changes in equity 33Notes to the financial statements 34Officers and professional advisers 60

NetPlayTV is the UK’s largest interactive TV gaming company. Our goal is to be the destination of choice for multi-channel gaming entertainment by delivering a cutting edge interactive experience.

20%Third consecutive year with net revenue growth in excess of 20%

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OverviewNetPlayTV plc

Highlights Financial HighlightsNet revenue

+31%£17,070,000£21,769,000£28,539,00013

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EBITDA*

+21%£3,305,000£4,312,000£5,213,00013

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Adjusted profit before tax†

+35%£2,372,000£3,605,000£4,874,00013

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Adjusted earnings per share†

+32%0.85 pence1.27 pence1.68 pence13

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Profit for the year and total comprehensive income

+15%£642,000£3,599,000£4,416,00013

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Cash and cash equivalents

+13%£7,940,000£12,275,000£13,911,00013

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Operational Highlights

• New three year ITV agreement signed in April 2013, extending the number of nights of Jackpot247 from four to six per week

• SuperCasino.com was the headline sponsor of Big Brother and Celebrity Big Brother

• Acquisition of Vernons.com, the e-gaming business, delivering diversification through online casino, bingo, and sportsbook

• Significant investment in pure online digital marketing

* EBITDA is a non-GAAP, company specific measure and excludes share based payment charges described in note 25. Where not explicitly mentioned, EBITDA refers to EBITDA from continuing operations.

† Adjusted profit before taxation is calculated as profit before taxation from continuing operations and deducting the cost of amortisation of specifically identified intangible assets arising on acquisitions and the share based payments. Adjusted earnings per share is calculated using adjusted profit before taxation.

£17,070,000£21,769,000£28,539,00013

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Our Brands

Our aim is to deliver an interactive gaming experience to the mass market. We achieve this by using the flexibility of the Internet, linked with the trusted medium of TV.

Net revenue

£28.5m 32hOver 32 hours of live TV broadcast per week

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“Jackpot247 offers a truly exciting casino experience, 24 hours a day. Broadcast with live presenters on ITV six days a week since 2010.”

“SuperCasino.com is the hottest live casino experience online, on TV and on your Mobile. Broadcast live on Channel 5 every night of the week with live spinners since 2009.”

“Vernons is a pure online gaming brand offering casino, bingo and sports betting to its customers.”

Broadcast platformSix nights a week (Monday – Saturday) on ITV, seven nights a week on Freeview Channel 39.

• Online

• Mobile & Tablet

• IVR

Broadcast platformSeven nights a week on Channel 5. 24 hours a day, seven days a week on Sky Channel 862.

• Online

• Mobile & Tablet

• IVR

Broadcast platform• Online

• Mobile & Tablet

Show FormatPresenter-led show on ITV with live auto wheel projected onto a giant projector screen.

Show FormatLive spinner show on Channel 5 and Sky Channel 862.

Show FormatNo live TV show.

Established dateLive on ITV since May 2010 (formerly known as ChallengeJackpot.com).

Established dateLive on Channel 5 since September 2009.

Established dateVernons has been an established, trusted name in gaming since 1925. NetPlayTV acquired Vernons in October 2013.

www.Jackpot247.com www.SuperCasino.com www.Vernons.com

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NetPlayTV plcStrategic report

“ The 2013 results show that the Group has now firmly established itself and is now a well-positioned and integrated business.”

Chairman’s statement

While TV is core to our business, we believe it is important to diversify our business: We have substantially increased marketing and customer recruitment from pure online digital marketing initiatives, and continue to evaluate complimentary M&A opportunities. At the end of the year we purchased the Vernons.com e-gaming business from Sportech plc which brought a large database of customers and additional product verticals in bingo and sportsbook. We are currently applying our proven marketing strategy and I am confident that this will provide further opportunities to grow the business.

PeopleThe senior management team has been strengthened for the next phase of growth with a number of new roles. Akshay Kumar was appointed as Group Finance Director. Akshay served as Group Financial Controller from January 2011 and brings considerable strategic and financial input to the Board.

Bjarke Larsen has been made Chief Operating Officer. Bjarke has been with the Group since 2007 and is responsible for the day to day running of the gaming operations.

The Group also created a new role in 2014 to head up digital marketing to further build upon the positive traction gained in 2013, in expanding customer recruitment opportunities.

Every member of the NetPlayTV team has contributed to the Group’s success during 2013 and I would like to thank them all for their hard work and the contribution they have made.

Results overviewNetPlayTV has delivered a record set of 2013 results, with net revenue increasing 31% to £28.5m and EBITDA increasing 21% to £5.2m.

The Group has no debt and cash generation continues to be strong with the year-end balance increasing £1.6m from £12.3m to £13.9m. This is after the dividend payments of £1.2m and the £3.0m acquisition of Vernons.com business from existing cash balances.

Looking aheadThe 2013 results show that the Group has now firmly established itself and is now a well-positioned and integrated business. 2014 has started with a strong increase in the core KPIs that drive the growth of the business and I am confident that we will continue to improve performance year on year.

DividendDuring the year the Board announced an interim dividend of 0.18 pence per share and is proposing a final dividend of 0.32 pence per share, subject to approval by the shareholders at the Annual General Meeting to be held on 29 May 2014, bringing the full year dividend to 0.50 pence per share and an increase of 33% on 2013. The dividend is payable on 19 June 2014 for shareholders on the register on 23 May 2014.

Clive JonesNon-Executive Chairman7 April 2014

Dear Fellow Shareholder,It is a pleasure to report on a very strong set of results for NetPlayTV plc for 2013.

StrategyNetPlayTV’s strategy remained focused on providing our customers with the best true multi-channel live gaming experience in the industry across mobile, web and TV through acquisition and organic growth. The strategy has proved successful and has delivered impressive results in 2013 with profit before tax increasing by 33% to £4.2m.

We have continued to develop our relationships with key TV broadcasters and signed a new three-year agreement with ITV in April to extend the number of nights from four to six per week. In the summer of 2013 we entered into our first TV show sponsorship, with the SuperCasino brand as headline sponsor for Big Brother and Celebrity Big Brother. This was a significant success, and was followed up in January 2014 with the sponsorship of Celebrity Big Brother, which had the highest viewer numbers since Channel 5 first produced this show.

Clive JonesNon-Executive Chairman

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Strategic report

Business modelTV advertsAffiliates

Online digital marketingTV Teleshopping Airtime

Sponsorship

Other casino games (e.g. slots) Bingo tickets

PC, Mobile, IVR, Tablet

Player Account

Sportsbook BingoCasino

Proprietary TV Roulette Games

Currenty Vernons only

Currently SuperCasino & Jackpot247 only

Varied route to market with £13.3m invested in marketing in 2013 which equates to 47% of Net Revenue.

Multi channel approach allows new customers to open an account, deposit and play via Mobile, Tablet, Telephone or PC.

Allows the customer to play all TV, online and mobile games from a single account. This allows us to analyse customer behaviour and optimise the playing experience with the aim of increasing customer loyalty and value.

The acquisition of Vernons.com has brought with it additional product verticals of Sportsbook and Bingo.

All production and live casino front end managed internally with third party games and back office systems provided by Playtech.

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Marketplace NetPlayTV’s strategy has historically been to focus on casino which plays to our core strengths and brands.

UK Online gaming marketThe table below show NetPlayTV’s overall share of the UK online gaming market and how these values have increased annually since 2010:

The table below show NetPlay’s overall share of the UK online casino market and how these values have increased annually since 2010:

Whilst these figures show that NetPlayTV has experienced significant growth in these areas with net revenue increasing by a compound annual growth rate of 27% since 2010, it illustrates that there is considerable market opportunity available to the Group and NetPlayTV is well positioned to capitalise on this. The overall UK online gaming market (consisting of all online product verticals) and the UK online casino market is expected to grow in revenue terms by 12.2% and 11.8% in 2014 respectively*. Furthermore, the acquisition of Vernons.com provides opportunities for the Group to diversify its online gaming product offering as it includes Sportsbook and Bingo offerings.

2010 2011 2012 2013

Overall UK Online Market (GGY) – Gross Gambling Yield* £1,516.5m £1,713.7m £2,054.9m £2,275.8m

NetPlayTV’s Gross Gaming Win £17.4m £20.6m £26.9m £36.3m

NetPlayTV’s estimated share of overall market 1.1% 1.2% 1.3% 1.6%

2010 2011 2012 2013

Overall UK Online Casino Market – Gross Gaming Yield* £456.4m £548.4m £690.8m £796.4m

NetPlayTV’s Online Casino Gross Gaming Win £17.4m £20.6m £26.9m £35.8m

NetPlayTV’s estimated share of UK online casino market 3.8% 3.8% 3.9% 4.5%

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Strategic report

Point of Consumption taxIn the March 2013 Budget, the UK Government confirmed its intention to apply a ‘Point of Consumption’ (POC) tax to operators providing remote gambling into the United Kingdom. As widely reported it is currently expected that the POC tax will be applied from December 2014 and charged as 15% of net revenue.

As a leading operator within the UK gaming market, NetPlayTV will pay such POC tax on the majority of its net revenue. We estimate that the potential effect of the POC tax on the Group, if the regulation had been in place during 2013, would have been a reduction of circa £1.7m in profit for the year after incurring a gaming tax charge of £4.2m and implementing applicable contractual offsets and cost base efficiencies as outlined in points 1 and 2 below.

1. Contractual offsets: NetPlayTV has a number of contractual offsets with suppliers, where the revenue generated is directly linked to the amount payable to a supplier, and the potential additional cost due to the POC tax will consequently reduce the amount payable to these suppliers.

2. Consolidation of locations and cost base efficiencies: NetPlayTV currently runs two TV operations: one in the UK and one outside the UK. The Group may look to consolidate this into one location within the UK and has also already identified further cost efficiencies that can be achieved.

In addition to these two factors, the Board believes there are further opportunities for the Group to pursue as a result of the POC tax charge, including:

3. Opportunity to take market share and consolidation: There will be competitors within the UK gaming market who will have very low or negative profits after the introduction of the POC tax and maybe forced to exit the market1. NetPlayTV is well positioned to take advantage of a potential increase in market share. This also presents further opportunities for NetPlayTV to take part in the inevitable consolidation within the industry.

4. Operational gearing: While the POC tax will impact the EBITDA margin, the operational gearing in the business means that the EBITDA margin will rise again as the business continues to scale.

5. International expansion: Expanding our customer base internationally is a longer term objective and will further counterbalance the POC tax impact on our business.

1 A report published by Citi Research “UK Online Gambling: Mitigating the UK Point of Consumption Tax” published 23 August 2013 suggests that circa 15% of the UK gaming market could be left with low or negative profits post the POC tax and maybe forced to exit. They further estimate that 50% of this market share could migrate to existing operators giving each a potential 7-11% uplift in revenue.

27%Net revenue annual compound growth rate since 2010

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Strategic Priorities

1Continued focus on core live interactive casino

The Group intends to increase UK market share by leveraging existing broadcaster relationships and expanding commercial advertising to complement the core teleshopping airtime.

It also sees significant growth in the ability to target smartphone and tablet customers along with increasing the number of customers from pure online acquisition sources.

2Retention of existing players

Driving player life-time value is key, with 45% of net revenue generated from players who have been registered for over 12 months showing there is significant value in the existing customer base.

The Group has very high retention rates and has a dedicated team of account managers and retention specialists in place alongside the fact that the brand is on terrestrial television every night of the week.

3Expansion of product offering

The Group is committed to expanding its product portfolio and features. For example, in February 2014, the Group launched live streaming of the television broadcast direct to iPhone and iPad.

The Vernons.com acquisition provides the Group with further product differentiation opportunities. For example, it will enable cross marketing of the existing live roulette TV product to the Vernons customer base as well as pushing the Vernons sportsbook to the Group’s largely male dominated SuperCasino database, especially with the Football World Cup in the summer of 2014.

4Consolidation and new markets

Our strategy includes growth both organically and through acquisition in both our core UK market and overseas.

Due consideration will be given to newly regulated markets. Not all markets will be attractive dependent on size and tax rates amongst other considerations. The Group would look to enter with the right media relationship for that particular country.

£8.1m

£9.2m

£1.1m

£4.1m

Untrackedmarketing* (e.g. TV)

Pure onlinedigital marketing

2012 2013

16%

84%

27%

73%

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Strategy: investment into marketing

On the whole these players are more expensive to acquire than untracked customers, however early indications suggest that the lifetime value that these players contribute to the casino is also significantly higher. Encouragingly the net revenue generated by these players has increased by 120% between 2012 and 2013.

The graph above shows how pure online digital marketing investment has increased by 273% from £1.1m in 2012 to £4.1m in 2013.

2013 has been key for diversifying marketing activities, and the charts below show the increase in new depositing players acquired through pure online digital marketing.

Market expenditure

2012 New depositing players 2013 New depositing players

Pure online digital marketing Untracked marketing* (e.g TV)

* Untracked marketing (e.g. TV) includes marketing in relation to branded pay per click advertising which is tracked but actually categorised as untracked as it related to NetPlayTV’s own brand terms and therefore is analogous to organic search engine marketing.

Charles ButlerChief Executive Officer

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Chief Executive’s review

MarketingThe Group continued to invest significantly in marketing during 2013 and this resulted in a 25% increase in new depositing players to 63,832 and an increase in total depositing players of 30% to 84,833. Mobile and tablet is now an integral part of the overall marketing strategy and continues to grow well, accounting for 36% of all new depositing players, up from 21% in 2012. All TV adverts we produce have a strong ‘call to action’ for mobile customers and we expect the percentage of new customers from mobile and tablet to continue to increase throughout 2014.

In April 2013, a new three year agreement was signed with ITV to extend the number of nights the Jackpot247 show is aired on ITV from four to six, being Monday to Saturday inclusive. This is testament to the success of the format to date and reinforces the proven strategy of using TV to target new customers.

In addition, and again in line with the strategy of using TV to target new customers the Group entered into its first TV sponsorship deal in the summer of 2013 with its SuperCasino brand as the headline sponsor of Big Brother and Celebrity Big Brother. As part of the overall marketing strategy this proved a success and had the desired effect of increasing both brand awareness and customer reach leading to the decision for the sponsorship again of Celebrity Big Brother in January 2014. This series of Celebrity Big Brother was the most popular for Channel 5 yet with viewing audiences peaking at 4.2 million.

While player recruitment via TV is still at the heart of the business, during the year we increased our investment in pure online digital customer recruitment as part of a more diversified marketing strategy. This resulted in 27% of new depositing players coming from pure online, an increase of 16% since 2012.

Player retention remains key to the business model and works side by side with new player recruitment to ensure the best customer user experience, loyalty and in turn player value. In 2013, 45% of net revenue came from players who had an account for more than 12 months, up from 41% in 2012.

AcquisitionOn 31 October 2013, the Group bought Vernons.com, the e-gaming division of Sportech plc. Vernons.com operates online casino, bingo and sportsbook. The acquisition includes the brand, customer database and various other gaming assets. These assets were purchased through the Group’s subsidiary NetplayTV Group Limited in Alderney for a total consideration of £3 million which was satisfied by existing cash balances. This acquisition provides significant synergy opportunities. With further product differentiation it will enable cross marketing of the existing live roulette TV product to the Vernons’ customer base post integration as well as pushing the Vernons’ sportsbook to the Group’s largely male dominated SuperCasino database and provide a source of new customers, particularly with a view to the Football World Cup this year.

ProductThe Group’s core product offering throughout 2013 has been interactive TV casino via its brands SuperCasino and Jackpot247. With the strong interaction between TV and mobile and tablet the Group has been continually developing a best in class mobile offering. The success of this is illustrated by an increase of 188% in mobile and tablet net revenue which in turn accounted for 33% of total net revenue in 2013.

Whilst the primary product vertical for the Group remains casino, with the acquisition of Vernons.com brings new opportunities in bingo and sports betting. As the acquisition was only at the end of the year, it will be 2014 and beyond where the positive effect of these new product

Delivering against strategy2013 has seen the Group deliver its third consecutive year of net revenue growth in excess of 20% and the first year that gross bets exceeded £1 billion. We have continued to focus on our core strategy of delivering a cutting edge interactive gaming experience for our customers and this has delivered very strong year on year growth with net revenue increasing by 31% to £28.5m and EBITDA by 21% to £5.2m.

The business has been built on firm footings, is performing well and is highly cash generative. With this in mind, the Group is focused on diversification both in terms of marketing channels and product verticals enabling further customer reach and growth. This is illustrated by the strong increase in pure digital marketing, new customer numbers and the first acquisition since the business was restructured in 2010.

“ The Group continued to invest significantly in marketing during 2013 and this resulted in a 25% increase in new depositing players to 63,832.”

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Strategic report

verticals on the business will really be seen. Sports betting is currently only operating online, however we are aiming to launch mobile sports betting in Q2 2014, ready for the Football World Cup in Brazil.

All products are integrated with a single wallet now including bingo and sports betting. However in Q2 of 2014 all three brands will be moving onto the new state of the art version of the Playtech integrated wallet offering. This gives substantial enhancements to CRM and with customer retention playing such a key part in the overall offering it should bring with it enhanced player loyalty and value.

ResultsThe Group produced a very strong set of financial results during 2013. The core KPIs driving the business are new depositing players and total depositing players which increased by 25% and 30% respectively compared with 2012. This led to an increase in net revenue of 31% to £28.5m and an increase in EBITDA of 21% to £5.2m.

Whereas marketing expenditure increased by 44% as the Group continues to commit to driving strong net revenue growth, operating and administrative expenses only increased by 28% and 14% respectively in comparison to 2012.

The Group increased cash during 2013 by £1.6m to £13.9m after paying £3.0m during the year for the acquisition of Vernons.com from existing cash balances.

Trading update & outlookQ1 2014 was a record quarter for new depositing players and active depositing players, up 13% to 19,978 and 23% to 37,467 with net revenue increasing by 1% to £7.1m on a very strong Q1 2013 comparative. The net revenue increase would have been more significant if it had not been for SuperCasino’s margin reducing to 1.5% in February from an average of 2.8% over the prior 12 months as a result of several VIP winners. The margin has returned to the expected 2.8% in March 2014.

Delivering a truly multi-product interactive gaming experience is still an important part of our strategy. Mobile is continuing to show strong growth and in February 2014 we launched live, real time TV roulette streaming to mobile. Net revenue from mobile contributed 35% of overall net revenue in Q1 2014.

There are substantial product enhancements in the pipeline for 2014 for both player recruitment and retention. The new version of the Playtech single wallet was launched in March for our SuperCasino brand and will be rolled out across Jackpot247 and Vernons during Q2. This enables enhanced CRM capabilities which in turn should further improve player retention and average revenue per user.

The Group continues to look at potential acquisition opportunities in line with the strategy to grow the business to complement organic growth.

NetPlayTV is well positioned in its current markets and has strong growth opportunities both in its existing UK market and internationally. The Group looks forward to building on the very successful set of 2013 results.

Charles ButlerGroup Chief Executive7 April 2013

31,483

50,900

63,832131211

55%

55%

59%131211

43,832

65,002

84,833131211

40%

41%

45%131211

6,932

11,586

15,683131211

£393

£335

£336131211

£632,619,000

£788,601,000

£1,037,915,000131211 2.70%

2.76%

2.75%131211 40%

41%

43%131211

£5,856,000

£9,226,000

£13,281,000131211 34%

42%

47%131211

Pure onlinedigitalmarketing

27%

73%

Untracked marketing (e.g. TV)

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2013 in numbers

Focus on player values

Net revenue contributed by players registered more than 6 months

59%

Net revenue contributed by players registered more than 12 months

45%

Average net revenue per active depositing player

+0.5%

Focus on players New depositing players

+25%

Active depositing players

+31%

Customer support interactions with players (average monthly)

+35%

Focus on gaming statistics

Gross bets

+32%

Net revenue margin (Net revenue / Gross bets)

2.75%

Gaming hold (Net revenue / Total deposits)

43%

Focus on marketing

Marketing expenditure

+44%

Marketing expenditure as % of net revenue

47%

% of new depositing players acquired through pure online digital marketing

The information presented below includes the Company’s financial and non-financial key performance indicators (KPIs) as well as other metrics presented for information purposes only. All percentages preceded with an addition sign relate to the movement between 2012 and 2013.

£17,070,000

£21,769,000

£28,539,000131211 £3,305,000

£4,312,000

£5,213,000131211 £551,000

£3,388,000

£4,146,000131211

8%

21%

36%131211

0.85

1.27

1.68131211

5%

14%

33%131211

0.82

1.20

1.64131211

£775,000

£3,149,000

£9,082,000131211

–

0.375

0.500131211

£3,043,000

£4,038,000

£4,618,000131211 92%

94%

89%131211 £7,940,000

£12,275,000

£13,911,000131211

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Cash Net cashflow (online gaming operation)

+14%

EBITDA to net cashflow conversion

89%

Cash and cash equivalents

+13%

Earnings and dividend per share

Adjusted earnings per share(pence per share)

+32%

Diluted adjusted earning per share (pence per share)

+37%

Total dividends per share (pence per share)

+33%

Financially strong Income statement

Net revenue

+31%

EBITDA

+21%

Profit for the year from continuing operations

+15%

Focus on mobile and tablet

% of new depositing players acquired through mobile & tablet

36%

% of net revenue through mobile & tablet platform

33%

Net revenue generated from mobile & tablet

+188%

2013 was with record year with net revenue up 31% and the first year that gross bets exceeded £1 billion.

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Financial and performance review

“ The Group continues to be highly cash generative with cash generated from operations of £6.0m (2012: £4.3m).”

Marketing expenses increased by £4.1m to £13.3m (2012: £9.2m). These expenses include the cost of the revenue share agreements in respect of key broadcast agreements with ITV and Channel 5 as well as TV advertising and pure online digital marketing. While clearly an element of the marketing expenditure is associated with customer retention and loyalty the aggregate marketing expenditure per new depositing player has increased by 15%. This is primarily due to an increase in pure online digital marketing expenditure. These new player recruitment costs are higher than traditional TV player recruitment, however early indications suggest that the lifetime contribution of these players should also be greater than a traditional TV player.

Operating expenses have increased by £1.4m from £4.9m in 2012 to £6.3m in 2013 although have decreased as a percentage of net revenue from 23% in 2012 to 22% in 2013. These expenses include both variable and fixed costs of the broadcast and gaming operation.

Administrative expenses have increased by £0.4m to £3.7m. This increase can be explained by the increase in aggregate staff costs which have increased from £2.7m in 2012 to £3.1m in 2013. The average headcount has increased by 15% from 78 people in 2012 to 90 people in 2013 as the Company has expanded some of its operations to reflect the increased size of the Group. Administrative expenses have reduced from 15 to 13% of net revenue as the business starts to scale.

Earnings per shareReported profit for the year and total comprehensive income was £4.1m (2012: £3.6m) resulting in an increase in basic earnings per share of 19% to 1.43 pence per share (2012: 1.20 pence per share).

The Directors have additionally chosen to report an adjusted earnings per share as they believe it better reflects the underlying performance of the Group. This is calculated on the profit before taxation from continuing operations and deducting the cost of amortisation of specifically identified intangible assets arising on acquisitions and the share based payments.

2013£ 000’s

2012£ 000’s

2011£ 000’s

Profit before taxation 4,163 3,140 551Amortisation of specifically

identified intangibles 537 287 1,071Share based payments 174 178 750

Adjusted profit before taxation 4,874 3,605 2,372

Adjusted earnings per sharePence per

sharePence per

sharePence per

share

Basic 1.68 1.27 0.85Diluted 1.64 1.20 0.82

Akshay Kumar Group Finance Director

OverviewNetPlayTV delivered a record set of results in 2013, with a net revenue increase of 31% to £28.5m (2012: £21.8m) and profit before taxation increase of 33% to £4.1m (2012: £3.1m).

The Group continues to be highly cash generative with cash generated from operations of £6.0m (2012: £4.3m) and net cashflow (from the online gaming operation) of £4.6m, an increase of £0.6m on 2012. As a result the Board has decided to propose that the final dividend per share be increased by 42% to 0.32p (2012: 0.225p). The Group’s financial position remains strong with cash and cash equivalents at the year-end of £13.9m (2012: £12.3m) with no debt.

Income statement itemsNet revenue increased by 31% to £28.5m (2012: £21.8m).

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Adjusted profit for the year was £4.9m (2012: £3.6m) resulting in an increase in basic adjusted earnings per share of 32% to 1.68 pence per share (2012: 1.27 pence per share).

Cash balanceThe Group’s cash balance increased by £1.6m to £13.9m, which is equivalent to 4.7 pence per ordinary share in issue at 31 December 2013 (2012: 4.3 pence per ordinary share). Of this balance £1.7m is in relation to balances which players have in their gaming account on deposit with NetPlayTV (offsetting the liability described in Note 19 to the financial statements) leaving a corporate cash balance of £12.2m (2012: £10.6m), which is equivalent to 4.1 pence per ordinary share (2012: 3.7 pence per ordinary share).

CashflowThe table below separates the movements in player balances, working capital, exceptional items paid, share capital issued, acquisitions/discontinued operations, dividend paid and net finance income received to show how EBITDA reconciles to the net cashflow from the online gaming operation and the total movement in cash:

2013 £ 000s

2012 £ 000s

2011 £ 000s

EBITDA 5,213 4,312 3,305Less net capital expenditure (593) (192) (191)Other movements (2) (82) (71)Net Cashflow

(Online gaming operation) 4,618 4,038 3,043

Cash conversion: EBITDA to Net Cashflow 89% 94% 92%

Movement in player balances 175 329 162Working capital movements 616 (265) (1,100)Share capital issued 352 176 111Net finance income & borrowings

repaid 57 39 (42)Dividend paid (1,182) (428) –Acquisitions/discontinued

operations (3,000) 446 186Increase in cash balance 1,636 4,335 2,360

During the year the Group has invested additional capital expenditure to improve the quality of the on-air broadcast graphics, to upgrade the web environment to provide scalability in a new tier-1 hosting facility and the purchase of software licenses. All staff costs in relation to continual web and other platform development have been expensed through the income statement in full during the year.

DividendGiven the Group’s strong cash generation the Directors propose to increase the final dividend by 42% to 0.32 pence per ordinary share. If approved at the AGM on 29 May 2014 this dividend will be paid on 19 June 2014 to shareholders whose names are on the register of members at the close of business on 23 May 2014. This payment, together with the interim dividend of 0.18 pence per ordinary share paid on 11 October 2013, makes a total of 0.50 pence per ordinary share (2012: 0.375 pence per ordinary share).

Acquisition of Vernons.comDuring the period the Group acquired the assets of Vernons.com from Sportech (Alderney) Limited for total cash consideration of £3.0m. This transaction was financed from existing cash balances.

The Vernons brand contributed £0.9m to the Group’s net revenue. Due to the effective and immediate integration into our existing operations we do not prepare a separate contribution statement for the Vernons brand.

The Group has incurred no exceptional material expenditure in relation to the acquisition of Vernons.com therefore all costs in relation to the completion of this transaction have been expensed in the statement of comprehensive income through administrative expenses.

TaxationThe Group has £5.9m (2012: £6.7m) of tax losses carried forward which equates to a total deferred tax asset of £1.3m (2012: £1.4m). Of this the deferred tax asset recognised on the balance sheet is £231,000 (2012: £248,000) as this amount is tax benefit is deemed to be probable within one financial year and the remaining £1.0m of the potential deferred tax asset is unrecognised. The charge through the income statement of £17,000 in the year represents the movement in the deferred tax asset between 2012 and 2013. The Group works closely with its advisers to ensure that its tax position is optimal.

Akshay KumarGroup Finance Director

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Principal Risks and Uncertainties

The risks and uncertainties described below are considered to have the most significant effect on NetPlay’s business and prospects. This list is not intended to be exhaustive. NetPlayTV carries out a detailed risk management process to ensure that risks are identified and mitigated where possible.

The Board recognises that the nature and scope of the risks can change and so regularly reviews the risks faced by the Group as well as the systems and processes in place to mitigate them.

An explanation of how the Group manages its various financial risks is provided in note 22 to the Financial Statements.

Risk description and potential impact Current mitigation

STRATEGY RISK

Ineffective or non-delivery of the business strategyThe online gaming industry is constantly changing and developing, for example the increasing shift in interacting with gaming services with a PC or laptop to interacting with a mobile or tablet.

The market for online gaming products and services is characterised by technological developments, new product and service introductions and evolving industry standards. Failure by NetPlayTV to use leading technologies effectively, develop its technological expertise, enhance its products and services and improve the performance, features and reliability of its technology and advanced information systems, could have a material adverse effect on its competitive position.

The Group seeks to identify and anticipate risks regarding our assumptions and understanding of the industry and economic environment in order to ensure the strategy remains appropriate.Corporate planning processes are in place to ensure that the strategy of the business contributes to the delivery of shareholder value. These processes culminate in the setting of an annual budget for the year, together with long-range plans for the two following years. Over the course of the year these budgets and plans are reconsidered, in the light of any market changes, through business reviews and formal reforecasts on a quarterly basis.

Acquisition riskOur strategy includes growth through consolidation in the markets in which we operate and through acquisitions in new territories. A poorly executed acquisition could lead to lower profitability.

The risks associated with this approach are mitigated through clearly defined investment criteria, detailed due diligence by the Group and its professional advisers and robust financial and operational post-acquisition and integration plans.

During the year, these processes were followed for the acquisition of Vernons.com, which was completed in October 2013.

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REPUTATIONAL RISK

Under-age and problem gamingUnder-age and problem gaming are inherent risks associated with the online gaming industry and the Group is no exception.

The Group devotes considerable resources to putting in place prevention measures coupled with strict internal procedures designed to prevent under-aged players from accessing its real money sites. In addition, the Group promotes a safe and responsible gaming environment to its customers supplemented by its corporate culture.

Information securityNetPlayTV faces external and internal information security risks.

NetPlayTV receives most of its revenue through debit and credit card transactions and operates as an e-commerce business.

A security breach could result in an adverse impact for the business and reputational damage.

NetPlayTV focus on the protection of player information. Appropriate controls are in place including:• an effective information security incident management process to

identify, report and ensure appropriate management of security incidents;

• systems which are secured and monitored against unauthorised access;

• regular review of the security of internal systems and the brand websites through penetration testing;

• pre-employment screening checks performed for all finance employees;

• periodic mandatory employee security training to maintain staff awareness;

• consideration of information security risks within procurement processes; and

• monitoring and control of scanning software for fraudulent customer activity by the Fraud & payment processing team.

OPERATIONAL RISK

Gaming/Casino risk and volatilityThe Group is exposed to gaming risk in relation to its casino operations which could adversely impact its revenue.

The Group’s casinos and other games incorporate a “house edge” designed to provide a return to the Group over a large number of bets, in the short term the Group’s casinos and other games may experience losses.

Wagering limits are in place to mitigate the Group’s exposure to individual transactions.

Key personnelNetPlayTV has operations in various locations throughout the world (including Guernsey, Lancaster and Battersea).

Our success is driven through the development and retention of a focused leadership team and a number of skilled specialist employees throughout our business.

The performance of the Group is dependent on its ability to attract, recruit and retain quality staff in a highly competitive labour market. We continue to invest in our people, ensuring that we recruit and retain the right calibre of staff with the skills, experience and talent to grow the business. We seek to ensure we have appropriate management development programmes to assess, manage and develop our people’s leadership skills, talents and experiences throughout the organisation.

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OPERATIONAL RISK continued

Dependence on third partiesDue to the nature of live broadcasts, the Group’s business is highly dependent on broadcasters, networks, software providers and mobile operators, as well as other service providers who, for example, provide payment processing and customer age and ID verification. If there is any interruption to the products or services provided by other third parties or if there are problems in supplying the products or services, the Group’s business could be adversely affected.

To mitigate this risk the Group takes care to select third parties that are reputable and reliable, and ensures that contractual agreements with key third parties offer adequate protection to the Group.

Where commercially viable, NetPlayTV operates with a dual service provider.

Technology riskAs a leading online business, the Group’s technology systems are critical to its operation. The Group is reliant on the performance of these systems to generate revenue.

Cutting-edge technologies and procedures are implemented throughout the Group’s IT operations which are designed to protect its networks from malicious attacks and other such risks. These measures include traffic filtering, anti-DDoS (“Distributed Denial of Service”) devices, anti-virus protection from leading vendors and other such means.

Physical and logical network segmentation is used to isolate and protect the Group’s networks and restrict malicious activities. In order to ensure systems are protected properly and effectively, external security scans and assessments are carried out in a timely manner.

The Group has a high-end storage solution to ensure storage availability and performance. All critical data is replicated to another storage device for disaster recovery purposes and all data is stored off-site on a daily basis. In order to minimise dependencies on telecommunication service providers, the Group invests in network infrastructure redundancies whilst regularly reviewing its service providers.

The Group takes information technology risks seriously and keeps its policies under review in order to mitigate these risks.

TAXATION RISK

UK Point of Consumption (POC) taxThe UK Government has confirmed its intention to change the licensing regime on remote gambling to a ‘point of consumption’ basis on remote gaming operators supplying UK customers. The related regulatory and tax legislation is expected to receive Royal Assent in the coming months, with the new tax effective from December 2014.

The Group expects to be able to mitigate a portion of this tax by contractual offsets, broadcast savings and increased market share. More details are available on page 7 of this annual report.

VAT & Corporation TaxAll gaming activities are based in Alderney, where the Group currently benefits from a zero corporate tax rate and is outside the scope of UK VAT. If there was a change in the rate of corporate tax or VAT in Alderney or in UK legislation such that the Alderney subsidiary had a place of establishment in the UK for VAT purposes this would have an adverse effect on the overall tax rate of the Group.

The Group aims to ensure that each legal entity within the Group is a tax resident of the jurisdiction in which it is incorporated and has no taxable presence in any other jurisdiction. The Group works closely with its tax advisers to make sure that that tax position of the Group is optimal.

Principal Risks and Uncertainties continued

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EXTERNAL RISK

CompetitionNetPlayTV operates in competitive market places against both larger well established brands and new entrants to the online gaming market.

One of NetPlay’s key competitive advantages is its tightly controlled cost base. If NetPlayTV lost sight of this or relaxed its stance over cost control this could significantly reduce any competitive advantage and impact profitability.

Regular monitoring of competitor and consolidation activity.

NetPlayTV seeks to have a rapid response to any such activity that may impact NetPlay’s ability to grow the business.

Strong cost control across the Company

Laws, regulations and licensingDuring the year, the Group’s gambling activities were operated under a licence under the Alderney Gambling Control Commission. The regime under which Alderney permits remote gaming operations to be operated within its jurisdiction may be altered or restricted through legislation in Alderney which renders the Group’s operating base unusable or uneconomic. In addition, territories where the Group wishes to market its Alderney-based gambling services may impose restrictions upon remote gambling services which would restrict the Group’s ability to market to potential customers in that territory or to service existing customers by, for example, restricting financial transactions.

Where such restrictions exist, or come into existence in the future and/or in each case are actively enforced, the Group would seek to obtain gambling and gaming licences local to these territories.

Restrictions on promotion or the operation of remote gambling and gaming services in any particular location might also diminish or inhibit the Group’s ability to secure distribution in such territories.

The 2013 Strategic Report has been approved by the Board of Directors.

On behalf of the Board

Charles Butler Akshay Kumar Director Director7 April 2014 7 April 2014

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GovernanceNetPlayTV plc

Board of Directors

Charles Butler ACA, 41Group Chief Executive

Clive Jones CBE, 65Non-Executive Chairman

Akshay Kumar ACA ACIS, 35Group Finance Director

Andrew Lapping, 51Non-Executive Director

Tim Mickley ACMA, 44Non-Executive Director

Graham Stevens, 55Non-Executive Director

Joined January 2010 June 2009 November 2013 February 2007 November 2010 August 2003

Current Roles

Group Chief Executive of NetPlayTV plc. Non-Executive Chairman of NetPlayTV plc, Energetic Communications, the New York marketing and events company. Clive has recently taken the role of Chairman of Procam TV, the UK’s biggest broadcasting location facilities company and is also the deputy Chairman of the ITV Pension Fund.

Group Finance Director and Company Secretary of NetPlay TV plc.

Non-Executive Director of NetPlayTV plc. Managing director of The Hamilton Portfolio. Non-executive director of listed companies Maven Growth Opportunities, 4 VCT and Software Radio Technology plc.

Non-Executive Director of NetPlayTV plc. Non-Executive Director of NetPlayTV plc and finance director of Plexus Holdings plc.

Past Roles

Consultant to various land based and online gaming groups in Europe and South America. Before this he was finance director and chief executive of Bowman International, an online sportsbetting, casino and poker operator (which was sold to the Bet365 Group in 2006). Charles qualified as a chartered accountant with KPMG.

Chairman of GMTV and the chief executive of ITV News and Regions until 2007. He has also held positions as managing director of the ITV Network, CEO of Carlton Television, managing director of Central Television, non-exec director of the S4C board and managing director of London News Network and was the project leader overseeing the digitisation of the ITV and Channel Four newsrooms for ITN.

Prior to his appointment as a Director of NetPlay TV plc, Akshay served as Group Financial Controller of the Company since January 2011. Prior to this he was Financial Controller at Sporting Index, the sports spreadbetting specialist. Akshay qualified as a chartered accountant with PwC.

Andrew established The Hamilton Portfolio with John Boyle (a well-known Scottish entrepreneur) in 1999. Prior to establishing The Hamilton Portfolio, Andrew listed the Monstermob Group and Legend Communications as well as spending 12 years with PwC in corporate finance and tax.

Qualified as an accountant with Schroders and worked in city institutions for a number of years. He subsequently spent ten years in corporate finance roles, most recently as a managing director with Collins Stewart.

Until 2010, Graham was non-executive director and chairman of the Audit and Remuneration Committee of NRX Global Inc., the only commercial platform for building, standardising and sustaining maintenance master data for asset intensive companies around the world, and which has subsequently been acquired by HubHead Corp., the Enterprise Asset Hub Company. He has broad experience within both public and private companies, including Fii Group plc, Sketchley Group plc, BSM Group Limited and J Sainsbury plc.

Brings to the Board

Over thirteen years’ experience in the gaming sector, and the skills and ability to manage the Company’s future growth strategy.

Over thirty years’ experience in television industry.

Over seven years’ experience in the betting and gaming sector with overall responsibility for the Group’s accounting, financial planning and budgeting in accordance with the Group’s strategy.

Andrew is a member of The Chartered Institute of Taxation and as managing director of The Hamilton Portfolio is the driving force behind a number of that company’s investment projects.

Tim led the gaming team at Collins Stewart and advised on a number of significant transactions in this sector.

Experience in financial, corporate, and operational management as both director and investor, and acted in the capacity of corporate finance adviser for a number of fundraisings and business acquisitions disposals, and restructurings.

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Charles Butler ACA, 41Group Chief Executive

Clive Jones CBE, 65Non-Executive Chairman

Akshay Kumar ACA ACIS, 35Group Finance Director

Andrew Lapping, 51Non-Executive Director

Tim Mickley ACMA, 44Non-Executive Director

Graham Stevens, 55Non-Executive Director

Joined January 2010 June 2009 November 2013 February 2007 November 2010 August 2003

Current Roles

Group Chief Executive of NetPlayTV plc. Non-Executive Chairman of NetPlayTV plc, Energetic Communications, the New York marketing and events company. Clive has recently taken the role of Chairman of Procam TV, the UK’s biggest broadcasting location facilities company and is also the deputy Chairman of the ITV Pension Fund.

Group Finance Director and Company Secretary of NetPlay TV plc.

Non-Executive Director of NetPlayTV plc. Managing director of The Hamilton Portfolio. Non-executive director of listed companies Maven Growth Opportunities, 4 VCT and Software Radio Technology plc.

Non-Executive Director of NetPlayTV plc. Non-Executive Director of NetPlayTV plc and finance director of Plexus Holdings plc.

Past Roles

Consultant to various land based and online gaming groups in Europe and South America. Before this he was finance director and chief executive of Bowman International, an online sportsbetting, casino and poker operator (which was sold to the Bet365 Group in 2006). Charles qualified as a chartered accountant with KPMG.

Chairman of GMTV and the chief executive of ITV News and Regions until 2007. He has also held positions as managing director of the ITV Network, CEO of Carlton Television, managing director of Central Television, non-exec director of the S4C board and managing director of London News Network and was the project leader overseeing the digitisation of the ITV and Channel Four newsrooms for ITN.

Prior to his appointment as a Director of NetPlay TV plc, Akshay served as Group Financial Controller of the Company since January 2011. Prior to this he was Financial Controller at Sporting Index, the sports spreadbetting specialist. Akshay qualified as a chartered accountant with PwC.

Andrew established The Hamilton Portfolio with John Boyle (a well-known Scottish entrepreneur) in 1999. Prior to establishing The Hamilton Portfolio, Andrew listed the Monstermob Group and Legend Communications as well as spending 12 years with PwC in corporate finance and tax.

Qualified as an accountant with Schroders and worked in city institutions for a number of years. He subsequently spent ten years in corporate finance roles, most recently as a managing director with Collins Stewart.

Until 2010, Graham was non-executive director and chairman of the Audit and Remuneration Committee of NRX Global Inc., the only commercial platform for building, standardising and sustaining maintenance master data for asset intensive companies around the world, and which has subsequently been acquired by HubHead Corp., the Enterprise Asset Hub Company. He has broad experience within both public and private companies, including Fii Group plc, Sketchley Group plc, BSM Group Limited and J Sainsbury plc.

Brings to the Board

Over thirteen years’ experience in the gaming sector, and the skills and ability to manage the Company’s future growth strategy.

Over thirty years’ experience in television industry.

Over seven years’ experience in the betting and gaming sector with overall responsibility for the Group’s accounting, financial planning and budgeting in accordance with the Group’s strategy.

Andrew is a member of The Chartered Institute of Taxation and as managing director of The Hamilton Portfolio is the driving force behind a number of that company’s investment projects.

Tim led the gaming team at Collins Stewart and advised on a number of significant transactions in this sector.

Experience in financial, corporate, and operational management as both director and investor, and acted in the capacity of corporate finance adviser for a number of fundraisings and business acquisitions disposals, and restructurings.

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Corporate governance

The following section sets out the key governance policies and practices adopted by the Group. In common with most other companies traded on AIM, NetPlayTV plc is not required to follow the guidelines set out in the UK Corporate Governance Code (“the Code”) and does not claim to do so. The Directors have given consideration to the Code and have chosen to provide certain information on how the Group has adopted various principles of it.

BoardAt the date of this report, the Group Board was made up of two Executive and four Non-Executive Directors. Under the Company’s Articles of Association a Director shall retire from office at the first Annual General Meeting after his or her appointment and one-third, but not exceeding one-third, of the Directors are required to retire by rotation each year.

The Board meets regularly throughout the year and all Directors have full and timely access to the information necessary to enable them to discharge their duties. There is a scheduled Board meeting at least every month and additional Board meetings are held as required.

During the year, the Board met seven times and the following attendance occurred:

C Jones CBE 7C A N Butler 7G P Stevens 7A C Lapping 7T S Mickley 6A Kumar* 7

* Of the seven meetings attended during 2013, six were attended in the role of Company Secretary and one as both Company Secretary and Finance Director.

The Board is assisted in the discharge of its duties by the following Board committees:

Audit CommitteeThe Audit Committee, which comprises three Non-Executive Directors: G P Stevens who chairs the Audit Committee; C Jones; and A C Lapping. The Audit Committee is responsible for ensuring that the financial performance of the Group is properly reported on and monitored, and for overseeing the operation of internal financial controls appropriate to the size and operations of the Group. The Audit Committee meets twice a year to review the results, the findings of the auditors, the independence and objectivity of the auditors, and the internal controls. It also reviews the application and appropriateness of the Group’s accounting policies, including any changes to financial reporting requirements brought about by both external and internal requirements and it gives consideration to all major financial announcements made by the Group including its interim and preliminary announcements and annual report and accounts.

The external auditors and other Executive Directors may be invited to attend the meetings.

During the year the Audit Committee met twice. G P Stevens and A C Lapping attended both meetings.

Remuneration CommitteeThe Remuneration Committee (“the Committee”), which comprises three Non-Executive Directors: G P Stevens who chairs the Committee; C Jones; and A C Lapping. The Committee has the principal function of agreeing with the Board the framework and policy for the remuneration of the Group’s executive management and determining, on behalf of the Board, the remuneration packages of the Executive Directors. The Committee also determines the policy on executive appointments.

No member of the Committee has any personal financial interest (other than as a shareholder), conflict of interest arising from cross-directorships or day-to-day involvement in running the business. No Director plays a part in any discussion about his own remuneration.

The Chief Executive Officer may be invited to attend certain discussions of the Committee.

During the year the Remuneration Committee met three times. G P Stevens and A C Lapping attended all meetings.

Remuneration policy and arrangementsThe objective of the remuneration policy is to ensure that the Executive Directors and managers of the Group are provided with appropriate incentives to encourage enhanced performance and are, in a fair and reasonable manner, rewarded for their individual contributions to the success of the Group. Each Director is assessed individually so that their remuneration is directly related to their performance over time and so that a proportion of their remuneration is performance related.

There are five main elements of the remuneration package for Executive Directors:

(i) Basic salary:An Executive Director’s basic salary is determined by the Committee before the start of each year and when an individual changes position or responsibility. In deciding appropriate levels, the Committee seeks to be competitive, but fair, using information obtained from both internal and external sources.

(ii) Performance related bonus:Performance related bonuses are designed to reward contribution and to encourage the achievement of targeted levels of performance over the short term. The maximum cash bonuses are set by the Committee and are subject to stretching targets linked to the Group’s operating performance in the year.

(iii) Long-term incentive arrangements:The Company’s long-term incentive arrangements are intended to encourage Directors and other key employees to focus on long-term, strategic corporate objectives and to further align the interests of management and shareholders. These arrangements consist of an Enterprise Management Incentive Scheme (“EMI”), an Inland Revenue approved share option scheme and an Inland Revenue unapproved share option scheme. Details of these schemes are outlined in notes 6 and 25 to the financial statements.

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(iv) Pension arrangements:The Group does not operate a pension scheme for employees; however it does make contributions to personal pension plans.

(v) Other benefits:Other benefits for Executive Directors include a private health care scheme.

Service contractsC A N Butler has a service agreement, dated 29 January 2010, which is terminable on six months’ notice by either party.

A Kumar has a service agreement, dated 11 November 2013, which is terminable on six months’ notice by either party.

In the event of early termination, the Directors’ contracts provide for compensation up to a maximum of basic salary plus the fair value of benefits to which the Directors are contractually entitled for the unexpired portion of the notice period. The Company seeks to apply the principle of mitigation in the payment of compensation on the termination of the service contract of any Executive Director.

Non-Executive DirectorsAll Non-Executive Directors have specific terms of engagement, the dates of which are set out below. There are no provisions for compensation payable in the event of early termination. The Non-Executive Directors are appointed for an initial period of one year, following which the notice period is three months.

Director Date of engagement letter

C Jones CBE 11 June 2009

G P Stevens 31 July 2003

A C Lapping 1 February 2007

T S Mickley 1 November 2010

The determination of the Non-Executive Directors’ remuneration has been delegated by the Board to the Executive Directors, within the limits set by the Articles of Association. The fees paid to the Non-Executive Directors in the year, shown in note 6 to the financial statements, are inclusive of the additional work performed for the Group in respect of membership of the Board committees. At the 2004 Annual General Meeting, shareholder approval was granted to allow Non-Executive Directors to participate in the Group’s unapproved share option scheme.

Relations with shareholdersThe Group is committed to ongoing communication with its shareholders. At the Annual General Meeting, individual shareholders are afforded the opportunity to question the Board.

Internal controlThe Board has overall responsibility for the system of internal control established by the Group and places considerable importance on maintaining a strong control environment. However, such a system is designed to identify, manage and mitigate rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance against material misstatement or loss.

Key elements of the Group’s system of internal control are as follows:

Financial managementAnnual budgets are prepared for each business division and for the Group. These budgets are reviewed and agreed by the Board and actual performance is measured against these budgets on a regular basis. Monthly management accounts are prepared, reviewed, analysed and presented to the Board. The Group has in place documented authority levels for approving purchase orders, invoices and all bank transactions.

Company managementThe Executive Directors meet regularly to monitor and evolve the Group’s strategic direction, including product offerings and routes to market. In addition, the Chief Executive conducts regular management meetings to ensure that the strategy is cascaded throughout the Group’s operations and is being acted upon accordingly.

Risk analysisThe Group maintains a comprehensive risk register. The Board approves annual updates and appropriate risk mitigating action plans.

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Directors’ report

The Directors present their annual report together with the audited financial statements for the year ended 31 December 2013.

DirectorsThe Directors who served during the year and to the date of this report were:

• C A N Butler • C Jones CBE• A Kumar (appointed 11 November 2013)• A C Lapping• T S Mickley• G P Stevens

Details of Directors’ service contracts are contained within the Corporate Governance report on page 22. Details of their share interests and other details of their remuneration by the Company are contained in the Directors’ remuneration report in note 6 of the financial statements.

Financial instrumentsDetails of the Group’s financial risk management objectives and policies are included in note 22 to the financial statements.

Going concernThe Group’s business model is set out on page 6, Financial and Performance Review on page 26, and current trading and outlook set out in the Chief Executive’s Review on page 15.

The Group’s budget and forecasts, taking account of reasonably possible changes in trading performance, show that the Group should be able to function entirely from its cash generated from operations. The Group is currently funded entirely through shareholders’ funds.

After making enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the annual report and financial statements.

Appointment and replacement of DirectorsDirectors are appointed to, or removed from, the Board according to the provisions contained in Company’s Articles of Association (“Articles”) and the requirements of the Companies Act 2006. A copy of the Articles is available to view on the Company’s website www.netplaytvplc.com.

Directors’ indemnities and insuranceEach of the Directors has been provided with a qualifying third-party indemnity from the Company. The Company maintains Directors’ and officers’ liability insurance.

Annual General MeetingThe AGM will be held at the Company’s registered office: Battersea Studios, 80 Silverthorne Road, London, SW8 3HE on Thursday 29 May 2014 at 14:00.

Directors’ responsibilities in relation to the Company’s auditorThe Directors who held office at the date of approval of this Directors’ Report confirm that, so far as they are each aware, there is no relevant audit information of which the Company’s auditor is unaware; and each Director has taken steps that ought to have been taken as a Director to make themselves aware of any relevant audit information and to establish that the Company’s auditor is aware of that information.

The auditors, BDO LLP, have indicated their willingness to continue in office, and a resolution to reappoint them will be proposed for the Annual General Meeting in accordance with section 489 of the Companies Act 2006.

By order of the Board

C A N ButlerDirector7 April 2014

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Directors’ responsibilities

The Directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the Group and Company financial statements in accordance with International Financial Reporting Standards (“IFRSs”) as adopted by the European Union. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company and of the profit or loss of the Group for that period. The Directors are also required to prepare financial statements in accordance with the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market.

In preparing these financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and accounting estimates that are reasonable and prudent;

• state whether they have been prepared in accordance with IFRSs as adopted by the European Union, subject to any material departures disclosed and explained in the financial statements; and

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the requirements of the Companies Act 2006. They are also responsible for safeguarding

the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Website publicationThe Directors are responsible for ensuring the annual report and the financial statements are made available on a website. Financial statements are published on the Company’s website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company’s website is the responsibility of the Directors. The Directors’ responsibility also extends to the ongoing integrity of the financial statements contained therein.

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NetPlayTV plcGovernance

We have audited the financial statements of NetPlayTV plc for the year ended 31 December 2013 which comprise the consolidated statement of comprehensive income, the consolidated and company statements of financial position, the consolidated and company statement of cash flows, the consolidated and company statement of changes in equity and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (“IFRSs”) as adopted by the European Union and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006.

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditorsAs explained more fully in the statement of directors’ responsibilities, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Financial Reporting Council’s (“FRC’s”) Ethical Standards for Auditors.

Scope of the audit of the financial statementsA description of the scope of an audit of financial statements is provided on the FRC’s website at www.frc.org.uk/auditscopeukprivate.com.

Opinion on financial statementsIn our opinion:

• the financial statements give a true and fair view of the state of the Group’s and the Parent Company’s affairs as at 31 December 2013 and of the Group’s profit for the year then ended;

• the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;

• the Parent Company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and

• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

Opinion on other matters prescribed by the Companies Act 2006In our opinion the information given in the strategic report and directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements.

Matters on which we are required to report by exceptionWe have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

• adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not visited by us; or

• the Parent Company financial statements are not in agreement with the accounting records and returns; or

• certain disclosures of directors’ remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit.

Kieran Storan (senior statutory auditor)For and on behalf of BDO LLP, statutoryauditorLondonUnited Kingdom7 April 2014

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

Independent Auditor’s Report to the members of NetPlayTV plc

27

Financial statementsNetPlayTV plc

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Note

Year ended 31 December

2013 £ 000s


2012 £ 000s

Net revenue 28,539 21,769Marketing expenses (13,281) (9,226)Operating expenses (6,304) (4,938)Administrative expenses (3,741) (3,293)

EBITDA* 5,213 4,312

Depreciation of property, plant and equipment 12 (375) (703)Amortisation of intangible assets 15 (558) (330)Share based payments (174) (178)Finance income 8 57 39

Profit before taxation 4,163 3,140

Income tax (charge)/credit 9 (17) 248

Profit for the year from continuing operations 4,146 3,388Profit for the year from discontinued operations 3 – 211

Profit for the year and total comprehensive income 4,146 3,599

Basic earnings per shareFrom continuing operations (p) 10 1.43 1.20From discontinued operations (p) 10 – 0.07

1.43 1.27

Diluted earnings per shareFrom continuing operations (p) 10 1.39 1.13From discontinued operations (p) 10 – 0.07

1.39 1.20

The notes on pages 34 to 59 form part of these consolidated financial statements. The Company has taken advantage of section 408 of the Companies Act 2006 not to publish its own statement of comprehensive income.

* EBITDA is a non-GAAP, company specific measure and excludes share based payment charges described in note 25. Where not explicitly mentioned, EBITDA refers to EBITDA from continuing operations.

Consolidated statement of comprehensive incomefor the year ended 31 December 2013

28


Consolidated statement of financial positionas at 31 December 2013

Company registration number: 03954744

Note


2013 £ 000s


2012 £ 000s

AssetsNon-current assetsProperty, plant and equipment 12 582 432Goodwill 14 4,171 3,615Other intangible assets 15 4,274 1,699Deferred tax asset 16 231 248Other receivables 18 – 141

Total non-current assets 9,258 6,135

Current assetsTrade and other receivables 18 1,007 898Cash and cash equivalents 22 13,911 12,275

Total current assets 14,918 13,173

Total assets 24,176 19,308

Equity and liabilitiesShare capital 24 2,936 2,862Share premium 24 500 222Merger reserve 1,088 1,088Retained earnings 13,001 9,999

Total equity 17,525 14,171

Current liabilitiesTrade and other payables 19 6,273 5,137Provisions 20 378 –

Total current liabilities 6,651 5,137

Total equity and liabilities 24,176 19,308

The notes on pages 34 to 59 form part of these financial statements.

These financial statements were approved by the Board of Directors and authorised for issue on 7 April 2014 and signed on their behalf by:

C A N Butler A KumarDirector Director

29


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Consolidated statement of cash flowsfor the year ended 31 December 2013

Note


2013 £ 000s


2012 £ 000s

Cash flows from operating activitiesProfit for the year 4,146 3,599Adjustments for:Depreciation of property, plant and equipment 12 375 703Amortisation of intangible assets 15 558 330Disposal of goodwill 14 – 2Share based payments 174 178Profit on disposal of discontinued operation, net of tax 3 – (274)Finance income 8 (57) (39)Income tax charge/(credit) 9 17 (248)Decrease/(increase) in trade and other receivables 448 (84)Increase in trade and other payables 376 148Decrease in provisions 20 (35) –

Cash generated from operations 6,002 4,315

Cash flows from investing activitiesAcquisition of business combination 28 (3,000) –Purchase of property, plant and equipment 12 (475) (158)Purchase of intangible assets 15 (118) (34)Disposal of discontinued operation 3 – 425Interest received 8 57 39

Net cash used in investing activities (3,536) 272

Cash flows from financing activitiesProceeds from issuance of ordinary shares under share options, net of issue costs 24 352 176Dividend paid 21 (1,182) (428)

Net cash from financing activities (830) (252)

Net increase in cash and cash equivalents 1,636 4,335

Cash and cash equivalents at beginning of period 22 12,275 7,940

Cash and cash equivalents at end of period 22 13,911 12,275


30


Consolidated statement of changes in equityfor the year ended 31 December 2013

Share

capital £ 000s

Share premium

£ 000s

Merger reserve £ 000s

Retained earnings

£ 000sTotal

£ 000s

As at 1 January 2012 10,679 22,923 1,088 (23,992) 10,698Profit for the year and total comprehensive income – – – 3,599 3,599Share capital reduction (7,856) (22,838) – 30,694 –Shares issued for employee share options 39 137 – – 176Share based payments charge – – – 126 126Dividend paid (note 21) – – – (428) (428)

As at 31 December 2012 2,862 222 1,088 9,999 14,171

Profit for the year and total comprehensive income – – – 4,146 4,146Shares issued for employee share options 74 278 – – 352Share based payments charge – – – 38 38Dividend paid (note 21) – – – (1,182) (1,182)

As at 31 December 2013 2,936 500 1,088 13,001 17,525


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Company statement of financial positionas at 31 December 2013

Company registration number: 03954744

Note


2013 £ 000s


2012 £ 000s

AssetsNon-current assetsProperty, plant and equipment 13 28 8Investments 17 7,324 5,243Deferred tax asset 16 163 165Other receivables 18 – 1,715

Total non-current assets 7,515 7,131

Current assetsTrade and other receivables 18 468 696Cash and cash equivalents 23 6,183 7,335

Total current assets 6,651 8,031

Total assets 14,166 15,162

Equity and liabilitiesShare capital 24 2,936 2,862Share premium 24 500 222Retained earnings 9,123 10,952

Total equity 12,559 14,036

Current liabilitiesTrade and other payables 19 1,607 1,126

Total current liabilities 1,607 1,126

Total equity and liabilities 14,166 15,162


These financial statements were approved by the Board of Directors and authorised for issue on 7 April 2014 and signed on their behalf by:

C A N Butler A KumarDirector Director

32


Company statement of cash flowsfor the year ended 31 December 2013

Note


2013 £ 000s


2012 £ 000s

Cash flows from operating activities(Loss)/profit for the year 11 (685) 92Adjustments for:Depreciation of property, plant and equipment 13 8 30Impairment of investments 17 446 –Disposal of investment in subsidiary 17 – 2Share based payments 11 11Finance income (118) (153)Income tax charge/(credit) 2 (165)(Increase)/decrease in trade and other receivables (172) 3,797Increase/(decrease) in trade and other payables 481 (323)

Cash generated from operations (27) 3,291

Cash flows from investing activitiesPurchase of property, plant and equipment 13 (28) (7)Purchase of shares in subsidiary 17 (2,500) –Interest received 118 153

Net cash from in investing activities (2,410) 146

Cash flows from financing activitiesProceeds from issuance of ordinary shares under share options, net of issue costs 24 352 176Repayment of borrowings 2,115 –Dividend paid 21 (1,182) (428)

Net cash from financing activities 1,285 (252)

Net (decrease)/increase in cash and cash equivalents (1,152) 3,185

Cash and cash equivalents at beginning of period 23 7,335 4,150

Cash and cash equivalents at end of period 23 6,183 7,335


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Company statement of changes in equityfor the year ended 31 December 2013

Share

capital £ 000s

Share premium

£ 000s

Retained earnings

£ 000sTotal

£ 000s

As at 1 January 2012 10,679 22,923 (19,531) 14,071Profit and total comprehensive income for the year – – 92 92Share capital reorganisation (7,856) (22,838) 30,694 –Shares issued for employee share options 39 137 – 176Share based payment charges:Charge for the year – – 11 11Additions to investments – – 114 114Dividend paid (note 21) – – (428) (428)

As at 31 December 2012 2,862 222 10,952 14,036

Loss and total comprehensive income for the year – – (685) (685)Shares issued for employee share options 74 278 – 352Share based payment charges:Charge for the year – – 11 11Additions to investments – – 27 27Dividend paid (note 21) – – (1,182) (1,182)

As at 31 December 2013 2,936 500 9,123 12,599

34


Notes to the financial statements

All intra-group transactions are eliminated on consolidation.

Revenue RecognitionNet revenue comprises gross income less customer incentives expensed in the period. Gross income comprises gross gaming win and ancillary income.

Gross gaming win represents gross bets and wagers, being amounts staked, less player winnings in the financial year. Gross gaming win is recognised when the bet or wager is settled.

Customer incentives expensed in the period represent the actual cost of customer incentives redeemed as well as an adjustment for the movement in the fair value of unredeemed customer incentives.

Ancillary income is predominantly in relation to broadcast airtime and is not directly related to the operation of the interactive gaming services under its Alderney gaming licence. This income is recognised when the amount of revenue can be reliably measured and when it is probable that future economic benefits will flow to the entity.

TaxationIncome tax expense represents the sum of the tax currently payable and deferred tax.

Current tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantively enacted at the date of the statement of financial position.

Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the consolidated statement of financial position differs from its tax base, except for differences arising on:

• the initial recognition of goodwill;• the initial recognition of an asset or liability in a transaction which is

not a business combination and at the time of the transaction affects neither accounting or taxable profit; and

• investment in subsidiaries and jointly controlled entities where the Group is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future.

Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the difference can be utilised.

The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the reporting date and are expected to apply when the deferred tax liabilities/(assets) are settled/(recovered).

Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and

1. Accounting policiesGeneral informationNetPlayTV plc (“the Company”) and its subsidiaries (together, “the Group”) operate a number of interactive gaming services under an Alderney gaming licence, including Supercasino.com, Jackpot247.com and Vernons.com. The Group is focused on the delivery of a converged interactive gaming experience allowing its customers to interact with its games on a variety of platforms: TV, internet, mobile and tablet from a common integrated wallet.

The Company is admitted to trading on the AIM market of the London Stock Exchange. It is incorporated and domiciled in the UK. The address of its registered office is Battersea Studios, 80 Silverthorne Road, London, SW8 3HE.

Basis of preparationThe principal accounting policies applied in the preparation of both the company and the consolidated financial statements are set out below. These policies have been consistently applied to the years presented, unless otherwise stated.

These financial statements have been prepared in accordance with International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively IFRSs) issued by the International Accounting Standards Board (“IASB”) as adopted by the European Union (“adopted IFRSs”).

The preparation of financial statements in compliance with adopted IFRS requires the use of certain critical accounting estimates. It also requires Group management to exercise judgement in applying the Group’s accounting policies. The areas where significant judgements and estimates have been made in preparing the financial statements and their effect are disclosed below.

Basis of consolidationThe consolidated financial statements include the financial statements of the Company and its subsidiary undertakings made up to 31 December each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.

On acquisition, the assets, liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill. Any deficiency of the cost of acquisition below the fair values of the identifiable net assets acquired is credited to profit or loss in the period of acquisition.

The profits or losses of subsidiaries are included in the consolidated statement of comprehensive income. The results of those subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition or up to the effective date of disposal, as appropriate.

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consolidated statement of comprehensive income as part of the profit or loss on disposal.

Intangible assetsGoodwillGoodwill represents the excess of the cost of a business combination over, in the case of business combinations completed prior to 1 January 2010, the Group’s interest in the fair value of identifiable assets, liabilities and contingent liabilities acquired and, in the case of business combinations completed on or after 1 January 2010, the total acquisition date fair value of the identifiable assets, liabilities and contingent liabilities acquired.

For business combinations completed prior to 1 January 2010, cost comprises the fair value of assets given, liabilities assumed and equity instruments issued, plus any direct costs of acquisition. Changes in the estimated value of contingent consideration arising on business combinations completed by this date are treated as an adjustment to cost and, in consequence, result in a change in the carrying value of goodwill.

For business combinations completed on or after 1 January 2010, cost comprised the fair value of assets given, liabilities assumed and equity instruments issued. Contingent consideration is included in cost at its acquisition date fair value and, in the case of contingent consideration classified as a financial liability, re-measured subsequently through profit or loss. For business combinations completed on or after 1 January 2010, direct costs of acquisition are recognised immediately as an expense.

Goodwill is capitalised as an intangible asset with any impairment in carrying value being charged to the consolidated statement of comprehensive income.

Customer databasesExternally acquired customer databases are capitalised at cost and are subject to 50% straight-line amortisation.

Customer databases acquired as part of business combinations are valued by estimating discounted cash flows that will be generated by the assets over their lifetime and are subject to 50% straight-line amortisation.

The carrying value of player databases is reviewed when there is an indication of impairment.

Internally generated player databases are not capitalised.

BrandsBrands acquired as part of business combinations are valued by applying a royalty rate to the estimated discounted future revenues that will be generated and are subject to 10% straight-line amortisation.

the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either:

• the same taxable Group company; or• different Group entities which intend either to settle current tax

assets and liabilities on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are expected to be settled or recovered.

DividendsDividends are recognised when they become legally payable. In the case of interim dividends to equity shareholders, this is when declared by the Directors. In the case of final dividends, this is when approved by the shareholders at the AGM.

Pension costsThe Group makes contributions to defined contribution plans. The Group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due.

Foreign currencyTransactions entered into by Group entities in a currency other than the currency of the primary economic environment in which they operate (their “functional currency”) are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates ruling at the reporting date. Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are recognised immediately in the statement of comprehensive income.

On consolidation, the results of overseas operations are translated into sterling at rates approximating to those ruling when the transactions took place. All assets and liabilities of overseas operations, including goodwill arising on the acquisition of those operations, are translated at the rate ruling at the reporting date. Exchange differences arising on translating the opening net assets at opening rate and the results of overseas operations at actual rate are recognised in other comprehensive income and accumulated in the foreign exchange reserve.

Exchange differences recognised as profit or loss in Group entities’ separate financial statements on the translation of long-term monetary items forming part of the Group’s net investment in the overseas operation concerned are reclassified to other comprehensive income and accumulated in the foreign exchange reserve on consolidation.

On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign exchange reserve relating to that operation up to the date of disposal are transferred to the

1. Accounting policies continued

36


Depreciation is charged so as to write off the cost over their estimated useful lives using the straight-line method of depreciation, as follows:

Computer equipment 33.3% straight lineFixtures & fittings 33.3% straight lineLeasehold improvements Shorter of the unexpired period of the

lease and the estimated useful economic life of the assets

The gain or loss arising on disposal of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is expensed to profit or loss for the period.

Financial instrumentsFinancial instruments are classified and accounted for, according to the substance of the contractual arrangement, as either financial assets, financial liabilities or equity instruments.

Financial assetsFinancial assets held by the Group consist of loans and receivables.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through the provision of services to customers, but also incorporate other types of contractual monetary assets. They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently carried at cost less impairment provisions.

Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the counterparty or default or significant delay in payment) that the Group will be unable to collect all of the amounts due under the terms receivable, the amount of such a provision being the difference between the net carrying amount and the present value of the future expected cash flows associated with the impaired receivable. Trade receivables are reported net of impairment provisions, with impairment losses being recognised within administrative expenses in the consolidated statement of comprehensive income. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.

The Group’s loans and receivables comprise trade and other receivables and cash and cash equivalents in the consolidated statement of financial position. Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less and, for the purpose of the statement of cash flows.

Financial liabilitiesFinancial liabilities held by the Group consist of trade payables and other short-term monetary liabilities.

Websites and other development costsWebsite and other development expenditure relating to the application and infrastructure development of websites is capitalised where the expenditure leads to substantially improved products or processes, the products or processes are technically and commercially feasible and the Group has sufficient resources to complete the development. All other development expenditure relating to planning, content development and other operational activities is charged to the statement of comprehensive income in the period it is incurred. Subsequent expenditure is capitalised only where it clearly increases the economic benefits to be derived from the asset to which it relates.

Website expenses are capitalised at cost and are subject to 50% straight-line amortisation. The carrying value of websites is reviewed when there is an indication of impairment.

Domain namesExternally acquired domain names are capitalised at cost and are subject to 10% straight-line amortisation.

Domain names acquired as part of business combinations are valued by estimating discounted cash flows that will be generated by the assets over their lifetime and are subject to 10% straight-line amortisation.

The carrying value of domain names is reviewed when there is an indication of impairment.

Partner relationshipsPartner relationships entered into as part of a business combination are valued by estimating discounted cash flows that will be generated by the assets over their lifetime and are subject to straight-line amortisation over the life of the relationship. Their carrying value is reviewed when there is an indication of impairment.

Internally generated partner relationships are not capitalised.

Investments (Company accounts)Investments in subsidiary undertakings are stated at the fair value of the consideration paid plus share based payments granted by the Company to employees of the subsidiary incurred to date. Investments that were acquired prior to the Company’s conversion to IFRS are held at cost, where cost is the aggregate of the nominal value of the Company’s shares and the fair value of any other consideration given to acquire the share capital of the subsidiary undertakings. Provision is made where there is an impairment in the value of the investment.

Property, plant and equipmentAll property, plant and equipment is stated in the statement of financial position at historical cost less accumulated depreciation and accumulated impairment losses.


Notes to the financial statements continued

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The preparation of financial statements under IFRS requires the Group to make estimates and judgements that affect the application of policies and reported amounts. Estimates and judgements are continually evaluated and are based on historical experience and other factors including expectations of future events that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.

Included below are the areas that the Directors consider require estimates, judgements and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities

Impairment of goodwill and other intangible assetsGoodwill and other intangible assets are reviewed for impairment and their values are written-down on the basis of the Group’s expectations of future economic benefits expected to be received by the Group.

Any process which attempts to estimate future outcomes is subject to uncertainty. Where it is believed that the estimation uncertainty can give rise to material differences in asset carrying values, this will be stated in the relevant notes to the financial statements.

Deferred tax assetsDeferred tax assets and liabilities, are recognised for temporary differences and for tax loss carry-forwards. The valuation of temporary differences and tax loss carry-forwards, is based on management’s estimates of future taxable profits in different tax jurisdictions against which the temporary differences and loss carry-forwards may be utilised.

At 31 December 2013, the value of deferred tax assets recognised amounted to £231,000 (2012: £248,000). The deferred tax assets relating to loss carry-forwards are reported as non-current assets.

Valuation of goodwill and other intangible assets acquired with business combinationsIdentified intangible assets and goodwill are capitalised at fair value when entering into a business combination. Establishing the fair value of the assets generally requires use of a technique such as discounting expected future cash flows.

Any process which attempts to estimate future outcomes is subject to uncertainty. Where it is believed that the estimation uncertainty can give rise to material differences in asset carrying values, this is stated in the relevant notes to the financial statements (note 14).

Standards and interpretationsNone of the new standards, interpretations and amendments, which are effective for periods beginning after 1 January 2013 are expected to have a material effect on the Group’s future financial statements.

Financial liabilities are initially recognised at fair value net of any transaction costs directly attributable to the issue of the instrument and subsequently at amortised cost.

Equity instrumentsAn equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities.

The Company’s ordinary shares are classified as equity instruments.

ProvisionsProvisions are recognised when the Group has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the amount of the obligation can be made. Provisions for onerous contracts are recognised when the expected benefits to be derived from contracts are less than the unavoidable cost of meeting the obligations under the contracts. Provisions are measured at the present value of the amounts that are expected to be paid to settle the obligations.

Share based paymentsWhere equity settled share options are awarded to employees, the fair value of the options at the date of grant is charged to the consolidated statement of comprehensive income over the vesting period.

Where equity settled share options are awarded to parties other than employees in exchange for services performed, the fair value of the options at the date of grant is charged to the consolidated statement of comprehensive income over the expected lifetime of the services received by the Group.

Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Non-vesting conditions and market vesting conditions are considered when calculating the fair value of the options granted.

The fair value of share options issued without market-based vesting conditions is measured by the application of the Black-Scholes option pricing model by reference to the grant date of the options. The fair value of share options issued with market-based vesting conditions is measured by use of the Monte Carlo method.

Capital managementThe Group is funded entirely though shareholders funds. If financing is required the Board will consider whether debt or equity financing is more appropriate and proceed accordingly.

Critical accounting estimates and judgementsEstimates and judgements are based on historical experience, expectations of future events, and other factors deemed to be relevant in the circumstances.


38


2. Segmental informationThe Board is the Group’s chief operating decision-maker. Management has determined the operating segments based on the information reviewed by the Board for the purposes of allocating resources and assessing performance. The Group has one reportable segment, being the online gaming segment. This division consists of all online products and ancillary income. The brands operated in this division are Supercasino.com, Jackpot247.com and Vernons.com which are aggregated into one reportable segment.

The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies. The Board evaluates performance on the basis of segment EBITDA. This measurement basis excludes head office costs not derived from operations of any segment and are only disclosed in total.

The Group holds some domain names as specified in note 15 in the British Virgin Islands.

2013 £ 000s

2012 £ 000s

Income statement itemsGross gaming win 36,281 26,873Ancillary income 803 459

Gross income 37,084 27,332Customer incentives (8,545) (5,563)

Net revenue 28,539 21,769Marketing expenses (13,281) (9,226)Operating expenses (6,304) (4,938)Administrative expenses – online gaming (2,492) (2,187)

Online Gaming EBITDA 6,462 5,418Administrative expenses – Head Office Costs (1,249) (1,106)

EBITDA 5,213 4,312Depreciation of property, plant and equipment (375) (703)Amortisation of intangible assets (558) (330)Share based payments (174) (178)Finance income 57 39

Profit before tax and discontinued operations 4,163 3,140Discontinued Operations (Note 3) – 211Income Tax (charge)/credit (17) 248

Profit for the year 4,146 3,599

External revenue by location of customers

Non-current assets by location of assets

Geographical information2013

£ 000s2012

£ 000s2013

£ 000s2012

£ 000s

United Kingdom including Channel Islands 28,513 21,769 8,033 4,572British Virgin Islands – – 1,366 1,563Rest of World 26 – – –

28,539 21,769 9,399 6,135


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3. Discontinued operationsThere were no discontinued operations in the financial year ended 31 December 2013.

During the financial year ended 31 December 2012 the Group disposed of its Bingo business segment in two transactions on the 29 February 2012 and 31 March 2012 for cash consideration of £425,000. As a result of this, discontinued operations comprise the “Bingo” business segment as reported in past Annual Reports.

The gain on disposal of discontinued operations was determined as follows:

2012£ 000s

Sale proceeds 425Net assets disposed:Intangible assets (150)Expenses related to sale (1)

Gain on disposal of discontinued operations 274

Analysis of the result of discontinued operations is as follows:

2012 £ 000s

Net revenue 301Operating expenses (361)Depreciation and amortisation (3)Gain from sale of discontinued operations 274

Profit for the year 211

Analysis of the cash flows of discontinued operations is as follows:

2012 £ 000s

Profit for the year 211Adjustments for:Depreciation and amortisation 3Profit on disposal of discontinued operation, net of tax (274)Decrease in trade and other receivables 88(Decrease)/increase in trade and other payables (7)

Net cash from operating activities 21

Disposal of discontinued operation 425

Net cash from investing activities 425

Net cash flows from discontinued operations 446

40


4. Profit before taxation

2013 £ 000s

2012 £ 000s

Profit before taxation is stated after charging/(crediting):Depreciation of property, plant and equipment 373 703Amortisation of intangible assets 558 330Equity settled share based payments 174 178Research and development 153 196Operating lease rentals: land and buildings 430 447Net (gains)/losses on foreign currency translation (1) (4)

5. Auditors’ remunerationDuring the year the Group obtained the following services from the Company’s auditor:

2013 £ 000s

2012 £ 000s

Fees payable to the Company’s auditor for the audit of parent company and consolidated financial statements 75 68Fees payable to the Company’s auditors for other services:– Tax advisory services 5 46– Tax compliance service 18 22– Other services 2 –

100 136

6. Directors’ remunerationDirectors’ remuneration for the year ended 31 December 2013:

Salary and fees 2013

£ 000s

Contributions to personal

pension plans 2013

£ 000s

Performance related bonus

2013 £ 000s

Total emoluments

2013 £ 000s

Total emoluments

2012 £ 000s

ExecutiveC A N Butler 125 21 80 226 215A Kumar* 10 4 3 17 –Non-ExecutiveC Jones CBE 45 – – 45 43A C Lapping 25 – – 25 23T S Mickley 25 – 10 35 23G P Stevens 30 – – 30 28

260 25 93 378 332

* A Kumar’s remuneration is from 11 November 2013, being the date he was appointed as a Director of the Company.

During the year retirement benefits were accruing to two Directors (2012: one Director) in respect of money purchase (defined contribution) pension schemes.

There were no other long-term benefits payable to Directors. The aggregate share based payments charge in relation key management personnel compensation is £5,000 (2012: £7,000). The aggregate social security payments in relation to key management personnel compensation is £45,000 (2012: £20,000).


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Directors’ interests in long-term incentive plansThe Directors’ interests in share options, over ordinary shares in the Company, were as follows:

Options over ordinary shares of 1p each

Share options at beginning

of year Number

Exercised during

the year Number

Lapsed during

the year Number

Surrendered during

the year Number

Share options at end of year

Number

Exercise price

PenceExercise

period

C A N Butler 3,662,077 (1,337,922) – – 2,324,155 4.28

18/11/2011 – 17/11/2020

C Jones CBE 200,000 – – – 200,000 4.28A C Lapping 166,666 – – – 166,666 4.28G P Stevens 166,666 – – – 166,666 4.28

C A N Butler 3,662,077 – – – 3,662,077 4.28

18/10/2011 – 17/11/2020


C A N Butler 4,662,078 (4,662,078) – – – 4.28

25/09/2012 – 17/11/2020


A Kumar* 166,667 – – – 166,667 11.87508/02/2014 – 07/02/2023

A Kumar* 333,333 – – – 333,333 11.87508/02/2015 – 07/02/2023

A Kumar* 500,000 – – – 500,000 11.87508/02/2016 – 07/02/2023

14,586,232 (6,000,000) – – 8,586,232

* A Kumar’s interest in share options is shown from 11 November 2013, being the date he was appointed as a Director of the Company.

C A N Butler made a £778,000 (2012: £77,000) gain on the exercise of share options.

The options were granted in accordance with the terms and conditions laid out in the Company Share Option Scheme rules.

The market price of the NetPlayTV plc ordinary shares at 31 December 2013 was 20.25 pence (31 December 2012: 11.5 pence) and the range during the financial year was from 11.5 pence to 21.88 pence (2012: 8.5 pence to 12.375 pence).

6. Directors’ remuneration continued

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7. Staff numbers and costThe average number of persons, including Executive Directors, during the year was:

2013 Number

2012 Number

Operational 45 42Customer Care 14 11Marketing 15 11Management and Administrative 16 14

90 78

The aggregate payroll costs for these persons is as follows:

2013 £ 000s

2012 £ 000s

Wages and salaries 2,817 2,448Social security costs 264 225Pension contributions 60 61

3,141 2,734

The Group makes contributions to defined contribution plans. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due. The assets of the individual schemes are held separately from those of the Group in independently administered funds. The pension cost charge for the year was £60,000 (2012: £61,000). Of this amount, £6,000 (2012: £3,000) is included within other payables at 31 December 2013.

Key management personnel are defined for the purpose of disclosure under IAS 24: Related Party Disclosures as the members of the Board. Details of their remuneration can be found in note 6.

8. Finance income

2013 £ 000s

2012 £ 000s

Bank interest 57 39

9. Income tax

2013 £ 000s

2012 £ 000s

Current taxAdjustment in respect of prior years – –

Total current tax – –

Deferred tax (note 16) 17 (248)

Tax charge/(credit) from continuing operations (17) (248)

Tax charge from discontinued operations – –

Total tax charge/(credit) 17 (248)


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Factors affecting the tax expense for the yearThe tax assessed in the year differs from the standard rate of corporation tax in the UK of 23.3% (2012: 24.5%). The differences are explained below:

2013 £ 000s

2012 £ 000s

Profit/for the year 4,146 3,599Tax charge/(credit) (including discontinued operations) 17 (248)

Profit before tax 4,163 3,351

Tax at the UK corporation tax rate of 23.3% (2012: 24.5%) 970 821Effects of:Expenses not deductible for tax purposes 106 145Share options exercised (213) –Recognition of deferred tax asset – (248)Brought forward trading losses utilised in the year (846) (966)Adjustment in respect of prior years – –

Tax charge/(credit) for the year 17 (248)

10. Earnings per share


2013 £ 000s


2012 £ 000s

Profit attributable to shareholdersProfit after taxation from continuing operations 4,146 3,388Profit after taxation from discontinued operations – 211

Total profit attributable to shareholders 4,146 3,599

Number of shares

Number of shares

Weighted average numbers of ordinary shares in issue 289,934,524 283,633,658Dilutive effect of shares under option 7,367,502 17,131,858

Weighted average numbers of dilutive ordinary shares 297,302,026 300,765,516

Pence per share

Pence per share

Earnings per share (EPS)From continuing operations 1.43 1.20From discontinued operations 0.00 0.07

1.43 1.27

Pence per share

Pence per share

Diluted earnings per shareFrom continuing operations 1.39 1.13From discontinued operations 0.00 0.07

1.39 1.20

9. Income tax continued

44


Adjusted earnings per shareAn adjusted earnings per share, based on the profit before taxation from continuing operations and before the amortisation of specifically identified intangible assets arising on acquisitions and the share based payments, has been presented below in order to highlight the performance of the Group.


2013 £ 000s


2012 £ 000s

Profit before taxation 4,163 3,140Amortisation of specifically identified intangibles 537 287Share based payments 174 178

Adjusted profit before taxation 4,874 3,605

Pence per share

Pence per share

Adjusted earnings per shareBasic 1.68 1.27Diluted 1.64 1.20

EBITDA per shareThe Directors also believe that EBITDA per share (from continuing operations) reflects the underlying performance of the business and assists in providing a clearer view of the performance of the Group. It is also a performance measure used internally to manage the operations of the business.


2013 £ 000s


2012 £ 000s

EBITDA from continuing operations 5,213 4,312

Pence per share

Pence per share

EBITDA per shareBasic 1.80 1.52Diluted 1.75 1.43

11. Result for the yearAs permitted by section 408 of the Companies Act 2006, the Parent Company’s income statement has not been included in these financial statements. The Parent Company’s loss after tax for the year was £685,000 (2012: profit after tax £92,000).

10. Earnings per share continued


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12. Property, plant and equipment – Group

Leasehold improvements

£ 000s

Computer equipment

£ 000s

Fixtures & fittings £ 000s

Total £ 000s

CostAs at 1 January 2012 465 2,562 170 3,197Additions – 158 – 158Disposals – (45) – (45)

As at 31 December 2012 465 2,675 170 3,310

Additions – 431 44 475Additions acquired through business combination (note 28) – 50 – 50

As at 31 December 2013 465 3,156 214 3,835

DepreciationAs at 1 January 2012 366 1,727 127 2,220Charge in the year 39 631 33 703Disposals – (45) – (45)

As at 31 December 2012 405 2,313 160 2,878

Charge in the year 33 327 15 375

As at 31 December 2013 438 2,640 175 3,253

Net book valueAs at 31 December 2013 27 516 39 582

As at 31 December 2012 60 362 10 432

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13. Property, plant and equipment – Company

Leasehold improvements

£ 000s

Computer equipment

£ 000s

Fixtures & fittings £ 000s

Total £ 000s

CostAs at 1 January 2012 299 164 67 530Additions – 7 – 7Disposals – (2) – (2)

As at 31 December 2012 299 169 67 535

Additions – 28 – 28Disposals – – – –

As at 31 December 2013 299 197 67 563

DepreciationAs at 1 January 2012 293 143 63 499Charge in the year 6 20 4 30Disposals – (2) – (2)

As at 31 December 2012 299 161 67 527

Charge in the year – 8 – 8Disposals – – – –

As at 31 December 2013 299 169 67 535

Net book valueAs at 31 December 2013 – 28 – 28

As at 31 December 2012 – 8 – 8

14. Goodwill

£ 000s

CostAs at 1 January 2012 3,617Disposal (2)

As at 31 December 2012 3,615

Additions acquired through business combination (note 28) 556


Net book valueAs at 31 December 2013 4,171


£2,565,000 of goodwill, relates to the SuperCasino cash generating unit, which arose on the acquisition of NetPlayTV Services Limited and NetPlayTV Broadcasting Limited in December 2006. £1,050,000 of goodwill, relating to the Jackpot247 (formerly known as Challenge Jackpot) cash generating unit, arose on the business combination due to the acquisition of certain assets from Two Way Gaming Limited and the simultaneously entering into production and gaming contract with Virgin Media Television to operate the Jackpot247 Service in May 2009. £556,000 of goodwill arose on the business combination due to the acquisition Vernons.com business acquired from Sportech (Alderney)


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Limited in October 2013, as described in note 28. The recoverable amount of the SuperCasino, Jackpot247 and Vernons.com cash generating units, to which this goodwill has been allocated, has been determined using value in use calculations.

The calculation of value in use is based on several assumptions which feed into a forecast model based on past player behaviour. The key assumptions of the forecast were as follows:

• number of new player depositing registrations;• rate of retention of existing players;• spending patterns of players;• cost per acquisition (CPA) from different acquisition sources;• the growth rate applied to cash flows arising after the end of approved budgets; and• the discount rate applied to cash flows.

The above assumptions are based on past experience, as considered appropriate for any external influences. For example a planned increase of marketing activity or TV airtime would be expected to increase player registrations.

Management forecasts cover a 12-month period and beyond that no growth rate is applied to cash flows. A discount rate of 13.7% has been used over five years.

The Directors do not believe that any reasonably possible change in key assumptions would lead to an impairment of the carrying amount of the SuperCasino, Jackpot247 or Vernons.com cash generating unit.

£2,000 of goodwill arising on the consolidation of NetPlay IP Limited was disposed of in the year ended 31 December 2012 as this company was dissolved.

14. Goodwill continued

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15. Intangible assets

Customer databases

£ 000sBrand

£ 000sDomain names

£ 000s

Websites and other

development £ 000s

Partner relationships

Total £ 000s

CostAs at 1 January 2012 3,488 – 5,601 162 997 10,248Additions 4 – 13 17 – 34Disposals – – (225) – – (225)

As at 31 December 2012 3,492 – 5,389 179 997 10,057

Additions 4 – 12 102 – 118Additions acquired through business combination

(note 28) 2,555 460 – – – 3,015Disposals – – – – – –

As at 31 December 2013 6,051 460 5,401 281 997 13,190

AmortisationAs at 1 January 2012 3,294 – 3,683 126 997 8,100Amortisation charge– Continuing operations 191 – 103 36 – 330– Discontinuing operations (note 3) – – 3 – – 3Disposals – – (75) – – (75)

As at 31 December 2012 3,485 – 3,714 162 997 8,358

Amortisation charge 323 12 204 19 – 558Disposals – – – – – –

As at 31 December 2013 3,808 12 3,918 181 997 8,916

Net book valueAs at 31 December 2013 2,243 448 1,483 100 – 4,274

As at 31 December 2012 7 – 1,675 17 – 1,699

The Group holds several highly desirable domain names which were acquired as part of the Bingos transaction in 2008, some of which being .de, .fr and .it domains, are particularly attractive for use in the German, French and Italian markets respectively. These domain names are held by NetPlayTV Marketing BVI Limited, a company resident in the British Virgin Islands. During the year, the Directors of the Group have considered any indications of impairment and have come to the conclusion that there are none.

The useful economic life of a domain name will be affected by the demand for the game or product to which it relates (e.g. the relative demand of bingo compared, for example, to poker). In recent years, the directors have noted that, whilst customers’ interest in online gaming products in general remains robust, their interest in specific games is becoming more transitory and susceptible to prevailing trends. In consequence, the directors have revised the useful economic life of the Group’s domain names from 20 to 10 years. This will have the effect of increasing the annual amortisation charge by £98,000.

Domain names with a cost of £225,000 and amortisation of £75,000 and therefore a net book value of £150,000 were disposed of during the year ended December 2012 as part of the discontinued operations disclosed in note 3.


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16. Deferred tax

Group Tax losses

£ 000s

Company Tax losses

£ 000s

Deferred tax asset as at 1 January 2012 – –Credits to the income statement 248 165

Deferred tax asset as at 31 December 2012 248 165

Charge to the income statement (17) (2)

Deferred tax asset as at 31 December 2013 231 163

Deferred income tax assets are recognised for tax loss carry-forwards to the extent that the realisation of the related tax benefit through future taxable profits is probable. At the year end the Group had unused tax losses of £5,930,232 (2012: £6,745,032) available for offset against future taxable profits from the Group and an unrecognised further deferred tax asset of £1,045,000 (2012: £1,139,000).

17. Non-current asset investments

Company


2013 £ 000s


2012 £ 000s

Investment in subsidiary undertakingsAs at 1 January 5,243 5,131Additions 2,527 114Impairment (446) –Disposal – (2)

As at 31 December 7,324 5,243

During the year the Company increased its investment in subsidiary undertakings by subscribing to additional share capital in NetPlayTV Group Limited for £2,500,000 and increasing its capital contribution due to Group share based payment arrangements between the parent and its subsidiary by £27,000 (2012: £114,000).

An impairment charge of £446,000 has been realised in the year in relation to NetPlayTV Marketing BVI Limited. The impairment charge has been realised to bring the investment value in line with the fair value of the net assets of the subsidiary.

On 30 April 2013, NetPlayTV (Malta) was formally liquidated. This investment had been fully impaired in prior years.

The Company has investments in the ordinary shares of the following subsidiary undertakings, all of which are included in the consolidation:

Residence Principal activity Shareholding

NetPlayTV Group Limited Alderney TV and online gambling 100%NetPlayTV Broadcasting Limited UK TV broadcasting 100%NetPlayTV Marketing Services Limited UK Marketing services 100%NetPlayTV Services Limited UK TV and online gambling 100%NetPlayTV Marketing BVI Limited BVI Marketing services 100%

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18. Trade and other receivablesIncluded within non-current assets

Included within current assetsGroup

2013 £ 000s

Group 2012

£ 000s

Company 2013

£ 000s

Company 2012

£ 000s

Trade receivables 4 2 106 –Amounts owed from Group undertakings – – 9 543Prepayments and accrued income 565 681 147 149Other receivables 438 215 206 4

1,007 898 468 696

Included with non-current assets

Group 2013

£ 000s

Group 2012

£ 000s

Company 2013

£ 000s

Company 2012

£ 000s

Receivables from subsidiaries – – – 1,574Other receivables – 141 – 141

– 141 – 1,715

The Group and Company do not have any receivables that are past due.

19. Trade and other payables

Group 2013

£ 000s

Group 2012

£ 000s

Company 2013

£ 000s

Company 2012

£ 000s

Trade payables 2,602 1,316 200 198Amounts owed to Group undertakings – – 921 351Other taxes and social security 70 75 17 16Accruals and deferred income 1,435 1,881 393 408Customer funds held 1,746 1,571 – –Other payables 420 294 76 153

6,273 5,137 1,607 1,126

20. Provisions

Onerous contracts

£ 000s

As at 1 January 2013 –Provision arising on acquisition (note 28) 413Provisions utilised in the year (35)

As at 31 December 2013 378

A contract relating to the provision of software infrastructure services was acquired as part of the Vernons.com business combination during the year ended December 2013. The contract, which is for three years, is considered onerous as the level of minimum revenue guarantee did not exceed the maximum projected revenues associated with the sportsbook to which it related. The provision is based on the present value of the element of the minimum revenue guarantee which is considered onerous.


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21. Dividend

2013 £ 000s

2012 £ 000s

Final dividend of 0.225 pence (2012: nil) per share proposed and paid relating to the previous year’s results 654 –Interim paid: 0.18 pence (2012: 0.15 pence) per share paid during the year 528 428

1,182 428

A final dividend in respect of the year ended 31 December 2013 of 0.32 pence per share, totalling approximately £939,000, is to be proposed at the Annual General Meeting on 29 May 2014. These financial statements do not reflect this dividend payable.

22. Financial instruments and risk management – GroupTreasury managementThe Group’s financial instruments comprise cash, along with various items, such as trade receivables and payables.

The main risks arising from the Group’s financial instruments are liquidity risk, credit risk and market risk. The Board reviews and agrees policies for managing these risks and the policies adopted have been applied throughout the year and since the year end.

Liquidity riskThe Group’s policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due. Customer funds are kept in dedicated client accounts, separately from the Group’s operational bank accounts in order to ensure that their liability is met.

The Board receive information of cash balances daily in order to keep the Group’s liquidity under review.

The following table sets out the contractual maturities of financial liabilities:

At 31 December 2013Less than 3 months

£ 000s

3 to 12 months £ 000s

Over 12 months

£ 000s

Trade payables 2,580 22 –Accruals 1,367 68 –Customer funds held 1,746 – –Other payables 407 13 –

6,100 103 –


£ 000s


Over 12 months

£ 000s

Trade payables 1,316 – –Accruals 1,811 70 –Customer funds held 1,571 – –Other payables 258 36 –

4,956 106 –

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Credit riskCredit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Group is mainly exposed to credit risk from cash in transit, though this exposure is relatively small given that the Group’s payment processors generally hold only a few days’ transactions at any given time.

Credit risk also arises where cash and cash equivalents are deposited with banks or financial institutions. It is the Group’s policy to deposit funds only with reputable institutions, and to keep the position under review.

Quantitative disclosures of the credit risk exposure in relation to financial assets are set out below:

Carrying value 2013

£ 000s

Maximum exposure

2013 £ 000s

Carrying value 2012

£ 000s

Maximum exposure

2012 £ 000s

Cash and cash equivalents 13,911 13,911 12,275 12,275Trade and other receivables 1,007 1,007 1,039 1,039

14,918 14,918 13,314 13,314

Market riskForeign currency riskForeign exchange risk arises because the Group has assets and liabilities denominated in both sterling and euros. The Group’s policy, where possible, is to settle liabilities with cash generated from operations denominated in the same currency.

The Directors receive a daily summary of cash balances held in each currency and regularly monitor the foreign currency risk exposure.

Current assets and liabilities denominated in Euros (EUR) and US Dollars (USD), translated into sterling are included within the statement of financial position as follows:

EUR 2013

£ 000s

EUR 2012

£ 000s

USD 2013

£ 000s

USD 2012

£ 000s

Cash and cash equivalents 39 137 – –Trade and other receivables – – – –Trade and other payables (824) (219) (296) –

Net current liabilities (785) (82) (296) –

A strengthening/weakening of 10c of the Euro against sterling at the reporting date would result in a decrease/increase in net assets of £65,000 (2012: increase of £44,000). A strengthening/weakening of 10c of the US Dollar against sterling would result in a decrease/increase of £18,000 (2012: £nil).

Cash flow interest rate riskThe Group’s interest rate risk arises from cash balances it holds. At 31 December 2013, if interest rates on cash deposits had been 10 basis points lower/higher with all other variables held constant, post-tax profit for the year and net assets would have been £13,000 lower/higher (2012: £12,000).

22. Financial instruments and risk management – Group continued


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Financial assets and liabilitiesFinancial assetsGroup cash balances as at 31 December are shown in the table below:

2013 £ 000s

2012 £ 000s

Cash held in client accounts 2,279 1,700Capital reduction trust bank account 137 428Company cash balances 11,495 10,147

Net cash balances 13,911 12,275

The Group has unrestricted access to all remaining cash balances.

23. Financial instruments and risk management – CompanyTreasury managementThe Company’s financial instruments comprise cash, along with various items, such as receivables and payables. The Company’s policy does not permit entering into speculative trading of financial instruments and this policy has been applied throughout the year.

The main risks arising from the Company’s financial instruments are liquidity risk, credit risk and market risk. The Board reviews and agrees policies for managing these risks and the policies adopted have been applied throughout the year and since the year end.

Liquidity riskThe Company’s policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due.

The Board receive information of cash balances daily in order to keep the Company’s liquidity under review.

The following table sets out the contractual maturities of financial liabilities:


£ 000s


Over 12 months

£ 000s

Trade payables 178 22 –Amounts owed to Group undertakings 921 – –Accruals 372 21 –Other payables 63 13 –

1,534 56 –


£ 000s


Over 12 months

£ 000s

Trade payables 198 – –Amounts owed to Group undertakings 351 – –Accruals 348 60 –Other payables 117 36 –

1,014 96 –

22. Financial instruments and risk management – Group continued

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Credit riskCredit risk is the risk of financial loss to the Company if a counterparty to a financial instrument fails to meet its contractual obligations. The Company is mainly exposed to credit risk from loans made to subsidiaries.

Credit risk also arises where cash and cash equivalents are deposited with banks or financial institutions. It is the Company’s policy to deposit funds only with reputable institutions, and to keep the position under review.

Quantitative disclosures of the credit risk exposure in relation to financial assets are set out below:

Carrying value 2013

£ 000s

Maximum exposure

2013 £ 000s

Carrying value 2012

£ 000s

Maximum exposure

2012 £ 000s

Cash and cash equivalents 6,183 6,183 7,335 7,335Trade and other receivables 468 468 2,411 2,411

6,651 6,651 9,746 9,746

Market riskForeign currency riskForeign exchange risk arises because the Company has investments in subsidiaries which have assets and liabilities denominated in euros.

The Company has no direct exposure to foreign currency risk as it has no monetary assets or liabilities denominated in any foreign currencies. The only subsidiary with any foreign exchange risk exposure is NetPlayTV Group Limited. The potential exposure has been detailed in note 22.

Cash flow interest rate riskThe Company’s interest rate risk arises from cash balances it holds. At 31 December 2013, if interest rates on cash deposits had been 10 basis points lower/higher with all other variables held constant, post-tax profit for the year and net assets would have been £7,000 lower/higher (2012: £7,000).

Financial assets and liabilitiesFinancial assetsCompany cash balances as at 31 December are shown in the table below:

2013 £ 000s

2012 £ 000s

Capital reduction trust bank account 137 428Sterling cash balances 6,046 6,907

Net cash balances 6,183 7,335

23. Financial instruments and risk management – Company continued


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24. Share capital & share premium

Ordinary Shares of 1p each

Number

Ordinary shares £ 000s

Share premium

£ 000sTotal

£ 000s

At 1 January 2012 282,309,552 2,823 5,917 8,740Share Capital Reduction (May 2012):– Reduction of Share Premium – – (5,832) (5,832)Employee share option scheme:– Proceeds from shares issued 3,872,296 39 137 176

At 1 January 2013 286,181,848 2,862 222 3,084Employee share option scheme:– Proceeds from shares issued 7,362,364 74 278 352

At 31 December 2013 293,544,212 2,936 500 3,436

Deferred Shares of 4p each

Number

Deferred shares £ 000s

Share premium

£ 000sTotal

£ 000s

At 1 January 2012 196,391,315 7,856 17,006 24,862Share Capital Reduction (May 2012):– Cancellation of Deferred Shares (196,391,315) (7,856) (17,006) (24,862)

At 1 January 2013 and 31 December 2013 – – – –

25. Share based paymentsThe Group has four employee share schemes – the 2000 All Employee Share Ownership Plan (“AESOP”), the 2000 Enterprise Management Incentive Scheme (“EMI”), the 2000 Approved Executive Share Ownership Scheme (“ASOS”) and the 2000 Unapproved Share Ownership Scheme (“USOS”). To date, the Group has granted options under the AESOP and EMI schemes.

AESOPThe AESOP holds shares in trust on behalf of employees. Subject to the satisfaction of any performance condition and the continuous employment of the beneficiary, access to shares occurs three years from the date of grant, unless there is a change in control of the Company when access may occur earlier.

A summary of activity in shares issued through AESOP is shown below:

2013 Number

2012 Number

At the beginning of the year 99,933 99,933Movement in the year – –

At the end of the year 99,933 99,933

The market value of the shares held by the AESOP at 31 December 2013 was £20,236 (2012: £11,492).

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EMIOptions to acquire ordinary shares under the EMI may be granted up to a maximum of £3,000,000 (based on the market value of the shares placed under option at the date of the grant).

The determination of the number of options granted to employees is at the discretion of the Remuneration Committee.

No consideration is payable for the grant of an option and options are not transferable or assignable. Cash consideration is paid to the Company by the employee at the point that the share options are exercised. The price paid for share options by employees is determined at the time of grant, and is normally equal to the mid-market share price on the date that the option is granted.

An option is normally exercisable in stages between the 1st and 10th anniversaries of the date of grant. All options normally lapse if the option holder ceases to be employed by the Group, though at the discretion of the Company and depending upon the circumstances in which the employment has ended, some individuals may be permitted to retain options after they leave employment for six months, or an alternative timescale if agreed by the Remuneration Committee.

Options to subscribe under various schemes for ordinary shares of 1p, including those noted in Directors’ interests in note 6, are shown in the table below:

Date of grantExercise price per share

Pence Exercise period2013

Number2012

Number

01-Sep-03 10.000 02/09/2006–01/09/2013 – 12,00030-Apr-07 23.250 30/04/2010–29/04/2017 30,554 30,55401-Jun-07 30.670 01/06/2010–31/05/2017 32,000 32,00027-Jun-08 16.500 27/06/2009–26/06/2018 28,000 28,00014-Oct-08 22.000 14/10/2009–13/10/2018 10,000 10,00018-Nov-10 4.280 18/11/2011–17/11/2020 2,857,487 4,235,41018-Nov-10 4.280 18/10/2011–17/11/2020 4,195,411 4,195,41118-Nov-10 4.280 26/09/2012–17/11/2020 567,333 5,590,88412-Jan-11 6.250 20/02/2013–11/01/2021 – 200,00001-Feb-11 6.875 27/09/2012–31/01/2021 – 18,00001-Feb-11 6.875 22/02/2013–31/01/2021 – 18,00004-Jan-12 8.500 04/01/2013–03/01/2022 – 143,00004-Jan-12 8.500 21/02/2013–03/01/2022 – 143,00004-Jan-12 8.500 05/03/2013–03/01/2022 – 143,00018-May-12 9.000 18/05/2013–17/05/2022 – 295,89018-May-12 9.000 18/05/2014–17/05/2022 227,890 295,89018-May-12 9.000 18/05/2015–17/05/2022 227,890 295,89008-Feb-13 11.875 08/02/2014–07/02/2023 946,183 – 08-Feb-13 11.875 08/02/2015–07/02/2023 1,892,367 – 08-Feb-13 11.875 08/02/2016–07/02/2023 3,016,580 – 15-Oct-13 16.88 15/10/2014–14/10/2023 161,833 – 15-Oct-13 16.88 15/10/2015–14/10/2023 323,667 – 15-Oct-13 16.88 15/10/2016–14/10/2023 485,500 – 16-Dec-13 19.375 16/12/2014–15/12/2023 160,917 – 16-Dec-13 19.375 16/12/2015–15/12/2023 321,833 – 16-Dec-13 19.375 16/12/2016–15/12/2023 482,750 –

15,968,195 15,686,929

25. Share based payments continued


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The table below gives a reconciliation of the opening balance to the closing balance of these options:

Number

As at 1 January 2012 28,736,913Options issued in the period 1,316,670Options lapsed (10,494,358)Options exercised (3,872,296)

As at 31 December 2012 15,686,929

Options issued in the period 8,141,297Options lapsed (497,667)Options exercised (7,362,364)

Total options at 31 December 2013 15,968,195

The weighted average share price on the date of exercise in 2013 was 17.21 pence (2012: 11.44 pence).

The weighted average issue price in 2012 was 13.36 pence (2012: 8.84 pence). The weighted average fair value of options issued in 2012 was 1.57 pence (2012: 0.89 pence).

In accordance with IFRS 2: Share Based Payments, a charge of £38,000 (2012: £126,000) in respect of the fair value of share options has been included within the share based payment charge. £136,000 (2012: £52,000) of the share based payment charge relates to employer’s Class 1 national insurance contributions on issued share options.

The share option valuation model assumed volatility of 41% (2012: 28%) based on historic volatility, a dividend yield of 2% (2012: 3%), an expected life of one year and a risk free rate of 0.5% (2012: 0.5%). There were 8,141,297 (2012: 1,316,670 ) options granted in the year.

26. Reserves – GroupThe following describes the nature and purpose of each reserve within equity:

Reserve Description and purpose

Share premium Amount of paid-up share capital in excess of nominal value.Merger reserve Share capital in excess of nominal value issued as purchase consideration.Retained earnings All other net gains, losses and transactions with shareholders not recognised elsewhere.

25. Share based payments continued

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27. Financial commitmentsThe Group had future lease payments under non-cancellable operating leases on land and buildings, and other leases expiring as follows:

2013 £ 000s

2012 £ 000s

Land & buildingsWithin one year 324 326After one year and within five years – 319

324 645

2013 £ 000s

2012 £ 000s

Other leasesWithin one year 4,460 4,886After one year and within five years 6,846 8,858

11,306 13,744

The Group had no capital commitments as at 31 December 2013 (2012: £Nil).

28. AcquisitionsOn 31 October 2013 the Group acquired the trade and assets of Vernons.com, the e-gaming division of Sportech plc, from Sportech (Alderney) Limited. The principal reason for the acquisition is to enhance the Group’s scale and product offering. Details of the fair value of the identifiable assets and liabilities acquired, purchase consideration and goodwill are as follows:

Fair Value £ 000s

Intangible assetsCustomer database 2,555Brand 460Property, plant and equipment 50Other receivables 416Other payables (624)Provisions (note 20) (413)

Total Net Assets acquired 2,444

Consideration 3,000Goodwill 556

Acquisition costs of £32,000 arose as a result of the transaction. These costs have been recognised within administrative expenses in the statement of comprehensive income.

Since the date of acquisition, Vernons.com has contributed £902,000 to the Group Net Gaming Revenue. If the acquisition had occurred on 1 January 2013, the Group net gaming revenue would have been £4,412,000. It is impractical to consider the effects on the Group profit as business expense have not been attributed by brand.


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29. Related party transactionsKey management personnel are defined for the purpose of disclosure under IAS 24: Related Party Disclosures as the members of the Board. Details of their remuneration can be found in note 6.

The following related party transactions took place during the period:

NetIDme Limited, a company which A C Lapping has a shareholding, which provides the Group with age verification and ID checks invoiced £49,546 (2012: £43,506). At 31 December 2013 the Group owed £Nil (2012: £Nil) to NetIDme Limited and had a prepayment for credits it can utilise in the future worth £3,185 (2012: £13,640).

The beneficiary of Direct Force Trading Limited also has a significant beneficial interest in Playtech Limited. The Group use the services of Playtech, its subsidiaries and related parties to provide software, technology platform, hosting and age-verification services. During the year a charge of £3,749,746 (2012: £2,738,452) was expensed in respect of these services. At 31 December 2013 the Group owed £838,869 (2012: £206,258) to Playtech Limited.

SafeCharge Limited is a company of which T S Mickley is a director. During the year the Group expensed £582,941 (2012: £436,119) of fees in relation to payment processing services provided by SafeCharge Limited. At 31 December 2013 SafeCharge Limited held pending customer funds of £1,219,092 (2012: £1,232,580) payable to the Group.

The Company conducted many transactions with its subsidiaries during the year which included the recharge of expenses, cash transfers and transactions arising where companies are consolidated for tax computations. The table below summarises the movements in these balances:

Receivables31 December

2013 £ 000s

31 December 2012

£ 000s

Period change £ 000s

NetPlayTV Services Limited 3,418 3,419 (1)NetPlayTV Broadcasting Limited 3,803 3,800 3NetPlayTV Marketing Services Limited 251 250 1NetPlayTV Group Limited 4 2,115 (2,111)NetPlay (Malta) Limited – 302 (302)Provision against recoverability of receivables (7,467) (7,769) 302

9 2,117 (2,108)

Payables31 December

2013 £ 000s

31 December 2012

£ 000s

Period change £ 000s

NetPlayTV Marketing BVI Limited 921 322 599NetPlayTV Broadcasting Limited – 27 (27)NetPlayTV Marketing Services Limited – 2 (2)

921 351 570

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Officers and professional advisers

DirectorsC Jones CBENon-Executive Chairman

C A N ButlerChief Executive Officer

A KumarGroup Finance Director

G P StevensNon-Executive Director

A C LappingNon-Executive Director

T S MickleyNon-Executive Director

Company SecretaryA Kumar

Registered officeBattersea Studios 80 Silverthorne Road London SW8 3HE

AuditorsBDO LLP 55 Baker Street London W1U 7EU

RegistrarsNeville Registrars LtdNeville House 18 Laurel Lane Halesowen West Midlands B63 3DA

BankersBarclays Bank plc Wytham Court 11 West Way Botley Oxford OX2 0YP

Nominated AdvisersN+1 Singer Advisory LLP 1 Bartholomew Lane London EC2N 2AX

Registered Office:NetPlayTV plcBattersea Studios80 Silverthorne RoadLondon SW8 3HE

Tel: +44 (0)20 7819 9100Fax: +44 (0)20 7819 9199

www.netplaytvplc.com

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nnual report and financial statem

ents 2013

per share, subject to approval by the shareholders at the annual general meeting to be held on 29...

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