The Board has discussed the implications of the internet gaming
provisions contained in Title VIII of the Safe Ports Act which passed
Congress in the USA early on the morning of Saturday 30 September.
These provisions state that, from the date the legislation
becomes effective, the receipt of funds by electronic funds transfer and other prescribed methods
in connection with internet gaming that is illegal under U.S. state or
federal law will constitute a federal offence by the relevant operator.
The legislation is
expected to be signed into law by President Bush within the next two
weeks, and will become effective immediately thereafter. In addition the Act requires the Secretary of Treasury, within 270 days , to
issue regulations requiring financial institutions to block
transactions in connection with internet gaming.
In many respects the precise effect of the legislation is
unclear and it is not yet known what the implementing regulations will
say or how financial institutions at whom part of the legislation is directed
will react. However, this legislation indicates Congressional intent
to treat internet gaming, whether sports related or not, as illegal . In addition, it is the first federal measure to address internet gaming explicitly. This represents a significant development in the US legal
status. The Act also addresses certain jurisdictional and other
uncertainties in the previous U.S. legal situation .
In the light of these considerations the Board has
concluded that it is appropriate to suspend participation
by US based customers in activities covered by the legislation. The
Company will implement this suspension immediately upon
the legislation taking effect and the suspension will continue for so long as the legal situation remains the same .The Board will continue to seek
clarification of the overall US legal position to determine whether
and to what extent if any resumption of participation by US customers
is feasible. At present however no assurance can be given that this
will be possible. The Company will continue and develop those aspects
of its US business which are not affected by relevant legislation.
In recent years 888 has pursued a strategy of building
its brand and business in markets outside the US. In the six months to
30 June 2006 revenues from non US players amounted to approximately
48 per cent of the Group's net gaming revenue and in the second
quarter of 2006 approximately 68 per cent of first time depositors (new customers)
were non US. The Board believes the Company is well placed to achieve
further growth outside the US and will continue to focus its
attention on growth in non US markets.
A significant proportion of the Group's cost base is
variable and relates directly to the level of activity. The Company
will review its fixed cost base in the light of the suspension of US
business described above and this may result in charges being taken in
this year's results.
Whilst suspension of US activities will have a
material adverse impact on results for this year and beyond, the
Company has significant cash resources which are more than adequate to continue its operations and further develop its business taking
account of sums required to cover return of deposits to US customers and
the dividend payment due to be made to shareholders on 31 October 2006 .
Notwithstanding the planned suspension of US business
referred to above, the Board is confident that 888 remains a viable,
profitable business and looks forward to pursuing growth opportunities
in its international markets with continued vigour.
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