28. Post balance sheet events

On 14 September 2006, Peter Dicks resigned as Non-Executive Chairman and Director of the Company.

On 29 September 2006 the United States Congress passed the Unlawful Internet Gambling Enforcement Act. The Act makes it a crime for anyone involved in the business of betting and wagering to knowingly accept, from transactions originating in the United States of America, payments, wire transfers or any other bank instrument in connection with unlawful internet gambling. The Act was enacted into law when signed by President Bush on 13 October 2006.

Having considered the legal advice received and the options available, the Board concluded that a disposal of the Group’s US-facing sports betting and casino operations together with the closure of its US-facing poker operations was in the best interest of all its stakeholders.

As a result, on 12 October 2006, Sportingbet sold its US-facing sports betting and casino business to Jazette Enterprises Limited for a cash consideration of US$1 and has discharged excess liabilities amounting to approximately $13.2m. Sportingbet retained the Paradise Poker business, but has ceased taking deposits from US resident customers.

The continuing operations of Sportingbet will consist of the Group’s existing European sports, casino and poker business, the Australian sports business and the non US-facing business of Paradise Poker.

As a result, the carrying value of the Company’s investment and the Group’s assets employed in its US-facing operations have been significantly impaired. Contingent Consideration and goodwill will be reduced from £18.8m to £6.8m due to an anticipated reduction in earnout profits. Shares to be issued and goodwill will be reduced from £24.0m to £5.7m based on a share price of 58.5p as at 13 October 2006. Following the disposal of the US-facing operations, the Board considers that the carrying value of the US-facing business at 13 October 2006 will be written down from £108.4m to approximately £30.0m. The US-facing part of Paradise has been closed and as a result the Board considers that the carrying value of this investment at 13 October 2006 will be written down from approximately £186.0m to approximately £63.0m, representing the Directors’ best estimate of the present value of the expected cash flows arising from the non US-facing operations.

Consequently, for the year ending 31 July 2007, the Board’s best estimate of the goodwill impairment charge to the Group’s profit and loss account amounts to approximately £200.0m and to the Company’s profit and loss account of approximately £160.0m for impairment of investments and intercompany indebtedness.

The impact of the passing of the Act and the subsequent decision to close the US-facing part of Paradise and dispose of the remaining US-facing operations will result in a number of costs (including redundancies and other related costs) which are estimated to amount to £10.0m.

The results of the Group’s US-facing business and the US-facing part of Paradise Poker are shown as discontinued operations in the profit and loss account for the year ended 31 July 2006. No other adjustments are reflected in the accounts.