24. accountinG estimates and JudGements continued
24.6 open Bets
the Directors review the scale and magnitude of open bets frequently, and in particular at the balance sheet date.
Assessments are made on whether to make provisions for the outcome of such open bets. management have assessed
that the fair value adjustment in respect of open bets at year end is not material.
24.7 east pioneer corporation B.V.
on 21 november 2011 the group entered into a B2B arrangement with east pioneer corporation B.V. (“epc”) to provide a
suite of back office services to the company following epc's acquisition of superbahis, a business then operated by
sportingbet pLc (“sBt”).
the terms of the contracts between sBt, epc and the group are complex. until 19 march 2013, neither the group nor epc
provided the platform or licensing, held the customers on their servers, retained the brand nor set and controlled the sports
book odds of the website. in return for the back office services provided, the group was entitled to receive income from
epc equating to a share of the profits of the business. the group does not, however have any interest in the net assets or
equity of epc which is an independently held entity. prior to 19 march 2013, management asserted that the group did not
control any of the operating or financial policies of epc. the group did recognise there are material transactions between
itself and epc and the provision of back office services necessitates an interchange of management personnel and the
provision of essential technical information between epc and the group. Accordingly, such amounts due under the B2B
transaction with epc were therefore included within revenue up to 19 march 2013.
Following the acquisition of sportingbet pLc on 19 march 2013, the group now has the power to govern the financial and
operating policies of the superbahis operations, delivers virtually all of the services required to operate the business and in
turn enjoys substantially all of the risks and rewards arising from the performance of that business. on this basis, from this
date, the group considers it is appropriate to consolidate the results of the superbahis business of epc within these financial
the Directors considered that the guarantee relating to the acquisition by epc as referred to in note 23.2 had a fair value
of €nil due to the uncertainty regarding the regulatory environment in which epc operates and also due to the fact that
much of the cash used to fund such payments resides within payment processor accounts operated by the group.
in considering the impact of the acquisition of sportingbet and its contracts with epc with whom the group had pre-existing
contracts relating to the superbahis business, the group re-evaluated its contract with epc in accordance with iFRs 3. in
so doing it considered the services provided, the risks associated with the provision of those services and the expected
financial reward for their provision and concluded the existing contract remained on terms no more or less favourable to
market conditions than on its outset.
24.8 Betit call/put option
on 14 may 2014, the group acquired a 15% stake in Betit holdings Limited ('BhL') from Betit securities Limited ('BsL').
Where an entity holds, directly or indirectly through subsidiaries, less than 20 per cent of the voting power of an investee, it
is presumed that the entity does not have significant influence and therefore an investment does not qualify as an associate
unless such influence can be clearly demonstrated. Although the group has a Director on the Board of BhL and has influence
through its shareholding over the payment of dividends the Director does not participate in policy making decisions, and
the entity is unlikely to be in a dividend paying position over the lifetime of the investment. the group does not believe there
is evidence to rebut the presumption it does not have significant influence over BhL and therefore the investment is not
considered to be an associate and has been accounted for as an available for sale asset.
the group has a call option to acquire the balance of the outstanding shares. the call option can be exercised no earlier
than 1 July 2017 and no later than 30 september 2017, and would be subject to further mgA clearance and the Aim Rules.
the minimum call option price is €70 million, and the actual price would be determined by the mix of revenues between
regulated and non-regulated markets and certain multiples attaching thereto which at our current multiple levels would lead
to the transaction being accretive for shareholders.
if the group decides not to exercise its call option BsL may require the group to acquire its shares in BhL at a price
determined by the mix of revenues between regulated and non-regulated markets and certain multiples thereof (but absent
any floor on the price). completion of this purchase would be subject to certain conditions including the group's ability to
raise the necessary financing. should the group fail to raise the required financing, BsL may acquire the group's shares in
BhL for nominal consideration.
these options have been valued based on expected future cash flow projections and using a monte carlo valuation model.
in addition there were two commercial factors relating to regulatory and financing matters which were not initially factored
into this valuation model. the calculations of the options values and the estimated future economic life of the assets involve,
ANNUAL REPORT 2014 60
notes to the consolidated financial statements continued
for the year ended 31 december 2014