Playtech reports rising revenues in trading update

In a trading update issued Monday, online gambling technology and games provider Playtech plc reported that revenues have continued to rise.

In business-to-business operations the company reported that average daily revenue on a year-to-date basis excluding Asia is up 7 percent compared with the same period last year, and up 12 percent in Q2-2018 vs. Q2-2017.

However average daily revenue in Asia continues to be impacted by an increasingly competitive backdrop. Towards the end of the first half, this market has seen a particularly aggressive pricing environment from new entrants to the market, which has impacted revenue.

The management team continues to take steps to protect Playtech’s position in the region, but given the recent decline and in the absence of any change in market dynamics, management warns of a significant impact on revenue throughout the rest of the year.

In business-to-consumer operations Playtech management reports that the gaming division is performing in line with expectations, with the Sun Bingo contract continuing to see some revenue improvement and negotiations with News UK ongoing.

TradeTech Group’s already reported good start to 2018 has continued, with the B2B division delivering a strong performance.

Playtech reported that the acquisition of 70.6 percent of Snaitech has been completed and that the company’s results have been fully consolidated into Playtech’s group accounts with effect from June 5, and will contribute to Playtech’s interim results.

Playtech has subsequently acquired a further 10.8 percent of Snaitech’s issued share capital and has launched the mandatory takeover offer for the remaining shares of Snaitech not already owned by the group.

Management believes the increased activity due to the FIFA World Cup and general strength in the Italian gaming market is encouraging for the current period.

Reporting on its sale of the Playtech holding in GVC Holdings plc, management said that Playtech’s 3.4 percent stake was sold on June 7, and net proceeds of Euro 222 million will be accounted for within the Group’s cash balances on the interim balance sheet date of 30 June 2018.

Together with the proceeds received from the sale of shares pursuant to the takeover of Ladbrokes Coral plc by GVC, the disposal is expected to lead to a one-off credit to Playtech’s profit & loss account of approximately  Euro 42 million in H1 2018.

Turning to the future outlook of the company, management advised that interims for the six months ended 30 June will be posted on August 23. Given the downturn in Asia towards the end of the period together with the strong performance from Tradetech in the first half, Playtech’s H1 2018 group performance is broadly in line with its expectations at the start of the year.

Asia appears to be front-of-mind for Playtech, with the company commenting that for the remainder of the year, the current run rate in Asia is materially below both the average in H2 2017 and the average which was expected for H2 2018 at the start of the year.

“If the current run rate in Asia continues unchanged for the remainder of 2018, including no material improvement in Malaysia, Playtech’s expected revenue from Asia will be c.  Euro 70 million lower than original expectations,” management reports.

“Given that the downturn in Asia has been relatively sudden and taking into account Playtech’s centralised cost base, the vast majority of this revenue loss will drop through to adjusted EBITDA.

“Consolidating Snaitech from June 2018 will contribute c. Euro 80 million of adjusted EBITDA to Playtech’s group forecasts for 2018, based on Snaitech’s current market consensus.

“Taking into account all of the above, including the consolidation of Snaitech and specifically taking into account the uncertainty in Asia, Playtech now expects group adjusted EBITDA for 2018 in the range of Euro 320 million to Euro 360 million. This excludes the Euro 42 million one-off gain in 2018 relating to the sale of shares in Ladbrokes and GVC which will not impact adjusted EBITDA but will increase adjusted EPS.”

Mor Weizer, CEO of Playtech, said: “Clearly the recent trading performance in Asia is disappointing. We have taken steps to further support our partners in the region and we will continue to work to preserve our position in the face of an increasingly competitive environment.

“In line with our stated strategy, progress in fast-growing, regulated and soon to-be-regulated markets continues apace. Momentum in key regulated markets continued in the first part of 2018 with new agreements with Gala Leisure in the UK, SAS in Portugal and Totalizator, the Polish national lottery.

“Additionally, regulatory developments in the US represent a significant opportunity for the Group. The organic growth reported in the non-Asian B2B gaming business combined with the recent acquisition of Snaitech in Italy provides management with confidence that this strategy will materially improve the quality and diversification of Playtech’s performance in 2018 and beyond.”

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