Playtech posts trading update
TradeTech Group’s reported good start to 2018 has continued, with the B2B division delivering a strong performance.
Playtech has earlier today posted a trading update.
- B2B Gaming division
The key trends reported at the Annual General Meeting in May 2018 have continued.
Average daily revenue year to date excluding Asia (on a constant currency and ex-acquisition basis) are up 7% vs the same period last year and up 12% in Q2 2018 vs Q2 2017.
As previously reported, 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 and this has impacted revenue. The management team continues to take steps to protect Playtech’s position in the region and to drive revenue generation. However, given the recent decline and in the absence of any change in market dynamics, the Group expects a significant impact on revenue throughout the rest of the year.
- B2C Gaming division
The B2C 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
TradeTech Group’s reported good start to 2018 has continued, with the B2B division delivering a strong performance in line with management’s strategy communicated at the recent TradeTech investor day held in May.
- Acquisition of Snaitech
Playtech completed the acquisition of 70.6% of Snaitech on 5 June 2018. As a result, Snaitech’s results have been fully consolidated into Playtech’s group accounts with effect from this date and will contribute to Playtech’s interim results.
Playtech has subsequently acquired a further 10.8% 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.
As Snaitech currently remains a separately listed company, it will provide any update on its trading separately. However, Playtech believes the increased activity due to the FIFA World Cup and general strength in the Italian gaming market is encouraging for the current period.
- Sale of holding in GVC Holdings plc
As part of the continued improvement in capital structure and balance sheet efficiency, Playtech sold its 3.4% stake in GVC Holdings plc (“GVC”) on 7 June 2018. Net proceeds of €222 million will be accounted for within the Group’s cash balances on the interim balance sheet date of 30 June 2018, having previously been held as an available for sale asset.
Together with the proceeds received from the sale of shares pursuant to the takeover of Ladbrokes Coral plc (“Ladbrokes”) by GVC, the disposal is expected to lead to a one-off credit to Playtech’s profit & loss account of approximately €42 million in H1 2018.
- Outlook
Playtech will announce its interim results for the six months ended 30 June 2018 on 23 August 2018. Given the downturn in Asia came 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.
Looking to 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. €70 million lower than original expectations. 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. €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 €320 million to €360 million. This excludes the €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, 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.”
