Financial News — Weekly Round-up for August 04, 2017

By Brian Cullingworth, Last updated Aug 5, 2017

Sunbets Losses Mount

Tabcorp update ups estimate of expected losses this year to A$46 million

It appears from a report in the satirical publication Private Eye that all is not well with the online bookmaking venture Sunbets, a jv between Aussie gambling group Tabcorp and Britain’s News UK in the Rupert Murdock stable of media investments.

The publication reports friction between the Australian and British management teams, and quotes from a recent Tabcorp trading update which escalated the expected losses this year to A$46 million…this on the threshold of the venture’s first anniversary since its launch to much fanfare last year,  when News UK chief executive Rebekah Brooks heralded the operation as an online betting game changer.

Sunbets represents, at A$20 million, the largest international investment yet made by Tabcorp; whilst the Aussie betting group handles the actual bookmaking side, News UK’s responsibilities are centred on marketing and publicising the enterprise through its powerful media machine and massive readership.

And, it appears, it has not lived up to Australian expectations in this regard, as detailed in the Private Eye article here: http://www.private-eye.co.uk/issue-1449/street-of-shame.

The publication notes that the managing director of Sunbets left in February this year, and that the company announced in June that it planned to “reset the business, including its leadership” – a process that could involve redundancies and the shuttering of its dedicated customer contact centre.

With partnership friction and mounting losses, insiders at News UK have reportedly speculated on how long the situation will be allowed to continue from a Tabcorp perspective.

Hong Kong Investor Building A Significant Holding In Amaya

Tang Hao investing hundreds of millions of dollars in Amaya stock buys

A Hong Kong-based businessman associated with the Goldenway Group, Tong Hao, has reportedly been investing heavily in Amaya shares, most recently with a buy of 4.2 million shares this week and previous buys last week of 279,200 shares for Cdn$ 6.24 million and 500,000 shares for Cdn$11.12 million.

Earlier this month in separate transactions Hao bought a total of just over 3.5 million shares for Cdn$ 77,5 million.

Tao is now a substantial shareholder in Amaya, having previously acquired 18.3 million shares in the company for hundreds of millions of dollars.

InfoPowa readers may recall that Goldenway was one of the Hong Kong investment groups that backed disgraced former Amaya CEO David Baazov’s bid to acquire the company last year. Baazov stepped down as CEO of Amaya to fight allegations of insider trading on the acquisition of Pokerstars deal, and subsequently sold off large tranches of his Amaya stock.

Bet-At-Home Report Strong First Half Results

Customer acquisition and retention key, says report, despite reduction in marketing expenses

bet-at-home AG has reported double-digit increases in revenue and earnings for the first half 2017 period despite cutting back on marketing expenses.

Key performance highlights include:

– Gross betting and gaming revenue up 17.5 percent to Euro 76.8 million (H1/2016: Euro 65.4 million).

– Net betting and gaming revenue increased 15.9 percent to Euro 61.5 million (H1/2016: Euro 53.1 million).

– The company said investing large amounts of cash and cash equivalents and issuing short-term loans at arm’s length terms and conditions to the majority shareholder of bet-at-home.com AG, saw the Group financial result reach Euro 0.5 million (H1/2016: Euro 1.1 million), a consequence of the gradual repayment of loans granted. EBT, therefore, amounted to Euro 17.2 million (H1/2016: Euro 9.6 million).

– EBIT was Euro 16.7 million, up Euro 8.2 million or 97.2 percent (H1/2016: Euro 8.5 million).

– EBITDA of Euro 17.4 million (H1/2016: Euro 9.0 million) and Euro 12.4 million in Q2 2017.

– Group betting and gaming volume totaled Euro 1,688.6 million in the first half of 2017 (H1/2016: Euro 1,369.6 million), representing 23.3 percent year on year growth.

– Betting fees and gambling levies increased to Euro 10.1 million corresponding to the increase in gross betting and gaming revenue (H1/2016: Euro 8.0 million). European Union VAT regulations were Euro 5.2 million (H1/2016: Euro 4.3 million).

– Current liquid assets and securities of Euro 77.8 million.

The company attributes its robust performance to continued investments in the bet-at-home brand specifically customer acquisition and retention.  As at 30 June 2017, the Group reported over 4.7 million registered customers (30.06.2016: 4.5 million).

Looking ahead, the Board expects gross betting and gaming revenue to increase to Euro 144 million in the 2017 fiscal year and EBITDA to reach a level between Euro 34 million and Euro 38 million.

Macau Revenues Continue Upward Trend In July

29 percent year-on-year growth

The Macau regulator has released gambling sector numbers for July 2017, showcasing continued revenue growth in the gambling hub.

Overall revenues were up 29 percent year-on-year in July at 23 billion patacas ($2.86 billion), extending a year-long winning streak due to an upsurge in spending by wealthy punters and an increase of leisure visitors driven by the summer holidays, according to a Reuters news agency report. The improvement is within the range predicted by analysts.

Bet365 Australia In The Black For First Time

After five years of losses

International gaming firm bet365’s Australian operation has reported its first profit since market entry five years ago.

In the year to March 31, 2017, bet365 accounts submitted to the Northern Territory Government’s gambling authority, disclose an A$1.2 million profit.

Australian bettors wagered just over A$2.5 billion with bet365 during the 2017 fiscal year, leading to a reported A$101.4 million in revenue.

It’s a vast improvement on previous submissions with the company reporting an A$10.9 million loss in 2016 and A$31 million loss in 2015.

The result is hard earned as Australian authorities clamped down on advertising, banned credit betting and instituted a point-of-consumption tax in Southern Australia within the period under review.

“The directors remain confident of improving future financial performance of the company and are committed to maintaining the present level of operations to support that aim,” the submission reads.

IGT Losses Continue In Second Quarter Report

$220 million in net foreign exchange losses impact results

Second quarter results from International Game Technology PLC (IGT) show continued losses attributed in part to the negative impact of foreign exchange losses, the sale of DoubleDown and new Lotto concession dynamics.

Chief executive officer, Marco Sala, however, is upbeat on the company’s prospects saying he expects a more robust product offer to support stronger sales and profit levels in the second half of the year.

Key performance indicators for the second quarter period ending June 30, 2017 include:

– Consolidated revenue of $1,220 million (Q2/2016: $1,285 million), a decline of 5 percent.

– Global lottery same-store revenue, excluding Italy, grew 2.6 percent over and above strong North America jackpot activity in the prior year period. Excluding late numbers, Italy Lotto wagers increased 1 percent.

– Gaming service revenue increased 5 percent driven by 25 percent growth in terminal sales that was partially offset by lower systems sales.

– Operating income was $192 million (Q2/2016: $171 million). Adjusted operating income was $264 million compared to $290 million in the prior-year period.

– Adjusted EBITDA was $424 million (Q2/2016: $443 million) reflecting the DoubleDown sale and new Italy Lotto concession terms.

– Net loss attributable to IGT was $290 million in the second quarter of 2017 inclusive of $220 million of net foreign exchange loss. On an adjusted basis, net income attributable to IGT was to $31 million.

– Net loss per diluted share of $(1.43) – which on an adjusted basis was $0.15 per diluted share.

– Cash from operations was $543 million and capital expenditures were $371 million.

– Cash and cash equivalents were $495 million as of June 30, 2017, compared to $294 million as of December 31, 2016. Net debt was $6,999 million as of June 30, 2017.

“We’ve made a lot of good progress on many levels so far this year,” Alberto Fornaro, chief financial officer of IGT, said, pointing to a reduction in debt and enhancing cash generation through “disciplined asset and financial management”.

IGT maintains its outlook for adjusted EBITDA of $1,600 to $1,680 million, and the expectation for net debt remains $6,950-$7,150 million for the full year 2017 period. The outlook for maintenance and growth capital expenditures has been reduced by $50 million to $575-$625 million.

Portugal’s Online Gambling Market Hits A Speed Hump

Decline across all verticals

Second quarter results released by the Portuguese online gambling authority, Serviço Regulação e Inspeção de Jogos do Turismo de Portugal (SRIJ), this week showed a decline in total revenue which reached Euro 25.4 million (Q1/2017: Euro 31.4 million).

In brief, Online sports betting revenue amounted to Euro 13.9 million, a 20 percent decline compared to the previous quarter, while online casino revenue (including online poker) dropped to Euro 11.4 million (Q1/2017: Euro 13.9 million).

Serviço Regulação e Inspeção de Jogos do Turismo de Portugal took Euro 16.3 million in taxes from its seven licensees over the period under review.

Italian Cash Game Poker Numbers Down In July

AAMS figures show a continued decline in cash game activity, whilst tournament action grows

July online poker statistics from the Italian regulator show that cash game stakes declined 2.9 percent year-on-year at Euro 5.1 million, whilst tournament turnover reached Euro 5.9 million – a 22.9 percent rise over July 2016 figures.

The July statistics bring Italian cash game online poker stakes for the seven months of 2017 to Euro 40.9 million – a 5.3 percent decline compared to the corresponding period in 2016, whilst tournament turnover rose 17.4 percent to Euro 49.1 million in the same period.

InfoPowa readers will recall that France, Italy, Spain and Portugal have agreed to introduce shared player pools, which will hopefully increase interest in cash games.

William Hill Pre-Tax Profits Fall 7 Percent In H1-2017

William Hill online gambling growth fails to offset decline in high street retail betting

Online operations for H1-2017 at William Hill plc significantly outperformed the retail side of the business in terms of revenue growth, according to the company’s interim report released Wednesday.

Online, which now accounts for 35 percent of group revenue, saw betting amounts go up 11 percent compared to just two percent in the group’s high street retail shops, where revenues declined 2 percent year-on-year to GBP 460.1 million as sales costs rose.

Retail wagers rose 2 percent y-o-y to GBP 1.2 billion, but punters are placing bets worth twice as much in the group’s online operations, where mobile growth boosted the digital division performance. 81 percent of Sportsbook net revenue was generated through the mobile channel, up from 70 percent in the corresponding period last year.

Online activity delivered improvements in amounts wagered, gaming net revenue, new accounts and active customers, the company reported.

Gaming proved to be the fastest growing segment, with revenue up 10 percent at GBP 150.9 million.

Overall, group pre-tax profits slipped 7 percent y-o-y to GBP 93.5 million, despite revenues increasing 3 percent at GBP 837 million. Operating profit was down 1 percent at GBP 129.5 million.

The dip in profit did not discourage shareholders and investors, with the share price topping 10 percent in early morning trading.

Observers noted the similarity in the pattern of results (declines in retail action) between William Hill and its main rival, Ladbrokes Coral.

William Hill CEO Philip Bowcock reported that the company had made good progress on strategic objectives that included product improvements, better marketing and growth in new customers, with momentum building in the digital division a result.

He said that a priority is now to grow UK market share, noting that adjusted operating profit in this sector had declined 14 percent year-on-year to GBP 80.9 million, primarily due to increased staff costs and weak sporting results.

Bowcock sounded a cautionary note on Fixed Odds Betting Terminals in the company’s retail betting shops, saying that whilst revenues were up 3 percent in H1 at GBP 250.1 million (54 percent of retail shop revenues), this source of income was under threat by media and political pressure for lower staking limits.

Turning to transformation strategies, Bowcock said that he was confident that the promised GBP 40 million in annualised savings would be achieved by year-end, helping the company to turn in good results at the end of the year.

Contagious Gaming In An Uncomfortable Position

President and director resigns on the back of bleak full year results

On the back of a bleak full year fiscal report for the 12 months ending March 3 2017, president and director of Contagious Gaming, Sean Yeomans, has resigned.

Yeomans will remain president of Contagious Gaming subsidiary Telos Entertainment but has opted to exit the other posts at Contagious for personal reasons, a company advisory reads.

Contagious Gaming reported a total loss of C$8.5 million for the year almost doubling the previous year’s loss of C$4.4 million despite having achieved an increase in revenues from continuing activities which amounted to C$1.33 million (2016: C$1.27 million).

The company finds itself in an uncomfortable position as it seeks to deploy its first-to-market lottery-style sports betting platform in the UK market but doesn’t have sufficient cash to meet both working capital and capital expenditure needs for the next twelve months.

Contagious intends embarking on a funding initiative before the end of 2017 but warns should it be unsuccessful in raising the necessary finances it may have to terminate some or all of its initiatives.

Czech Gambling Market Prospers In 2016

But international online operators continue to shun licensing due to clumsy registration requirements and heavy taxation

The Czech Ministry of Finance has unveiled 2016 statistics showing that the country’s overall gambling market delivered the local equivalent of US$1.78 billion in revenues in 2016, a 29 percent year-on-year increase achieved despite operator complaints of high taxation.

The state’s take on these revenues rose 38 percent y-o-y to CZK 10.5 billion, the report reveals.

Discussing the improvements, deputy finance minister Ondřej Závodský attributed the improved business at least in part to successful government enforcement actions against illegal unlicensed operators.

Závodský including some 2017 numbers in his enforcement claim, pointing to the shuttering of some 300 illegal betting shops this year, which has reduced competition with legal and licensed operators.

The deputy minister also detailed actions against unlicensed online operators, resulting in the withdrawal from the Czech market of 52 operators who had not obtained Czech licenses. The government’s enforcement measures have included ISP domain blocking on government directives, he said.

International online gambling operators continue to shun the Czech market, complaining that the tax rate is unreasonably high, and that player registration regulations that require players to physically present themselves at land establishments and produce ID are impractical and clumsy (see previous InfoPowa reports).

So far only five online operators are licensed and active in the Czech market, with PokerStars the only international operator among them.

Zynga Quarterly Performance Improves

Games developer enjoys best quarterly performance in years, and breaks mobile revenues record

San Francisco-based games developer Zynga appears to have emerged from its recent doldrums, reporting a vibrant Q2-2017 performance that includes best quarterly in the past four years, and continued record breaking numbers from mobile revenues.

* Overall revenues up 15 percent y-o-y at $209.2 million and comfortably ahead of predictions;

* Mobile revenue rose 30 percent, and sales 33 percent, accounting for 86 percent of Zynga revenues during the quarter;

* Net income overall came in at $5.1 million, a dramatic reversal of last year’s $4.4 million loss, with overall sales up 20 percent at $209.2 million;

* Group EBITDA up 61 percent year-on-year at $29.9 million;

CEO Frank Gibeau applauded the improvements, especially in mobile, revealing that Zynga’s mobile audience has grown 28 percent year-on-year this quarterand is now at 19 million daily average users.

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