Financial News — Weekly Round-up for August 11, 2017

Tabcorp FY-2016/17 Results Show Significant Losses

Growth in digital turnover of 13.9 percent underpins TAB performance

Australian land and online betting behemoth Tabcorp has released its FY 2016-2017 figures, reporting a net profit after tax loss (NPAT) of A$20.8 million following significant items after tax that included AUSTRAC litigation costing A$61.8 million; AFP Cambodia investigation A$1.9 million; proposed merger with Tatts A$53.9 million; Intecq acquisition A$4.9 million; Sun Bets operating loss A$47.6 million; Sun Bets assets impairment A$20.7 million and Melbourne premises relocation A$8.9 million.

InfoPowa readers may recall that the SunBets enterprise is a joint online gambling venture between Tabcorp and the UK media company News UK, which has incurred heavy losses in its first year of operation. Top management bailed earlier this year, and Tabcorp says it has “reset” the business after EBITDA recorded a loss of A$46.2 million.

Financial highlights in the group’s annual report included the overall NPAT loss and:

* Revenues marginally up 1.9 percent at A$2,229.6 million, within previous guidance;

* EBITDA of A$504.1 million, down 2.3 percent;

* NPAT prior to significant expenses A$178.9 million, down 3.8 percent;

* 6 percent rise in Wagering & Media operating expenses;

* Growth in digital turnover of 13.9 percent, and total TAB fixed odds revenue growth up15 percent, including 20.8 percent growth in racing;

* Final dividend 12.5 cents per share, taking the full year ordinary dividend to 25.0 cents per share.

Significant business developments included:

* Good progress on the merger with Tatts, which is expected to complete by the end of 2017;

* The acquisition of acquired Intecq, a complementary gaming systems and monitoring business;

* The launch of SunBets in the UK;

* Settlement achieved in the AUSTRAC civil proceedings;

* Ongoing digital expansion and stronger retail partnerships through a digital communications model and the launch of a digital Keno product;

* All divisions performed to expectations, with increased investments in technology, capability, marketing, risk and compliance;

* The company has embarked on a review of its cost base;

* Digital and fixed odds metrics were strong in the core TAB division, where digital turnover growth was in double digit territory;

* Luxbet disappointed with a poor performance, recording an EBITDA loss of A$8 million. A strategic review of this business is currently underway

CEO David Attenborough described the year as strategically important for Tabcorp.

“Our plan for FY18 centres on completing the combination with Tatts,” he said. “At the same time, we have a clear set of priorities to drive performance in our core businesses and benefit from the strategic initiatives we delivered in FY17. We will continue to focus on maintaining a disciplined approach to operating expenses and capital expenditure and delivering sustainable returns for our shareholders and partners.”

Will Hill’s Aussie Profits Take A Dive In H1-2017

“Disappointing” operational profit plunges 85 percent to only A$1.1 million

Australian business media reports indicate that William Hill plc is “disappointed” with the H1-2017 performance of its Australian subsidiary after operating profit plunged 85 percent year-on-year to just A$1.1 million.

The decline is all the more remarkable given a 28 percent rise in amounts wagered in the period to A$1.48 billion, a phenomenon which management attributed to “weaker gross win margins” which hampered revenue growth.

The numbers were also adversely impacted by new Northern Territory regulations outlawing the company’s lucrative “click to call” in-play online phone offering.

William Hill plc chief executive in London, Philip Bowcock, remains confident regarding Australian operations, however, commenting:

“We continue to see Australia as an attractive market and an important arm of the business. “We expect performance to improve, benefiting from the additional content and product innovations we launched in the first half. In the second half, we are also launching new products that gamify the betting experience and increase the frequency of betting opportunities.”

Costs for the Aussie business, which accounts for about 7.7 percent of William Hill’s global revenue, also increased as the subsidiary coughed up around A$5million-A$10 million for exclusive digital vision rights to NSW horse racing. Marketing expenses also rose due to the Australian Open Tennis sponsorship taken up by the company.

William Hill warned that a proposed federal law ending credit betting could have a severe business impact, revealing that some 30 percent of stakes in Australia originated from punters betting on credit.

The company is reportedly already studying tactics to mitigate the effects of such a measure, perhaps through alternative funding methods.

Revenues Up But Inspired Continues To Record Losses

Land and online gambling technology supplier expects full year performance at the lower end of expectations

Land and online gambling technology supplier Inspired Entertainment has posted its Q2-2017 results, reporting a net loss of $8.3 million despite improved revenues up 9 percent at $32.3 million.

The company reported EBITDA down 10.2 percent at $9.6 million but boasted solid growth in its server based gaming and virtual sports and mobile divisions, particularly in the Greek market.

President and CEO Luke Alvarez said that the company has multiple engines of growth across the business accelerating in parallel.

Developments highlighted by the company included:

* Three mobile RGS implementations were launched during the quarter with mobile casino operators Leo Vegas, My Bet and Sky Bingo. After the quarter-end, Inspsired also secured a contract with Mr. Green, a fast-growing online casino group. Mr. Green is now live with several of Inspired’s HTML5 games.

* The company launched its first Rush Go on-demand virtual sports games across multiple mobile RGS customers, and these new types of hybrid sports games are exhibiting encouraging signs of player interest.

* Server based gaming roll-out in Greece has gone well with 1,050 terminals installed as of June 30, 2017. The full deployment is expected to be at least 3,960 terminals in the first half of calendar 2018. The performance has been strong in the Greek OPAP estate, where, Is[pired claims its terminals have outperformed those of competitors. Virtual Sports is now live with OPAP in 4,600 retail venues.

* In the UK 550 Self-Service Betting Terminals (“SSBTs”) were installed in betting shops, and second and third Virtual Sports channels were launched with a major UK betting retailer.

* Inspired continued to deploy SBG terminals with its sixth Italian concessionaire, Gamenet. As of June 30, 2017, there were 125 terminals installed and launched.

* The company’s virtual sports product is also live now in Poland with Central Europe’s largest betting operator, Fortuna, through its retail venues.

* Finnish operator Veikkaus selected the company as its virtual sports supplier.

Paddy Power Betfair Posts Interim Results

Betting company’s plan is to use technology to improve efficiency, lower costs and enhance the customer proposition

On the heels of yesterday’s announcement that CEO Breon Corcoran is to step down later this year (see previous InfoPowa report) Paddy Power Betfair has released its 2017 interim results, reporting improved revenues but higher promotional and pricing investment.

Highlights of the H1-2017 report include revenue up 9 percent year-on-year to GBP 827 million, driven by good stakes growth, with online especially strong, up 10 percent. Underlying EBITDA was up 21 percent to GBP 220 million, with EBITDA margin up 3 percentage points to 27 percent.

Revenue growth over the first six months fell to 9 percent from 18 percent in H1-2016, despite H1-2017 figures receiving a GBP 40 million boost from a lower pound sterling after Brexit, which flattered overseas sales.

The group reported continued strong cash conversion with underlying free cash flow of GBP 172 million, representing 113 percent of underlying profit after tax in the period. Operating profit jumped 22 percent year-on-year to GBP 180 million.

Management expects good returns from the investment in acquiring US daily fantasy sports business Draft.

Looking ahead, the company expects full-year EBITDA (including a provision for GBP 15 million in losses on Draft) to reach GBP 445 million to GBP 465 million.

Outgoing CEO Breon Corcoran said:

“We continue to make substantial investments to position Paddy Power Betfair as a structural winner in a dynamic and highly competitive market. The focus of this investment is to use technology to improve efficiency and minimise the cost of servicing our customers and to further enhance our customer proposition.

“The integration of our technology platforms is on track for completion by the end of the year and will bring significant benefits including increased quantity and pace of new product development in 2018 and beyond.

“Ahead of that, our customers and shareholders are already seeing benefits from efficiencies and investments. In the first half alone, customers enjoyed approximately GBP 30 million of extra value through better odds, more generous offers and new loyalty benefits.

“Operating efficiency and the annualisation of merger-related cost savings resulted in strong operating leverage in the period, with operating profit up 22 percent.”

Gaming Innovation Group Report Strong Second Quarter Results

Revenues reach all time high

Gaming Innovation Group (GIG) delivered robust second quarter 2017 results in its latest trading update, reporting all time high revenues of Euro 26.6 million, driven by organic growth across its business areas.

Key financial highlights for the Q2/2017 period include:

– Operating revenues of Euro 26.6 million, up 174 percent (Q2/2016: Euro 9.7 million)

– Organic revenue growth of 71 percent y-o-y.

– EBITDA of Euro 1.9 million (Q2/2016: Euro 1.0 million).

– B2C revenues of Euro 20.2 million, up 213 percent y-o-y.

– B2B revenues of Euro 8.5 million, up 108 percent y-o-y.

– Marketing expenses of Euro 11.1 million represent 42 percent of revenues.

“We continue to expand our business at a rapid pace. We have made important affiliate acquisitions during 2017 which will strengthen our traffic driving capability and increase activities and volumes for all stakeholders in GIG’s eco-system.

“In parallel with launching innovative iGaming services, we are progressing towards our goal of becoming the leading iGaming company from the Nordics,” Robin Reed, chief executive officer of GIG, commented.

GIG withdrew its B2C brands from non-core markets during the second quarter and is now focusing on expanding operations and market presence in the Nordics, UK, Ireland and Western Europe.

The company maintains its full year guidance of Euro 120 million in revenues.

Slower Revenue Growth In Paysafe First Half Report

In 2016 payment solutions company delivered y-o-y revenue growth of 118 percent…this year’s H1 records just 11 percent

Payment solutions provider Paysafe, which recently migrated its tax residence from the Isle of Man to Britain, posted its H1-2017 results Tuesday, recording lower year-on-year growth in revenue but improved adjusted EBITDA.

The company reported:

* 11 percent y-o-y revenue growth – well down on the 118 percent recorded in the comparable period in 2016; revenues came in at $538.7 million.

* Organic revenue growth at constant currency rates was 12 percent (H1-2016: 20 percent).

* Adjusted EBITDA improved to $169.2 million from $144.2 million, with margins up at 31.4 percent (H1-2016: 29.6 percent).

* Operating profit up at $99.6 million (H1-2016: $89.7 million).

* Adjusted profit after tax was $124 million (H1-2016: $101.4 million).

* Statutory profit after tax improved to $73.7 million from $64.5 million.

* Cash conversion before payments working capital was 77 percent, down slightly from 78 percent, but adjusted cash conversion improved
significantly to 98 percent from 74 percent.

* Net debt reduced during the period to $259.9 million from $279.8 million on 31 December.

Chairman Dennis Jones said that the group has returned to a “more sustainable” level of revenue growth after an exceptional FY 2016 of trading. He reported the acquisition of US-based MCPS in July for a consideration of $470 million (see previous InfoPowa report), strengthening the group processing business and increasing the company’s North American footprint.

This also helps the group to continue rebalancing its portfolio away from online gambling, he said.

Operational highlights reported by Paysafe included:

* Employee headcount up 9 percent at 2,299, driven by the platform development operation in Hyderabad, India and its operations, compliance
and risk operation in Sofia, Bulgaria.

* The prepaid division launched ‘paysafecard direct’, a QR code-based e-commerce platform enabling consumers to complete online purchases
with a cash payment.

* The company joined forces with Google to be one of the first payment service providers to launch in-app Android Pay capabilities to Paysafe merchants in Canada.

* Spain’s state-owned postal company Correos chose Paysafe during the period as a recommended payment provider for businesses using Comandia, its e-commerce platform.

The Stars Group Presents Second Quarter Results

Diversification into online casino and sports betting shores up revenues impacted by declining online poker

The freshly named The Stars Group (formerly Amaya Inc.) delivered a good performance impacted by a decline in online poker in its second quarter report Wednesday.

Key performance highlights for the 12 week period ending June 30, 2017 include:

–  Total revenues increased 6.8 percent to reach $305.3 million (Q2/2016: $285.8 million).

–  Adjusted EBITDA was $146.5 million, up 12.8 percent (Q2/2016: $129,9 million).

–  Net earnings grew 213 percent to reach $70.5 million (Q2/2016: $22.5 million).

–  Real-money online poker revenues and real-money online casino and sportsbook combined revenues represent around 66.5 percent and 29.3 percent of total revenues, respectively, compared to 75.5 percent and 20.9 percent the prior year period.

–  Real-money online poker revenues for the quarter were $202.9 million, a decrease of approximately 5.9 percent y-o-y.

–  Combined real-money online casino and sportsbook revenues were $89.6 million, up 50.2 percent y-o-y.

–  Redefined Quarterly Real-Money Active Uniques (QAUs) were 2.1 million, down 2 percent y-o-y, primarily led by a decline on the Full Tilt platform, exiting small markets and the customer registration process in the Czech Republic.

–  2.0 million QAUs played online poker during the quarter, a decrease of approximately 4 percent y-o-y.

–  Online casino QAUs reached 547,000, up 33 percent y-o-y.

–  Online Sportsbetting arm BetStars had approximately 251,000 QAUs, an 8 percent increase y-o-y.

–  Customer Registrations increased by 2.1 million to reach approximately 113 million.

–  Total long term debt outstanding at the end of the quarter was $2.55 billion with a weighted average interest rate of 4.7 percent.

TSG prepaid approx. $40 million under its second lien term loan using cash flow from operations, earlier this week which it says will save around $3 million in annual interest savings. The principal balance of the second lien is now $170 million.

“Our evolution and transformation into The Stars Group continued as we completed our name change and head office move, while our second quarter saw the strengthening of our core senior management team and continued solid revenue growth led by our real money online casino offering,” Rafi Ashkenazi, Chief Executive Officer of TSG, commented.

“We plan to use this momentum to continue improving and strengthening our business and pursuing our strategic objectives.”

In a Full Year Guidance update, TSG expects revenues of $1,200 to $1,260 million and adjusted EBITDA of $560 to $580 million.

Adjusting its forecast upward, Adjusted Net Earnings are forecast to be $413 to $437 million and adjusted Net Earnings per Diluted Share is now $2.01 to $2.15.