Financial News — Weekly Round-up for August 25, 2017

Tatts Net Profit Down 5.7 Percent

Poor racing weather and fewer jackpots blamed for decline

In what could well be its last annual report as a standalone company as it heads for a merger with Tabcorp, the Australian betting group Tatts has posted a 5.7 percent drop in net profit for the financial year ended June 30 2017.

The company blamed fewer major jackpots and poor weather in the racing season for the decline, but claimed that its performance was strong despite absorbing merger costs of A$23.4 million and reduced revenues, which came in at A$2.8 billion (US$2.2 billion), down 5.1 percent year-on-year.

On a continuing pre-merger costs operations basis the group reported an after-tax profit of A$244.6 million.

Digital lottery sales outperformed other divisions in the group, reporting sales up 14.5 percent (from 13.5 percent a year ago), but the company’s wagering arm, UBET, saw its turnover fall 6.9 percent to A$3.8 billion.

Tatts gaming operations, known as MAX, saw EBITDA rise 10.7 percent to A$75.4 million.

CEO Robbie Cooke said the company restructuring to focus on core business over the last three years was now delivering benefits, and he revealed that the group has started its new financikal year “extremely well” with net profit after tax in July 2017 up 25 percent year-on-year.

Scandinavian Affiliate Marketer Reports A Good Half-Year

Strategic acquisitions boost Catena Media revenues

Affiliate marketing group Catena Media issued its H1-2017 report this week, illustrating how its strategy of expansion through acquisitions is working for it.

Highlights from the report include:

* Group revenues up 78 percent at Euro 30 million;

* Search revenues at an all-time-high of Euro 11.53 million, an increase of 58 percent year-on-year;

* Growing player acquisition and lead generation services for online casinos and sports betting operators;

* Operating profits of Euro 12 million (H1 2016: Euro 8.25 million);

* Adjusted EBITDA an all-time high at Euro 7.95 million, with a margin of 53 percent.

CEO Robert Andersson said the strong growth is continuing as H2 develops and reported:

“We referred 91,222 NDCs to our clients in Q2-2017, an increase of 92 percent year-on-year and an increase of 13 percent compared to the first quarter. The strong development of this key performance indicator is a reflection that the underlying business development continues to be strong and healthy.

“Search revenues are at an all-time-high of Euro 11.53 million, an increase of 58 percent year-on-year, and an increase of 5 percent compared to the previous quarter despite a negative impact of Euro 300,000 as a result of withdrawing from the Dutch market.” (see previous InfoPowa reports).

“Paid revenues amounted to Euro 3.11 million, an increase of 35 percent year-on-year.”

MECN Study Says Cherry Group Are Tops In Revenue Growth

Swedish online gambling group grew revenues 281 percent in Q1-2017

A study of Q1-2017 results conducted by independent research firm MECN has produced an interesting “best 4” list of top revenue-generating companies, with the Swedish Cherry Group singled out as the leader, having grown its revenues in the quarter by a remarkable 281 percent to SEK453 million.

Cherry’s success was to some extent based on its earlier multi-million kronor acquisition of the ComeOn online casino group, and Cherry continues to harbour big ambitions for the enterprise.

Canadian online gambling services provider NYX Gaming is second on the list with Q1-2017 revenues of Cdn$59 million – a year-on-year rise of 200 percent.

Again a major acquisition helped drive the business to new heights – the purchase of online sports betting provider OpenBet for a reported GBP 270 million. The company also launched 11 new online gambling websites during the quarter, which boosted returns.

Malta-based but Norwegian owned Gaming Innovation Group is third on the MECN list, reporting revenues up 193 percent in Q1-2017 at Euro 23.1 million.

With an agile acquisition and creative strategy the company launched a number of attractive and successful online casino brands which boosted player acquisition to record heights. GIG has also embarked on a strong affiliate company acquisition strategy, buying up affiliate websites and bringing them into the group as a powerful business generator.

Live dealer provider Evolution Gaming occupies the fourth position on the list, growing its Q1-2017 revenues 60 percent to almost Euro 40 million. Evolution is a leader in a fast-growing sector that is proving increasingly popular with the international player community, with strong future potential.

Cherry Lowers Full Year Forecast

Come On! merger not yet reached full positive effect on Group’s revenue and earnings

Cherry Group has adjusted its full-year forecast for 2017, saying the integration of its recent acquisition of Come On! has not yet achieved a full positive impact.

The Group moved to emphasize that all business areas continue to perform well, showing strong development and profitable growth.

The total revenue for full year 2017 forecast of between SEK 2,600 million and SEK 2,700 million has been lowered to approximately SEK 2,500 million and forecast EBITDA of SEK 550 to SEK 600 million lowered to approximately SEK 480 million.

 

GVC Mounts Another Attempt For Ladbrokes Coral

But fails a second time

GVC Holdings has made another bid for Ladbrokes Coral, its latest offer thought to be around the GBP 3.6 billion mark.

A report by The Financial Times Tuesday detailed a break down in discussions specifically regarding consensus on the value of the company. The information reportedly gleaned from two unidentified people intimately involved with the talks.

According to the two insiders, GVC’s latest bid valued Ladbrokes Coral at 140p per share with an add on of 50p per share based on the outcome of the UK Government’s gambling review due out later this year.

This is the second time GVC has made a bid for Ladbrokes, the second just prior to its merger with Coral last year (see previous InfoPowa reports).

NYX Q2-2017 Results Show Continued Strong Performance

Double-digit revenue growth for online gambling supplier

Toronto-listed online gambling supplier NYX Gaming has posted another strong quarterly for the three months to end June 2017, reporting double-digit growth in revenue, with a significant improvement in the contribution from subsidiary Openbet.

Highlights from the report include:

* Revenue up 73.3 percent year-on-year at Cdn$ 61 million;

* Contribution to revenue from Openbet up significantly at Cdn$ 32.9 million (Cdn$ 16.5 million a year ago);

* Royalty and licence revenue up 53 percent at Cdn$ 31.9 million;

* Revenue from professional services up 142 percent to Cdn$ 28.8 million;

* Social gaming revenue down Cdn$ 2.2 million at just Cdn$ 300,000 (the play money business was closed in June this year);

* Gross profit at Cdn$ 52 million on margin of 85 percent;

* Adjusted EBITDA up 66.7 percent at Cdn$ 17.5 percent (Q2-2016: Cdn$ 10.5 million);

* Net loss reduced to Cdn$ 21.1 million (Q2-2016: Cdn$ 36.5 million); the losses were incurred mainly through interest payments of Cdn$ 11 million associated with the grouip acquisition strategy;

* 13 new OGS content clients were signed, and 18 new OGS-OPS client signed up in the quarter, with a strong circa 36 pipeline.

CEO Matt Davey reported:

“We saw positive momentum in the second quarter with sequential improvement in revenue, adjusted EBITDA and adjusted EBITDA margin from the prior quarter. Our development pipeline remains strong and we continue to sign new customers at a steady rate, as our sportsbook, gaming and content offerings are resonating with customers and driving scale and operating leverage in our business.”

New Acquisition For Playtech’s Financials Division

Acquisition of ACM Group Limited assets to enhance Financials B2B offering – Financials Division to be named TradeTech Group

Online gambling software and games provider Playtech plc has announced that its Financials B2B Division has agreed to acquire technology, intellectual property and certain customer assets from ACM Group Limited (Alpha) in order to enhance the Division’s B2B offering.

Consideration for the acquisition comprises an initial up-front payment of $5 million; two staged payments based on 1 x EBITDA of 2017 and 2018; and contingent consideration based on 5.2 x the 2019 EBITDA, minus the initial payment and 2017 and 2018 payments, with the total consideration capped at $150 million.

As a result of the acquisition of the assets a team from Alpha will join the TradeTech Group and the brand TradeTech Alpha will be created to deliver a bespoke risk management and trading solution to B2B customers.

Playtech simultaneously announced that its Financials Division will henceforth be known as TradeTech Group to better reflect the full capabilities of the businesses within the division and align its brand recognition throughout the industry.

Alpha is a UK based B2B market maker, dealer and broker focusing on delivering bespoke risk management and trading services to institutional and professional clients.

TradeTech Group has agreed to acquire various assets from Alpha including a portfolio of international B2B clients, its proprietary trading technology, and the institutional focused Alpha Pro trading platform.

In addition, the trading, risk, dealing and business development teams of Alpha will join TradeTech Group, including approximately 20 staff based in the UK.

The acquisition of these key assets brings with it proprietary technology enabling TradeTech Group to offer an enhanced suite of products and services, which will now include market leading B2B risk management and bespoke trading solutions to the industry.

Management believes that success for brokers in the financial trading industry is driven by the ability to acquire customers directly, monitor their performance and monetise their order flows through enhanced risk management.

Following the completion of the acquisition, TradeTech Group will be positioned to offer a turnkey B2B solution to brokers covering the entire lifecycle of a trade, from front end technology to CRM and platform management, to liquidity technology, and risk management and professional trading services.

In addition to intellectual property and sophisticated proprietary technology, the Alpha dealing, risk and business development teams have a significant track record and reputation in the financial trading industry that brings a wealth of trading experience to TradeTech Group.

Completion of the acquisition, which is subject to the satisfaction of certain conditions, is expected to take place by 30 September 2017.

Following the acquisition, Playtech’s TradeTech Group will comprise:

TradeTech Alpha, created to deliver a dedicated, industry leading, B2B solution delivering market made liquidity, professional bespoke trade execution, and risk services

Markets.com, a brand operated by Safecap as a provider of CFD and FX trading platforms

MarketsPro, a newly established dedicated B2C brand for high-net worth clients, following the acquisition of assets from Alpha Capital Markets

CFH, which will continue to provide tier 1 FX liquidity services and multi-asset execution through its best of breed proprietary brokerage technology

Ron Hoffman, CEO of Playtech’s Financials Division, TradeTech Group, said in a statement Wednesday:

“This is a significant step in the evolution of TradeTech. The financial trading industry is driven by the core capabilities of platform technology, customer acquisition and retention, CRM management, and financial trading and risk management expertise.

“The acquisition of Alpha’s high-quality technology and teams of industry experts will significantly deepen our expertise in trading and risk management, allowing TradeTech Group to offer a full turnkey solution to B2B clients across the industry.”

Muhammad Al-Amin Rasoul, chief executive of Alpha, added:

“The strength of TradeTech Group’s management team and asset base will provide us with a platform to grow our offering with TradeTech Alpha. Not only does TradeTech offer everything that you need for a complete B2B solution for brokers, but you can get that solution from the most financially secure company in the industry.”

Cherry Group Q2 And H1-2017 Report Out

Gambling group reports strong growth in revenues and earnings

Cherry Group has posted strong Q2 and H1-2017 numbers, emphasising strong growth in earnings and revenues and highlighting:

Q2-2017

* Group revenue up 179 percent year-on-year to SEK 536 million (192), with organic revenue growth amounting to 37 percent;
* Profitability improved and EBITDA increased by 524 percent to SEK 93 million (15) on margin of 17.3 percent (7.7);
* Profit of SEK 15 million (8);
* The acquisition of the remaining 51 percent of ComeOn Malta Ltd was completed and additional secured bonds of nominal Euro 134.5 million were issued;
* 25 percent of the gaming technology company, Highlight Games Ltd was acquired, with an option to acquire a further 26 percent. The purchase price for Cherry’s initial 25 percent stake was SEK 27 million.

H1-2017

* Group revenue increased by 192 percent year-on-year to SEK 1,077 million (369), with organic revenue growth amounting to 40 npercent;
* EBITDA up 334 percent to SEK 176 million (40) on margin of 16.3 percent (11.0);
* Profit for the period amounted to SEK 51 million (26).

Events following the reporting period:

* On July 3, a share split 1:5 was conducted, regardless of series;
* On August 17, Cherry revised its full-year forecast and now expects the Group to generate total revenue of about SEK 2,500 million in 2017, with EBITDA of about SEK 480 million;

CEO Anders Holmgren commented:

“We continue to be a profitable, fast-growing company, even if the integration of ComeOn! has not yet reached full positive effect. By further diversifying and consolidating our operations, we strengthened our platform and thus the conditions for long-term leverage.

“Game development and Performance-based marketing are the stand-out performers, but Online gaming has not quite been delivering in line with our plan.

“However, the Online gaming business continued to develop positively. Revenue grew by 241 percent to SEK 437 million, with organic growth of 31 percent. EBITDA improved from SEK 5 million to SEK 62 million compared with the same quarter last year and the EBITDA margin increased from 4 percent to 14 percent.

“The rapid merging of ComeOn!’s activities has led to a strong focus on integration, affecting growth. It is worth mentioning that marketing efforts have not yet had the expected effect. At the same time, there is a high level of activity with a variety of initiatives that strengthen both the business area’s organization and the offering as a whole.

“We assess that the future of ComeOn! looks bright, but that integration will take a little longer than initially anticipated.

“Yggdrasil Gaming had a very strong second quarter and revenue increased by 103 percent to SEK 40 million with an EBITDA margin of 44 percent. A number of new important licensing agreements were concluded and more innovative games were launched. During the quarter, Yggdrasil also went live with their games in the Italian regulated market.

“In summary, the second quarter confirmed a continued positive trend for Cherry, and the development has been strong throughout the opening period of the third quarter.”

Sportech Interim Posted

Global expansion continues

Regulated gambling technology supplier Sportech plc has posted its H1-2017 results, highlighting the following:

* Global expansion continued in Asia, Europe and the United States;
* Group had cash of GBP 76.2 million at 30 June 2017, and no bank debt following the cancellation of the bank facility, which totalled GBP 75 million;
* Successful VAT claim in the UK – final receipt of outstanding cash in March 2017 taking refund to GBP 97 million from HMRC;
* Returned GBP 21 million to shareholders through Tender Offer in March 2017;
* Following shareholder approval, Court process commenced to create approximately GBP 55 million of reserves to enable a substantial return to shareholders;
* Completion of GBP 83 million sale of The Football Pools announced on 26 June 2017;
* Total Group EBITDA from continuing operations down 5 percent y-o-y at GBP 3.9 million (2016: GBP 4.1 million);
* Revenue up 5 percent at 36.4 million;
* Adjusted profit before tax improved by GBP 1.5 million to GBP 1.1 million;
* Statutory loss before tax improved by GBP 700,000;
* Sportech Racing and Digital – EBITDA of GBP 3.9 million, down GBP 900,000 on a constant currency basis;
* Sportech Venues – EBITDA of GBP 1.7 million, on a constant currency, in line with last year;
* The Group generated approximately GBP 6 million in cash from the Football Pools during the period prior to disposal for a further GBP 83 million.

CEO Ian Penrose reported:

“2017 has seen the transformation of the Group continue.

“We were successful with the GBP 97 million VAT legal case in the Supreme Court; we modernised and sold the Football Pools for GBP 83 million; repaid over GBP 60 million in debt and returned GBP 21 million to shareholders with further substantial shareholder returns still to come from the GBP 76 million cash balance.

“Following significant investment into our technology and licensing, Sportech has now established a strategic base to grow our business globally through our unique regulated gaming business based in North America together with our expanding presence in Asia. We have transitioned our business away from the UK market which is encountering regulatory headwinds, and await with interest the Supreme Court’s decision in the US on the future of sports betting.

“With our strong balance sheet and cash balances, we have the resources to fund attractive growth opportunities, meet ongoing commitments and deliver substantial returns to shareholders.”

Playtech Reports Strong H1-2017

Revenues from regulated jurisdictions grow

Online gambling and financials group Playtech plc has posted strong H1-2017 results showing continued growth driven by recent acquisitions.

The company reported the following financial highlights:

* Total revenues of Euro 421.6 million up 25 percent vs H1 2016 on a reported basis (30 percent at constant currency rates). 20 percent of growth attributable to acquisitions;
* 50 percent of Group revenues were from regulated jurisdictions in H1 2017 (FY 2016: 48 percent);
* Adjusted EBITDA of Euro 170.9 million – up 19 percent y-o-y on a reported basis and 24 percent at constant currency – in line with previous guidance;
* Net profit jumped 84 percent to Euro 89.6 million;
* Adjusted diluted EPS up 21 percent at constant currency;
* Gross cash at period end Euro 536 million;
* Online casino revenue rose 26 percent to Euro 235.5 million;
* Online sports betting revenue more than doubled to Euro 19 million;
* Online poker declined 5 percent to Euro 5 million;
* Online bingo revenue rose 70 percent to Euro 9 million;
* Mobile channels again excelled, accounting for 38 percent of online software revenue (H1-2016: 29 percent);
* Interim dividend per share up 10 percent.

Operational highlights included:

Gaming Division

* Strong revenue performance with 28 percent growth at constant currency led by flagship online casino offering;
* Double-digit underlying growth, with a particularly strong performance in Asia;
* Recent acquisitions integrated and performing in line with expectations;
* Regulated Gaming revenues of 44 percent (H1 2016: 39 percent);
* Online software revenues from mobile of 38 percent in H1 2017 (H1 2016: 29 percent);
* Significant contracts renewed including Paddy Power Betfair, Sky Bet and Betfred;
* Landmark Sports contract signed with Greek operator OPAP;
* LIVE offering launched with world’s largest Live Casino in Riga;
* Sun Bingo contract remains challenging;
* Pipeline of new licensees focussed on large, quality omni-channel opportunities;
* Excluding acquisitions, average daily revenue in the Gaming Division for the first 53 days of Q3 2017 was down by 1 percent on Q3 2016, increasing 3 percent at constant currency.

Financials Division

* Momentum from 2016 continued into H1 with strong performance and improved KPIs;
* B2B offering further enhanced with acquisition of Alpha Capital Markets assets post period end;
* TradeTech Group brand launched to reflect the full B2B and B2C capabilities of the Financials Division;
* The Financials Division is trading in line with expectations.

Current trading and outlook

* Management confident of a strong performance in 2017 driven by both organic growth and the acquisitions made in 2016 and 2017, albeit with normalised levels of growth in the second half from Asia following unusually high levels of activity in the first half;
* Average daily revenue in the Gaming Division for the first 53 days of Q3 2017, traditionally the slowest part of the year, was up 1 percent on Q3 2016 (6 percent at constant currency) and down 9 percent on an unusually strong Q2 2017 (down 6 percent at constant currency);

Playtech chairman Alan Jackson said in his report:

“The first half of the year saw Playtech’s Gaming Division deliver strong growth with double-digit underlying growth and recent acquisitions integrated and performing in line with expectations.

“Playtech has also continued to execute on its omni-channel solution by deepening its offering in key verticals with the integration of Playtech BGT Sports creating a fully integrated best-in-class sports technology solution and the launch of the world’s largest Live Casino studio in Latvia, revolutionising the offering in a growing and dynamic channel.

“As with the Gaming Division, momentum in the Financials Division continued with improvements across all KPIs. The announced acquisition of assets from Alpha brings an important new B2B revenue stream and the creation of TradeTech Group as our operating and corporate brand for the business is an important milestone and better reflects the broadening of the division’s offering towards a full turnkey B2B financial trading solution.

“Taken all together, this proven platform for growth across the business has again delivered a strong performance and management remain confident of further strategic progress in the second half of 2017.”