Financial News — Weekly Round-up for July 28, 2017

Major Earnings Improvement At Mr Green Online Casino

Swedish operator says a bumper Q2-2017 was driven by expenses discipline and new products

On Friday the Mr Green online casino group posted an impressive set of second quarter and half-year 2017 results, highlighting the following:

Q2-2017

* Total revenue increased by 36.3 percent y-o-y to SEK 287.8 (211.2) million;
* EBITDA up a remarable 337 percent to SEK 52.4 (12.0) million, with margin up 12.5 percent at 18.2 percent;
* Earnings per share before/after dilution increased to SEK 0.90 (-0.13);
* Cash and cash equivalents amounted to SEK 463.6 million following the new share issue, which provided the company with SEK 195 million before issue expenses and broadened the owner base;
* The Garbo mobile casino site was relaunched.
* Good growth reported in Denmark, Finland and Sweden, which accounted for 33 percent of quarterly revenue;
* Exceptional growth in Western Europe, which delivered over 41 percent of revenues – an improvement of over 80 percent y-o-y;
* Central, Eastern and Southern European revenues were up 30.2 percent.

H1-2017

* Total revenue grew by 31.2 percent to SEK 563.9 (429.7) million;
* EBITDA increased by 105 percent to SEK 86.6 (42.2) million on a margin up 5.5 percent at 15.4 (9.8) per cent;
* Earnings per share before/after dilution increased to SEK 1.43 (0.55);
* The company remains free of debt.

CEO Per Norman attributed the revenue improvements to the 2016 launch of new live dealer casino and sportsbook products, along with better cost efficiencies in the company, which included lower marketing costs achieved by “intensified focus on digital marketing and personalized customer communication.”

He reported that the company plans to launch its Danish sportsbook operations in Q3.

Scientific Games Reports Its Seventh Consecutive Quarter Of Growth

Interactive and gaming divisions drive rising revenues

Scientific Games has reported continued revenue growth for the seventh quarter running, driven by the company’s gaming and interactive divisions.

The group’s Q2-2017 results include:

* Revenue up 5 percent y-o-y to $766.3 million, despite an $8 million adverse foreign exchange impact;
* Operating income doubled to $117.3 million, reflecting revenue growth, a more effective organisational structure and lower depreciation and amortisation;
* Net loss declined to $39.1 million from $51.7 million in the prior-year period;
* Attributable EBITDA increased 13 percent year-on-year to $314.8 million;
* Net cash flow from operating activities increased to $168.5 million from $90.8 million a year ago, thanks mainly to a $61.4 million increase in net income.

The group’s Interactive Division reported B2C social gaming revenues up 31.8 percent year-on-year at $91.1 million, and B2B other gaming revenue up 9.8 percent at $15.7 million.

Chief executive officer Kevin Sheehan reported:

“Second quarter results represent our seventh quarter of consecutive year-over-year growth, including $169 million of cash flow from operating activities, as a result of ongoing improvements in our gaming, lottery and interactive operations

“We achieved year-over-year revenue growth in global gaming machine sales, gaming systems, table products and interactive; as well as in U.S. instant games revenue.

“Across the company, we are maintaining a laser focus on executing our strategies and capitalising on our many opportunities.”

Pagcor Profits Rise 25 Percent In H1-2017

But online revenues unimpressive at P1.1 billion (US$21.7 million)

Latest H1-2017 results from the Philippine Amusement and Gaming Corporation (PAGCOR) show that the land and online gambling regulator-operator enjoyed another successful half-year, generating a 25 percent year-on-year rise in profit at P3 billion (US$60.2 million), principally from land activity.

Revenue rose almost 8.5 percent y-o-y to P23.3 billion (US$558.5 million) and the Philippines taxman benefitted by P13.4 billion.

Online operations in the new Philippine Offshore Gaming Operators (POGO) dispensation were less impressive, generating revenue of just P1.1 billion or US$21.8 million – well short of the US$ 120 million that PAGCOR hopes this sector will eventually generate.

POGO operators will soon be expected to start coughing up the $150,000 Monthly Minimum Guaranteed Fee that PAGCOR has imposed in addition to the 2 percent tax rate online operators pay on GGR.

Kindred Group Delivers Robust Results

Acquisition of 32Red and marketing investments pay off

In an industry update Wednesday, Kindred Group plc reported robust second quarter and first half year highlights saying marketing investments in the previous quarters were bearing fruit.

Key performance indicators for the first half-year ending June 2017 include:

– Gross winnings revenue of GBP 319.8 (H1/2016: GBP 249 million).

– Underlying EBITDA was GBP 63.7 million (H1/2016: GBP 50.5 million).

– Profit before tax was GBP 41.1 million (H1/2016: GBP 37.9 million), includes M&A costs of GBP 2.6 million related to the acquisition of 32Red.

– Profit after tax was GBP 36.7 million (H1/2016: GBP 33.5 million).

– Earnings per share were GBP 0.161 (H1/2016: GBP 0.146).  Underlying earnings per share were GBP 0.188 (H1/2016: GBP 0.154).

“Taking into consideration the lack of major tournaments this year, we are confident that we have continued to outpace market growth and have continued to take market share,” Henrik Tjärnström, chief executive officer of Kindred, commented.

“In the second quarter of 2017, 38 per cent of the Group’s Gross winnings revenue came from locally regulated markets. The acquisition of 32Red will significantly accelerate our development and profitability in the world’s largest locally regulated market. Gross winnings revenue from the mobile channel grew by 52 per cent and accounted for 73 per cent of total Gross winnings revenue in the second quarter”.

In the period up to 23 July 2017, Kindred reports a 20 percent increase in average daily Gross winnings y-o-y including 32Red.  Excluding 32Red,  a 9 percent increase y-o-y.

Kambi Report On First Half Progress

Impacted by renegotiated contract with 888 Holdings

Sportsbetting technology provider Kambi reported on its first half year and second quarter results which, while steady, were impacted by a renegotiated multi-year extension to its 888 Holdings contract.

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

– Revenue of  Euro 14.1 million (Q2/2016: Euro 13.7 million), an increase of 3 percent.

– Operating profit (EBIT) for the second quarter of 2017 was Euro 0.3 million (Q2/2016: 2.0 million, with a margin of 2 percent (Q2/2016: 14 percent).

The 888 Holdings contract has had a Euro 1 million impact on Revenue and EBIT for the first six months of the year but is in the long-term interest of the company, Kambi said.

– Profit after Tax amounted to Euro 0.1 million (Q2/2016: Euro 1.8 million).

– Earnings per share for the second quarter of 2017 were Euro 0.004 (Q2/2016: Euro 0.060)

– Cash flow from operating and investing activities (excluding working capital) amounted to Euro -0.5 million (Q2/2016: Euro 0.1 million).

– Solid operator turnover growth of 16 percent y-o-y despite tough comparisons.

“I am pleased to report that Q2 was a successful trading period for Kambi. Not only has the day-to-day performance of the business remained strong, but Kambi has managed to further strengthen its foundations for future growth,” Kristian Nylén, chief executive officer of Kambi, said.

“We are very pleased to have secured a multi-year extension with one of our key customers, 888sport. We believe the longer term benefit from securing 888sport for years to come, far outweighs the shorter term impact the re-negotiation has on our financial results. Together we have enjoyed a very successful partnership, with 888sport having seen a near 500% increase in sports betting revenues since switching to Kambi in 2013.”

Looking ahead, Kambi’s exclusive sportsbook deal with Corredor Empresarial in Colombia will strengthen the company’s foothold in Latin America and is expected to lead to other significant business opportunities for both parties.

“Together with Grupo Televisa in Mexico, Kambi has managed to secure two major players in the two largest regulated Latin American markets, which not only speaks to the strength and scalability of the Kambi Sportsbook, but also places us in a strong position to win further customers in the region,”  Nylén said.

French Online Sports Betting Up 9 Percent In Q2-2017

Turnover and revenue set new quarterly records

Figures released by French regulator ARJEL Wednesday brightened up the online gambling sector with the news that turnover and revenue rose to record quarterly levels in Q2-2017.

The improvement came despite a difficult comparison with the same period last year, when business was boosted by wagering on the Euro 2016 football championships.

Turnover of Euro 636 million was achieved in Q2-2017, a 9 percent y-o-y rise and a new quarterly record that generated revenue Euro 111 million, up 22 percent y-o-y, with margins up 1.9 percent.

The regulator reported less male but more female action in sports betting, with women punters up 5 percent at 80,000 whilst male gamblers declined 4 percent to 808,000 in the quarter.

The horseracing vertical reported turnover up 9 percent y-o-y at Euro 239 million, and revenue up 5 percent to Euro 58 million…a welcome change from the persistent downward trend experienced in the past

Online poker showed improvements too…revenue rose 5 percent y-o-y in the quarter to Euro 58.6 million, with tournament revenues again eclipsing those from cash games.  Tournament revenue was up 12 percent at Euro 36.6 million on stakes up 2 percent at Euro 459 million, whilst on the cash games front stakes fell half a percentage point to Euro 850 million, generating revenue of Euro 22 million.

The positive poker trend was overshadowed by a decline in the number of weekly active players during the quarter, which dropped 2 percent to 227,000, with cash games bearing the brunt of the fall-off – down 6 percent to 65,000.

Ladbrokes Trading Update Reports Merged Group On Track For 2017

Strong Digital performance with net revenue 17 percent ahead, and merger synergies better than expected…but retail performance lags

The merged Ladbrokes Coral group issued a trading update Thursday covering the period January to end June 2017 and highlighting the following achievements:

* The group is on track with expectations for the full year;
* Merger synergies upgraded to GBP 150 million by 2019 – more than double original predictions;
* Strong Digital performance with net revenue 17 percent ahead of estimates;
* UK retail revenues fall 6 percent y-o-y.

CEO Jim Mullen reported a strong H1-2017 performance with Digital doing particularly well and achieving net revenue growth of 17 percent y-o-y against a backdrop of a significant period of platform integration and a competitive trading environment.

“On integration, we have successfully migrated our UK Digital brands to a single platform and completed the consolidation of our head office team,” Mullen said.  The further synergies identified re-emphasise the merits of the merger and the potential of the enlarged group, with the additional savings delivered in 2017 offsetting the impact of current UK Retail run rates. We therefore remain in line with our expectations for the full year.”

Turning to the retail environment, Mullen said:

“In UK Retail, a key management focus has been on addressing some areas of ongoing inflationary pressure on the cost base and on improving gross win margins. Examples include the planned and considered commercial decisions taken on horse racing media costs and horse racing gross win margin. Whilst these have had a negative impact on stakes, they have been profit positive and helped mitigate some of the impact of underlying run rates. Furthermore, we are pleased to have resumed showing pictures from all UK racecourses following the agreement of a profit-share deal with The Racing Partnership reported last week.

“Sports net revenue was 25 percent ahead (cc +18 percent) with sports stakes 23 percent ahead (cc +18 percent). After adjusting for the Euros in 2016, sports net revenue was 34 percent ahead (cc +27 percent) with sports stakes 27 percent ahead (cc +21 percent). Sports gross win margin of 9 percent was 0.4pp ahead of last year. Gaming net revenue was 11 percent ahead of last year (cc +10 percent) and 15 percent ahead (cc +14 percent) in the sportsbook-led brands.”

Mullen reported that UK Retail net revenue was 6 percent behind last year, whilst European Retail net revenue was 1 percent behind last year (cc -10 percent). Poor football results in Italy meant that while amounts staked were 17 percent ahead of last year (cc +5 percent), OTC gross win margin was only 14.8 percent, 3.6pp behind last year.

Total Group net revenue was 1 percent ahead of H1-2016, with total group operating profit expected to be within the range GBP 153.3 million to GBP 158.3 million – 4 percent to 7 percent ahead of last year.

The update shows that estimated synergy savings have been upgraded from GBP 100 million to GBP 150 million over a three-year period, driven primarily by further cost savings identified through procurement, IT and the harmonising of horse racing gross win margins across the UK Retail brands.

The annualised phasing of the delivery of the GBP150 million synergies saving is expected to be circa GBP 45 million in 2017, GBP 130 million in 2018 and GBP 150 million in 2019.

Spanish Online Market GGR Declines In Second Quarter

But 22.6 percent up year-over-year

Second Quarter 2017 data published by Spain’s gambling regulator Dirección General de Ordenación del Juego shows a 4.51 percent decline in gross gaming revenue compared to the previous quarter but an increase of 22.6 percent year-over-year.

Detailed results include:

Total online market gross gaming revenue (GGR) decreased 4.51 percent to reach Euro 121.28 million (Q1/2017: Euro 127 million), and represents an increase of 22.6 percent y-o-y (Q2/2016: Euro 98.92 million).

Total deposits increased 4 percent to reach Euro 386.49 million over the last quarter (Q1/2017: Euro 354,28), and 27.25 percent up y-o-y (Q2/2016: Euro 289,59).

Total withdrawals by registered users amounted to  Euro 256.09 million, an increase of 13.1 percent over the previous quarter (Q1/2017: Euro 226,43) and an increase of 27.56 percent y-o-y (Q2/2016: Euro 200,76).

The number of active users during the second quarter of 2017 grew 0.98 percent to reach 646,475.  Y-o-y this number represents a 6.95 percent increase.

Registered users have decreased to reach 603,220 – 3.94 percent down compared to the first quarter and a decrease of 10.29 percent y-o-y.

Advertising expenditure decreased 14.1 percent over the previous quarter to reach Euro 25.03 million (Q1/2017: Euro 29.13), and 15.89 percent y-o-y (Q2/2016: Euro 29.75).

In terms of sector, compared to the previous quarter, GGR from sports betting and poker decreased. The star performer was casino which increased 14,5 percent, followed by Bingo at 3 percent.

Casino now represents 35.35 percent of the total GGR in Spain, sports betting 49.56 percent, poker 11.9 percent and bingo 2.34 percent.

Online poker:

Gross gaming revenue in the poker sector decreased 4.82 percent to reach Euro 14.43 million (Q1/2017: Euro 15.16 million), and 4.94 percent y-o-y (Q2/2016: Euro 13.75 million).

Of the Euro 383.25 million wagered in the Poker segment, cash poker amounted to Euro 237.83 million (62.06 percent) and tournaments Euro 145.42 million (37.94 percent).  Cash poker accounts for Euro 5.61 million of total poker GGR and tournaments Euro 8.82 million, 38.88 percent and 61.12 percent respectively.

Online Casino:

GGR in the Casino sector increased 14.5 percent to reach Euro 42.87 million (Q1/2017: Euro 37.44 million), and 52.54 percent y-o-y (Q2/2016: Euro 28.1 million).

Of total online casino GGR slots comprised 50.28 percent or Euro 21.55 million; Blackjack 11.55 percent or Euro 4.95 million; and Roulette 38.17 percent or Euro 16.36 million.

Of the Euro 1,475.63 million wagered in Casino, slots accounted for 38.5 percent or Euro 568 million; Blackjack 14.14 percent or Euro 208.69; and Roulette 47.35 percent or Euro 698.75 million, of which Live Roulette was 57.93 percent or Euro 404.82 million and conventional Roulette 42.07 percent or Euro 293.93 million.

Year-over-year, in terms of online casino stakes, Slots have increased 90.5 percent, Blackjack 12.09 percent and Roulette 39.27 percent – however, Baccarat has declined 45 percent.

Sports Betting:

GGR in the sports betting sector declined 14.91 percent to reach Euro 60.11 million (Q1/2017: Euro 70.64 million, but increased 12.32 percent y-o-y (Q2/2016: Euro 53.52 million).

Stakes in the second quarter amounted to Euro 1,413.14 million.

Bingo:

Bingo GGR grew 3 percent to reach Euro 2.83 million (Q1/2017: Euro 2.75 million), and 30.14 percent y-o-y (Q2/2016: Euro 2.18 million).