Financial Reports and Acquisitions in the News — Weekly Round-up for May 26, 2017

Online Performs Better Than Land In Latest Swedish Gambling Results

Q1-2017 figures show that state-owned Svenska Spel underperformed again

The Q1-2017 statistics on gambling issued by Sweden’s Lotteriinspektionen this week showed some interesting contrasts between online and land operations, with the former producing a better percentage performance, particularly in the state owned enterprise Svenska Spel.

Overall, the Swedish gambling market was pretty much flat, growing just 0.2 percent year on year with a total turnover of SEK 5.4 billion (around US$ 617.1 million).

Interestingly, and despite government interference in the market, the foreign operators by and large did well, increasing their market share by 13 percent to SEK 1.25 billion, whilst local companies reported a y-o-y decline in their turnover of 3 percent at SEK 4.2 billion.

Svenska Spel led that decline, reporting stakes down 5 percent at SEK 2.16 billion, with the drop-off mainly attributed to its land activity, which was down almost 10 percent year-on-year. In sharp contrast, online operations at the state-owned firm were up 6 percent y-o-y.

The land vs. online difference was repeated in horseracing, where monopoly ATG delivered overall flat revenue y-o-y at SEK 954 million. Land operations accounted for SEK 417 million of that – a slide downwards of 10 percent, whilst the online division posted a 10 percent rise to SEK 536 million.

In the lottery sector online again performed better: The Postcode Lottery’s online revenue contribution rose 22 percent, albeit to just SEK 11 million, in percentage terms outperforming land revenue, which fell 3 percent to SEK 623 million.

The People’s Game lottery suffered an overall decline of 10 percent in ticket sales, although it was not clear what percentage of that was attributed to online activity.

After years of skirmishing with the European Commission over its attempts to keep its gambling market to itself (see previous InfoPowa reports), Sweden is now on the threshold of a reformed and more competitive market, with national government mulling the contents of an extensive review concluded last year.

Whilst it seems unlikely that reform will reach as far as land gambling and the lucrative and popular slots sector, the changes will improve prospects for operators in general as the monopolistic policies that have governed the market in the past are scrapped.

GVC Delighted With First Quarter Performance

Positive momentum continues in second quarter

Sportbetting and gaming group GVC Holdings delivered a strong performance in a first quarter update published Thursday.

Key performance highlights for the 12 week period ending March 31, 2017, include:

–    Sports Brands gross win margin was 9.6 percent (Q1/2016: 8.5 percent)

–    Sports Brands total net gaming revenue up 16 percent to Euro 1.9 million (Q1/2016: 1.68 million).

–    Sports wagers Euro 12,9 million (Q1/2016: Euro 12,86 million) up 3 percent in constant currency terms.

–    Sports net gaming revenues were Euro 948,000 (Q1/2016: Euro 843,000), up 12 percent.

–    Gaming/Other net gaming revenues were Euro 1 million (Q1/2016: 838,000), an increase of 19 percent.

–    Group net gaming revenues were Euro 241 million (Q1/2016: Euro 215 million), an increase of 12 percent.

The positive momentum continues into the second quarter, GVC reports, with group daily net gaming revenues up 16 percent for the period to 21 May 2017, sports gross win margin’s of 10 percent and wagers up 10 percent.

“I’m delighted at the performance of the Group, with the positive momentum continuing in 2017,” Kenneth Alexander, chief executive officer of GVC Holding’s, said.

“Comparatives will get more challenging as we move through the rest of the year, particularly in the absence of a major football tournament this summer. However, I’m very confident that the combination of continued enhancements to the customer offering combined with a return to more normalised marketing spend will deliver another year of strong progress at GVC.”

Arena Racing Company Acquires Greyhound Stadia From Will Hill

Joins Greyhound Media Group

Arena Racing Company (ARC) will acquire Newcastle and Sunderland Greyhound Stadiums from William Hill PLC for an undisclosed consideration.

ARC will take over the operational running of both stadiums and responsibility for the 160 employees across the two sites. The stadiums host 520 greyhound racing fixtures a year, of which, 384 are part of the BAGS schedule.

In addition, ARC has joined Greyhound Media Group (GMG), who represent the media rights of twelve greyhound tracks, and around 70 percent of the greyhound fixtures shown in Licenced Betting Offices, through the Bookmakers Afternoon Greyhound Service (‘BAGS’).

“We are really delighted to have moved at pace and acquire the tracks and join our new partners at GMG as part of a long-term deal,” Martin Cruddace, chief executive of ARC said.  “We very much look forward to working with the great teams at both stadiums and developing our relationship with the greyhound industry.”

Raketech Acquires Danish Affiliate Sites

Strengthens position in Danish market

Malta-based Raketech Group has boosted its position in the Danish affiliate market with the acquisition of poker community website Pokernet.dk and iGaming affiliate websites Odds.dk and Casinoguide.dk for an undisclosed consideration.

“Pokernet.dk and Odds.dk are a perfect fit for RakeTech. We are delighted to have acquired these new assets and look forward to continuing to provide relevant and high-quality content with a focus on sports, poker, and casino to Danish users. Our aim is to create real user value and increase the relevance for the operators,” Michael Holmberg, RakeTech Group’s chief executive officer, said.

The group will both maintain its affiliate acquisition strategy and focus on the organic growth of the business.

Intralot Delivers In First Quarter Results

But EBITDA impacted by excessive Powerball results and change in product mix

Gaming solutions and operations firm, INTRALOT, hailed strong first quarter results driven by its focus on key markets and diversification in products and services.

Key performance indicators for the 12 week period ending March 31, 2017 include a 20 percent increase in consolidated revenues amounting to Euro 368 million, Euro 6.8 billion of worldwide wagers – a 1.1 percent y-o-y increase, EBITDA amounting to Euro 46.5 million and gross profit up 7.3 percent to Euro 63.2 million.

On a yearly basis, EBITDA margin decreased to 12.6 percent compared to 14.6 percent in Q1/2016, as a result of the product mix change and last year’s customer-friendly Powerball effect while EBT amounted to Euro 18.1 million, up 72.4 percent y-o-y.

Lottery Games are INTRALOT’s largest contributors to the top line, comprising 44.6 percent of revenues, followed by Sports Betting contributing 40.5 percent to Group turnover. Technology contracts accounted for 9.4 percent and VLTs represented 2.8 percent of Group turnover while Racing constituted the 2.7 percent of total revenues for the first quarter of 2017.

INTRALOT Group CEO Antonios Kerastaris noted:

“Robust revenue growth and improved profits registered in 1Q2017 are driven by our strategic decisions to focus on key markets as well as products & services portfolio diversification.

“All the transformational initiatives undertaken over the last two years are depicted both at profit and cash-flow levels, considerably improved from a year ago. With a significantly improved financial structure and operational performance, we are also reaping the fruits of lower debt servicing costs and enhancing our credit grade outlook by rating agencies that boost our confidence going forward.”

Fortuna Entertainment Group Completes Hattrick Acquisition (Update)

And offloads Fortuna sázky a.s. for an undisclosed consideration

In an industry update Thursday, Fortuna Entertainment Group N.V. (FEG) confirmed the successful execution of its acquisition of Hattrick Sports Group Ltd (Hattrick) after receiving approvals from regulatory authorities and shareholders.

FEG has taken ownership of Romanian betting operator, Casa Pariurilor and Croatian operator, PSK, along with Hattrick’s joint venture partnership in Luckia.es.

In related news, FEG sold its 98.4 percent stake of Fortuna sázky a.s. to Sazka a.s. last week.

This transaction was settled and closed on the signing date for an undisclosed consideration.

Aristocrat Half Year Results Beat Expectations

Americas, Digital and International Class II businesses the star performers

Aristocrat Leisure is flying high on the back of impressive first half-year results for the period ending March 31, 2017.

Net profit after tax and before amortisation of acquired intangibles for the half year was A$272.9 million, representing growth of 49 percent (H1/2016: A$183.2 million).  Revenue rose 21.6 percent to A$1.2 billion, while EBITDA increased 34 percent to reach A$498.9 million. Net profit after tax was A$249.8 million, up 56.9 percent from A$159.1 million in the prior-year period.

The strong performance was attributed particularly to growth in Aristocrat’s Americas, Digital and International Class III businesses, supported by sustained momentum in Australia.

Digital revenue grew 36.1 percent to reach A$178 million (H1/2016: A$130.8 million) and segment profit was A$77.7 million (H1/2016: A$50.7), up 53.3 percent, driven primarily by the ongoing success of Heart of Vegas and the launch of Aristocrat’s new Cashman Casino app.

A dividend of 14.0 cents per share (A$89.4 million), a 40 percent increase, was authorized by company directors, franked at 25 percent, in respect of the 6 months ended 31 March 2017.

Aristocrat Chief Executive Officer and Managing Director, Trevor Croker, said: “Aristocrat delivered outstanding results over the first half of fiscal 2017. Industry leading content, hardware and technology translated into exceptional operational performance despite competitive market conditions.

“Aristocrat is fully focused on growing our core business while investing wisely to capture attractive opportunities in adjacent segments and markets over time.

“Aristocrat’s strong balance sheet, improving debt ratios and substantial liquidity position provides us with ample flexibility for continued investment going forward, consistent with our strategy and shareholders’ interests,” Croker concluded.