Gambling Industry Acquisitions and Financial News — Weekly Round-up for April 27, 2018

The Stars Group Clinches Deal To Acquire Sky Betting And Gaming

$4.7 billion deal will result in the world’s largest publicly listed online gaming company

In a surprise news release Saturday the Canadian online gambling company The Stars Group announced that it has agreed to acquire Sky Betting and Gaming (“SBG”) from CVC Capital Partners (“CVC”) and Sky plc in a cash and stock transaction valued at $4.7 billion.

Early reports indicate that talks have been quietly going on for some weeks leading up to the announcement.

The Stars Group release claims the deal will result in the world’s largest publicly listed online gaming company.

“The acquisition of Sky Betting and Gaming is a landmark moment in The Stars Group’s history,” said Rafi Ashkenazi, the company’s Chief Executive Officer. “SBG operates one of the world’s fastest growing sportsbooks and is one of the United Kingdom’s leading gaming providers.

“SBG’s premier sports betting product is the ideal complement to our industry-leading poker platform. The ability to offer two low-cost acquisition channels of this magnitude provides The Stars Group with great growth potential.”

Ashkenazi concluded, “Following this transaction, The Stars Group will have significantly enhanced scale and a highly-regarded global brand portfolio. As a result, we are well positioned to realize our vision of becoming the world’s favorite iGaming destination.”

The press release lists multiple operational and financial benefits, including:

  • Greater revenue diversification and significantly enhanced exposure to sports betting, the world’s largest and fastest growing online gaming segment, as the majority of SBG’s revenues are generated by sports betting;
  • An increased presence in regulated markets, particularly within the United Kingdom, the world’s largest regulated online gaming market;
  • The development of sports betting as a second low-cost customer acquisition channel, complementing The Stars Group’s core poker business and enabling more effective cross-sell to players across multiple verticals;
  • Improved products and technology as a result of the addition of SBG’s innovative casino and sports book offerings, and portfolio of popular mobile apps;
  • Identified cost synergies of at least $70 million per year.

SBG is currently home to the United Kingdom’s largest active online player base and, with over 80 percent of revenues generated from mobile devices, is a leading mobile betting and gaming operator. In partnership with Sky, Europe’s leading sports broadcaster and media company,

SBG has developed some of online gaming’s most well-known brands, most notably Sky Bet, Sky Vegas and Sky Casino. The company’s unaudited annual revenue was GBP 624 million and unaudited adjusted EBITDA was GBP 202 million in the 12-month period ended December 31, 2017, representing compounded annual growth rates of approximately 46 percent and 51 percent, respectively, over the prior two years.

SBG was the United Kingdom’s fastest growing established online gaming operator over this period.

Following the acquisition, The Stars Group’s leadership will draw from two highly experienced teams, and SBG’s Yorkshire base will operate as a major hub of the enlarged group.

“We are delighted to join forces with The Stars Group,” said Richard Flint, Sky Betting and Gaming’s Chief Executive Officer. “We have had a fantastic last few years and would like to thank CVC and Sky for supporting us in becoming a leading online operator in the UK.

“This transaction allows us to offer our best-in-class products to a truly global audience. We’re excited about our future together.”

Pev Hooper, Partner at CVC, said, “Richard and his team have done a fantastic job building Sky Betting & Gaming into one of the UK’s largest and fastest growing operators. We have thoroughly enjoyed working closely with the team and our partners at Sky. This combination with The Stars Group opens a new and exciting chapter for SBG to accelerate its international growth, and we look forward to continuing the journey as a shareholder in the combined group.”

CVC holds 71 percent of Sky Bet’s shares, while Sky plc, the owner of Sky News, has a 20 percent stake. The remaining shares are held by Sky Bet’s management, including CEO Richard Flint.

Sportech Agrees Sale Of Dutch Tote Business To RBP Luxembourg

For Euro 3.25 million consideration

Sportech PLC has agreed terms for the sale of its Netherlands tote business, Sportech Racing BV, to RBP Luxembourg (RBP) for a Euro 3.25 million consideration.

Sportech Racing BV holds the exclusive rights for horserace tote betting in the Netherlands after securing the five-year license in June 2017. Under the licenslicencee, Sportech operates nine betting shops, 38 other outlets with point-of-sale terminals and online via the runnerz.nl domain.

The sale is subject to local regulatory consent and the transfer of various agreements and licences from unidentified Sportech group entities to Sportech Racing BV, a press statement cautions.

Euro 2.8 million of the consideration will be payable at closing and up to a further Euro 450,000 will be payable in January 2019, subject to agreed performance conditions being met.

Andrew Gaughan, CEO of Sportech, said: “The Proposed Disposal represents an attractive opportunity to realise value following the successful licence extension and restructuring of the business by management as we increase focus on US growth opportunities.

“Sportech will continue to provide RBP, under a long term contract, its ongoing tote services and also has a strong working relationship with them focused on developing and selling their French racing pools into our vast footprint of global customers.”

Netent Posts Q1-2018 Report

Departing CEO received a SEK 6 million exit package

NetEnt has reported a positive Q1-2018, highlighting the following metrics:

Revenues up 9.3 percent y-o-y at SEK 430 million (Q1-2017: SEK 393 million);

  • Operating profit (EBIT) rose to SEK 134 million on margin of 31.2 percent (Q1-2017: SEK127 million on margin of 32.2 percent);
  • Profit after tax of SEK 146 million (Q1-2017: SEK 115 million);
  • Cash flow for the period amounted to SEK 158 million (Q1-2017: SEK 79 million);
  • EPS of SEK 0.61 (0.48) before and after dilution.

The numbers show that the severance package for recently departed former CEO Per Eriksson was SEK 6 million, noting that this has been included under operating profit and commenting that adjusted for this cost the operating profit was SEK 140 million and the operating margin 32.5 percent.

The company lists the following noteworthy events during the reporting period:

  • 6 new customer agreements signed, and 8 new customers’ casinos launched;
  • Games launched with Caliente in Mexico;
  • Five new slot games released, including The Phantom’s Curse, Asgardian Stones and Hotline;
  • Live Beyond Live launched with Mr Green;
  • Digital marketing service (programmatic) contract signed with Mr Green;
  • Therese Hillman appointed acting CEO after Per Eriksson left the company.

Acting CEO Therese Hillman, reported:

“Costs increased in the quarter, mainly due to more staff in Live Casino and higher depreciation, attributable to newly launched products and currency effects. The business continued to generate strong cash flows. In March, we initiated measures to enable margin expansion going forward. Among other things, the company is taking action to reduce costs.

“Growth in NetEnt’s royalty income was nine percent in the first quarter compared to the first quarter of last year. The share of revenues from locally regulated markets was 34 (31) percent in the quarter. We saw overall solid performance in locally regulated markets and a key contributor to growth was the Italian market.

“Regarding North America, we recently decided to apply for a license in Pennsylvania and intend to launch our games with British Columbia Lottery Corporation in British Columbia (Canada) in the third quarter.

“We phased out deliveries to unlicensed operators in Australia, Poland and the Czech Republic. In the first quarter, the net negative effect from these markets was about two percentage points on royalty revenue growth in euro for the company. The weakness in Norway continued and this also had a negative impact on revenues in the quarter.

“We released five new slot games in the quarter: Twin Spin Deluxe, Phantom’s Curse, Fruit Spin, Asgardian Stones and Hotline. For Live Casino, we launched the new concept called Live Beyond Live for Mr Green.

“For the full year 2018, we plan to release 21 new slot games – an increase from 14 new games in 2017 – and we look to roll out more customised solutions with exclusive tables in Live Casino. We also introduced some new functionality that strengthens our mobile Live offering.

“For the remainder of the year, we see conditions for better growth, supported primarily by regulated markets, more new games and new customers. We continue to work on optimising the organisation and to make sure that revenues grow more than costs.

“We plan to host a capital markets day on May 22 in Stockholm, where we will present our view on products, regulated markets and future growth opportunities for NetEnt.

In related news, NetEnt announced that it will propose that during the Annual General Meeting to be held on April 25, 2018, shareholders elect Fredrik Erbing as new chairman of the board of directors. Erbing has been a member of the Board at NetEnt since 2008.

NetEnt’s current chairman Vigo Carlund has decided to stand down as chairman and member of the Board, for personal reasons.

Fredrik Erbing has been a member of the Board of NetEnt since 2008 and is a member of the Audit Committee. He is Vice President at Acando AB and has a Master of Engineering degree from the Royal Institute of Technology in Stockholm.

NetEnt’s departing chairman, Vigo Carlund, commented:

”During my two board tenures I have been part of the Board of NetEnt for a total of 15 years, 11 of which as chairman. Due to personal reasons not related to the company, I have now decided to leave the Board. Fredrik Erbing has great knowledge about the sector and NetEnt, and he has played an important role for NetEnt’s development during his time at the Board.”

The Board’s Nominating Committee proposes that the rest of the Board be re-elected at the AGM and that the new Board shall consist of the current seven directors.

Philweb Posts Strong Performance In Q1-2018

eGaming provider sees revenue soar

Philippines e-gaming provider PhilWeb Corp. has posted a come-back Q1-2018 report showcasing revenue up 236.7 percent y-o-y at PHP87.8 million (US$1.68 million), and a reduction in cash losses by 91.1 percent to PHP4.4 million (US$84,159), a remarkable recovery from the same period last year when losses reached PHP45.4 million (US$868,375).

Philweb provides software and other services to operators of PAGCOR-licensed gaming sites, and went through a difficult patch shortly after top government changes in the Philippines in late 2016, when its licence expired and was not renewed until late last year (see previous InfoPowa reports).

The parlous situation the company found itself in resulted in its chairman Roberto Ongpin stepping down to be replaced by Gregorio Araneta, who rebranded the corporate and resolved its issues with government.

Betsson Back To Its Roots After ‘Turbulent’ 2017

Focuses on regaining traction in core markets

Betsson AB’s full 2017 report describes a turbulent year which has shaped the company’s focus in 2018 and beyond with “getting back to our roots and our passion for gaming”.

CEO Pontus Lindwall acknowledged a loss of traction in some of the company’s core markets during the year saying its operational subsidiaries have “some work to do” in living up to Betsson’s vision of offering “the best customer experience in the industry.”

Key performance indicators for the 12 months ending December 31, 2017 include:

  • Revenues of SEK 4,716 million (2016: SEK 4,117 million).
  • Gross Profit of SEK 3,419 million (2016: SEK 3.078 million).
  • Operating Income of SEK 882 million (2016: SEK 946 million).
  • Profit before tax of SEK 843 million (2016: SEK 936 million).
  • Income after tax of SEK 786 million (2016: SEK 878 million).
  • Online Casino delivered SEK 3,437 million in revenue (2016: SEK 2,907 million).
  • Online sportsbook revenues were SEK 1,140 million (2016: 1,080 million).
  • Revenue from ‘Other Products’ was SEK 138 million (2016: SEK 129 million).
  • Number of registered customers was 12.9 million (2016: 10.1 million) and active customers rose to 615,000 (2016: 573,000).

“2018 will be a year when we work hard to get the business back on track. We believe there is no one silver bullet, but are instead systematically implementing actions to improve the business step by step. The ambition is that results of our efforts will show both in product offering and financial performance in the future,” Lindwall said.

Sportech Emerges Leaner Following Financial Review

“2018 is shaping up to be one of significant opportunity,” CEO says

Betting tech firm Sportech PLC has reported full year results for the 2017 financial year detailing a corporate restructuring and the completion of a cost reduction programme following a comprehensive financial review.

The company revealed plans to focus and leverage opportunities going forward aimed at the possibility of a liberalised US sports betting market.

Key performance indicators for the 12-month period ending December 31, 2017 include:

  • Revenues of GBP 66.3 million, 2 percent higher than reported for 2016 but 2 percent lower in constant currency.
  • Adjusted EBITDA of GBP 6.7 million (2016: GBP 8.5 million).
  • Statutory loss before tax of GBP 23.2 million (2016: profit, GBP 63.6 million).
  • Adjusted profit from continuing operations, GBP 1.5 million, up from GBP 0.7 million

Andrew Gaughan, CEO of Sportech, commented:

“2017 was a year of material change for Sportech and 2018 is shaping up to be one of significant opportunity. Our recurring revenue in our Racing and Digital business is further being enhanced by additional sales opportunities and commingling along with the growth in our Bump 50-50 business. We have an enhanced platform for growth in our Venues division. Both should see benefit from a liberalisation of sports wagering in the US.”

Kindred Group Reports Strong First Quarter 2018

Mobile growth of 34 percent in gross winnings revenue

Kindred Group plc’s first quarter financials reveal a strong performance highlighted by a 34 percent increase in gross winnings revenue on the mobile channel year-on-year which now accounts for 72 percent of the group’s total gross winnings revenue.

Key performance indicators for the 12-week period ending March 31, 2018 include:

  • Gross winnings revenue of GBP 207.8 million (Q1/2017: GBP 153.2 million), up 36 percent.
  • Underlying EBITDA was GBP 47.5 million (Q1/2017: GBP 30.3 million) representing a 57 percent increase.
  • Profit before tax amounted to GBP 33.6 million (Q1/2017: GBP 18.2 million.
  • Profit after tax was GBP 29.9 million (Q1/2017: GBP 16.3 million).
  • Earnings per share were GBP 0.131 (Q1/2017: GBP 0.072).
  • Number of active customers increased to 1,383,201 (Q1/2017: 1,232,915).
  • Gross winnings revenue from mobile grew 34 percent year-on-year and now contribute 72 per cent of total Gross winnings revenue.
  • Of the Group’s Gross winnings revenue 42 percent was derived from locally regulated markets.
  • Gross winnings revenue contribution from 32Red for the first quarter of 2018 was GBP 17.9 million and underlying EBITDA was GBP 2.6 million.

In a further trading update, CEO Henrik Tjärnström revealed average daily gross winnings revenue to April 22 were up 52 percent y-o-y or 40 percent adjusting for the acquisition of 32Red.

Betsson Reports First Quarter Results

Focus continues are getting Betsson “back on track”, says CEO

Betsson AB (publ) has reported first quarter results with a decline in EBIT attributed to negative currency fluctuations, increased marketing spend and a disappointing return from recent acquisitions.

Key metrics for the 12-week period ending March 31, 2018 include:

  • Group revenue of SEK 1,210 million (Q1/2017: SEK 1,102 million), up 10 percent with an organic growth of 4 percent.
  • Gross Profit of SEK 864.3 million (Q1/2017: SEK 806.3 million), up 7 percent.
  • Net income was down 12 percent to SEK 187.9 million (Q1/2017: SEK 214.4 million).
  • Earnings per share were down 12 percent to SEK 1.36 (Q1/207: SEK 1.55).
  • Online casino revenue grew 12 percent to reach SEK 922.8 million (Q1/2017: SEK 822.9 million).
  • Sportsbook revenue grew 5 percent to reach SEK 263.5 million (Q1/2017: SEK 250.3 million). Gross turnover was down 4 percent. Sportsbook margin was 6.6 percent.
  • Operating income (EBIT) was SEK 211.4 million (Q1/2017: SEK 240.9 million), down 12 percent.
  • Operational expenses in the quarter included a non-recurring restructuring cost of SEK 15 million.
  • Operating margin was 17.5 percent (Q1/2017: 21.9 percent).

Pontus Lindwall, chief executive officer of Betsson AB, said: “We follow a detailed plan and took several actions within different areas in the first quarter, aiming at getting Betsson back on track.

“The recent restructuring was made to increase efficiency in Betsson’s operations. We will continue to systematically implement further improvements. However, I want to repeat my message from last quarter that it will take time until we can see any material effects.”

Kambi Group Shines In First Quarter Report

Double digit growth in Revenue and EBIT

Sportsbetting provider Kambi Group plc reported a robust performance in its first quarter 2018 financial report.

Key performance indicators for the 12 week period ending March 31, 2018 include:

  • Revenue amounting to Euro 16.4 million (Q1/2017: Euro 14.2 million), 15 percent.
  • 42 percent increase in operating profit (EBIT) amounting to Euro 2.0 million (Q1/2017: Euro 1.4 million) with a margin of 12 percent (Q1/2017: 10 percent)
  • Profit after Tax amounted to Euro 1.5 million (Q1/2017: Euro 1.1 million).
  • Earnings per share were Euro 0.051 (Q1/2017: Euro 0.036)
  • Cash flow from operating and investing activities (excluding working capital) amounted to Euro 0.6 million (Q1/2017: Euro 0.8 million)

“Kambi kicked off the year in positive fashion with Q1 2018 delivering double-digit revenue growth, a strategic investment in a virtual sports company and the signing of a new customer,” Kambi CEO Kristian Nylén, said. “In addition, since the end of the quarter, we added another operator to the Kambi network, stretching our run of new customer wins to an impressive 10 consecutive quarters.”

“With a World Cup around the corner and preparations for the potential opening of a US market progressing well, the levels of excitement and optimism at Kambi continue to grow.”

Churchill Downs Quarterly Posted

Three months to end March this year shows online action grew 21.6 percent

US racing group Churchill Downs Inc., has reported a positive quarterly report for the three months ended March, highlighting:

  • Overall revenue up 13 percent y-o-y at $189.3 million;
  • EBITDA up 36 percent at $49.2 million;
  • Net income (including $168.3 million from last November’s sale of Big Fish Gaming) at $182 million (equivalent period last year: $7.3 million);
  • Adjusted net income of $15.8 million (vs. 2.2 million in Q1-2017);
  • Terrestrial operations delivered revenue of $98.1 million (up 12 percent y-o-y) and adjusted earnings up 25.4 percent at $44.3 million;
  • Online operations via Twin Spires revenue up 21.6 percent at $63.6 million, with earnings up 25 percent at 16.5 million;

“Our adjusted EBITDA for the first quarter was up 36% compared to prior year on the strength of our Casino and TwinSpires segments,” said Bill Carstanjen, Chief Executive Officer of the Company. “Looking forward, we are a little over a week away from the 144th running of the Kentucky Derby and are excited to show our guests the myriad of improvements to our facility that we have made over the last year.”