Gambling Industry Acquisitions and Financial News — Weekly Round-up for August 10, 2018

William Hill Makes Provision For FOBTs Losses In Latest H1-2018 Report

‘GBP 882 million non-cash impairment’ booked for gambling group’s Retail division

William Hill plc‘s H1-2018 results posted this week highlight the severe impact that the UK government’s radical reduction in Fixed Odds Betting Terminal maximum deposits is expected to have on retail betting shops across the country.

Hill had already warned that the new GBP 2 staking limit on FOBTs in shops would cut Retail’s gaming revenues by 35-45 percent and operating profit, after mitigation, by GBP 70-100 million.

That would make 900 shops or 38 percent of its estate loss-making it said today, with exceptional charges of GBP 50,000 to GBP 60,000 per shop.

The group has made provision for a GBP 882 million “non-cash impairment” of its retail division to accomodate the changes that will see mazimum stakes reduced from GBP 100 to GBP 2 by 2020. These charges, and others totalling GBP 916 million in all will cause a statutory loss in the period before tax of GBP 820 million.

The group highlighted developments that include:

  • GBP 241 from the disposal of its Australian assets to CrownBet and unloading its investment in NYX Gaming to Scientific Games:
  • 1 million active punters signed up during the Russian World Cup football festival;
  • Group net revenues up 3 percent at GBP 802 million;
  • Underlying interim profits rose by 1 percent to GBP 130.8 million, though the group invested GBP 17.2 million to expand in the US;
  • Substantial growth across digital assets, with the firm’s online sportsbook up 18 percent in net revenues and 16 percent in new accounts;
  • Online gaming bet revenues up 4 percent overall;
  • Retail net revenues down 3 percent due to a ‘challenging environment for the UK high street’, and cancelled racing fixtures due to inclement weather;
  • Expanding the group presence in the newly liberalised US sports betting market with a new sportsbook at Ocean Casino in Atlantic City;
  • Costs of GBP 29.9 million for the closure of the Tel Aviv office and other restructuring costs.

CEO Philip Bowcock, reported:

“William Hill has performed well during the first half of 2018 and, following major regulatory decisions in the UK and US, we now have greater clarity over the challenges and opportunities that lie before us.

“During the first half, our Online business continued to deliver double-digit growth. In Retail, we are beginning to put in place plans to mitigate the impact of the Triennial Review. In the US, we have moved quickly following the repeal of PASPA as we grow into newly regulating states. We will continue to invest in the US to ensure we are well placed to capture the substantial potential available to us.”

Snaitech Departs Milan Listing Today

Playtech’s latest acquisition reports solid final online numbers as a listed company, but Retail stumbles

Italian sports betting giant Snaitech, recently acquired by Playtech plc, delisted in Milan Friday, posting legacy H1-2018 figures that continued to impress.

  • Online betting revenues rose 23 percent to Euro 255 million aided by the recent World Cup football championships;
  • Online gaming revenue rose by 22 percent to Euro 674 million.
  • Retail numbers slumped, with sports betting down over 2 percent at Euro 376 million as punters increasingly chose the online environment;
  • Overall, Snaitech took Euro 80 million in wagers on the World Cup – double the 2014 total – and generated revenue of Euro 11.6 million;

Net profit of Euro15.4 million and reduced leverage ratio;

  • Total wagers rose 2 percent y-o-y at Euro 5.3 billion;
  • Overall EBITDA was up a third at Euro 74 million.

Revenues Grow At Zynga Following Gram Games Acquisition

7 percent rise in Q2 revenue recorded, but EBITDA down and losses mount.

Online games developer and operator Zynga has posted a 7 percent rise in Q2-2018 revenues, which it attributes to the growth in its mobile gaming business.

Total revenue amounted to $217 million and bookings climbed 12 percent to $233.9 million, the company revealed in its report.

Whilst revenues were up, the company reported a previously anticipated 11 percent year-on-year drop in adjusted EBITDA, as well as a loss of $900,000, compared to profit of $5.1 million in Q2 of last year.

Zynga acquired mobile games developer Gram Games for $250 million in May this year, reporting that the acquisition’s titles have in total recorded 170 million downloads (see previous InfoPowa report). The company believes the acquisition will have further positive impact on its Q3 numbers.

“We anticipate that our year-over-year growth will benefit from full quarter contributions from our Casual Cards and Gram Games acquisitions as well as strength across our forever franchises,” the Zynga quarterly predicted, but cautioned.

“We continue to expect our sequential and year-over-year progression to be affected by declines in web and older mobile games.”

Management reiterated its strategy to grow Zynga in four approaches: delivering growth in live services; building new games with the goal of creating forever franchises; investing in emerging mobile technologies; and exploring M&A opportunities that will enhance growth potential.

Paddy Power Betfair Buys Back More Shares

Another GBP 300 million spent in repurchase of ordinary shares

Paddy Power Betfair plc announced Wednesday in a stock exchange advisory that it has entered into a second share buy-back deal worth GBP 300 million with Goodbody Stockbrokers UC in respect of the repurchase of ordinary shares of PPB.

The advisory notes that on 2 May 2018, PPB announced its intention to return GBP 500 million of cash to shareholders. Subsequently, on 29 May 2018, the group announced arrangements with Goldman Sachs International in respect of the buyback of shares of an initial tranche of GBP 200 million, an initial initiative that is currently underway.

The deal with Goodbody is irrevocable and non-discretionary. It will commence after all transactions under the Initial Buyback Tranche have completed and will continue until no later than 28 February 2019, subject to market conditions. The purpose of the Second Buyback Tranche is to reduce the company’s share capital and, accordingly, shares repurchased by the group will be cancelled. It is intended that ordinary shares may be repurchased on both the London Stock Exchange and the Irish Stock Exchange, trading as Euronext Dublin.

“Goodbody will make its trading decisions in relation to the company’s securities independently of, and uninfluenced by, the group,” the PPB communication notes.

“The Second Buyback Tranche arrangements will be conducted in accordance with the company’s general authority to repurchase ordinary shares as approved by shareholders at its 2018 Annual General Meeting on 18 May 2018, the parameters prescribed by the Market Abuse Regulation 596/2014/EU and the Commission Delegated Regulation (EU) 2016/1052 and the applicable laws and regulations of the London Stock Exchange and Euronext Dublin.

“The maximum number of ordinary shares to be repurchased under the Second Buyback Tranche is 12,692,692 less the number of shares repurchased as part of the Initial Buyback Tranche.”

Paddy Power Betfair Posts H1-2018 Numbers

EBITDA forecast revised due to new Australian taxes and FanDuel acquisition

Paddy Power Betfair plc released its H1-2018 figures Wednesday, noting that it has revised downward its EBITDA forecast to between GBP460 and GBP480 million as a result of the additional burden of new Australian taxes and acquisition costs for FanDuel.

The numbers were generally positive, highlighting:

  • Revenue up 7 percent at GBP 867 million;
  • EBITDA at GBP 217 million;
  • Q2 sales up 13 percent, thanks to the FIFA World Cup and growth in the US and Australian markets;
  • The company has declared a dividend of 67p per share, up from 65p a share a year ago;
  • Profit before tax up by 4 percent at GBP106 million.

CEO Peter Jackson reported that the group has made substantial progress against Management’s strategic priorities and trading in Q2 was good, with all brands and operating divisions contributing to the Group’s double-digit revenue growth.

“Our FanDuel sportsbook is now available in New Jersey and with our recent partnership with Boyd Gaming we’re looking forward to launching in further states as the legislation progresses,” Jackson said.

“In Europe, product enhancements and improved cross sell rates have led to stronger gaming revenue growth over the past few months for both brands, whilst customer satisfaction with the Paddy Power sports app has stepped up.

“Recent marketing campaigns have also been successful with the Betfair brand increasingly identified as having the best odds. The World Cup was a showcase event for Paddy Power, with a series of successfully executed marketing campaigns leading to it being one of the UK’s most talked about brands in social media conversations around the tournament.”