Gambling Industry Acquisitions and Financial News — Weekly Round-up for August 17, 2018

By Brian Cullingworth, Last updated Aug 17, 2018

The Stars Group Reports An Impressive Q2-2018

Revenues and EBITDA rise as Australian acquisitions deliver

Online gambling corporate The Stars Group has posted an impressive second quarter report, highlighting:

• Almost 35 percent rise in y-o-y revenue at $350 million;
• EBITDA up 14.8 percent to $168.3 million;
• Sales up at $412 million from $305.3 million last year;
• Poker revenue grew 7 percent to $217 million;
• Online casino revenue was up 26.3 percent at $102 million. TSG plans to rebrand its casino operations as CasinoStars;
• International sports betting revenue more than doubled to $19.6 million;
• Australian assets of TSG reported online betting revenue of $61.3 million, gross profit of $46.8 million and adjusted earnings of $13.5 million, although the division (comprising William Hill Australia and CrownBet trading as BetEasy) reported an actual operating loss of $6.5 million;
• H1-2018 revenue up 29 percent at $804.4 million;
• Management issued a revised H2-2018 guidance, forecasting full year 2018 revenue of between $2billion and $2.15 billion, and adjusted earnings between $755 million and $810 million;

CEO Rafi Ashklenazi reported:

“The continued emergence of our sports betting and casino offerings and the addition of our 2018 acquisitions have transformed our business and greatly enhanced the foundation and diversity of our consolidated revenue base, which will now be nearly equally split among verticals and roughly 75 percent locally regulated or taxed.

“We are now focused on the next stage of our transformation – integration. While this will be a phased and measured process, we expect that it will prepare us to not only be a leader within the world’s largest regulated markets but to also leverage the strength of our combined platform to take advantage of new opportunities and markets.”

Gaming Innovation Group Reports Strong Q2-2018

Expansion taking place across all i-gaming verticals

Online gambling corporate Gaming Innovation Group (GIG) has posted a strong set of Q2-2018 results, highlighting:

• Revenues up 39 percent year-on-year at Euro 36.9 million;
• EBITDA slightly down at Euro 1.7 million (Q2-2017: Euro 1.9 million);
• Entry to the sports betting sector via subsidiary Rizk’s sportsbook during the quarter;
• GIG’s platform service, GiG Core, licensed in the regulated US market of New Jersey and operations started with Hard Rock International;
• Organic revenue growth of 30 percent compared to Q2 2017;
• B2B revenues of Euro 15.6 million, up 84 percent from Q2 2017;
• B2C revenues of Euro 24.2 million, up 20 percent year-on-year;
• Marketing expenses of Euro 13.2 (11.1) million, 36 percent of total revenues, down from 42 percent in Q2 2017;
• Media Services reached quarterly all-time-high revenues of Euro 8.7 million, 99 percent growth from Q2 2017;
• Operating expenses were up 77 percent at Euro 15.7 million;
• GIG has applied for Swedish licensing for its white label operators and in-house operations;
• GiG Comply: new website monitoring compliance tool developed and ready for launch in September;
• Process for listing at NASDAQ Stockholm proceeding according to plan;
• Launching first proprietary game in H2 2018;
• Full year 2018 guidance forecast of revenues Euro 155 – 162 million; EBITDA Euro 16 – 20 million.

CEO Robin Reed said in a statement Tuesday:

“GiG has invested significantly to expand across all verticals of iGaming. We are building to become the one stop shop for every company serious about its iGaming business. With the majority of the heavy-lifting behind us and the strongest season ahead of us, we should see growth in both revenues and profits in the coming quarters, while working towards our goal of becoming the largest full service company to the iGaming industry”.

Jackpot Joy And Vera John Online Gambling Parent Reports H1 Results

JPJ expects return to earnings growth in second half of 2018

The JPJ online gambling group, which operates the Jackpot Joy and Vera and John enterprises, has posted its H1-2018 results, highlighting:

• Revenue up 10 percent y-o-y at GBP 161.1 million;
• Adjusted net income up 7 percent at GBP 45.5 million;
• Adjusted EBITDA down by 4 percent at GBP 56.9 million after investment in major marketing and accounting for higher taxes;
• Average active players per month up 7 percent thanks to new markets, especially in Spain;
• Jackpot Joy completed its final earn-out payment for Spanish business Botemania during the half-year

CEO Neil Goulden said in his report that he expected earnings to return to return to growth in the second half of the year, thanks to strong cash flow generation throughout the company.

He revealed that JPJ has signed a share purchase agreement for the sale of its social business for GBP 18.1 million, although no further details were disclosed, adding:

“Post completion, the group will be exclusively focused on its core activity of real money gaming and the disposal will represent another positive step in reducing net leverage.”

Following the release of the report JPJ shares waned almost 5 percent on the London exchange.

Rank Group Pre-Tax FY Profit Plunges 40 Percent

Land traffic declined at casinos and bingo halls, but digital division showed growth

The UK land and online gambling corporate Rank Group plc posted a dismal set of results Thursday, reporting that it plans to cut costs and boost revenue following a plunge of more than 40 percent in FY pre-tax profits.

Traffic at the group’s bingo and casino assets dropped, and even the digital division saw lower demand. The results prompted the company to reiterate earlier profit warnings.

Key indicators included:

• More focus is being emphasised on the digital business with the appointment of Jim Marsh as chief transformation officer;
• UK digital business revenue grew year-on-year by 9.9 percent;
• However, operating profit in the digital division fell 7.9 percent to GBP 20.9 million, hurt by higher employment costs and taxes following a change in taxation of free bets that started October 2017;
• UK digital business growth slowed down in the second half, with customer visits dropping after the UK Gambling Commission announced tighter regulation on money laundering and stricter customer identification;
• Low win margins and unusually prolonged good weather in the UK hurt Grosvenor casinos, where revenue declined more than 6 percent for the year ended June 30;
• Total revenue fell 2.2 percent to GBP 691 million;
• Full-year operating profit before exceptional items fell nearly 8 percent to GBP 77 million, in line with the company’s revised estimate of profit between GBP 76 million and 78 million;
• In the 12 months to 30 June 2018, like-for-like revenue at Rank dropped by 2.3 percent to GBP 738 million while statutory pre-tax profit tumbled from GBP 79.7 million to GBP 46.7 million;
• Customer visits declined resulting in revenue falling by 9.9 percent in the second half compared to a 2.4 percent fall in the first half;
• Mecca’s bingo revenue fell 2.6 percent in the year driven by a 7.9 percent decline in customer visits;

CEO John O’Reilly, said: “I joined Rank because of its underlying potential. With the backdrop of a disappointing performance in 2017/18, we are now moving quickly to identify the key priorities which will begin to realise the significant underlying potential that I have now seen first-hand since joining the group in early May.

“We are taking steps to increase our focus on the customer, to accelerate growth in the digital business, to drive cost efficiencies across the business and to strengthen our organisational capabilities. This will be delivered within a transformational programme framework, which will ensure that we deliver a growing Rank Group that is fit for the future.”

Cherry Posts Solid H1-2018 Results

Continued expansion and innovative investments

Cherry posted a positive set of results Thursday, highlighting:

Q2-2018:

• Group revenue increased by 41 percent to SEK 753 (536) million, with organic revenue growth amounting to 39 percent (37);
• Profitability improved, and EBITDA increased by 78 percent to SEK 165 (93) million on margin of 22 percent (17);
• Profit for the period amounted to SEK 91 (15) million;
• The Board of Directors appointed Gunnar Lind as Acting CEO;
• Cherry has completed the acquisition of 44 percent of the shares in the affiliate company, Game Lounge, with Cherry now holding 95 percent of shares outstanding. The purchase consideration amounted to Euro 9.8 million and 1,554,017 newly issued shares in Cherry AB;
• A further 7.5 percent of the shares in the online gaming company Almor Holding were acquired, with Cherry now holding 90 percent of the shares outstanding. The purchase consideration amounted to Euro 2.2 million and 299,504 newly issued shares in Cherry AB.

H1-2018

• Group revenue increased by 33 percent to SEK 1,434 (1,077) million, with organic revenue growth amounting to 32 percent (40);
• Profitability improved, and EBITDA increased by 103 percent to SEK 357 (176) million on margin of 25 percent (16);
• Profit for the period amounted to SEK 180 (51) million;
• Following new share issues, the number of shares has increased to 4,988,000 Class A shares and 100,680,026 Class B shares, as of 30 June 2018, totalling 105,668,026 shares.

Post reporting period events:

• On 3 July, Cherry was granted a sports betting licence in Poland;
• On 7 August Cherry exercised its option to acquire an additional 7.8 percent of the shares in the gaming specialist Highlight Games. Cherry also acquired shares corresponding to 15.1 percent in the company and now holds of 60.4 percent of the shares outstanding in Highlight Games;
• On 9 August Game Lounge acquired two premium domains in North America, BetNJ.com for sports betting and casino in New Jersey, and the Mexican domain OnlineCasino.mx.

Acting President and CEO Gunnar Lind reported that the second quarter was characterised by expansion, focus on growth and investment. Investments during the quarter were made primarily in the marketing of existing and new brands, and of games developed in-house by Yggdrasil and Highlight Games.

“Online Gaming is expanding and strengthening its position in key markets, while the business area’s new brands are also rapidly building awareness and establishing a good customer base. Game Development and Online Marketing have also acted proactively through increased investment in game development, acquisitions and a clearer presence in Sweden. To me, as acting CEO, this is a secure situation providing opportunities to continue strengthening Cherry in its core markets and, in parallel, to assess complementary growth alternatives,” Lind said.

Cherry’s subsidiary Almor, including the German brands Sunmaker and Sunnyplayer Casino, experienced one of its strongest quarters, thereby strengthening Cherry’s market position in the regulated Schleswig-Holstein market, Lind noted, adding that games developer Yggdrasil had an active quarter that included the launch of five new games, including “Sonya Blackjack”, the first game in the new “Table Games” product vertical.

Yggdrasil also signed distribution agreements with 13 operators and boosted head count to 243 (134). Following the end of the period, a global distribution agreement was reached with 888 Holdings, one of the world’s most popular gaming operators. An agreement was also reached with Intralot, which has a strong position in Italy, complementing Yggdrasil’s existing collaboration with Lottomatica. In April, Northern Lights became the first independent game studio to use Yggdrasil’s partner program, YGS Masters, and we make the assessment that this will be an excellent way to collaborate with companies in early phases of development. Following the end of the quarter, Yggdrasil was also certified for the fast-growing Spanish market – an important milestone in Yggdrasil’s strategy to grow in regulated markets.

At the beginning of the year, Highlight Games launched its virtual soccer game, SOCCERBET, in selected African markets, while the company also prepared for its introduction in Italy. During the third quarter, Highlight Games, alongside Eurobet and other leading Italian operators, will launch the game in Italy, where the virtual gaming market is expected to generate sales of some EUR 2 billion in 2018, as assessed by the independent data specialist H2 Gambling Capital. Highlight Games has favourable prospects of capturing significant market share, thus Cherry has acquired additional shares in the company and Cherry’s holdings in August totalled 60.4 percent and, accordingly, consolidated as a subsidiary effective from August 2018.

The Group’s affiliate company, Game Lounge, is developing according to plan. The company has established a new office in Stockholm and has a total of 60 employees. During the quarter, Game Lounge acquired assets, including some 1,500 websites, various search engine optimization (SEO) tools and services, and a team of ten employees with unique SEO expertise to aid the expansion of the company into new verticals. In August, Game Lounge acquired two premium domains in North America, which will be important bridgeheads in New Jersey and Mexico.

Yggdrasil Enjoys Another Strong Quarter

Plenty of orders and revenues on an upward trend at Cherry subsidiary

Cherry Group’s online gambling games development subsidiary Yggdrasil has booked another strong quarterly performance, reporting the following highlights from its Q2-2018 activity:

• 13 new licence agreements signed (12 in Q2-2017);
• 5 new games launched including first Table Game “Sonya Blackjack” (3);
• 2 gaming studios signed with YGS Masters;
• Number of FTEs 243 (134);
• Yggdrasil partners with Nitro Circus for first ever branded game;
• Player rounds increased by 66 percent to 1,328 million (801);
• Mobile share of EGW was 62 percent (56 percent);
• Total operating revenues increased by 65 percent to SEK 66.7 (40.4) million;
• EBIT increased by 8 percent to SEK 16.6 (15.3) million on margin of 24.9 percent;

The developer reported on H1-2018 performance:

• Total operating revenues increased by 67 percent to SEK 124.3 (73.7) million;
• EBIT increased by 17 percent to SEK 30.4 (26) million on margin of 24.5 percent (35.3 percent);
• EBIT margin amounted to 24.5% (35.3%)

Notable events after the quarter included:

• Signed with 888, Intralot and Tipsport. The signing with Tipsport allows Yggdrasil to enter into the Czech Republic market;
• Launch of casino games fan site;

CEO Fredrik Elmqvist reported

“The second quarter has been active with the launch of Sonya Blackjack, the first game out in our new product vertical Table Games, including our ground-breaking motion capture technology and in-house proprietary client framework platform.

“We have also launched a number of new blockbuster titles including Vikings Go To Hell, the third game in the highly appreciated Vikings series, and most recently Tut’s Twister. I am immensely proud of the achievements made by the team and for the continued strong demand among both operators and end players.”

Elmqvist concluded by observing that conditions are favourable for the company to capture additional market share going forwards.

“We will continue to put full emphasis on growth and further quality enhancement initiatives targeting both our products and the business,” he said.

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