Gambling Industry Acquisitions and Financial News — Weekly Round-up for February 16, 2018

2017 Was Mr Green’s Most Successful Year Ever

Revenues exceed annual target for fifth consecutive quarter

Mr Green reported its most successful year ever in full year results released Friday, saying revenues exceeded annual growth targets of 20 percent for the fifth consecutive quarter.

Key performance highlights include:

Group revenue increased 28.9 percent to reach SEK 1,192 million.

Strong customer growth and record-high customer deposits. Active customers increased 24.6 percent to 297,667 (238,822). Customer deposits rose by 28.6 percent to SEK 3,468.3 million (2016: SEK 2,696.5 million.

The strong growth in revenue was the result of digitally driven customer communication, enhanced entertainment value and a new, unique product offering. Casino games and live casino were the primary growth drivers.

Revenue in Western Europe rose 63.5 percent to SEK 489.3 million (2016: SEK 299.2 million).

Revenue for Central, Eastern and Southern Europe increased 14.4 percent to SEK 285.7 million (2016: SEK 249.6 million), with healthy growth in Austria.

Revenue in the Nordic region increased 10.2 percent to SEK 390.3 million (2016: SEK 354.2 million) due to growth in Sweden and Finland and the new market in Denmark via the acquisition of Dansk Underholdning.

Revenue in the rest of the world rose 24.9 percent from a small base to reach SEK 26.7 million (2016: SEK 21.4 million).

Revenue from markets where Mr Green pays or makes provisions for betting duties increased by 39.1 percent to SEK 648.8 million (2016: SEK 466.4 million) during the year. The markets included are Denmark, Italy, Ireland, Malta, the UK, Germany and Austria.

Total betting duties including interest rose 37.3 percent to SEK 182.3 million (2016: SEK 132.8 million). As a proportion of revenue, total betting duties increased by 0.9 percentage points to 15.3 percent (2016: 14.4 percent) of revenue. Most, or 10.4 percent (2016: 10.2 percent) of revenue comprised betting duties including interest in Austria.

Marketing costs rose 20.0 per cent to SEK 403.9 million (2016: SEK 336.4 million).

In 2017, EBITDA increased 103 percent to SEK 185.6 million (2016: SEK 91.4 million). The improvement in profitability was mainly due to strong revenue growth and enhanced marketing efficiency.

EBIT increased 508 percent to SEK 116.0 million (2016: SEK 19.1 million).

“I can now state that 2017 was Mr Green’s most successful year ever,” Per Norman, chief executive officer of Mr Green, said highlight growth of 28.9 per cent and a 103-per cent improvement in EBITDA.

GVC Publish Ladbrokes Coral Acquisition Prospectus

Detail executive make-up of enlarged group and cost synergies

GVC Holdings published details on its approximately GBP 3.8 billion takeover of Ladbrokes Coral in an official prospectus released late Friday.

The executive leadership structure of the enlarged group will comprise Lee Feldman as Chairman, Kenneth Alexander as Chief Executive and Paul Bowtell as Chief Financial Officer, the only Ladbrokes Coral Director to join the enlarged group.

The senior executive team will comprise joint Chief Operating Officers Andy Hornby and Shay Segev. Hornby will be responsible for retail business in the UK and Europe as well digital marketing. Segev’s responsibilities will comprise technology, product, customer service and leadership of operation and technology integrations post completion.

Australian operations will report directly to Kenneth Alexander.

On completion of the acquisition, Ladbrokes Coral chief executive officer James Mullen will step down from his position and from the board, along with all non-executive Ladbrokes Coral Directors.

GVC said operational restructuring of both GVC and Ladbrokes will most likely be required which may lead to redundancies of up to 6 percent of the combined employee base, representing 1600 jobs, whose functions overlap.

The Enlarged Group is anticipating pre-tax cost synergies of at least GBP 100 million per annum by 2021 with technology and data accounting for 44 percent, corporate and administrative efficiencies 30 percent, marketing efficiencies 14 percent and the remaining 12 percent spread over consolidation of some international businesses and savings in payment processing and professional services fees.

The creation of an enlarged group is reliant on a resolution to approve the Scheme being passed at the Court Meeting by at least 75 percent, receiving Court sanctions, approval of Admission and a UKGC determination that all operating licenses held by Ladbrokes Coral shall continue to have effect following the acquisition.

The Court Hearing is currently expected to take place on March 26, 2018.

French Online Gambling Market Shows Encouraging Signs

Growth across all three business sectors during 2017

The French Autorité de régulation des jeux en ligne (ARJEL) released encouraging online gambling statistics for full year 2017 this week.

The regulator said the “slight rumbling last year is clearly confirmed” revealing that all market segments had recorded an increase in activity and positive results in stakes, gross gaming revenues and the number of active players accounts.

The entire market yielded Euro 9.2 billion in wagers and entry fees, an increase of 9 percent. Gross gaming revenues increased 18 percent to reach Euro 9.2 billion and active player accounts grew 13 percent.

“These results are encouraging, they testify to the dynamism of the licensed operators and reflect the determined action of the regulator,” ARJEL said.

Despite positive overall results, the regulator highlighted disparities in the three markets saying sports betting confirmed its dominance with record wagers amounting to Euro 2,5 billion and 2 million active player accounts, an increase of 400,000.

Online horserace betting reignited after four consecutive years of decline due to new, innovative products and an increase in the return rate. Active player accounts grew 7 percent to reach 523,000 y-o-y.

Online poker surprised with a turnaround, especially on cash game business, recording growth for the first time since 2011, even if it was a modest 1 percent. ARJEL anticipates the positive trend to continue following the advent of shared liquidity pools with European partners.

Government coffers were fattened with a 13 percent increase in tax revenues to reach Euro 439 million, the regulator confirmed.

A point of concern raised by ARJEL was the increase in average player expenditure across the three segments which amounted to Euro 343 compared to Euro 328 in 2016. ARJEL said it will present a new strategy in the coming weeks to reinforce responsible gambling.

Novomatic Group Forecasts Record Revenues For 2017

Strong growth through strategic acquisitions

Harald Neumann, chief executive officer of Novomatic AG, at a press conference in London last week, revealed the expectation of a new revenue record for 2017 in which initial assessments indicate accumulated revenue of Euro 4.8 billion (2016: Euro 4.4 billion).

Citing strong growth, primarily through strategic acquisitions, Neumann said the finalisation of the company’s majority holding in Australian industry giant Ainsworth Game Technology Limited marked a significant milestone in the history of NOVOMATIC AG.

“Having grown a lot over the past few years, we will this year focus on increasing synergies between companies and, correspondingly, on more effective internal structures,” Neumann said. “Nevertheless, we will continue to watch the market and make purchases, where it makes sense.”

Pagcor Expects Online Casino Revenues To Double

As POGO scheme comes online

In an interview with the Business Inquirer.net, Philippine Amusement and Gaming Corporation (PAGCOR) chair, Andrea Domingo, said as the Philippine Offshore Gaming Operator (POGO) scheme comes online, the country expects revenues from gaming operators to double.

The gaming regulator expects the Philippine Government to benefit from P6 Billion in revenues in 2018, double that raised in 2017.

“Not all the licensees were fully operational last year, but this year, everyone will be operational, so we expect revenue to increase,” Domingo said.

Spanish Online Market Q4 Results

Making steady progress

The Spanish gambling authority DGOJ’S fourth quarter 2017 report on online gambling shows steady growth and progress across most verticals.

Key indicators include:

Gross gaming revenues in the fourth quarter of Euro 173.3 million, up 23.49 percent over the previous quarter and 37.94 percent y-o-y.

Deposits of Euro 495.5 million, up 17.4 percent on Q3/2017 and 53 percent on Q4/2016.

Withdrawals amounting to Euro 328.94 million, up 59.12 percent y-o-y.

Registered users have only grown 0.62 percent y-o-y to reach 602,000.

Euro 31.28 million was spent on advertising during the quarter, a decrease of 1.4 percent on Q4/2016.

Bonusing amounted to Euro 21.06 million, an increase of 13.14 percent compared to Q4/2016.

Sponsorship expenses increased 101.7 percent y-o-y to reach Euro 3.15 million.

In terms of segment, sports betting grew 35.67 percent in terms of GGR compared to the previous quarter, Poker 4.96 percent, Casino 12.97 percent and Bingo 14.77 percent.

Sportsbetting leads the market in terms of percentage GGR per segment with 56.78 percent, followed by Casino 28.5 percent, Poker 8.92 percent and Bingo 1.87 percent.

The Poker segment enjoyed an increase of 8.17 percent in terms of stakes amounting to Euro 411.6 million and 4.96 percent in terms of GGR compared to Q3/2017. Stakes were led by cash games which grew 65 percent to reach Euro 267.9 million, followed by tournaments with a 34.9 percent increase to reach Euro 143.66 million. Cash games delivered growth of 41 percent or Euro 6.32 million in terms of GGR and tournaments Euro 9.14 million, up 59.12 percent.

Cash game stakes declined 2.58 percent y-o-y, however, but Tournaments increased 2.22 percent. A similar pattern follows in terms of GGR with cash games declining 6 percent and tournaments increasing 7.4 percent.

Casino game GGR increased y-o-y across all game types with the exception of Blackjack. Slots grew 53.24 percent, Live Roulette by 51.88 percent, conventional roulette by 21.81 percent.

Slot wagers y-o-y grew 61.85 percent, Blackjack 21.56 percent, PuntoyBanca 29.72 percent and live roulette 71.56 percent and conventional roulette 20 percent.

Sports wagers grew 6.45 percent y-o-y. Conventional betting grew 11.24 percent and live betting 4.37 percent.

In terms of GGR, conventional betting increased 64.57 percent, while live betting grew 35.3 percent y-o-y.

GIG Delivers In Fourth Quarter Report

All Time High quarterly revenues

Gaming Innovation Group (GIG), in the release of its Q4 2017 results, reported profitable growth along with all time high quarterly revenues of Euro 39.9 million and EBITDA of Euro 7.9 million attributed to growth in recurring B2B revenues.

Robin Reed, chief executive officer of GIG, said: “We have taken large strategic and organic steps throughout 2017. The effects have now started to be evident in the financial performance. Going forward this trend will be strengthened. We look forward to a 2018 where we expect to see more positive results from the initiatives we have made – and those that we have in the pipeline.”

Financial highlights Q4 2017 compared to Q4/2016 include:

Operating revenues of Euro 39.9 million, up 86 percent from Euro 21.5 million.

Organic revenue growth of 67 percent.

EBITDA of Euro 7.9 million, up from Euro 3.9 million.

B2B revenues of Euro 18.0 million, up 255 percent.

B2C revenues of Euro 25.4 million, up 42 percent.

Marketing expenses of Euro 13.1 million, compared to Euro 7.0 million y-o-y.

Financial highlights full year 2017, include

Operating revenues of Euro 120.4 million (2016: Euro 53.6 million), up 125 percent.

EBITDA of Euro 12.5 million, up 115 percent from Euro 5.8 million in 2016.

Marketing expenses amounted to Euro 47.1 million, up 147 percent from Euro 19.1 million in 2016.

“Our goal is to re-invent the value chain in the industry, replacing it with an open and connected eco-system, benefitting users, suppliers and operators alike. I see the recently announced Hard Rock partnership as one evidence of our capabilities to develop these industry leading services.”

GIG is targeting a New Jersey license which it expects to receive in the first half of this year while also revealing it is currently exploring several acquisition opportunities.

French Online Gambling Revenue Up 18 Percent In FY 2017

Online revenue increased to Euro 962 million

France’s online gambling regulator ARJEL has released figures showing that in FY 2017 French online gambling revenue rose 18 percent year-on-year to Euro 962 million.

The increase was attributed to rising bets and entry fees, which collectively grew 9 percent year-on-year to Euro 9.2 billion.

Sports betting was the most popular with French punters, delivering Euro 2.51 billion in wagers over the year from 2 million gamblers – up 400,000 players compared with the preceding year. Online betting on horse racing rose for the first time in four years, recording an active punter base of 523,000 (2016 – 484,000).

Online poker deposits rose marginally at 1 percent year-on-year to Euro 3.6 billion on cash games, with tournaments delivering a 9 percent y-o-y improvement.

Government tax and fees coffers benefitted by 13 percent yea-on-year at Euro 439 million.

Kindred Group Reports Impressive Full Year 2017 Results

Early 2018 trading shows promising trend

Kindred Group plc has released its full year 2017 report delivering an impressive year of growth.

Key highlights include:

All-time high in Gross winnings revenue of GBP 751.4 million (2016: GBP 544.1million).

Underlying EBITDA was GBP 185.0 million (2016: GBP 123.7 million).

Profit before tax amounted to GBP 132.0 million (2016: GBP 92.8 million), includes non-cash fair value adjustments of GBP 9.2 million relating to the accelerated amortisation of acquired assets.

Profit after tax amounted to GBP 117.4 million (2016: GBP 83.9 million.

Earnings per share for the full year was GBP 0.516 (2016: GBP 0.366).

Underlying earnings per share were GBP 0.578 (2016: GBP 0.379).

The Board of Directors has proposed a dividend of GBP 0.551 (2016: GBP 0.310) per share/SDR, amounting to a proposed distribution to shareholders of GBP 125.5 million (2016: GBP 71.4 million).

The strong momentum continues into 2018 with “an average daily gross winnings revenue up 35 percent y-o-y in the period up to February 11, 2018,” Henrik Tjärnström, CEO of Kindred Group, said.

Kambi Reports Positive Progress In Full Year 2017 Results

Future looks bright, CEO says

Online sports betting supplier Kambi Group plc reported continued upward momentum in its full year 2017 results.

Key performance indicators include:

Revenue of Euro 62.1 million (2016: Euro 56.0 million).

Operating profit (EBIT) of Euro 7.7 million (2016: Euro 8.8 million) with a margin of 12 percent (2016: 16 percent).

Profit after Tax amounted to Euro 5.9 million (2016: Euro 7.5 million).

Earnings per share for full year 2017 amounted to Euro 0.198 (2016: Euro 0.253).

Cash flow from operating and investing activities (excluding working capital) amounted to Euro 4.7 million (2016: Euro 4.1 million)

“I’m delighted to report Kambi ended 2017 on a high, with the fourth quarter delivering record revenues, a new customer signing and three customer contract extensions. We are entering 2018 with strong momentum.

“Our 12-month operator trading margin was 7.4 percent, a figure more in line with our previously communicated expected range of 6.5-7 percent,” CEO Kristian Nylén said.

“A consequence of a higher operator trading margin is lower operator turnover growth – when results favour operators, as they frequently did in Q4, players have less money in their betting accounts to play with. Despite this suppressing factor, Kambi operator turnover grew year-on-year.”

Bidders Lining Up For Cirsa?

Major hedge funds rumoured to be circling

The rumour mill continues to swirl that Cirsa Gaming Corp. is weighing up acquisition prospects with several major hedge funds wooing Spain’s major casino, bingo hall and online operator.

According to numerous Spanish media outlets, Apollo Global Management, Advent International, Blackstone Group and Cerberus Capital Management are all in the mix following the appointment of financial advisory firm Lazard Ltd. by owner Manual Lao Hernandez back in November 2017.

Lazard Ltd. was reportedly tasked at the time with exploring various prospects which included an IPO, a merger, an outright sale or the sale of a minority stake.

A Euro 2 billion price tag was estimated at the time in the advent of an outright sale.

NetEnt Posts Fy 2017 Numbers

Management reports a lacklustre fourth quarter but another year of strong growth

Online gambling software and games developer NetEnt has published its Q4 and FY numbers for 2017, with management highlighting the following KPIs:

Fourth quarter 2017

* Revenues increased by 4.7 percent to SEK 419 (400) million;
* Operating profit down 3.9 percent at SEK 150 (156) million;
* Operating margin was 35.8 (39.0) percent;
* Profit after tax up 1.5 percent at SEK 152 (150) million;
* 8 new customer agreements were signed and 11 new customers’ casinos were launched.

Important events in the fourth quarter

Customer agreement signed with Caliente in Mexico
New digital marketing service launched with Ve Global
The games Planet of the ApesTM and Finn and the Swirly SpinTM were released
Live Casino Black Jack for mobile was launched

Full year 2017

* Revenues up by 11.7 percent to SEK 1,625 (1,455) million;
* Operating profit up 9.5 percent at SEK 587 (536) million;
*Operating margin was 36.1 (36.8) percent;
* Profit after tax up 9.5 percent at SEK 552 (504) million;
* 37 new customer agreements signed and 35 new customers’ casinos launched;
* Proposed cash distribution to shareholders of SEK 2.25 (2.25) per share .

CEO Per Eriksson characterised the full year as one delivering continued strong growth, although not meeting management expectations in the fourth quarter.

“In 2018, we are increasing our commercial focus and optimizing our organization to make sure that revenues grow more than costs,” he said.

“Our strategy to grow on regulated markets remains in place and during 2017 we terminated deliveries of games to operators in Australia, Poland and Czechia, which affected revenues negatively by three percentage points in the fourth quarter.”

Discussing the fourth quarter performance, Eriksson said that the lower-than-expected revenue growth resulted in a lower operating margin compared to the previous year as the company continued to make growth-enabling investments to strengthen product and sales organization, enhance the Live Casino offering and moved to new, larger offices in Malta.

Eriksson said that NetEnt continued to invest in mobile games for online casino and in November released Finn and the Swirly Spin, a ground-breaking game with a new type of game mechanic, developed to offer the ultimate mobile gaming experience.

“So far the game has been very well received by players. Further, we introduced a mobile version of Black Jack Live Casino. Mobile games accounted for 54 percent of our revenues in the fourth quarter,” he revealed.

NetEnt plans to release at least 20 new games in 2018, compared to 14 in 2017, including two branded games, Jumanji and Vikings, Eriksson said. A third branded game was unveiled at ICE based on the popular Netflix-series Narcos and will be released in Q1 2019.

Turning to the year ahead, Eriksson said: “For 2018, we see conditions for profitable growth, supported by a large pipeline of new games, growing revenues from regulated markets, the mobile channel and new customers to be launched.”

Revenue And Profits Up At Live Dealer Provider

Evolution Gaming posts good FY 2017 results

Live dealer technology and games supplier Evolution Gaming has reported strong Q4 and FY 2017 results, highlighting the following key performance indicators:

Q4-2017

* Operating revenues up 48 percent year-on-year to Euro 50.7 million (34.3);
* EBITDA up 74 percent at Euro 22.6 million (13.0), on a margin of 44.6 percent (37.8);
* Profit double at Euro 18 million (9.0).

Events during the fourth quarter of 2017

* Continued high growth and margin;
* High level of expansion in environments and tables;
* Focus on product development with several new games to be launched in 2018.

FY 2017

* Operating revenues up 54 percent y-o-y at Euro 178.4 million (115.5);
* EBITDA up 81 percent at Euro 80.6 million (44.6), on a margin of 45.2 percent (38.6);
* Profit at Euro 62.1 million (31.7);
* The Board has proposed a dividend of Euro 0.90 c per share (0.45 c)

CEO Martin Carlesund reported strong growth and profitability in both quarterly and full year results, noting:

“The quarter was characterised by intense expansion at our studios, resulting in increased cost levels compared with the third quarter. The company is in the midst of an investment phase, and we expect this to continue to drive costs during the first half of 2018. Looking at the margin, it will vary somewhat from quarter to quarter, although we have, at the same time, established a clearly higher level of profitability compared with Evolution’s historical average.”

Carlesund revealed that the company now has around 400 gaming tables in operation, and plans are well advanced for the introduction of more games in the coming year. He emphasised the new Lightning Roulette, a ground-breaking Roulette game that combines Live Casino with an RNG element, saying:

“In addition to all the classic Roulette features, players will have new possibilities to win through random-generated lucky numbers offering high pay-outs. The game environment is reminiscent of an entertainment show with advanced sound and lighting effects; a concept that adds a new dimension of excitement to the traditional table game and which we have already successfully established through our Dream Catcher product.”

Carlesund said the product was the first step in introducing table games that can be used in a purer RNG environment in a new category branded First Person Gaming. The products offer players an interactive first-person experience of the most popular table games, and also include a “Go Live” button that quickly takes the player to a Live Lobby and the complete range of Live Casino games, giving operators good cross-selling opportunities.

The company is also planning the launch of a new Salon Prive facility for super VIP players, offering high limits and private tables for individual players. Only selected individuals are given access to the environment, where they can expect personal service and opportunities to control the game round themselves.

The company is also strengthening its Baccarat portfolio with two new variants, No Commission Baccarat and Dragon Tiger, catering for the growing popularity of Baccarat.

Carlesund revealed that work is well advanced on the new Georgian studios of the company, which will be operational in the second quarter of 2018. The company went operational with its additional Vancouver studios earlier this month.

“On the whole, with new studios and exciting product launches on the cards, we see good prospects to continue strengthening our business in 2018, with a clear focus on profitable growth.” Carlesund concluded.