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

Lottery Performance Boosts I.G.T. Fourth Quarter Result

But company profit declines y-o-y

International Game Technology posted fourth quarter results Thursday, boosted by a strong lottery performance.

Highlights flagged by the company included:

  • Group revenue up 3 percent y-o-y at $1.34 billion;
  • Adjusted EBITDA up at $452 million (Q4-2016: $422 million);
  • Net income attributable to IGT was $80 million, on an adjusted basis $4 million;
  • Adjusted group operating income was $268 million compared to $281 million in the prior-year period;
  • Profit came in at $3.79 million, or $0.02 per share – down from $179.17 million, or $0.88 per share, in last year’s fourth quarter;
  • Net income per diluted share of $0.39 and earned $0.02 per diluted share on an adjusted basis, which includes $0.66 of non-cash, net negative tax impacts;
  • Benefit from income taxes rose to $83 million (Q4-2016: $5 million). Tax dynamics in the fourth quarter of 2017 primarily reflect the non-cash impacts of recent U.S. tax reform;
  • Interest expenses were slightly down at $114 million (Q4-2016: $116 million);
  • Management expects an adjusted EBITDA of $1.70 to $1.78 billion in 2018.
  • Operating income for North America Gaming and Interactive was $69 million compared to $102 million in the fourth quarter of 2016. The decline is attributable to the sale of DoubleDown, lower revenue, and the timing of jackpot expenses, partially offset by lower operating costs.

CEO Marco Sala said a strong finish to the year had been achieved, including outstanding results in the Lottery business and improved key performance indicators in the gaming business.

Impressive Performance From GVC Holdings In 2017

But plenty of hard work ahead as company acquires Ladbrokes Coral

Online gambling group GVC Holdings plc has posted its audited results for the year ended 31 December 2017, highlighting the following:

  • NGR up 17 percent y-o-y to Euro 925.6 million;
  • Clean EBITDA up 40 percent at Euro 239.5 million;
  • Adjusted profit before tax up 182 percent to Euro 178.7 million;
  • Adjusted EPS Euro 0.56 (2016: Euro 0.19);
  • Second interim dividend Euro 0.175, giving full year €0.34 (up 13 percent vs 2016);
  • Pre-tax loss for 2017 was Euro 25.6 million compared with a loss of Euro 173.5 million in 2016, due mainly to exceptional charges and amortization of acquired assets;
  • Sports revenue rose 20 percent to Euro 331.2 million on margins up 1.4 percent at 10.8 percent;
  • Gaming/other revenue from Bwin, Sportingbet, Betboo, Gamebookers rose 21 percent to Euro 332.6 million;
  • PartyPoker, PartyCasino, Casino Club, Gioco Digitale, Foxy Bingo gaming revenue was up 12 percent to Euro 224 million;
  • Running against a market growth trend of just 2 percent growth, PartyPoker posted revenues up 42 percent in 2017, reinvigorated by management investment and attention;
  • Net debt Euro 108.8 million – down from Euro 126.1 million lst year);

Operational highlights

  • Sports Brands NGR up 20 percent vs pro forma 2016, driven by strong sports and gaming;
  • Games Brands NGR up 12 percent, driven by investment in PartyPoker and positive performance from casino brands;
  • Platform migration of all key territories now complete;
  • Significant product development and enhancements released in 2017 and more to come in 2018;
  • Disposal of Headlong and associated Turkish facing businesses;

Update and Current Trading (Q1 for period up to 4 March)

  • GVC and Ladbrokes Coral shareholders overwhelmingly approve acquisition;
  • Strong start to 2018 with NGR up 16 percent (up 18 percent in constant currency) up to 4 March 2018;
  • Acquisition post period end of 51 pecent of Mars LLC (‘Crystalbet’) in Republic of Georgia;
  • Board’s expectations for the full year remain unchanged.

Chief executive officer Kenneth Alexander, reported:

“GVC achieved a significant amount in 2017 and as these numbers demonstrate, we have delivered material value from the bwin.party acquisition. It is particularly pleasing that we have been able to produce such strong results at the same time as completing the integration of bwin.party and continuing to enhance our product offering.

“Our core markets offer attractive growth prospects but we also recognise the opportunity presented by our proprietary technology to create significant synergies through M & A. The importance of geographic diversification is also a key dynamic given the evolving regulatory backdrop. Thus the acquisition of Ladbrokes Coral Group represents an exciting opportunity, bringing together industry leading online and retail brands. There will be plenty of hard work ahead, but we are confident that GVC will deliver once again.”

Time To Consolidate Says GVC Management

“We bought Ladbrokes Coral and we are done for the UK,” says CEO

After posting strong results for 2017 this week, online (and soon retail) gambling group GVC Holdings management told the Reuters news agency that following a expansion phase that has included the imminent GBP 4 billion acquisition of the Ladbrokes Coral group it was probably a good time for the company to consolidate its assets.

Whilst there would be more merger activity in the UK market in the year ahead, it is unlikely that GVC Holdings will be a participant, chief executive Kenneth Alexander told the news agency.

“I expect there would be some more deals in the next 12 to 18 months in UK,” Alexander said.

“We bought Ladbrokes Coral and we are done for the UK. Ladbrokes is what we wanted, we got them and we are biggest in the UK when the deal closes so we don’t need anything more here.”

That did not mean that GVC would not consider acquisitions in other markets, Kenny said.

Hong Kong Investor Now Second Biggest Shareholder In The Stars Group

Tang Hao’s Discovery Key Investments Limited owns 17.9 percent stake in top online gambling group

InfoPowa readers may remember that around the middle of last year a little known Hong Kong investor, Tang Hao, used his Discovery Key Investments company to gobble up a growing number of shares in The Stars Group (then Amaya Gaming), investing hundreds of millions of dollars in buying up lots, some reportedly from stock sold off by disgraced Amaya executive David Baazov.

Business press reports from Canada Monday indicate that the Hong Kong mogul is still splashing the cash around in acquiring TSG stock, and has now acquired a 17.9 stake in the online gambling giant, making Discovery the second-largest shareholder of common shares in TSG.

With 26,455,200 common shares, Discovery trails only Caledonia Investments, which holds 29,353,153 shares.

Hao has certainly attracted the attention of TSG management, judging by reports that the two companies have inked an agreement regarding a Discovry “observer” to sit in on TSG board meetings in the person of Melvin Yanmin Zhang.

Once he and Hao have obtained the necessary licenses and clearances the plan is apparently for them to become members of the board.

There has been so far unconfirmed speculation that Hao might be the same Asian investor who backed Baazov in an abortive earlier deal (quashed by other interested parties) to acquire Amaya. That possibly namesake headed Goldenway Capital, whom Baazov claimed was supporting his bid.

For now, TSG seems unperturbed by the situation, with a spokesman noting:

“Mr. Tang will not acquire greater than 20 percent of the outstanding common shares of The Stars Group prior to the 2020 annual general meeting of shareholders other than by way of a negotiated transaction approved by The Stars Group board of directors or by way of formal takeover bid for all of the outstanding common shares of The Stars Group.”

Codeta Raises More Capital

Online casino operator uses convertible loan financing to raise cash to bolster marketing and product activity

Live dealer pioneer and casino operator Codeta has reported completing its latest funding round, in which it raised Euro 600,000 through convertible loan financing.

The cash injection will be used to ramp up marketing activity and to bankroll an uptick in VIP players that the operator has acquired since its recent re-design.

This is part of the operator’s third funding round, having raised Euro 4.3 million since its launch in 2016, and will be completed with a subsequent share issue later in the year.

A convertible loan sees investors provide a loan and the accumulated interest, along with the loan itself, are converted into stock once the share emittance has occurred.

Codeta chairman Edward Ihre, said: “Codeta’s latest funding round will enable us to increase our marketing activity and to drive awareness of the brand among more players in regulated markets around the world.

“Following our re-design at the back end of last year, we have seen an increase in VIP players so we will also use the cash injection to bank-roll their wagering activity.

“We have big plans for 2018, which will include another, larger funding round later in the year.”

Nektan Reports Unaudited Results

Diversification key to continued growth

Despite reducing losses in its Managed Gaming Solutions division, making good progress in the Europe and Asian regions and showing strong growth in total revenue, Nektan Plc reported adjusted EBITDA losses of GBP 1.6 million for the six month period ending December 31, 2017.

Key performance highlights for the six months ending December 31, 2017 include:

  • Total revenue of GBP 8,8 million, up 54 percent (6M/Dec312016: GBP 5,7 million).
  • Adjusted EBITDA loss* of GBP 1,6 million (6M/Dec312016: 1,5 million)
  • Adjusted EBITDA loss* – Managed Gaming Solutions of – GBP 918,000 (6M/Dec312016: GBP 1,5 million)
  • Operating loss of GBP 3,2 million (6M/Dec312016: GBP 512,000).
  • Loss before taxation of GBP 4,2 million (6M/Dec312016: GBP 1,2 million).
  • A loss in earnings per share of -12.6 pence (6M/Dec312016: 4.9 pence).

Gary Shaw, Interim Chief Executive Officer of Nektan, said:

“The European business continues to deliver strong trading momentum. We are developing our mobile first casino product, diversifying our portfolio of services to include additional B2B gaming solutions in Europe, US and now Asia.”

“I am particularly pleased that we are maintaining a central cost base to develop these revenue opportunities. We are expecting continued margin improvements, as our business partners develop new markets utilising our core technology platform, and to become a successful global technology supplier.”

German Tote Returns To Growth And Profit

Back in the black

Pari Mutuel Urbain-majority owned German Tote has returned to growth and generated a net profit of Euro 1.2 million, turning around a loss of Euro 3.5 million in 2015 – the French gambling firm confirmed Wednesday.

The turnaround is attributed to the German Tote’s 2017 strategy in which the firm adapted French practises and formulas to the German market along with the utilisation of additional communication tools which it says delivered a new dynamic to the German horse racing market.

Stakes reached Euro 277 million in 2017 (2016: Euro 252 million) benefiting from a focus on French races.

Alain Resplandy-Bernard, Chairman of the Board of the German Tote, said:

“This performance was made possible by the complementarity and the effective collaboration of the German Tote and PMU teams. In addition, the launch of a sports betting offer supported by an effective, targeted and relevant promotional campaign, as well as the marketing of German races abroad helped to maintain the trend.

“These very positive results enabled the German Tote to provide a substantial support of € 1.95 million to the German racetracks.”

As part of its international development strategy, the PMU holds a 51 percent stake in the German operator.

The German Tote benefits from PMU’s power and expertise enabling it to boost activity, in turn the relationship has enabled PMU to strengthen its international presence.

PMU’s international partnership strategy has raised overseas stakes 10 percent to reach Euro 1.14 billion, or 12 percent of PMU’s turnover.

Sportech PLC Off The Market

Appoints new CEO, on the hunt for CFO

Sportech PLC has closed the Formal Sale Process (FSP) it initiated late last year as a result of a strategic review and has appointed Andrew Gaughan as Chief Executive Officer.

Gaughan joined Sportech in 2010 following the acquisition of Scientific Games Racing, and was appointed to the Board in January 2017.

He is based in Toronto, where certain Group business operations are situated. Gaughan is a qualified lawyer and is well known to the Group’s customers and staff and has more than 25 years’ experience in the gaming, technology and horseracing industry having served in senior positions with other leading international gaming companies.

In addition, the company has embarked on a recruitment drive for a Group Chief Financial Officer who will be based in North America. Richard Cooper, a Non-Executive Director of Sportech, will continue to provide financial oversight to the Group, in the meantime.

Sportech confirmed it had held discussions with interested parties during the course of the FSP, but concluded they were unlikely to result in an offer for all or a material part of the Group that would be acceptable to shareholders.

The Strategic Review concludes that Sportech has “significant potential for long-term value creation through: growing its core businesses; diversification; and benefitting from the possible liberalisation of sports betting in a number of states in the US.”

Sportech expects 2017 adjusted EBITDA to be below expectation at around GBP 6.5 million due to a series of account corrections identified in the strategic review which include write-downs of old stocks and “doubtful” debtors. In addition, the impact of the departure of former board members and senior management, restructuring costs and the sale of NYX shares, had a negative impact totalling GBP 8 million, offset by GBP 1.4 million of additional net income from the “Spot The Ball” dispute,” the company said.
.
In a trading update, the company said the first ten weeks had proven fairly challenging due to weather related issues, but that this had been offset by the Racing and Digital business which secured several, new long-term contracts.

In related news, Sportech’s Racing and Digital arm has connected another new European commingling customer to horse race betting pools through its Sportech’s Quantum Data and Operations Centre in Europe.

The new agreement with Norsk Rikstoto, a foundation that supervises pari-mutuel betting on horse racing in Norway, will enable the operator to offer their racing product to operators outside of Norway through commingling, and to commingle bets from their players into pools offered by racing operators from around the world.

Bloomberg business news reported Wednesday that in the wake of the decision by Sportech to end sale discussions, the stock plunged 60 percent.

The Stars Group Delivers In 2017 Full Year Results

Significant year in the life of the company

The Stars Group has gone from strength to strength reporting record revenues in its 2017 full year report.

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

  • 13.6 percent rise in revenue to reach $1,312 million (2016: $1,155 million).
  • Real-money online poker revenues represented 66.9 percent (2016: 73.2 percent) of group revenue and combined online casino and sportsbook 29.3 percent (2016: 22.9 percent).
  • Poker Revenues grew 3.7 percent y-o-y to reach $877.3 million.
  • Casino and Sportsbook revenues combined were $384 million, up 45.4 percent y-o-y.
  • Net earnings up 91.3 percent to $259 million (2016: $135 million).

Diluted net earnings per share up 81.4 percent to $1.27 (2016: $0.70)

Adjusted EBITDA of $600 million (2016: $524 million)

In a 2018 Full Year Guidance announcement, TSG believes the company will deliver:

  • Revenues of between $1,390 and $1,470 million;
  • Adjusted EBITDA of between $625 and $650 million;
  • Adjusted Net Earnings of between $487 and $512 million; and
  • Adjusted Net Earnings per Diluted Share of between $2.33 and $2.47.

“During the year, we strengthened our core senior management team, delivered another year of record revenues, significantly deleveraged and continued to strengthen our balance sheet, all while investing in marketing, growth initiatives and technology infrastructure to support the long-term growth of our business,” Rafi Ashkenazi, chief executive officer of The Stars Group said.

“In 2018, we are continuing to execute on our growth initiatives, including through geographic expansion, inorganic growth, and improving our focus on and understanding of our customers, and we are beginning to realize our goal of becoming the world’s favorite iGaming destination.”