Gambling Industry Acquisitions and Financial News — Weekly Round-up for March 23, 2018

KamaGames Updates Market On Its Company And Financial Data

Revenues up 63.4 percent year-on-year at games developer

Irish online gambling games developer KamaGames has updated the market on its company and financial achievements, highlighting:

  • Gross revenue up 63.4 percent y-o-y at $57.5 million in 2017;
  • Revenue growth over the past 6 consecutive quarters;
  • Over the last year, the company has significantly increased its key metrics such as Average Revenue Per Paying User (ARPPU), share of paying users, and number of Daily Active Users (DAU);
  • The flagship title Pokerist, is currently ranked around the No.3 spot within social poker mobile games, alongside Zynga Poker and WSOP from Playtika when it comes to daily active users and revenue;
  • KamaGames has launched new game mechanics via various Party Modes. These modes have increased average hands played from 15 percent to 20 percent;
  • The developer engages with players via different game events every day including Weekly Tournaments, Party Modes, and a number of various other table tournaments in both poker and in roulette. There are also sales, bonuses, and giveaways. The success of these activities and the level of player engagement is shown by the increase in retention of 5 percent in 2017;
  • Kama has multiple games in 1 app allowing players to cross between various different games taking their profile, chip balance and friends list with them. 51 percent of daily active users play at least two games;
  • Games within the portfolio are designed to complement each other and help increase user metrics which are Retention, Paying Users Percentage and ARPPU;
  • ARPPU grew by 30 percent throughout 2017 with the share of paying users growing by 6 percent in the same time period;

The company is currently acquiring an average of 1.5 million new players every month, with plans to drive that number significantly higher by the end of 2018. The DAU count is up to an average of 414,500 vs 305,000 in 2016 which is a 35.9 percent increase. At the time of writing the DAU number was over 510,000.

Odyssey Europe Makes Play For Outright Purchase Of Olympic Entertainment Group

Euro 1.90 per share offer values business at Euro 288 million

Odyssey Europe, a Novalpina Group company, has announced its intention to acquire 100 percent of the share capital of Olympic Entertainment Group with a cash offer of Euro 1.90 per share, effectively valuing the business at Euro 288,403,291.

According to a press release, two of the anchor shareholders, holding approximately 64 percent of OEG’s share capital, have already agreed to the Offer.

The bidder and the majority shareholders of OEG, Armin Karu’s OÜ HansaAssets with 45 percent and Jaan Korpusov’s OÜ Hendaya Invest with 18.9, have entered into a share purchase agreement.

The transaction would earn Armin Karu Euro 129.9 million and Jaan Korpusov Euro 54.6 million.

The terms of the Offer and its acceptance will be based exclusively on the Prospectus that awaits approval by the Estonian Financial Supervisory Authority (“EFSA”) – its decision is expected by 3 April 2018.

888 Holdings Reports Strong 2017 Results

Record revenues and continued growth

Online gambling group 888 Holdings plc has posted its audited annual financial results for the year ended 31 December 2017, highlighting.

  • Group revenue increased 4 percent to US$541.8 million (2016: US$520.8 million) and increased 26 percent in regulated markets excluding the UK;
  • Group revenue increased in each quarter of 2017 on a year on year basis;
  • B2C revenue increased 6 percent to US$486.6 million (2016: US$460.2 million);
  • Casino revenue increased 4 percent to US$293.9 million (2016: US$282.1 million);
  • Sport revenue increased 45 percent to US$75.5 million (2016: US$51.9 million);
  • Adjusted EBITDA increased 12 percent to US$100.7 million (2016: US$90.2 million); on a constant currency basis, Adjusted EBITDA increased 19 percent;
  • Adjusted EBITDA margin increased to 18.6 percent (2016: 17.3%) or 19.5 percent at constant currency;
  • Exceptional charges of US$50.8 million were incurred during the period, out of which US$45.3 million relate to potential past German VAT matters and US$5.5 million in connection with the UK Gambling Commission (“UKGC”) settlement;
  • Substantial free cash flow, allowing for dividend payments during the year of US$70.5 million (2016: US$56.6 million);
  • The Board of Directors is recommending a final dividend of 5.9¢ per share in accordance with 888’s dividend policy, plus an additional one-off 5.6¢ per share, bringing the total for the year to 15.5¢ per share (2016: 19.4¢ per share)
  • Revenue from regulated and taxed markets continued to represent the significant majority of Group revenue at 70 percent (2016: 71 percent) despite heightened regulatory scrutiny in the UK market;
  • Mobile revenue continued to increase across verticals and represented 70 percent of UK B2C revenue (2016: 60 percent);
  • Continued strong growth in Spain and Italy, the Group’s two fastest growing regulated markets, with revenue increasing by 34 percent in each market;
  • Spain expanded to represent 12 percent of Group revenue driven by significant growth in Casino and Sport as well as increased marketing investment;
  • In January 2018, post year end, the Group launched 888poker.it;
  • 30 new skins added to the Dragonfish Bingo network;
  • Revised senior management structure to support 888’s continued growth with the appointment of Itai Pazner as Chief Operating Officer;
  • Regulatory uncertainty exists in certain territories in which 888 operates, including Germany. Following a recent ruling by the Federal Administrative Court of Germany, the Board of 888, together with the Group’s legal counsel, is assessing the status and breadth of its offerings in the German market;

Itai Frieberger, CEO of 888, reported to shareholders:

“888 has delivered another year of progress achieving record revenues of US$541.8 million and a 12 percent increase in Adjusted EBITDA. The Group’s growth was driven by further expansion in Casino, Sport and across regulated markets. This very robust outcome was achieved despite the Group’s withdrawal from certain markets during the year and demonstrates 888’s resilience and agility that is underpinned by first-class technology and an outstanding team.

“The Group has continued to reap the rewards of its investments in recent years in several growth markets including Spain and Italy. These markets helped to drive very strong revenue growth in regulated markets excluding the UK of 26 percent. The Group continues to gain momentum in Sport where revenue increased an impressive 45 percent.

“Current trading since the start of the year is in line with our expectations with average daily revenue 6 percent above the previous year, representing an 8 percent increase when adjusted for the withdrawn markets.

“The Group has a number of significant growth opportunities ahead and the Board is confident of another year of operational progress.”

The company’s share price dipped 5 percent following publication of the results, possibly on the news that the group may be mulling a German withdrawal, and the large payment in historic VAT.

German courts have recently handed down decisions that impact online gambling operators: In October last year the German Federal Administrative Court confirmed a ban on three types of online gambling (casino, poker and scratch cards), a ruling that 888 said it may appeal at the Federal Constitutional Court, and last week a Baden-Wurttemberg court ruled it was illegal for online gambling sites to operate in the state of Baden-Wurttemberg.

Jackpotjoy Plc Report Good Progress In Fy2017 Report But Losses Widen

Will continue deleveraging the business in 2018

Full year 2017 results from online bingo-led operator Jackpotjoy plc were negatively impacted by higher financing costs despite a strong performance that delivered double-digit revenue growth.

The company reported a good start to 2018 in which it plans to continue deleveraging the business.

Key financial highlights for the 12 months ending December 31, 2017, include:

  • 14 percent rise in gaming revenue to reach GBP 304.6 million (2016: GBP 266.9 million), supported by 12 percent growth in the Jackpotjoy segment and 28 percent growth in Vera&John.
  • Adjusted EBITDA1 increased 6 percent to reach GBP 108.6 million (2016: GBP 102.2 million), reflecting a planned increase in marketing costs in the second half of the year and the application of point of consumption tax to gross gaming revenue (“POC2”) in the UK in Q4.
  • Adjusted net income1 declined 9 percent year-on-year to GBP 76.1 million (2016: GBP 83.5 million) attributed to higher net interest costs.
  • Net loss of GBP 67.9 million (2016: GBP 40.6 million).
  • Record GBP 101 million of operating cash flow generated in 2017, equating to 22 percent growth year-on-year.
  • Free cash flow (operating cash flow less capital expenditure) of GBP 97.8 million
  • Successful refinancing of debt facilities and annualised interest cost savings in excess of GBP 9.0 million a year
  • Adjusted net debt of GBP 387.3 million (reduced from GBP 408.1 million at 31 December 2016).

Neil Goulden, Executive Chairman, commented:

“The record financial results we achieved in 2017 reflect the dedication, ambition and work ethic present in employees across the business.”

“We are confident of our prospects for growth against a healthy market backdrop in global online gaming and determined to ensure we present an entertaining, fun and responsible environment for our customers to enjoy.”

Ladbrokes Coral Acquisition By GVC Holdings Clears CMA

Competition and Markets Authority has no problem with potentially GBP 4 billion deal

GVC Holdings‘ acquisition of the Ladbrokes Coral online and retail gambling group is on track for completion following the news this week that the UK Competition and Markets Authority has given the potentially GBP 4 billion deal its blessing.

The clearance follows a thorough investigation and consideration of the deal.

The CMA notes that GVC currently has an online only presence, that it is not a close rival of Ladbrokes Coral, and the online environment has many competitors. The merger therefore does not give rise to competition concerns.

“The CMA looked closely at betting services for individual sports and individual games but found that, in all cases, there will be enough rivals to the merged entity to prevent price increases or a reduced quality of service as a result of the merger,” the CMA reported.

Snaitech Back In The Black

Online a star performer

Italian gaming firm Snaitech S.p.A., in its full year 2017 results, reported a return to profit for the first time in a decade despite presenting a mixed bag of results.

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

  • Total group revenue of Euro 889.6 million (2016: Euro 898.4 million), a decline of 1 percent which it attributes to an increase in tax, partially offset by strong online results.
  • Net consolidated profit of Euro 27 million (2016: loss of Euro 17 million).
  • EBITDA up 5.9 percent to reach Euro 135.9 million (2016: Euro 128 million.
  • Overall online wagers up 30 percent. Online Sportsbetting wagers up 34.3 percent and Online Casino wagers up 28 percent.
  • Total wagers of Euro 10.5 billion, down 0.5 percent.
  • Net Financial Position of Euro 428.8 million, improved by more than Euro 52 million from 31 December 2016.

“2017 represented a significant period for Snaitech”, chief executive officer Fabio Schiavolin, said.

“I would remark how such performance, along with the strong cash generation of Euro 55 million and the increase of EBITDA to Euro 136 million, was achieved in an unfavourable regulatory framework for concessioners, owing to taxation increase on Gaming Machines and more generally to the absence of homogeneous rules on Gambling applied by local authorities.”

Moving forward, SnaiTech said it would focus on new products, improving services and strengthening cross selling opportunities in its Online business among other strategies.

The first two months of 2018 have seen an almost 18 percent increase in online wagers weighed down by an 8.8 percent decrease in retail betting and a 2.6 percent decline in gaming machines.

Net Profit Declines At Online Lottery Firm Zeal Group

Sales flat but more punters on board

Online lottery company Zeal Group has posted a set of mediocre results for FY 2017, reporting:

  • EBIT down at Euro 25.2 million (FY2016: Euro 38 million);
  • Net profit down at Euro 17.2 million (FY2016: Euro 26 million);
  • Sales flat at Euro 280.5 million;
  • 31 percent increase in new registered customers; 411,000 new registered customers (FY 2016: 314,000);
  • Strong fourth quarter billings of Euro 78.8 million; up 21 percent sequentially from third quarter;
  • Earnings per share down at Euro 2.05 (FY 2016: Euro 3.09);
  • Total Operating Performance up at Euro 141.2 million (FY 2016: Euro 139.6 million);
  • Statutory revenue up at Euro 134.3 million (FY 2016: Euro 112.9 million);
  • Higher hedging costs due to EuroMillions rule changes, and significant pay-outs that included a single Euro 15 million prize in the first quarter;
  • The Group launched into three new international markets during the year, including two in the fourth quarter – Norway and the UK – which followed its second quarter launch in Ireland;

CEO Dr. Helmut Becker said: “The global regulatory environment continues to be challenging. However, we firmly believe the world’s lottery market is full of untapped potential. As a diverse and long-term focused business, we are well positioned to take advantage of those opportunities.”

For FY 2018 Zeal expects to deliver EBIT in the range of Euro 33 million – Euro 43 million, and Total Operating Performance of Euro150 million – Euro 160 million. The Group expects to pay a dividend of at least Euro 1.00 per share in 2018, subject to financial performance.