Gambling Industry Acquisitions and Financial News — Weekly Round-up for May 4, 2018

Metrics Going In The Right Direction For Mr Green

Online casino operator reports on Q1-2018 performance

The Mr Green online casino group has posted a strong Q1-2018 performance with good organic growth, highlighting:

  • Total revenues of SEK 381 million up 38 percent y-o-y;
  • EBITDA up 34 percent at SEK 46 million;
  • Customer deposits up 40 percent at to SEK 1.1 billion.
  • The group completed its acquisition of Malta-based operator Evoke Gaming for Euro 7 million and has successfully completed integration;

Per Norman, chief executive, reported:

“For six consecutive quarters, revenues have exceeded our target of annual growth of 20 percent. This was yet another very strong quarter, with a growth of 38 percent. In local currencies, organic growth was 25.2 percent, up 14.4 percent compared with the fourth quarter. Deposits increased by 40.7 percent during the quarter and customer growth was at 57.3 percent. This is confirmation from our customers that they like our products and brands.”

Digital Boosts Growth At Svenska Spel In Q1-2018 Performance

Digital growth outpaced that of land operations and now delivers almost 30 percent of turnover

According to Q1-2018 performance statistics released Friday by gambling regulator Lotteriinspektionen, Sweden‘s national gambling operations achieved online and land turnover growth of 2.8 percent year-on-year at SEK 5.63 billion.

SEK 4.13 billion was generated by locally licensed digital and land activity, a 1.1 percent y-o-y overall decline in turnover, whilst internationally licensed operators accessing the Swedish market reportedly achieved turnover growth of 15.3 percent over the quarter to reach to SEK1.5 billion, grabbing a 27 percent share of the market – 4 points better than the same period last year.

State-owned gambling group Svenska Spel total turnover rose 1.4 percent in the first quarter to reach SEK 2.1 billion, with digital operations recording growth of 24.8 percent, outperforming land activity, which declined 6.1 percent in turnover terms over the quarter.

Online activity now comprises almost 30 percent of Svenska Spel overall turnover.

The stellar performer in the gambling group’s digital activity was mobile, which recorded growth of 52 percent, thanks primarily to a new app for its Oddset sports betting product.

Lotteriinspektionen reported that horserace betting monopoly operator ATG posted online turnover growth of 11.3 percent in Q1-2018, but its land-based operations fared less well with a decline of 7.8 percent

Digital betting made up over 60 percent of ATG quarterly turnover of SEK 982 million .

Swedish lottery turnovers fell across the board in the quarter, with SAP/SSU the worst performer with an almost 20 percent decline to SEK 49 million. IOGT-NTO was down 11.6 percent at SEK 62 million; Folkspel down 8 percent at SEK 128 million; and Postcode down 12 percent at SEK 549 million.

GVC Publishes 2017 FY Report

Plenty of graphics in final audited report

Online (and now land) gambling group GVC Holdings has published its audited 2017 FY report, which is well illustrated with interesting infographics and presents a wealth of corporate information.

Early in March this year the company released a summary of its 2017 performance, showing:

NGR increase of 17 percent to reach Euro 925.6 million vs pro forma 2016 (+17 percent in constant currency).

Clean EBITDA, up 40 percent to Euro 239.5 million vs pro forma 2016.

Adjusted profit before tax was 182 percent to Euro 178.7 million.

Adjusted EPS of Euro 0.56 (2016: Euro 0.19), adjusted EPS incl discontinued Euro 0.66 (2016: Euro 0.31).

Second interim dividend of Euro 0.175, giving full year Euro 0.34 (up 13 percent vs 2016).

Net debt Euro 108.6 million (2016: Euro 126.1 million).

NGR from sports brands was up 20 percent vs pro forma 2016, driven by strong sports and gaming.

NGR from gaming brands grew 12 percent vs pro forma 2016, driven by investment in partypoker and positive performances from casino brands.

Macau Revenues Surge Again

Macau casinos’ revenue jumps 28 percent in April, beating analysts’ forecasts again

Gambling revenue in Macau surged 28 percent in April and beat analyst expectations, helped by solid demand from Chinese punters, official data released on Tuesday showed.

The Reuters news agency reports that April marks the 21st month of consecutive rise with revenue gains in the former Portuguese colony tracking steadily upwards, after plunging to five-year lows due to slowing economic growth and a widespread crackdown on corruption starting in 2014.

Figures from Macau’s Gaming Inspection and Coordination bureau showed revenues rose 27.6 percent to 25.73 billion patacas ($3.18 billion) versus analyst expectations of an 18-22 percent growth.

However, revenues still remain far off the highs reached in 2014, hovering only around monthly tolls seen in 2012.

Gig Report Significant Organic Growth

In 2017 annual report

Described as undergoing disruptive transformation, along with the industry as a whole, Gaming Innovation Group (GiG) in its end of year 2017 report said the company is being positioned to capitalise on, rather than be sidelined by, increased regulation – ultimately aiming at generating 100 percent of all revenues from regulated markets.

Despite a challenging environment, the company reported significant growth in the 12 months ending December 31, 2017.

Key performance indicators include:

Consolidated revenues of Euro 120.4 million, up 125 percent (2016: Euro 53.6 million) with a reported 56 percent increase in organic growth.

Gross profits were Euro 99.9 million, up 125 percent (2016: Euro 44.3 million). Gross margin was flat at 83 percent.

Group EBITDA was Euro 12.5 million, or an EBITDA margin of 10.4 percent (2016: Euro 5.8 million and 10.8 percent respectively).

Revenues in GiG Core (previously iGaming Cloud) were Euro 21.0 million, up 314 percent (2016: Euro 6.7 million). All growth was organic.

EBITDA for GiG Core was Euro 10.0 million with an EBITDA margin of 47 percent (2016: Euro 1.5 million and 22 percent margin respectively).

GiG Core total database transactions was 12.4 billion, up 256 percent (2016: 4.8 billion).

GiG Sports (previously BettingCloud) total turnover of Euro 42 million. Profit of Euro 0.98 million and a profit margin of 2.3 percent (2016: Euro 0.82 million and 1.8 percent respectively).

GiG Sports revenues were negatively impacted by the scaling out of automated trading to calibrate and test new sports, models and algorithms ahead of the launch of the new products. Negative EBITDA of Euro 3.2 million (2016: negative EBITDA of Euro 0.1 million) attributed to large increase in employees to 60 (2016: 16) and development of new sports products.

The Board expects GiG’s new sports offering will contribute positively to the revenue and EBITDA for GiG Sports going forward.

GiG Gaming (B2C) saw total deposits reach Euro 352 million, up 121 percent (2016: Euro 159 million). Revenues were Euro 86 million, up 103 percent (2016: Euro 42.4 million) of which 50 percent (2016: 25 percent) were taken from regulated markets. The Nordics remains GiG’s largest core market, followed by Western Europe.

The B2C business had margins of 3.58 percent in casino and 7.2 percent in sports betting (2016: 3.8 percent and 6.7 percent respectively). Betting duties were 3.5 percent of gaming revenues (2016: 2.7 percent).

EBITDA for GiG Gaming came in at negative Euro 9.0 million (2016: negative Euro 1.1 million) due to a significant increase in marketing expenses.

The Company expects GiG Gaming to have a positive EBITDA in 2018.

GiG Media revenues grew 177 percent to reach Euro 22.3 million, (2016: Euro 8.1 million) of which 72 percent were derived from revenue share, 19 percent from CPA and 9 percent from listing fees.

GiG Media EBITDA was Euro 14.9 million with an EBITDA margin of 67 percent, (2016: Euro 5.4 million and 66 percent respectively).

“We finished the year with our strongest quarter ever, both in terms of top and bottom line,” Robin Reed, chief executive officer of GiG said. “It was a result of growth across all business areas. I am especially proud to have generated this result, whilst at the same time investing heavily into future products and the operation as a whole.”

GiG’s aspirations to operate a complete value chain are moving towards fruition, Reed said.

Reed has high hopes for the company’s newest investment area GiG Sports and Games Services in which odds for sports betting and games for casino operators are being developed.

GiG Games has developed a new remote gaming server and games engine which will enable the company to design, host and distribute both proprietary and third-party games. A range of in-house games are under development including blackjack and roulette, as well as slots which will be offered on a revenue share basis. GiG aims to develop a major games studio, Reed said.

Subdued Performance From Paddy Power Betfair In Q1 Trading Udate

Operating profit fell 12 percent in Q1-2018 due to “bookmaker friendly sports results” and poor weather conditions

Paddy Power Betfair issued its Q1-2018 trading update Wednesday, reporting an unusually subdued performance due to “bookmaker friendly sports results” and poor weather conditions.

Highlights of the update included:

  • Q1 overall group revenue 2 percent down at GBP 408 million (flat on a constant currency basis);
  • Underlying EBITDA down 8 percent to GBP 102 million (down 6 percent in constant currency), due to the annualisation of new betting taxes & levies and start-up losses in US businesses;
  • Full year underlying EBITDA currently expected to be between GBP 470 million and GBP 495 million;
  • Operating profits fell from GBP 91 million in the first quarter of 2017 to GBP 80 million in Q1 2018;
  • Net cash of GBP 330 million at 31 March 2018;
  • Sales and marketing spend up 4 percent while other operating costs were flat year-on-year;
  • Plans to return GBP 500 million of cash to shareholders over the next 12 to 18 months; share buyback programme to be initiated shortly. This is in addition to the existing dividend pay-out policy, which is unchanged at 50 percent of profit after tax;
  • Share buyback programmes will commence shortly with an initial GBP 200 million tranche;
  • Good underlying growth in Australia partially offset by adverse sports results;
  • Online revenue down 2 percent at GBP 219 million. Online sports revenue was down 1 percent, with football growth offset by weakness in horseracing (14 percent of total UK/Irish races were cancelled versus 4 percent last year);
  • Sportsbook revenue was up 3 percent, with growth in the Betfair brand;
  • Exchange revenue was down 7 percent year on year;
  • Retail revenue was down 4 percent to GBP 79 million;
  • Gaming revenue was down 4 percent in the quarter with growth in Betfair offset by a decline in revenues on the Paddy Power brand;
  • In Australia, revenue increased by 6 percent in local currency, with continued good growth in underlying customer activity partially offset by adverse sports results. Ahead of the expected introduction of new taxes, competition remains intense and market consolidation has commenced;
  • US operations delivered revenue up by 23 percent in local currency, with sports revenue up 24 percent and gaming revenue up 19 percent. Sports revenue growth was driven by TVG where handle increased by 17 percent, supplemented by revenues from the daly fantyasy sports enterprise DRAFT;

Group chief executive Peter Jackson commented:
“We have made good progress against our strategic priorities. In Europe, the successful completion of our platform integration has resulted in a meaningful improvement to the Paddy Power product. This has seen the brand’s gaming revenue returning to growth from February and a significant uplift in Cash Out usage and in-running betting during the Cheltenham Festival.

“In Australia, Sportsbet continues to perform well and is targeting further market share growth, with additional investment planned to take advantage of any disruption arising from market consolidation and the introduction of increased taxes.

“In the USA, TVG and Betfaircasino.com have good momentum and we are continuing to make preparations for any positive regulatory changes.

“Notwithstanding lower profits in the first quarter, we expect full year underlying EBITDA of between GBP 470 million and GBP 495 million. This expectation reflects the increased investment in Australia and assumes no new taxes become payable in Australia in 2018. It is also before any potential additional investment which may arise in the event of positive regulatory changes in the USA.”

Online Gambling Operator Reports Q1-2018 Results

Leo Vegas claims another record quarter

Online gambling operator Leo Vegas has posted its Q1-2018 results, highlighting:

  • Revenue up by 76 percent y-o-y to Euro 77.4 million (43.9);
  • Organic growth of 40 percent – excluding markets closed in 2017 – 61 percent;
  • EBITDA Euro 9.5 million (6.0), corresponding to an EBITDA margin of 12.3 percent (13.7 percent);
  • Adjusted EBITDA totalled Euro 9 million (6.2), corresponding to an adjusted EBITDA margin of 11.6 percent (14.0 percent);
  • Number of depositing customers up 75 percent at 302,014 (172,338);
  • New depositing customers up 95 percent 146,063 (75,017);
  • Returning depositing customers up 60 percent at 155,951 (97,321);
  • Gross Gaming Revenue from sports betting and live casino were 6.5 percent and 15.3 percent, respectively, of total GGR;
  • Net Gaming Revenue from Royal Panda and Rocket X accounted for 14.3 percent and 5.2 percent, respectively, of total NGR.
  • NGR from regulated markets was up at 35.4 percent (18.3 percent) of total;
  • Operating profit (EBIT) was Euro 3.8 million (5.5);
  • Adjusted EBIT was Euro 7.9 million (5.7), corresponding to an adjusted EBIT margin of 10.2 percent (12.9 percent).
  • Earnings per share before and after dilution were Euro 0.02 (0.05) or adjusted EPS of Euro 1.07 (0.05).

Activity highlights during the quarter included:

  • The company acquired 51 percent of the shares in the company behind the streaming network CasinoGrounds.com for SEK 30 million (Euro 3.1 million), with a potential, maximum earn-out payment of SEK 15 million (Euro 1.5 million);
  • LeoVegas acquired assets for GBP 65 million (Euro 73.6 million) from Intellectual Property & Software Limited along with related assets from another two companies that operate several brands including 21.co.uk, slotboss.com, Bet UK and UK Casino, which are now jointly referred to as “Rocket X”;
  • The World of Sportsbetting was acquired for for Euro 2.6 million, which holds a sports betting licence and a casino licence in the German state of Schleswig-Holstein, and an approved application for a sports betting licence through the state of Hessen;
  • LeoVegas carried out a change in listing to Nasdaq Stockholm on 5 February;
  • The company is updating the amortisation rate for intangible assets related to the acquisition of customer databases in Royal Panda. The rate of amortisation of customer relationships in Royal Panda is being changed to harmonise it with the Group’s other acquisitions;
  • The group has made a provision of Euro 500,000 for fines from the UK Gambling Commission (UKGC) for alleged marketing violations in 2016;

Current events:

  • New financial targets for the full year 2020 are to reach at least Euro 600 million in revenue and EBITDA of at least Euro 100 million
  • Net Gaming Revenue (NGR) in April amounted to Euro 29.3 million (16.5), representing growth of 77 percent;
  • Concerns over legislative moves in Norway to prevent Norwegian residents from accessing foreign gaming sites. Revenue from Norway accounted for 4.6 percent of the Group’s total during March;

CEO and co-founder Gustaf Hagman reported:

“We are continuing our hard work and are accelerating into 2018 on the momentum we built up last year.

“We have opted to separately report on LeoVentures. LeoVentures today has an adjusted EBITDA of Euro -0.3 m, which is due to the fact that several of its companies are in the investment phase.

“Responsible gaming is one of LeoVegas’ foundations since the start of 2011. Over the past year, LeoVegas has made a push in Responsible Gaming, which has resulted in more staff and improved tools based, among other things, on machine learning combined with the launch of the site LeoSafePlay, a portal dedicated to identifying and managing unhealthy gaming behavior.

“The integration work (at Rocket X) is moving forward very well. We have quickly been able to work together on a number of matters and are identifying synergies in our knowledge-sharing and ways of working.

“Rocket X was put on the same gambling licence as LeoVegas. This was an extensive process, and already there we saw proof that we work very well and effectively together between the teams.

“During the quarter Rocket X contributed revenue for only one month. For the first quarter this entailed Euro 4 million in revenue and EBITDA of Euro 900,000 for an EBITDA margin of 22.5percent.

“During the first quarter Royal Panda was fully consolidated and contributed Euro 10.9 million in revenue, with an EBITDA margin of 7.8 percent. The low margin for Royal Panda is attributable to substantial marketing costs in February and March.

Sweden had yet another record quarter for new and returning customers. What we can see, however, is that the value per customer has gone down slightly.

Norway has historically and periodically blocked payment solutions that are linked to gaming sites. Now there is also a proposal to introduce additional barriers to using game sites. There are still no details when and how this will be introduced. Norway currently has no local licensing system, and instead of banning, I hope Norway will move towards a local regulation similar to the developments we see in Sweden.

“It was roughly one year ago that we acquired Winga.it and its gambling licence for the Italian market. During the autumn of last year we switched out the Winga brand to LeoVegas. The next step in our expansion for LeoVegas is to migrate the technical platform in Italy to our proprietary platform, Rhino. This will take place during the second quarter.

Canada is a market of great interest and is showing strong growth for LeoVegas. During the quarter we began using our ambassador, hockey legend Mats Sundin, in our market communication in Canada.

“Following our recent acquisitions, the UK is our largest market measured by revenue and accounted for 25.6 percent of NGR during the first quarter. LeoVegas has high ambitions for compliance with laws and regulations and we have continuously improved our procedures and processes. We have had discussions with the UK Gambling Commission, UKGC, on suspected cases of breaches of the British gaming rules. A clear majority of cases are attributable to affiliate marketing. Our assessment is that the UKGC will issue fines for these violations and we have made a provision for the full amount. We have also improved our routines, which has led us to close off non-compliant affiliates.”

Looking ahead, Hagman said:

“April has begun strong with Net Gaming Revenue (NGR) of Euro 29.3 million (16.5), corresponding to a growth rate of 77 percent. Marketing in relation to revenue for the Group in the second quarter of 2018 will be higher than the average for 2017, which was 42.3 percent. Due to the marketing opportunities surrounding the World Cup, the total amount of marketing is more difficult than usual to anticipate in advance. LeoVegas will act opportunistically with marketing on the opportunities we see.

“Rocket X will be included for the entire quarter and an exciting summer of sport will get under way with the World Cup in June followed by the Swedish Open tennis tournament in Båstad, for which we are now a Principal Partner.”

Philippines Treasurer Does Well Out Of Pagcor’S First Quarter Earnings

Regulator-operator’s net income tops US$27 million

In the Philippines, the state operated gambling regulator and operator Philippine Amusement and Gaming Corp (Pagcor) has posted a positive Q1-2018, highlighting the following:

  • Net income up 7.6 percent y-o-y at PHP1.42 billion (US$27.3 million);
  • Total revenue from gaming operations up 12.5 percent at PHP15.80 billion;
  • PHP8.29 billion paid out in gaming taxes and contributions based on GGR – deductions included PHP7.49 billion directly transferred to the Bureau of the Treasury (Pagcor is required by law to pass at least 50 percent of its annual gross earnings to Treasury);
  • Total income net of taxes up 9.3 percent at almost PHP8.45 million;
  • Total expenses increased by 9.7 percent to PHP7.03 billion;
  • Regulatory fees collected from licensed (land) casinos was around PHP5.70 billion;
  • Income from fees associated with the 53 licensed offshore gaming operators (POGOs) reached PHP1.15 billion;

Revenues Lag In Bet-At-Home’S First Quarter

But EBITDA increased significantly

Frankfurt-listed online gambling group Bet-At-Home AG has released its Q1-2018 numbers, reporting lagging gross revenue but positive EBITDA metrics.

Highlights of the report include:

  • Gross betting and gaming revenue down 10.8 percent y-o-y at Euro 33.2 million. Result was impacted by a decline in Polish revenues;
  • Group betting and gaming turnover totaled Euro 733.9 million in this period (Q1 2017: Euro 841.4 million);
  • EBITDA up 88.3 percent at Euro 9.3 million;
  • EBIT in the quarter reached Euro 9 million;
  • Earnings before taxes amounted to Euro 9 million;
  • Cash and cash equivalents and short-term time deposits of Euro 108 million;
  • Betting fees and gaming levies in the quarter were lower at Euro 5.1 million (Q1 2017: Euro 5.4 million), reflecting the decline in gross betting and gaming revenue;
  • The VAT regulations for providers of electronic services within the European Union led to a negative impact on earnings of Euro 1.9 million (Q1 2017: EUR 2.4 million);
  • Accordingly, net betting and gaming revenue declined by 10.9 percent to Euro 26.2 million (Q1 2017: EUR 29.4 million);
  • As at 31 March 2018, the bet-at-home.com AG Group had nearly 4.9 million registered customers (31.03.2017: 4.7 million);
  • Marketing expenses of Euro 7.7 million in the quarter were lower (Q1 2017: Euro 14.9 million). Going forward the group is to focus its marketing activities on the Football World Cup in Russia in June and July;
  • Other operating expenses at Euro 4.9 million were significantly below the previous year’s level (Q1 2017: Euro 5.6 million);
  • Management expect FY performance to remain on track.

Management said in a statement Monday that assuming an unchanged regulatory and tax law environment, the it expects gross betting and gaming revenue to rise to Euro 150 million in the 2018 fiscal year, with EBITDA of between Euro 36 million and Euro 40 million in 2018.

Cherry Group Reports Strong Q1-2018 Performance

Gambling group looks forward to “another eventful year”

Sweden’s Cherry gambling group has reported strong growth and earnings in its Q1-2018 interim report, highlighting:

  • Group revenue up by 26 percent to SEK 681 million (541), with organic revenue growth amounting to 25 percent (44);
  • Profitability improved and EBITDA up by 131 percent to SEK 192 million (83) on a margin of 28 percent (15);
  • Profit for the period amounted to SEK 89 million (36);
  • Earnings per share before and after dilution amounted to SEK 0.96 (0.24) and SEK 0.96 (0.24);
  • On 1 January 2018, ComeOn acquired Get Lucky Ltd;
  • On 29 January 2018, Game Lounge acquired the website Slottracker.com;
  • Online gambling business area’s revenue increased by 18 percent y-o-y, while earnings improved significantly, from SEK 57 million to SEK 143 million, an increase of 151 percent;

The report also covers events occurring after the reporting period, including:

  • On 12 April, Game Lounge acquired the SEO specialist TodaysWeb;
  • On 16 April, the owners of Cherry’s senior secured bond loan 2016/2020 of up to Euro 200 million, established the proposed Group internal restructuring schedule;
  • On 25 April, Lahcene Merzoug was appointed new Managing Director of ComeOn;
  • On 30 April, Cherry called on the option to acquire an additional 7.5 percent of the shares in Almor Holding Ltd, including the brands Sunnyplayer and Sunmaker. Following the acquisition, Cherry holds 90 percent of the shares in Almor.

CEO Anders Holmgren said the group looked forward to another eventful year.

“The first quarter of 2018 shows that Cherry’s business model yields good results,” he said. “Growth continued with increased profitability, and we see good prospects for 2018 becoming a good year for Cherry’s shareholders.

“There are ongoing efforts within Cherry’s business areas to launch several new products that we believe will create interest among existing customers. Equally important are the efforts several of the companies are making in new market segments.

“The online gambling business area’s revenue for the first quarter increased by 18 percent compared with the corresponding quarter in 2017, while earnings improved significantly, from SEK 57 million to SEK 143 million, an increase of 151 percent.

“All companies are developing well, and I particularly want to highlight the turnaround that ComeOn’s new management has accomplished in a short time, as well as Yggdrasil Gaming. The third company that is developing particularly strongly is Game Lounge, which has strong organic growth and has made some additional acquisitions, such as Slottracker.com and, in April, search engine specialist TodaysWeb.

“In the coming months, Highlight Games will launch its game, SOCCERBET, in Italy, which is one of Europe’s largest gaming markets. The game is a sportsbook based on a unique combination of filmed clips from European league football and can be played both online and in game stores, closely approximating the feeling of watching live football matches. We expect the game to reach both existing and new customer categories and to be introduced in additional countries.”

Looking ahead, Holmgren said that the gaming market is currently growing strongly and Cherry estimates that demand in the group’s largest geographic markets will continue to develop favourably.