Gambling Industry Acquisitions and Financial News — Weekly Round-up for October 05, 2018

Losses Widen at GAN

But future prospects are brighter thanks to US activity

Online gambling B2B technology provider GameAccount Network (GAN) posted its six-month performance numbers for the first half of 2018 Friday, reporting that despite promising future developments in the United States lying ahead, it had experienced widening losses after tax at GBP 2.9 million.

Nevertheless, the board noted that the company had performed “in line with market expectations”, highlighting the following indicators:

  • More than 28 percent increase in gross income to GBP 23.8 million (H1 2017: GBP 18.6 million);
  • Group Net Revenue up 11 percent at GBP 4.6 million (H1 2017: GBP 4.1 million);
  • Recurring revenues up by 19 percent YoY and now account for 92 percent of Net Revenue;
  • USA and Italian activity accounted for 61 percent and 38 percent of Net Revenue, respectively;
  • Clean EBITDA loss of GBP 467,000 (H1 2017: profit of GBP 24,000);
  • Loss after tax of GBP 2.9 million (H1 2017: loss after tax of GBP 2 million);
  • Cash and cash equivalents at 30 June 2018 of GBP 5.1 million (GBP 2.7 million at 31 December 2017);
  • A subscription by new investors for 15,000,000 new shares in the capital of the company raised gross proceeds of GBP 7.5 million;
  • The Company elected to redeem and repay in full, with interest, the GBP 2,001,483 nine percent Convertible Unsecured Loan Notes 2022 issued by GAN in April 2017;
  • Net Assets at 30 June 2018 of GBP 12.3 million (H1 2017: GBP 9 million)

Operational highlights included:

  • US Supreme Court decision overturning PASPA puts the company in a strong position in the States;
  • Entered into a multi-year extension with key client Paddy Power Betfair Plc for the continued provision of platform services in New Jersey’s fast-growing Internet gaming market and the integration of their nominated Sports betting application from third party provider IGT, Inc, substantially completed in the period;
  • Commenced a significant expansion of engineering resources principally in Sofia, Bulgaria with secondary recruitment in Las Vegas, Nevada in order to meet existing and expected demand from both existing clients and new clients for incremental real money Internet gambling services (particularly for sports betting in the US) and Simulated Gaming;
  • Opened ‘GAN Digital’ in Tel Aviv, Israel, an in-house marketing agency to provide digital user acquisition & retention services to selected GAN clients worldwide;
  • Announced a strategic relationship with SBTECH to serve real money sports betting to GAN’s diverse US casino operator clients;
  • Signed a multi-year agreement with GOLDBET Srl a leading Italian Internet sports betting & casino gaming operator in Italy’s regulated market;
  • Signed the Mississippi Band of Choctaw Indians as a new client of Simulated Gaming expected to launch in Q4 2018;
  • Launched Internet sports betting in New Jersey delivered for Paddy Power Betfair plc’s FanDuel Group, GAN’s first US client to operate Internet sports betting via the GAN Platform;
  • Extended for a multi-year period the existing agreement with Pennsylvania’s largest land-based casino, Parx Casino, in order to prepare for the commencement of real money Internet gaming, real money Internet sports betting and on-property retail sports betting delivered via the GAN platform. Pennsylvania’s real money Internet gambling market is now expected to commence in early 2019;
  • Launched real money internet gaming for GAN’s second New Jersey client, Ocean Resort Casino (“ORC”), supported by GAN’s turnkey managed services comprising technical operations management, software development, customer services & payments management together with associated regulatory consultancy;
  • Full marketing of GAN’s Overseas Internet Casino in Europe commenced on 12 September 2018. This followed an extended period in Q3 restructuring operational arrangements to ensure an efficient deployment of the previously-reported $10 million in user acquisition marketing provided to GAN, to develop their Internet gambling business in European regulated markets.

Dermot Smurfit, CEO of GAN commented: “Regulatory delays will impact US real money gaming results in H2 2018, but we will continue to invest in resources to prepare for 2019 and beyond.

“By way of outlook on 2019, the recent launch of internet sports betting, the company’s current sales pipeline and existing contracted clients are projected to significantly enhance GANs revenue and EBITDA prospects.”

Macau Gambling Revenue Remains On Growth Path In September 2018

But y-o-y rise is a little below analyst expectations

Macau’s Gaming Inspection and Coordination Bureau released revenue performance figures for the Asian gambling hub Monday, revealing that revenues rose 2.8 percent year-on-year to 22 billion patacas ($2.73 billion).

The percentage growth was slightly below analyst predictions of 3 to 10 percent, but marked the twenty-sixth consecutive monthly gain in the former Portuguese colony, after performance plunged to five-year lows starting in 2014 due to lean economic growth in China and a widespread crackdown on corruption.

The September results indicate a relatively small impact from the 33 hour closure due to the approaching Typhoon Mangkhut mid-month (see previous InfoPowa report) but analysts have pointed out that the September 2018 figures represent a 17.3 percent decrease from August’s 26.56 billion patacas (US$3.30 billion).

The latest monthly tally brings Macau’s accumulated GGR for the first nine months of 2018 to 224 billion patacas (US$27.86 billion), an increase of 15.9 percent compared to the prior-year period.

They remain positive regarding October 2018, forecasting a 7 percent revenue rise to 28.5 billion patacas (US$3.5 billion).

Cirsa Issues Trading Update

Spanish gambling group continues with expansion plan under Blackstone ownership

Blackstone Capital-owned Spanish gambling group Cirsa has posted a Q2-2018 trading update reporting 3.2 percent y-o-y revenue growth despite incurring a Euro 3 million loss in LatAm currency fluctuations over the reporting period.

Highlights of the report include:

  • 3.2 percent y-o-y increase in revenue to Euro 358 million;
  • Adjusted EBITDA up 3.8 percent at Euro 90 million;
  • Secured access to a $1.9 billion debt-noter in September, enabling continued international expansion plans;
  • Successful divestment of Argentine casino and arcade assets, to the founding Lao Hernandez family;
  • Continued expansion plans for existing Spanish land assets, including joint venture Sportium;
  • Total net debt of Euro 968.1 million – increased Euro 5.1 million from March 31, 2018;
  • Cash of Euro 131.8 million; decreased by Euro 13.6 million from March 31, 2018;

Cirsa was acquired for a reported Euro 2.1 billion by private equity group Blackstone Capital earlier this year in a deal that saw Blackstone acquire Cirsa’s casino, bingo and sports betting operations in Spain, Italy and most of Latin America. The Cirsa estate includes nearly 150 casinos and more than 75,000 gaming machines.

Good First Half For Greek Online Gambling Operators

World Cup football boosts revenues

The Greek news publication ekathimerini.com reported Monday that the Greek online gambling market has enjoyed a buoyant first half to this year thanks to the World Cup football in June-July, with the 24 “temporary” Greek betting licensees declaring total turnover of Euro 3.23 billion and gross gaming revenues of Euro 182.8 million in January-June.

The 24 licensed service providers posted turnover of Euro 5.28 billion and GGR of Euro 280.6 million over the whole of last year. H1 2018 turnover was up 24 percent on H1 2017, while GGR increased 30 percent.

Likewise, an additional 30 percent was also paid in taxes on GGR. The 24 licensed companies paid Euro 98.2 million to the state over the whole of 2017, while they paid Euro 64 million in the first half of this year alone.

Despite Greek team’s absence from the World Cup, betting in the quadrennial soccer tournament attracted great interest, ekathimerini reports, while another factor that has boosted online gaming this year is the government’s clear intention to issue definitive licenses to online providers of games of chance.

Licensed access to a market with such potential comes at a price; the new 5-year licences will carry a fee of Euro 4 million each for online betting and another Euro 1 million for other online gambling verticals. In addition the operators will be paying a tough 35 percent of GGR in tax, and punters who win more than Euro 100 will have to pay a tax of 15 percent, rising to 20 percent for wins over Euro 500.

Nektan Reports Stronger Growth In First Quarter Of Its Fiscal Year

Company claims record quarterly revenues

The Gibraltar-based international gambling technology and services platform provider Nektan plc has claimed another record quarter for the first three months of the financial year ending 30 June 2019 (Q1 FY19).

The company reported stronger than expected growth with the following highlights:

  • Record Q1-2019 NGR and Cash Wagering figures, during the traditionally quieter summer months; at GBP 6.4 million NGR was up 12.6 percent vs. Q4-2018 and up 64,6 percent on a y-o-y basis;
  • First time depositors fell 10 percent to 38,981 compared with the preceding quarter, and was down 2.9 percent on a y-o-y basis. The decline is attributed to an increasing focus on maximising player life time values which will improve profitability going forward for Nektan and its partners;
  • Cash wagering at GBP 178.3 million was up 9.4 percent vs the previous quarter and up 40.7 percent on a y-o-y basis;
  • Management reports that the company remains on course to break even in EBITDA terms by the end of FY19;
  • Nektan launched multiple new sites and is now delivering gaming content to a record number of 143 global casino brands in Q1 FY19;
  • The Group’s pipeline of additional casino brands from both existing and new UK and international partners remains strong;
  • The company’s platform has over 700 games (over 500 in Q4 FY18, an increase of 40 percent) from a total of 27 games providers;
  • In B2B terms, Nektan reports significant growth potential and higher margin, which in the past three quarters has provided quarter-on-quarter growth of 77 percent;
  • The company currently has a total of 14 deals live globally compared with 12 in Q4 FY18;
  • The first global platform deal with Tyche Digital now has 14 sites live from 10 operators and has experienced double digit month on month growth in Q1 FY19, albeit off a low base.
  • In addition, there is a significant pipeline of further integrations expected over the coming months;
  • 432 games are now live on E-Lite from a total of 13 games providers;
  • In Q1 FY19, Nektan has completed back-end integration, regulatory approval and white label customisation with a major North American tier-one operator for launch in-venue in Q2 FY19;
  • Metric Gaming’s full-service Race and Sports betting platform has now been integrated into the Evolve platform, giving Nektan a wider product offering in the US;
  • Using its development team based in India, Nektan has completed the development of four third-party games for launch on Nektan’s Evolve platform in both the US, through its US brand Rapid Games, and in Europe;
  • Following the recent US Supreme Court strike down of PASPA the Board is seeing significant interest in the US market, and continues to review its options in the US, which include expressions of interest to invest directly into the US business unit, with the objective of reducing the cash burden on Nektan within the next two quarters.

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

“Q1 FY19 has been very strong and we have seen accelerating growth momentum across all business lines. We are on course to be EBITDA positive in Europe by the end of this financial year. Since becoming a public company in 2014, Nektan has seen only one quarter-on-quarter decline in revenue, which was during this usually quieter period of activity in the same period last year, so we are very encouraged to see such a positive quarter and expect this success to continue.

“We will continue to build our portfolio of content. We are adding more cutting-edge content and channelling this not only to more partners, but bigger partners too. Nektan is live in more jurisdictions and languages than ever before and, in particular, our Asia business, is scaling substantially as our technology is applied by more partners.

“In addition, our North America division is making progress and is due to go live shortly with a tier-one operator. We are positioned to take advantage of the opening up of the sector in the United States with a pipeline of upcoming opportunities.”

Sports Betting Gives Denmark’S Gambling Market A Boost In Q2-2018

World Cup football provides a real fillip for revenues

Danish regulator Spillemyndigheden released Q2-2018 numbers Wednesday, revealing that sports betting in particular received a significant boost during the period from the World Cup football championships.

  • Overall revenues in Q2 were up 11.5 percent y-o-y at DKK 1.63 billion ($248 million) and 7 percent higher than Q1-2018;
  • Sports betting delivered a stellar revenue performance, rising 25 percent y-o-y to DKK 648 million, with a third of that generated offline;
  • Mobile activity generated 48.7 percent of betting revenue, with desktop accounting for 17.6 percent percent;
  • Betting turnover was also generated mainly from mobile (54.5 percent) with desktop accounting for 22.7 percent and land betting 22.9 percent;
  • World Cup football betting soared 72.5 percent this year when compared with the same event four years ago, and bets were 13 percent higher on average than the 2016 European championship;
  • Online and casino revenue rose 17.4 percent y-o-y to DKK 537.2 million, with slots the most productive at a 66.4 market share. 50.52 percent of slot action emanated from mobile use;
  • The bulk of online casino revenue (69.2 percent) came from desktop activity;
  • Multi-player commission games revenue (online bingo, poker tournaments and cash games) was up 12.4 percent at DKK 37.1 million, although down 9.5 percent on the immediately preceding quarter;
  • Bingo revenue fell 2,8 million to DKK 12.2 million compared with the immediately preceding quarter. 77.4 percent of online bingo revenue came from desktop;
  • Online poker revenue was also shy of the Q1-2018 figure dipping DKK 3 million to DKK 25 million;
  • Land-based gaming machines created revenue of DKK 353.8 million, 8.7 percent down y-o-y, continuing the established downward trend;
  • The seven land-based casinos posted a 4 percent y-o-y decline at DKK 91.5 million;
  • On the self-exclusion front, the numbers rose to 15,322 by August this year – a rise over the eight months of 4,149 , with 69 percent of self-excluders choosing permanent exclusion.