Gambling Industry Acquisitions, Mergers and Financial News — Weekly Round-up for November 02, 2018

By Brian Cullingworth, Last updated Nov 2, 2018

Kindred Group Reports A Buoyant Q3-2018

Marketing investment in World Cup boosts revenues

In its Q3-2018 performance report published Friday the Kindred Group reported the following highlights:

• Revenue up 19 percent y-o-y to GBP 230.7 million boosted by marketing investment in the mid-year FIFA World Cup football;
• Sports betting accounting for GBP 111.1 million in revenue, whilst casino contributed a further GBP 109.9 million;
• Poker delivered GBP 4.4 million in revenue, with other products contributing GBP 5.3 million.
• Mobile contributed 74 percent of revenue, a rise of 24 percent;
• Active players at 1.53 million declined slightly from the second quarter’s 1,55 million;
• Cost of sales rose to GBP 89.1 million, with GBP 38.2 million paid in betting duties.
• Market revenue share was GBP 12.4 million;
• Management reported gross profit up 16.9 percent y-o-y at GBP 141.6 million; operating profit was GBP 43.6 million, and profit after tax was GBP 36.9 million, up 23.4 percent.

“During the quarter, we reaped the benefits of the marketing investments made in the lead up to the World Cup, with active customers up 25 percent compared to the same period last year,” Kindred Group chief executive Henrik Tjärnström said. “The sports betting margin was 8.5 percent after free bets.

“Gross winnings revenue increased by 22 percent in constant currencies which means that we are continuing to gain market share,” he explained.

For the nine months of 2018 to September 30th, Kindred Group revenue was up 28.1 percent to GBP 657.5 million, with profit after tax climbing 38.6 percent to GBP 92.3 million.

Online Casino Group MRG Reports Strong Q3 Growth

Best revenue growth in five years claimed

Online casino group MRG, which operates the popular Mr Green brand, has posted Q3-2018 figures that it claims are the best in revenue growth terms for the last five years. The company reported the following highlights:

• Revenue up 50.9 percent y-o-y at SEK 445.2 million;
• Marketing spend below 30 percent of revenue for the first time at 29 percent;
• Organic growth of 36.4 percent, driven by a 72.3 percent rise in customer deposits;
• Earnings before interest and deductions rose 49.4 percent y-o-y at SEK75.5 million;
• Western Europe was the most lucrative region, contributing SEK178.9 million of total revenue, with.the Nordic nations contributing a further SEK160.7 million;
• Regulated markets were responsible for 17.1 percent of total revenue, whilst markets in the process of regulating generating 24.5 percent and other markets making up 23.1 percent;
• Sports betting revenue soared 439 percent y-o-y (from a low base) to account for almost 10 percent of Group revenue;
• Overall customer deposits for the quarter grew 72.3 percent year-on-year to SEK1.48 billion, with depositing punters up 47.3 percent to 193,273;
• New depositing customers rose by 38.9 percent to 73,174, and returning depositing customer numbers were up 52.9 percent at 120,099;
• Cost of services rose 65.6 percent to SEK155.1 million, with marketing spend at SEK129.6 million;
• After tax profit was up 31 percent y-o-y at SEK 40.4 million;

Chief executive officer Per Norman said Friday that management has focused on marketing efficiencies with a strong emphasis on digital marketing, player communication and effective business processes, backed by the popular Mr Green brand.

“The deposits growth is a great achievement considering the decreased marketing cost ratio in the quarter,” he noted. “This is the first quarter ever that we have reported marketing spend of below 30 percent of revenue.”

Norman reported progress on the company’s Strategy 2020 initiative, observing that after six months the strategy is clearly robust, enabling the company to build scale for a solid foundation that empowers innovation and investment in new products and services.

He said that the increased economies of scale help MRG to offset rising tax and compliance costs.

Norman said that MRG’s new Green Jade studio is scheduled to release its first game before the end of 2018, and already has a viable pipeline of products that will roll out in 2019.

The company has reiterated its projection for turnover growth of 40 percent for this year, and 25 percent for 2020.

MRG is among the 60 companies that has applied for Swedish licensing in preparation for the liberalisation of the market early next year.

On a YTD basis (to end September) the company reported revenue up 44.2 percent at SEK 1.214 billion.

Looking ahead, CEO Norman said that strong growth momentum continues.

Veikkaus Reports Declining Revenue In Third Quarter

Finnish monopoly to strengthen its competitiveness amid a changing operating environment

Finland’s gambling monopoly Veikkaus revealed Friday that its revenue fell during the third quarter, motivating management to increase competitiveness. The company reported:

• Turnover down 2.4 percent at Euro 2.36 billion, with revenue flat at Euro 725 million;
• Digital contributed 42.3 percent of turnover, with retail at 57.7 percent
• Lottery revenue grew 33.4 percent to Euro 222.8 million since the start of 2018.

President and CEO Olli Sarekoski reported:

“Gaming is undergoing a strong shift towards the digital channels. Although Veikkaus holds the exclusive right to operate gambling games in Finland, the gambling provision in the digital channels takes place in a competitive market in practice.

“The Finnish gambling market totalled an estimated Euro 1 460 million (+0%) in terms of GGR in the period between January and September. Veikkaus’ share of the total market was ca. 89 percent. The development of the regulatory environment, among other things, has led part of the gaming to take place with foreign operators.”

Breaking Data Plans Private Placement To Raise Funds For Oryx Acquisition

Canadian digital technology group hopes for Cdn 12 million to buy online gambling games developer

Canadian digital technology group Breaking Data Corporation has revealed plans to raise Cdn$ 12 million in capital funds through a private placement on the Toronto stock exchange, primarily in order to fund its acquisition of online gambling games developer Oryx Gaming.

The agreement to purchase was signed in August this year (see previous InfoPowa report) when Breaking Data revealed plans to incorporate Oryx into a new online gambling company titled Bragg Gaming Group, headed by industry veteran Dominic Mansour.

In a stock market update, Mansour revealed: “This acquisition will transform the organization into a next-generation gaming group that will have a strong foundation for future growth with a significant opportunity to leverage the incumbent media assets and enter the exciting sports betting market.”

Scout Gaming Group Issue New Shares

New issue will raise around SEK 42 million to fund US expansion

Scout Gaming Group has deviated from the shareholders’ preferential rights through the implementation of a directed new issue of 900,000 shares at SEK 47 per share.

The company will use the approximate SEK 42 million raised primarily to fund the completion of expansion in the US market where the Company recently entered into two partnership agreements with Milestone Entertainment and Metric Gaming, but also to expand its operations in existing and new markets.

The new issue was signed by Swedbank Robur, which after the Rights Issue becomes a significant owner with 1 180 000 shares or 8.88 percent of the share capital.

Other existing shareholders such as Novobis AB, Knutsson Holding AB and Lars Wingefors AB have also subscribed for shares in the rights issue.

Yggdrasil Enjoys Strong Third Quarter

Future looks bright after eventful quarter

Yggdrasil Gaming’s third quarter report ticks all the boxes delivering strong growth and a robust performance.

Key performance indicators for the three months ending September 30, 2018 include a 62 percent increase in total operating revenues amounting to SEK 71.5 million and an EBIT margin of 27 percent (Q3/2017: 35 percent).

Yggdrasil Gaming founder and CEO, Fredrik Elmqvist, said: “We continued to fully emphasize our expansional focus by making investments for the future, both in the business and into new products.”

It’s been an eventful quarter for Yggdrasil with the signing of several high-profile customers and their first social gaming partnership in Asia through a deal with Taiwanese operator XSG. In addition, the company has expanded its global footprint following deals with Tipsport in the Czech Republic and Intralot in Italy as well as becoming certified in Spain.

“I am also thrilled to announce that we have signed with ATG and Svenska Spel in Sweden and Veikkaus in Finland after the close of the quarter. We have also established a local presence in the highly important UK market to improve our commercial reach to new candidates for our YGS Masters program,” Elmqvist said.

“With the first nine months of the year behind us I am excited on the opportunities and challenges ahead. We continue to put full emphasize on growth and making investments into the organisation to stay at the forefront as a true industry innovator and to pave the way for our continued journey.”

Cherry Delivers In Third Quarter Report

All business areas strengthened

CHERRY AB delivered robust results in its third quarter report published Wednesday.

Key performance highlights for the three month period ending September 30, 2018 include:

• A 58 percent increase in Group revenue to MSEK 899 (Q3/2017: MSEK 567), with organic revenue growth amounting to 46 percentages. Acquisitions contributed 1 percentage and currency 12 percentages points.
• Profitability improved, and EBITDA increased by 130 percent to MSEK 258 (Q3/2017: MSEK 112) and the EBITDA margin was 29 percent (Q3/2017: 20 percent).
• Profit for the period amounted to MSEK 188 (Q3/2017: MSEK 42). EBIT was affected positively by an item affecting comparability of MSEK 57, following the revaluation of the previously owned holding in Highlight Games.
• Earnings per share before and after dilution amounted to SEK 1.75 (Q3/2017: SEK 0.22) and SEK 1.74 (Q3/2017: SEK 0.21) respectively.

“There are several bright points in development in the third quarter, and I particularly want to highlight the favourable development in Online Gaming,” said Gunnar Lind, acting CEO for Cherry.

Looking ahead, Lind said the company will continue to strengthen its presence in markets approaching regulation, including Sweden and other major markets, such as states in the US.

“The clear regulations that such markets offer are of interest to Cherry and its subsidiaries as they provide opportunities for long-term commitment and stability.”

IGT Narrows 2018 Forecast To Upper End Of Prior Range

Follows good third quarter results

International Game Technology (IGT) has narrowed its full year adjusted EBITDA forecast to reflect the top half of the prior range, to between $1,740 million and $1,780 million, following its third quarter results.

IGT reported adjusted EBITDA growth of 4 percent and 7 percent for the third quarter and year-to-date periods at constant currency and scope.

“Solid performance and important, long-term contracts drove very good third quarter and year-to-date results,” said Marco Sala, CEO of IGT.

“Global Lottery same-store revenues for instants and draw games rose mid-single digits. The installed base of gaming machines was up, and unit shipments of gaming machines increased 10%. And, we enjoyed particularly strong sales and profit growth in Italy, confirming the vitality of that important market.

“We are firmly on track to achieve our 2018 financial and operational goals.”

Macau Boasts Record Revenues In October

Highest since October 2014

The Gaming Inspection and Coordination Bureau in Macau has released impressive revenue figures for the gambling island during the month of October 2018, revealing that GGR reached the highest levels since October 2014 at MOP 27.33 billion (Euro 2.97 billion), a year-on-year percentage improvement of 2.6 percent that met analyst expectations.

Total revenue to date this year is currently MOP 251 billion (Euro 27.3 billion) up 14.3 percent on the same period in 2017 and the highest YTD figures since 2014 (MOP 303 billion.) October also marks the 27th consecutive month in which Macau’s casinos have delivered revenue improvements.

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