Gambling Industry Companies, Acquisitions and Financial News — Weekly Round-up for September 28, 2018

Perform Group Splits Into Two Brands

Introduces DAZN Group and Perform Content

Digital sports media provider Perform Group announced this week that it is to split into two brands, DAZN Group and Perform Content.

Executive chairman John Skipper explained that the company is faced by two “enormous growth opportunities”, that require distinctive brands.

“Consequently, we are re-organising to create dedicated management and standalone teams each with a clear and focused agenda and mission, Skipper said Friday. “We have an incredible opportunity to exploit significant shifts in sports media to drive great products to sports fans and create a company with ever more influence on the new sports media universe”.

DAZN will be the consumer-facing division, including DAZN itself, the world’s first dedicated live and on-demand sports streaming service, and some of the largest sports websites in the world, such as Goal.com, SportingNews, and Spox.com.

The content and traffic of these websites and apps will focus increasingly on acquiring subscribers for and driving traffic to DAZN, as well as serving fans with quality sports content. DAZN will also use its combined assets and inventory to create innovative packages for advertisers.

DAZN Group will be led by CEO and founder Simon Denyer and he will be joined by a new CFO, Stuart Epstein.- who has a 20-year track record at Morgan Stanley and has previously served as CFO for NBC Universal. James Rushton takes on a wider role as Chief Revenue Officer, responsible for all products, revenue, and marketing.

Perform Content will be responsible for the group’s B2B activities – continuing to provide world class sports data, news and video to the world’s leading broadcasters, digital companies and sports books. Perform Content will be given more resources and autonomy to invest in its primary products, such as Opta, Watch & Bet, and RunningBall.

The CEO of Perform Content will continue to be Ross MacEacharn and he will be joined by Ashley Milton as Perform Content Chief Financial Officer.

The two brands will each have their own governance and leadership but report into one board, chaired by Skipper.

DAZN and Perform Content will collaborate closely on a commercial basis. DAZN will use Perform Content data to power its products. Perform Content will continue to leverage and add value to global rights acquired by DAZN.

DAZN will remain the main rights holding company for the group including its long-term partnerships with strategic partners such as WTA, FIBA, CONMEBOL, Matchroom Boxing, NFL and EHF.

Sir Leonard Blavatnik’s Access Industries, the privately held group with global investments in multiple sectors, will continue to be the major shareholder of DAZN Group and support the growth of both brands.

Kenya Decides On Gambling Tax Rates – Finally! (Update)

President signs off on bill reducing operator tax rates but imposing tax on players

Since January this year, the tax situation for gambling operators in Kenya has been a nightmare of hope and depression as the politicians wrangled over what the tax rate should be, first raising the tax rate on GGR from single digit percentages to a whopping 35 percent, which when allied to hefty corporate tax bills and required social levies made the achievement of commercial prosperity increasingly difficult.

Politicians, trade associations and activists all had a view and the debate was fierce, but it finally all came to end Friday when Kenya president Uhuru Kenyatta signed off on the latest proposal in Finance Bill 2018, which imposes a 15 percent of GGR tax rate, but in its place hits winning Kenyan punters with a 20 percent withholding tax which the operators have to collect for the government.

The politicians have found other ways to dip into operator pockets too; such as a 15 percent tax on internet and data services, and a 20 percent tax on banking fees for money transfers.

Sports organisations, many of them left cash-strapped due to the unresolved tax issue, will be relieved at the resumption of sponsorship cash flows halted by some operators, which will now apparently flow once more.

Shares In Spread Betting Company Drop Following Income Warning

CMC Markets blames tighter CFD regulation and market volatility

CFD and spreadbetting provider CMC Markets shares declined sharply following an income warning from the company this week citing tighter regulations and a volatile market.

InfoPowa readers will recall that recently Playtech disposed of its holding in the rival Plus500 company.

CMC shares dropped 12 percent after the trading update warned income for 2019 would be lower than expected.

European regulators tightened controls on the retail online trading market earlier this year by restricting contracts for difference (CFD) by limiting the amount clients can borrow to leverage their bets.

CMC Markets said the European Securities and Markets Authority (ESMA) measures had reduced client activity.

“The implementation of the ESMA measures has reduced UK and European retail client activity as expected,” the company said Tuesday. “However, after just two months it remains too early to draw any real conclusions as to how clients will adapt to the new rules.”

The company said its CFD and spread bet revenue for the full year is now expected to see a 20 percent reduction year-on-year – below the previous guidance of a 10-15 per cent reduction.

Last week rival online trading platform IG reported a 4.7 percent profits drop in the first quarter, giving similar reasons.

888 Maintains Momentum In H1-2018

Continued strategic progress and record profit posted, but tougher compliance slows UK action

Online gambling group 888 Holdings posted its H1-2018 performance numbers Thursday, highlighting the following:

  • Group revenue up 1 percent to US$273.2 million (H1 2017: US$270.1 million);
  • B2C revenue up 2 percent to US$246.7 million (H1 2017: US$242.6 million);
  • Maintained momentum in regulated markets (but not in the UK) excluding the UK revenue increased by 30 percent led by Spain and Italy;
  • Casino revenue up by 10 percent to US$161.0 million (H1 2017: US$146.7 million);
  • Casino revenue excluding UK increased by 24 percent;
  • Sports revenue up by 11 percent to US$37.5 million (H1 2017: US$33.7 million); Sport revenue excluding UK increased by 34 percent;
  • Bingo revenue dropped by 11 percent to US$17.6 million (H1 2017: US$19.7 million) reflecting heightened regulatory scrutiny in the UK;
  • B2B revenue fell by 4 percent to US$26.5 million (H1 2017: US$27.5 million);
  • Release of an exceptional provision of US$22.4 million in respect of a legacy VAT matter in Germany;
  • Adjusted EBITDA up by 10 percent to US$52.4 million (H1 2017: US$47.6 million); EBITDA for the period was US$70 million (H1 2017: – US$7.3 million loss);
  • Adjusted EBITDA margin increased by 160bp to 19.2 percent (H1 2017: 17.6 percent);
  • Adjusted Profit before tax grew by 13 percent to US$42.5 million (H1 2017: US$37.6 million) and profit before tax was US$60.1 million (H1 2017: – US$17.3 million loss);
  • Adjusted basic earnings per share increased by 2 percent to 10.5¢ (H1 2017: 10.3¢); basic earnings per share increased to 15.4¢ (H1 2017: loss per share of 5.0¢);
  • Interim dividend of 4.2¢ per share (H1 2017: 4.0¢ per share) declared;

Operational highlights included:

  • Continued strong momentum in Casino and Sport and European markets (excluding UK) resulted in an increase in new B2C customers and healthy deposit levels;
  • Revenue from regulated and taxed markets represented the significant majority of Group revenue at 70 percent (H1 2017: 70 percent);
  • Mobile devices continued to drive growth across B2C verticals representing 75 percent (H1 2017: 69 percent) of UK revenue and 62 percent (H1 2017: 54 percent) of worldwide revenue;
  • Average active days per Casino player increased 9 percent and average revenue per Casino player increased 7 percent supported by the successful launch in May of Orbit, a new web-based Casino platform, across .com markets
  • Continued momentum in Sport with a very strong performance during the FIFA World Cup which continued post the period end;
  • Successful launch of 888poker.it in January;

Further investment and development in the US market including:

  • Recent launch of 888Sport in New Jersey;
  • Extension of 888’s unique interstate poker network to include New Jersey and pool poker players across all three currently regulated US states;
  • Two-year contract extension with the Delaware Lottery;
  • Extended contract with Kambi, 888’s sportsbook provider, to include the US market in readiness for opportunities presented by repeal of PASPA;
  • Significantly enhanced Casino content in New Jersey.

Itai Frieberger, CEO of 888, reported that further progress has been made against the strategic objectives of the group, and that 888 has continued to focus on enhancing compliance and customer protection, delivering growth in regulated markets and product innovation.

“We have maintained strong momentum in Casino and Sport particularly in continental European markets,” Frieberger noted.

“In the UK, we are pleased to report that since the period end we have started to see positive trends in revenue. This follows the proactive and prudent customer protection measures that we have implemented over the last 18 months which have adversely impacted revenue.

“The repeal of PASPA in May was a very exciting development for 888 given our unique experience and established partnerships in the US market. We have continued to invest in our US operations for long-term growth including extending our inter-state Poker network across all three currently regulated states, significantly enhancing our Casino product and, most recently, launching Sports betting in New Jersey.

“We have invested in product innovation to ensure that 888 customers continue to enjoy fresh and differentiated entertainment. In May, we launched ‘Orbit’, an innovative new Casino platform, across our .com markets and we have seen exciting early results. We plan to extend Orbit across a number of major regulated markets during the second half as well as introducing new features to 888Sport and launching ‘Poker 8’, 888’s next generation poker platform.

“The Board continues to believe that 888 is very well positioned for future growth underpinned by our diversification across products and markets, technology leadership and a first-class team. Trading during the second half of the financial year to date has been in line with the Board’s expectations with average daily revenue excluding the UK 6 percent higher year on year, 4 percent lower overall and an encouraging 9 percent increase in Group new customers acquisition. We have several exciting growth opportunities ahead and the Board remains confident that the profit outlook for the full year will be in line with market expectations.”

Mixed Results In Gaming Realms H1-2018 Report

Social publishing revenue declines 48 percent

Mobile real money and social games developer and publisher Gaming Realms has posted a mixed set of H1-2018 results, highlighting:

  • Real money revenue up by 18 percent to GBP 4.1 million;
  • Licensing revenue up by 175 percent at GBP 600,000;
  • Revenue from social publishing declined by 48 percent to GBP 2.1 million following a reduction in marketing spend of 88 percent to GBP 200,000;
  • Positive Adjusted EBITDA at GBP 400,000, an improvement from the GBP 1.1 million loss incurred in H1-2017;
  • Cash at bank at end June was GBP 400,000 prior to the receipt of a GBP 4.2 million cash payment from River UK Casino for the sale of the Gaming Realms UK B2C brands;
  • Capitalised development costs were GBP 1.5 million, mostly investment in content and platform development;

Operational highlights included:

  • Six new contracts were signed to license the company’s Slingo Originals portfolio of games in New Jersey, US, and Europe while new white label real money gambling sites for the Health Lottery were launched;
  • The sale of the company’s affiliate business also raised GBP 2.4 million;

Post-period trading events included:

  • Disposal of 70 percent of UK B2C brands to River UK Casino for up to GBP 23.1 million, with GBP 4.2 million received in August 2018. Of the remaining GBP 18.9 million, GBP 4.2 million will be received upon the completion of the June 2019 audit and up to GBP14.7 million will be subject to the earn out for the same period;
  • Licensing revenue increased 88 percent in the 9 weeks post period end;
  • Real Money Gaming revenue, excluding UK B2C brands sold, increased 10 percent in the 9 weeks post period end;
  • Successful launch, on time and on budget, of a new faster mobile optimised gambling platform;
  • Launch of ‘Slingo Originals’ games on GVC and Rank, also on time and budget, which have both been well received.

Patrick Southon, chief executive, said:

“Our strategy moving forward is to leverage our real money gaming platform and our market leading ‘Slingo Originals’ games library into the UK and international gaming markets. We believe that licensing our platform and content to leading brands and gaming operators will deliver high margin revenues and we have been very pleased with the results of our efforts over the first half of 2018. We look forward to delivering news about more developments on our strategy during the second half of the year.”

The Board expects the company to continue to incur capital expenditure on game and platform development, of approximately GBP 2.5 million per annum. However, given the sale of the assets to River UK Casino, the Board believes that the Group will have sufficient cash resources to cover these costs until such time as the Group is cash generative after all capitalised costs.

Alongside building on this strategy, Gaming Realms will continue to evaluate strategic opportunities for non-core activities such as the social publishing business