Weizer: You have to be honest about buy verses build

Weizer: You have to be honest about buy verses build

Friday, August 26, 2016 Posted by Andy McCarron
Playtech chief executive says BGT acquisition central to omni-channel push

Mor Weizer, the chief executive of Playtech, said the acquisition of the self-service betting terminal (SSBT) business Best Gaming Technology (BGT) came at an inflexion point in the development of the company’s omni-channel services.

In its results statement yesterday, the online gaming platform and supply services provider said it had recently signed an omni-channel agreement with Fortuna Entertainment for sports and casino offerings across its land-based and online operations in Czech Republic, Poland and Slovakia. It added that further deals are in the pipeline.

Speaking to TotallyGaming.com, Weizer said the deal for BGT ‘ticked every box’ for Playtech as regards its M&A strategy. “It is a central element of the omni-channel proposition,” he said. “That is key to our strategy. It is a growth company with fully regulated earnings. It also has a portfolio of fantastic customers and it is only just looking at expanding into other countries.”

Weizer suggested that as with previous acquisitions in specific product verticals, the company had looked at building in the SSBT space rather than buying before opting for the latter. “We tried going the proprietary route and it didn’t work,” he admitted.

“You have to be honest. We found that with Virtue Fusion. At the time it was a far better proposition than what we already had. The same with mobile sports and Mobenga. We’re always pretty honest about that. Our customers deserve the best. You factor in the cost of the acquisition against the potential growth opportunity.”

Playtech bought a 90% stake in BGT in July for €138m plus potential add-ons. The company now has a leading position in the SSBT space, particularly in the UK where it is the provider for most of the UK high-street bookmakers including Ladbrokes, Coral, Betfred and Paddy Power.

In 2015 BGT generated revenues of €41.6 million, and an adjusted EBITDA of €12.9m. In the first six months of 2016 adjusted EBITDA came in at €12.5m

Playtech said it had identified circa 100,000 potential outlets for SSBTs across Europe which at an average of five machines per outlet is a potential addressable market of half-a-million machines.

In the gaming space, Playtech also bought Sweden-based games developer Quickspin for €24m, a deal which Weizer described as being in line with the company’s strategy of buying high-quality games studios.

“They have some important customers, but also their platform is really good,” he said. “They have a Nordics reach… Sweden is a big market and we believe that by acquiring Quickspin we will be able to further diversify our business.”

The gaming division enjoyed a strong six months with revenue up 18% on a constant currency basis, including strong contributions from both existing and new customers. Over the period the company announced new deals with both PokerStars and SunBets and the migration of SunBingo across to its platform.

Within gaming it was the casino vertical which provided the biggest growth with revenue rising 19% to €177m while service rose 3% to €76.5m and sport was up 10% to €17.7m. The land-based business – which will soon be massively augmented by the revenues from BGT – was up 3% to €15.5m. The only negative within gaming remained the poker business where revenues fell 16% to €5m, although the sport segment did see the loss of three Mobenga contracts with UK licensees.

The only other negative came from the financials division which suffered a tricky six months with revenues down 27.5% on a pro-forma basis to €31.3m. This came against the backdrop of regulatory crackdowns on the financial trading sector on the part of the financial authorities in both the UK and Cyprus. Late last year, Playtech called a halt to its £460m bid for Plus500, a major competitor for its main financial trading brand Markets.com.

Investec analyst Alistair Ross said that the company’s remaining stake in Plus500, and also its small stake in Ladbrokes, are worth circa €290m. Taking into account the forthcoming acquisition and dividend payments, the company has liquid cash resources of circa €750m for potential use in any M&A activity. The company also said during the analyst conference call that it also had ready access to debt financing should it be necessary.

Totally Gaming says: The extent to which Playtech is accreting money even as it continues with its acquisitions and dividend payouts – a special dividend of €0.46 a share will be paid out to shareholder at the end of the year – is somewhat remarkable. Quibbles about the financials division aside, the company’s ability to spot and act upon strategic opportunities is arguably unmatched in the sector. Weizer’s comments that building technology is “not as easy” as some operators think will resonate across the sector even as companies talk about bringing development in-house.

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