Why Intertain is still keen on UK despite Brexit

Why Intertain is still keen on UK despite Brexit

Wednesday, July 20, 2016 Posted by Andy McCarron
A recession-resistant product means Intertain's UK plans aren't being phased by Brexit

Next week should see investors in bingo operator Intertain get updated on the company’s future direction, be it a sale of the whole company or plans to list on the London Stock Exchange. But, whatever the outcome, it appears that London will be the firm's new HQ.

The whole process has been delayed, but by no means derailed, by the Brexit vote in the UK, which saw the country narrowly vote to leave the EU. Indeed, in some ways the Leave vote could be advantageous to the company.

In a recent investor call, Intertain CFO Keith Laslop explained that a devaluation in sterling would be advantageous for revenue earned in other currencies.

“What this means to us is that in Sterling terms, given that we do have around 30 percent of our profits and cash flows coming in other currencies, as the Sterling depreciates—once you translate everything into Sterling, our profits and cash flows increase. And that increased cash flow will cover more of the Jackpotjoy earn-out and more of the debt. So fundamentally in terms of our business, a decline in the Sterling is a benefit to our business.”

Intertain is also less worried about Brexit causing a recession than other entertainment businesses of its size might be, describing online gaming is ‘recession-resistant’.

Laslop explained: “Although nothing is recession proof, I would say that online bingo out of all online gaming verticals is the most recession-resistant. The reason being is that our players; we're much less reliant on VIPs in our business, and our players bet a lot less than in other online gaming verticals.

“We have a lot more players betting much less. Our average deposit is only £16. So whereas someone might cancel an expensive trip to Vegas, they would tend to still be in their house and spend a little bit of money for their enjoyment that week.”

A Special Committee set up to investigate long term options for Intertain found the UK strategically appealing and potentially advantageous for a variety of reasons. Chairman David Danziger explained: “Among these is that Intertain believes the UK is a natural home for its listing, particularly following Intertain's acquisition of the Jackpotjoy business.

"We also expect a number of benefits in connection with a London listing, including that it would provide Intertain with access to a large liquid and international market with an analyst and investor base with extensive sector knowledge, and which is home to a significant number of our global gaming industry peers and a majority of its online gaming peers.

“Although we are assessing the implications of the outcome of the Brexit vote, the key advantages of a London listing for Intertain, including the existing ecosystem provided by the existing listing of so many of our industry peers, appears to remain substantially unaffected by this outcome.”

Totally Gaming Says: “Brexit appears not to have put the skids on the UK as an attractive hub for the gambling industry, at least not as far as Intertain is concerned. The appointment of experienced UK operators Neil Goulden and Andy McIver suggests they are ready to make a huge push in the market. Given the experience of the two new recruits in sportsbetting, it wouldn’t be surprising to see Intertain trying out a new vertical either.”

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