Asian struggles dampen regulated revenue lift for Playtech

Asian struggles dampen regulated revenue lift for Playtech

Thursday, August 23, 2018 Posted by Luke Massey
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The group's revenues climbed year on year, but only by four per cent

“Headwinds in the Asian market are not reflective of the core strength of the Playtech model,” argued Alan Jackson, the group’s chairman, in response to a significant net profit drop for one of the gambling industry’s major suppliers.

Reporting on the six months to 30 June, Playtech was keen to highlight that total revenues outside of Asia were up 35 per cent from the corresponding period of last year, while 69 per cent of group revenues are now from regulated markets, up from 50 per cent a year ago.

One of the key highlights on the balance sheet was Playtech BGT Sports (PBS), which recorded a 27 per cent increase in revenues to €46.7 million, and an eight per cent growth in its global retail machine footprint, driven by organic growth across the retail operations of the division, particularly the continued roll out and contribution from OPAP in Greece.

Despite remaining loss making, Sun Bingo mounted a H1 recovery by delivering a 28 per cent revenue growth at constant currency, while it must be noted that H1 2018 was the last period before Snaitech, officially acquired by Playtech on 5 June, becomes a significant shaper of the group’s performance.

The company also highlighted new licensee wins in some of its key markets, most notably in the UK with Gala Leisure Buzz Bingo. Over in Poland, Playtech was selected by Polish National Lottery provider, Totalizator Sportowy, to launch its first online casino offering.

However, successes were not replicated in Asia, where “disappointing market conditions” were raised as the biggest reason for Playtech’s adjusted profits falling by 34 per cent.

A considerable 25 per cent decline in casino revenue was driven by an aggressive pricing environment from new entrants to the market, particularly in China, and the tough like for like comparatives with a H1 2017 that included a higher contribution from Malaysia and an unusually active period across the rest of Asia.

Despite these figures, Playtech has taken the decision to not to change its pricing levels in Asia, instead choosing to focus on underlining the premium position of its content offering, having concluded that the current pricing environment is sustainable in its current form.

In a statement, Jackson said: “Playtech has had an extremely busy first half of the year with important operational progress and new licensee wins in key strategic markets, the UK, Europe and Latin America.

“This continued progress is resulting in higher quality earnings for Playtech with group revenue now 69 per cent regulated. Following headwinds in Asia and a full year contribution from the landmark Snaitech acquisition, regulated revenue at current run rate is expected to be circa 80 per cent in 2018.

“This progress is marked against the disappointing market conditions in Asia. However, it should be noted the headwinds in the Asian market are not reflective of the core strength of the Playtech model as the regulated segment continues to report organic growth and encouraging momentum.

“Looking to the future, the delivery of the Snaitech acquisition in the period has not only delivered geographical diversification of the Group’s revenue profile but more importantly delivered a cornerstone presence in the largest, and one of the fasted growing gambling markets in Europe.”

Totally Gaming says: Playtech’s poor performance in Asia comes as no surprise to the market following July’s profit warning, the second issued in the space of 12 months. However, the company is staying true to its strategy in the struggling region, while looking to new markets for increased profit margins. For example, expect the US to play a more prominent role in the next balance sheet, particularly after the appointment of former Sportech chief executive Ian Penrose.

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