Acquisitions drive strong revenue growth for The Stars Group in Q3

Acquisitions drive strong revenue growth for The Stars Group in Q3

Thursday, November 8, 2018 Posted by News Team
The Stars Group
However increased expenses lead to sharp drop in profit

The Stars Group has reported a 73.6% increase in revenue, driven primarily by significant increases in betting and gaming revenue resulting from the acquisitions of Sky Betting and Gaming, CrownBet and William Hill Australia. 

Revenue for the three months ended September 30th climbed to $572.0m, with a slight decrease in poker revenue more than offset by huge leaps in revenue from gaming and betting. 

While poker revenue declined 2.6% to $215.7m, due to currency fluctuations and the shut-down of the product in markets such as Australia, gaming revenue jumped 116.7% to $180.9m. 

This gaming growth was credited to the acquisition of SkyBet, supported by improvements to the PokerStars Casino product, which has been supplemented by more than 250 new games in the nine months of 2018 to date. 

Betting, meanwhile, saw huge revenue growth from a combination of factors, including the positive impact of the FIFA World Cup, the SkyBet deal, the roll-out of the product in New Jersey, and an increase in betting margin for BetStars. This led to revenue for the vertical increasing from $11.7m in Q3 2018 to $158.4m. 

“This was a landmark quarter during a transformative year for the company as we begin to deliver on our vision to become the world’s favourite iGaming destination,” The Stars Group chief executive Rafi Ashkenazi said. 

“We completed our acquisition of Sky Betting & Gaming, which was cleared by the CMA in October, making us the leader in the UK online betting and gaming market. We also launched BetEasy in Australia and sports betting in New Jersey.”

Gross profit for the period rose 65.8% to $442.8m, again thanks to the SkyBet and Australian acquisitions. However, the shift in revenue composition resulted in gross profit margin falling 4.5 percentage points to 77.4%, with sports betting traditionally having lower profit margins than poker and gaming. Margins were also impacted by increased gaming duties, levies and fees resulting from the expanded operations and the launch of shared liquidity between the French, Spanish and Portuguese markets. 

Adjusted earnings before interest, tax, depreciation and amortisation was up 27.3% to $198.3m.

The acquisitions led to an increase in operating expenses, which rose 145.2% to $267.5m. Sales and marketing expenses grew 179.4% to $92.5m with research and development costs almost doubling to $11.9m, while net financing charges came in at $74.4m. 

As a result of the increased expenses profit for the quarter fell sharply, down 87.2% to $9.7m. 

For the first nine months of 2018 to September 30th, revenue was up 44.6% at $1.38bn, with adjusted EBTIDA up 19.5% at $541.5m, and the company posted a net loss of $70.7m. 

“We are pleased with our quarterly results, which reflect both continued organic growth from our International business and contributions from both BetEasy and Sky Betting & Gaming, despite unfavorable sporting results during the period,” Ashkenazi commented.

“As we continue our transformation and look towards 2019, we are excited to take advantage of the opportunities ahead of us by leveraging our leading positions in attractive markets, strong brands, technology and operating expertise.”


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