Playtech has reported a 54% year-on-year increase in revenue for 2018, though growth for the year was largely down to the acquisition of Italian operator Snaitech, with the solutions giant’s B2B division struggling.

“This has been an extremely important year in the growth and development of Playtech,” the company’s chairman Alan Jackson said of the 2018 performance. “The year has produced many challenges for Playtech and the industries we operate in, making our achievements this year all the more critical to our longer-term success.

“Playtech has continued to improve its quality of earnings, has delivered strategic progress in fast growing markets, has an improved financial profile and continued to develop its corporate governance through the evolution of the board,” he explained. “This progress lays the foundations for long term, sustainable growth and shareholder value in 2019 and beyond.”

Revenue for the year rose to €1.24bn (£1.08bn/$1.41bn), with the results including Snaitech’s income and balance sheet from June 5 2018, when Playtech acquired a 70.6% stake in the business. The operator became a wholly-owned subsidiary of the business from August 3.

Snaitech contributed revenue of €511.9m to the total, which coupled with €33.7m from Sun Bingo (up 43% year-on-year, though the offering was loss-making) and €47.6m from casual and other gaming, saw total B2C revenue grow to €593.2m. This makes it the largest single division of the business, with revenue up 744% from 2017.

The B2B division, however, struggled in 2018 with total revenue down 14% to €566.0m. Casino revenue was down 22% to €320.1m, which Playtech blamed on a 41% drop in Asian revenue – something that forced it to issue a profit warning in July last year.

This decline was partially offset by a 12% increase in regulated market revenue, which accounted for 43% of the division’s total.

Playtech’s B2B sports business, Playtech BGT Sports, saw revenue grow 12% to €98.0m, which was attributed to a €10% increase in retail sports revenues that resulted from its partnership with OPAP. Struck in February 2017, this saw the solutions provider roll out self-service betting terminals across the Greek operator’s retail network, as well as launching an over-the-counter betting solution. The division was also boosted by increased revenue from the Mexican, Belgian, and UK markets.

With the Asian decline impacting B2B casino revenue, the services division struggled as a result of declines in dot.com markets. Revenue fell 10% year-on-year to €84.6m, though this was offset by a 12% increase in regulated market revenue, including a 46% boost from Playtech’s structured agreements with Spanish media giant Marca and Mexican operator Caliente.

The B2B bingo and poker offerings both grew, though marginally and from low bases. Bingo revenue was up 1% at €26.3m, while poker was also up 1%, to €9.6m. Playtech generated a further €27.4m from other sources, including its IGS casino platform subsidiary and from its partnership with marketing solutions provider Beehive.

The financials division, TradeTech Group, saw revenue grow 9% to €92.9m, due to increased B2B revenue and a full-year contribution from ACM Group, known as Alpha, which was acquired in August 2017.

While the Snaitech acquisition boosted revenue, it also weighed heavily on costs for 2018. Operating expenses for the operator amounted to €418.9m, leading to an 85% increase in group costs to €897.4m. The B2B arm saw costs decline 6% to €313.4m, with a 14% hike in sales and marketing expenses mitigated by declines in expenditure on research and development, operations and administrative expenses.

Full year earnings before interest, tax, depreciation and amortisation (EBITDA) was up 6.5% year-on-year to €343.0m, boosted by a €93m contribution from Snaitech. Underlying adjusted EBITDA fell 21%, as a result of declines in the Asian market.

Once depreciation, amortisation and impairment charges of €104.9m, plus finance costs of €40.4m and share-related losses of €2.8m were stripped out, and finance income of €36.4m and fair value changes of disposed assets of €65.7m factored in Playtech posted a pre-tax profit of €297.2m. After paying taxes of €35.1m, Playtech posted a net profit of €262.1m for the year.

Analysts from Regulus Partners noted that the operator’s focus appeared to be shifting away from Asia, in favour of locally regulated markets and high-margin strategic partnerships, supported by the bolstered B2C division.

“Playtech is a very different beast to only two years ago, with significantly improved operational visibility and regulated market exposure,” Regulus said. “However, the extent to which this repositioning can drive net growth is an open question, even with Asia stabilising from its new low base.”

The solutions giant also provided an update on its early performance in 2019, revealing that it has applied for a licence in New Jersey as it considers licensing opportunities and strategic partnerships across the US.

“Playtech has strategic optionality within its technology stack in order to go into joint ventures, partnerships and B2B deals with land-based casino groups, media groups and existing international clients,” it noted.

For the first 49 days of 2019, regulated B2B gaming revenue was up 7%, though non-regulated B2B revenue had fallen 26% over this period. Snaitech, meanwhile, had got off to a strong start for the year, though Playtech noted that it had tempered its growth projections for the business as a result of new regulatory controls in Italy. TradeTech was also performing in line with management expectations, it added.

For the year ahead, Playtech expects to post full-year EBITDA in the range of €390m to €415m. This assumes that Sun Bingo, which was loss-making in 2018, makes a positive EBITDA contribution for the year, a €20m impact from adopting new International Financial Reporting Standards, and Asia remains stable with an annual revenue run rate of approximately €150m.

Source: www.igamingbusiness.com