Playtech profits drop as Asian markets disappoint
Playtech - which issued a profit warning back in July - posted a drop in interim earnings on Thursday but a rise in revenue as the gaming and casino software maker said Asian markets were increasingly competitive.
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In the six months to 30 June, adjusted earnings before interest, taxes, depreciation and amortisation were down 15% to €145m and adjusted net profit slid 34% to €83.3m, even as revenue increased 4% to €436.5m. The company held its dividend flat at 12.1 cents.
Playtech noted that an increase in new market entrants in China saw the development of a "highly competitive" pricing environment.
Although increased competition is set to remain in the region, the group does not believe the current pricing environment is sustainable in its current form. As a result, it has decided not to change its pricing levels in Asia and instead has focused its response on underlining the premium position of its content offering in the region. The group has launched a number of new games, focused on branded games content and increased the support given to partners in the region for them to offer progressive jackpots.
Playtech added that the challenges faced in China in the first half are unique to that region and there is no risk of contagion into the regulated part of the business.
Excluding Asia, organic B2B revenues were up 16%, driven by sport revenue and new licenses.
The company said its financials division, TradeTech, enjoyed strong growth, driven by organic growth and further acceleration delivered by acquisitions. Revenue and adjusted EBITDA grew 37% and 72% respectively on a reported basis.
Chairman Alan 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% 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% 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."
Playtech also provided an update on current trading, saying that positive momentum in TradeTech in the first half has continued into the second, with the B2B division continuing to deliver a strong performance in line with management's strategy.