Playtech Sees H1 Revenues Soar In All Verticals But iPoker

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Monday, September 7th, 2015 | Written by Stephen Smith

Playtech is the biggest supplier of online and offline gambling software in the world, with the FTSE 250 Index listed company valued at around £2.77 billion. The company continues to perform rather well, too, and recently released its financial results for the first six months of 2015, revealing a 33% rise in revenues to $320.8 million (€286m), compared to the $240.5 million (€214.4m) generated in the same period last year. The company’s net profit were also up by 11% to €83.9 million in H1, and commenting on the impressive figures Playtech chairman Alan Jackson, said:

“Our continued operational delivery across all business segments has translated into a strong financial performance across all key metrics, with revenues up by a third in the half year.. Our gaming business continues to go from strength to strength with our strategy of focusing on regulated markets driving growth.”

Regulated Markets Provide 40% Of Revenues

In H1, Playtech derived 40% of its revenues from regulated markets, up from 35% in H1 2014, although the company still generates the majority of its earnings from the ‘grey market’. As mentioned in Playtech’s 2014 annual reports, the Philippines grey market accounts for 29% of its gaming revenue, while for its Antigua-licensed business that figure was around 13%. Nevertheless, the company is keen to emphasize it does not accept players from the unregulated US market, with Playtech spokesperson James Bennett explaining:

“The US has been and largely remains an excluded territory since the ban and we have never taken US customers and don’t today.”

Double Digit Growth

Playtech reported double digit revenue growth across all its verticals in H1, with the exception of poker. The company’s casino business soared by 28% to €149 million, with mobile casino revenues up an impressive 73%. Meanwhile, sports betting noted a 30% improvement in revenues to €16 million, with the vertical representing a largely untapped yet “critical component” for the firm. Also higher were services revenues, up 21% to €74million, with bingo revenues rising by 20% to €10 million, and land-based revenues up an incredible 159% to €15 million, from €5.8 million in H1 2014, helped chiefly by last year’s €10.5 million acquisition of Australian slot machine manufacturer Aristocrat Leisure Ltd.

Poker Disappoints

Bucking the upward trend, however, was the company’s poker vertical which reported a 19% slide in revenues to just €6 million ($6.7 million), from the €7.4 million ($8.3 million) it generated the previous year. As a company statement then explained:

“Poker remains a challenging vertical due to unfavorable wider market trends. Revenues [are] down 19 percent in the half compared to the same period last year, although already from a very low base.”

In 2012, Playtech attempted to stem the downward trajectory of its online poker division by splitting its iPoker Network into two tiers, the aim of which was to separate its recreational players from its skilled online grinders. It had been hoped that the move would have created a more appealing playing arena for casual players, but a few weeks ago Playtech finally accepted the measure did not work, and so reverted back to its previous one for all system. Casing point, Playtech had 2,900 players on its iPoker Network just before implementing its two tier system, but is now showing just 1,350 cash players at any one time, ranking it the fourth most popular iPoker destination in the world, with PokerStars (15,500) leading the way, followed by 888poker (2,100), and Bodog (1,600).

Benefits From Acquisitions and Mergers

Going forward, Playtech says it stands to benefit from the increasing trend towards acquisitions and mergers in the gambling industry. Many of the software provider’s customers have already been a part of this M&A trend, placing Playtech in a good position to grow alongside the newly merged firms. This includes last months £2.3 billion agreement between Ladbrokes and Coral to form the biggest betting shop operation in Britain, while last week Betfair and Paddy Power also announced a merger to create an online gambling businesses worth around £6 billion. As Playtech CEO Mor Weizer explained to The Telegraph:

“We see this as an opportunity to further strengthen our relationship with them. The beauty of the business model of Playtech is that it’s [based on] revenue-sharing agreements”.

Playtech, itself, has also been gripped by this acquisition frenzy, with Weizer stating that there is a “pipeline of companies” with which it is currently in discussions.