Gaming solutions giant Playtech has reported a 22.5% year-on-year decline in revenue for the first half of 2020, after a strong start to the period was halted by the impact of novel coronavirus on B2B and B2C operations.
Revenue for the six months to 30 June declined to €564.0m (£513.0m/$664.6m), with a strong performance from its financials division TradeTech unable to offset a 13.5% drop in B2B revenue, and a 41.0% drop in B2C’s contribution.
Total gambling revenue for the period, after €6.5m in inter-company eliminations, was down 30.8% at €476.7m. This broke down to €229.7m from B2B operations, and €253.5m from B2C.
Playtech explained that B2B revenue declined as a result of retail activities around the world being brought to a halt by government measures to slow the spread of Covid-19, and a decline in Asian revenue. Retail B2B revenue was down 54% during the period, though this was improved slightly to a 43% drop when one-off hardware sales in the Playtech Sports division from H1 2019 were excluded.
Asia, meanwhile, saw revenue decline 35% on a constant currency basis, which Playtech blamed the impact of Covid-19.
However, Playtech said that if Asian revenue and the H1 2019 hardware sales were excluded, B2B gambling revenue had actually proved resilient during the pandemic, remaining flat year-on-year, and up 2% on a constant currency basis.
Bingo and poker, meanwhile, performed strongly under lockdown, aided by Playtech growing its poker network by signing up 19 brands, including a number in the wake of Microgaming shutting down its network. In the wake of lockdown being eased and live sports returning, revenue had normalised, but still remains above prior year levels, the supplier added.
Turning to B2C operations, Snaitech was by far the largest source of revenue, though its contribution declined 45.6% to €215.5m. This was blamed on Covid-19, which shuttered Italian betting shops and the lack of sporting events.
This decline could have been greater were it not for a strong online performance, with igaming revenue up 37% for the period.
White label revenue, meanwhile, was up 21.4%, thanks to an “outstanding” performance from Sun Bingo. That brand alone saw revenue grow 61.1% to €28.2m, more than offsetting a steep drop in other white label revenue, which fell to €1.2m. Playtech said this was due to efforts to consolidate or cease certain brands’ operations during the period.
Retail sport revenue was also down, falling 14.1% to €8.5m, due to retail closures resulting from Covid-19.
Playtech’s standout performer in the first half – and the only division to grow – was TradeTech, the financials business which it is in talks to divest. TradeTech benefitted from increased market volatility and trading volumes, particularly in March and April, resulting from Covid-19 creating large price movements in major instruments. This led to a 123.4% year-on-year increase in revenue, to €87.3m.
The decline in revenue led to a decline in distribution costs for Playtech in the first half, which declined 28.6% to €344.0m, while administrative expenses were down marginally at €74.8m, and impairment charges for financial assets rose to €7.1m.
This left earnings before interest, tax, deprecation and amortisation (EBITDA) of €138.1m, down 14.7% year-on-year. However, Playtech’s adjusted results, which eliminate non-cash and one-off items, and which its board said better reflected its H1 performance, suggested an EBITDA decline of 15.8% to €162.3m.
Depreciation and amortisation charges declined to €107.1m, while charges related to the impairment of tangible and intangible assets amounted to €7.2m.
After financial costs of €35.2m, plus profit share from joint ventures and associates, fair value changes of assets and equity investments and a €13.4m profit from an asset held for sale – presumably TradeTech – actual pre-tax profit came to €10.5m.
However, when this was adjusted to remove the impairment charges, fair value changes and profit from items held for disposal – plus reducing the depreciation and amortisation charges, adjusted profit was down 45.4% at €52.4m.
After €6.0m in income taxes, Playtech posted a €4.5m profit from continuing operations. Adjusted profit, meanwhile, came to €44.6m, down from €75.4m in the prior year.
It then recorded an €815,000 share of profit from its discontinued social and casual gaming business, that was sold to US publisher Tilting Point earlier this year. After a €899,000 foreign exchange adjustment, plus €65,000 in charges related to employee terminations, Playtech’s net profit for the period was €4.4m, down 81.5%.
The adjusted profit, which reduced the share of profit from discontinued operations to €393,000, came to €43.7m, down 43.7%.
In the early stages of the second half, Playtech said it has seen strong trading and cash generation throughout July and August, though noted that July was the stronger of the two months.
Online is expected to continue to perform strongly going forward, though management remains cautious about retail’s outlook, and TradeTech’s first half performance is not expected to continue into H2, with market volatility significantly lower.
In the medium term, Playtech believes its technology and strong balance sheet positions the business to recover strongly from the Covid-19 disruption and take advantage of new opportunities. Key among these is the US, where the business has a strong pipeline of potential new customers, and is in the process of securing licences to move into states beyond New Jersey.
With a long-term partnership in place with Caliente in Mexico and a major agreement signed with Wplay in Colombia in H2 2019, Playtech also sees scope for further growth in Latin America, especially after signing partnerships in Guatemala and Costa Rica in 2020.
Brazil, it said, was an “interesting opportunity”, while other jurisdictions such as Peru and Argentina are expected to open up in the coming years.
“As well as increasing our work with existing tier one licensees and adding more than 50 new brands to our SaaS model, we have also continued to execute our expansion into strategically important markets such as the US with our first launch in New Jersey and further structured agreements in Latin America,” Playtech chief executive Mor Weizer said.
“The scale of our technology and the breadth of our product offering mean Playtech can capture commercial opportunities in the fast-growing US and Latin America markets outside the remit of traditional B2B suppliers and we are investing in accelerating this strategy.”