BUSINESS

Playtech plummets on Asian black-market competition woes

TAGs: Playtech

playtech-asia-market-profit-warningGambling technology provider Playtech saw its shares tumble after issuing another warning about its black-market Asian operations.

On Monday, Playtech issued a trading update covering the first six months of 2018, stating that its performance was “broadly in line” with the results from the same period last year. Average revenue excluding Asian markets is up 7% year-on-year.

However, looking at the way H2 2018 has started, the company warned that the current run rate in Asia was “materially below” both the H2 2017 average and the average expected for H2 2018 at the start of this year.

Playtech said average daily revenue in Asia has suffered from “a particularly aggressive pricing environment from new entrants” to the Asian market. Playtech has been forced to take steps to “protect Playtech’s position in the region and to drive revenue generation.”

If these current Asian trends continue, Playtech expects to take a €70m hit to its 2018 full year revenue and expects “the vast majority” of this loss will drop through to adjusted earnings.

Panicked investors began dumping Playtech shares, resulting in the stock price falling over 26% to close at £5.56. That’s an even bigger plunge than the 22% decline following Playtech’s November 2017 profit warning due to a crackdown on illegal gambling in Malaysia, one of the company’s principal black-market jurisdictions.

Playtech has long relied on its grey- and black-market B2B operations in Asia to drive its revenue, despite ongoing efforts to boost its operations in regulated markets. These efforts include Playtech’s $1.05b acquisition of Italian operator Snaitech earlier this year and a deal to provide online casino technology for Poland’s lottery monopoly Totalizator Sportowy.

Playtech CEO Mor Weizer called the company’s Asian performance “disappointing” but said the company was doing what it could to support its regional partners and “preserve our position” in this “increasingly competitive market.”

Weizer also expressed optimism that Playtech might reap benefits from the new legal US sports betting market, which he called a “significant opportunity” for the company, although US regulators might frown on a company whose reliance on black-market operations is so clearly reflected in its investor’s confidence.

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