BUSINESS

Playtech lowers earnings forecast as TradeTech unit struggles

TAGs: colombia, jason ader, markets.com, Playtech, tradetech, Wplay

playtech-earnings-tradetech-financial-declineOnline gambling technology provider/operator Playtech says its 2019 earnings won’t match its forecasts due to its struggling financial trading division.

On Friday, Playtech issued a trading update for the four months ending October 31, during which its TradeTech financial services unit – which offers forex and contracts for difference (CFD) via Markets.com – had experienced “highly challenging” trading conditions during September and October.

These challenges will result in TradeTech performing “well below management’s expectations” and Playtech warned investors that its overall adjusted earnings for 2019 are “now expected to be a little below current consensus.” Investors frowned at the news, pushing Playtech’s share price down 2.5% by the close of Friday’s trading.

Playtech added that it is “evaluating all options” for its TradeTech unit, which like other firms offering CFDs, binary options and forex trading has come under increased regulatory scrutiny in recent years. Playtech is also considering the sale of its Casual and Social Gaming business in an effort to streamline its overall structure.

Activist investor Jason Ader, whose SpringOwl Asset Management holds a 5% stake in Playtech, spoke earlier this month at the Sohn Investment Conference in London, where he urged the company to ditch TradeTech and other non-core assets because they had “no place in Playtech.”

Ader also urged Playtech to sell some of its struggling Asian-facing business to a local partner while declaring that Playtech was the perfect candidate for a leveraged buyout, based on Ader’s belief that Playtech is currently seriously undervalued.

REGULATED B2B, SNAI ON THE UP
TradeTech’s struggles spoiled a 12% revenue gain in Playtech’s regulated market B2B gambling operations in H2 to date, partly due to “some hardware sales.” The Snaitech operations in Italy continue to exceed Playtech’s expectations, particularly online.

As for Playtech’s controversial Asian grey- and black-market operations, the company is sticking with its August forecast of €115m in revenue this year. Playtech continues to implement its incentivization program for its Asian-facing licensees but acknowledged that “the backdrop in Asia remains highly competitive.”

LATAM BOOST VIA WPLAY COLOMBIA DEAL
Friday also saw Playtech announce a “major structured agreement” with Aquila Global Group, which operates the popular Wplay sports betting brand in Colombia. Wplay was the first operator to receive a Colombian online gambling license in 2017 and also operates over 7k retail points-of-sale.

The agreement will see Playtech migrate all of Wplay’s retail and online operations to Playtech’s IMS player management platform and will exclusively power all sports and casino software (along with third-party game content) as well as handling CRM and marketing. Playtech will also make “structured investments” in Wplay’s omni-channel offering, which will entitle Playtech to a share of Wplay’s profits on top of a revenue-sharing arrangement.

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