Online gambling operator/technology supplier Playtech is making investors queasy after warning that the coronavirus crisis could take a tough toll on its Asian and Italian market operations.
Figures released Thursday show Playtech’s 2019 revenue rising 23% to €1.5b while adjusted earnings improved 11% to €383m. But rising costs and write downs resulted in adjusted net profit falling 50% to €133.6m, profit from continuing operations tumbling 90% to just €13.8m, while the company actually booked a net loss of €19.6m once taxes and discontinued operations were included.
If that wasn’t bad enough, already skittish investors panicked after Playtech warned that the COVID-19 crisis was having an impact on its Asian grey- and black-market revenue, while Italy – where Playtech’s primary B2C brand Snai operates – has become Europe’s epicenter of viral infection over the past week. Playtech’s shares fell 11.2% by Thursday’s close.
Playtech’s B2B gambling unit saw its revenue fall 2% to €554m and earnings decline 15% to €214.8m as the company’s primary Asian markets of China and Malaysia reported revenue falling 38% year-on-year. Playtech previously flagged a “significant” increase in competition from new market entrants but says its Asian operations “remained broadly stable” through the second half of the year.
B2C gambling revenue rose 56% to €900.5m, of which Snai accounted for nearly €830m. Had Snai been part of Playtech throughout 2018, its revenue would have fallen 7% year-on-year last year as new taxes on land-based gaming machines tempered players’ interest. On the plus side, Snai’s online revenue gained 21% as sports betting wagers spiked 28% despite 2019’s lack of a major football tournament.
Playtech’s ‘white label’ B2C operations saw revenue dip 2% to €51.1m despite “strong growth” from its Sun Bingo deal. Retail sports B2C revenue improved 40% to €19.7m, thanks to Playtech’s expanding German/Austrian HPYBET betting business.
The struggling TradeTech financial services unit reported revenue falling 27% in 2019, due to a lack of market volatility in Q1 and some “exceptional market-making movements” in September and October. TradeTech cost the mothership a €90.1m impairment loss in 2019 and Playtech hasn’t ruled out selling the unit, much as it recently decided to unload its Casual Gaming business (at an impairment cost of €23.7m).
Playtech said trading over the first 55 days of 2020 was up 5% year-on-year but the COVID-19 crisis is “significantly affecting” business in China and Italy. As a result, Playtech warned that its FY20 performance will likely fail to match the market’s original expectations.
Playtech also warned that the UK government’s threats to impose a £2 maximum stake on online slots could prove costly. Slots make up nearly 70% of Playtech’s €70m in UK B2B casino revenue, while its B2C UK revenue of €35m is almost entirely from slots.
Playtech has lagged its UK gambling rivals in carving out chunks of the expanding US market but the company has opened a US office and says it’s “increasing its investment” in US operations, including plans to develop a live dealer online casino facility in New Jersey.
Playtech has yet to announce a replacement for outgoing chairman Alan Jackson, who announced his imminent exit last May following shareholder revolts over executive compensation.
