If you ignore the not insignificant Asian part of Playtech PLC’s (LON:PTEC) business, interims from the gaming software group were halfway decent.
Total revenues excluding Asia in the first half of 2017 were up 35% year-on-year, helped by a contribution from recently acquired Italian business, Snaitech.
READ: Playtech says €846mln Snaitech stake acquisition to complete sooner than expected
Group revenue including Asia was up 4%, or 6% on a constant currency (CC) basis, at €436.5mln from €421.6mln the year before.
Adjusted underlying earnings declined 15%, or 13% on a CC basis, to €145.0mln from €170.9mln while adjusted earnings per share fell 34% (CC: 37%) to 23.9 cents from 36.2 cents the year before.
The interim dividend was held at 12.1 cents.
Average daily revenue in the business-to-business (B2B) gaming division for the first 52 days of the third quarter was down 13% year-on-year (down 14% on a CC basis and excluding acquisitions). Excluding Asia, average daily revenue was up 6% (CC: 5%) year-on-year.
Snaitech saw a strong performance at the start of the second half of the year, driven by the closing weeks of the World Cup following which the business has continued to trade in line with expectations.
The business-to-consumer (B2C) side, excluding Snaitech, is performing in line with expectation in the second half of the year.
“Playtech has had an extremely busy first half of the year with important operational progress and new licensee wins in key strategic markets, the UK, Europe and Latin America. This continued progress is resulting in higher quality earnings for Playtech with group revenue now 69% regulated,” said Alan Jackson, the chairman of Playtech.
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“Following headwinds in Asia and a full year contribution from the landmark Snaitech acquisition, regulated revenue at current run rate is expected to be c. 80% in 2018,” Jackson revealed.
“This progress is marked against the disappointing market conditions in Asia; however, it should be noted the headwinds in the Asian market are not reflective of the core strength of the Playtech model as the regulated segment continues to report organic growth and encouraging momentum.
“Looking to the future, the delivery of the Snaitech acquisition in the period has not only delivered geographical diversification of the group's revenue profile but more importantly delivered a cornerstone presence in the largest, and one of the fastest growing gambling markets in Europe,” Jackson said.
READ: Playtech says Italian financial market regulator approves mandatory takeover offer for remaining Snaitech shares
“First half results from online gambling firm Playtech suggest the company may be starting to move past the problems in its Asian businesses which have dogged the share price in 2018,” suggested Russ Mould, the investment director at AJ Bell.
“The problems in Asia haven’t gone away – profit is showing double-digit declines whatever way you slice it. The company has been a victim here of heightened competition and industry-led pricing pressure.
“However, putting these problems to one side, the rest of the business is performing well with revenue outside of Asia up 35% year-on-year, and the acquisition of Italian firm Snaitech is at least helping to reduce the reliance on Asia and increases exposure to regulated markets,” he added.
“Strong cash flow performance means the company is able to maintain its dividend at the same level as a year ago, and if the same was true for the year-end payment, this would imply a forward yield of nearly 6%,” Mould noted.
Shares in Playtech were up 9.1% at 564.4p.
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