Playtech PLC (LON:PTEC) warned on 2020 results as current trading has been affected by the coronavirus outbreak in its important markets of China and Italy.
The FTSE 250-listed gaming software specialist reported revenues of €1.5bn and underling profit (EBITDA) €383.1mln for last year, up 22% and 11% respectively and both in line with or slightly better than expectations that were lowered late last year.
READ: Playtech issues "little" profit warning
But management said while the business started 2020 strongly but in the last two weeks it has started to see a “material impact from changes in normal customer patterns due to COVID-19, which is significantly affecting two of its largest markets”.
“Accordingly, results for 2020 are likely to be below existing market expectations,” the statement said.
Trading conditions in Asia weakened such that February revenues were estimated at just €7mln, meaning prior guidance of around €100mln revenue this year from the region is far from likely.
Alongside this, its Snaitech Italian sports betting chain has seen changes in customer trading patterns over the last two weeks.
The board showed their confidence in the medium-term with a new €40mln share buyback programme and a final dividend of 12 euro cents per share, though the total dividend of 18.1 euro cents is down 25% year on year.
Brokers Shore Capital and Peel Hunt both downgraded their recommendation of the company’s shares to ‘hold’.
The ShoreCap analysts said: “We continue to believe that the current valuation fails to reflect the global opportunities in digital and its leading position in Asia, and that there remains numerous strategic opportunities to unlock this value (notably exiting financials). However, until the current situation becomes clearer we lower our recommendation”.
And Peel Hunt’s said: “For many of the companies we follow, the impact of the coronavirus is likely to be shortlived. With Playtech we believe other pressures (regulation, competition in China) may make it harder for the much-needed strategic tidying up to take place as well as delaying any recovery in profit.”