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Playtech’s profits slump on Covid-19 disruption

While online gambling revenue surged during lockdown, this was unable to offset the impact of cancelled sports and retail closures
September 17, 2020

Gambling software provider Playtech (PTEC) has been squeezed by the cancellation of sporting events around the world as well as the closure of retail betting shops in response to Covid-19. The group’s adjusted cash profits fell by 15 per cent at constant currencies in the six months to 30 June, to €163m.

IC TIP: Hold at 355p

This reflects declines across both its business-to-business (B2B) and business-to-consumer (B2C) divisions, partially offset by growth at its financial trading segment, TradeTech. The latter benefitted from market volatility and higher trading volumes, pushing its adjusted cash profits up to €53m, versus €8m a year earlier. However, with the trading frenzy having eased, this performance is not expected to repeat in the second half and Playtech is in early discussions to sell the business.

Momentum in online gambling operations also helped temper the pandemic blow. In the B2B business, excluding sports, online revenues climbed by more than a quarter amid increased demand for casino, bingo and poker games during lockdown. Meanwhile in B2C, growth in higher margin online sales – as well as low fixed costs – meant that the 37 per cent drop in Snaitech’s cash profits was lower than the 46 per cent decline in revenue.

Net debt fell by over a tenth from the start of the year to €523m, equivalent to 1.5 times adjusted cash profits. This is well below the new covenant multiple of 5 that has been negotiated with lenders for the December test date. But higher finance costs from interest expenses on bond loans and drawing down its revolving credit facility weighed on statutory earnings.  

Peel Hunt anticipates full year cash profits will decrease by a quarter from 2019, to £287m, before rising to £351m in 2021.

PLAYTECH (PTEC)    
ORD PRICE:355pMARKET VALUE:£ 1.06bn
TOUCH:353-355p12-MONTH HIGH:442pLOW: 111p
DIVIDEND YIELD:NILPE RATIO:NA
NET ASSET VALUE:407¢*NET DEBT:43%
Half-year to 30 JunTurnover (€m)Pre-tax profit (€m)Earnings per share (¢)Dividend per share (¢)
2019 (restated)72836.08.16.1
202056410.51.6nil
% change-23-71-80-
Ex-div:na   
Payment:na   
£1=*Includes €1.5bn in intangible assets or 500¢ a share