ii view: Playtech profit hit by Covid cancellations

by Keith Bowman from interactive investor |

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Investors have today been cashing out of this gaming software maker – here’s why. 

First-half results to 30 June  

  • Revenue down 23% to €564 million
  • Adjusted earnings down 16% to €162 million
  • Gross debt up 26% to €1.18 billion as of 31 Dec 2019
  • No dividend payment

Chief executive Mor Weizer said:

"The attitude of our people coupled with the resilience and diversification of our technology-led business model has delivered a strong first half performance during an extremely challenging period for the industry. These strengths, combined with early decisive action to focus on the safety of our employees and protect the group's cash flow, has placed us in a strong position to benefit from the recovery and to capture the exciting market opportunity in the US and Latin America.”

ii round-up:

Gaming software maker Playtech (LSE:PTEC) has reported a 15% drop in adjusted earnings, hit by cancelled sporting events and closed bookmaker outlets under the Covid-19 pandemic. 

Earnings for its own Italian consumer-focused store and online betting business Snaitech fell by 37% to €47 million. Accompanying management outlook comments in relation to the consumer retail business proved cautious in tone. 

Playtech shares fell by more than 10% in UK trading having risen by over 130% since pandemic-induced market lows in March. Shares for gaming companies GVC (LSE:GVC) and 888 Holdings (LSE:888) are up by similar amounts. 

Playtech’s financial markets-focused business Trade Tech had enjoyed a strong first half, driven by volatile markets and significant pandemic uncertainty – adjusted earnings rose by more than 500% to over €50 million. But management did not expect the stellar performance to continue given more recent market stability. 

The future of Trade Tech is under review, with a possible sale being considered. Shares for rival financial trading platform Plus500 (LSE:PLUS) are up over 70% year-to-date. 

The software business added 50 new brands during the period, along with pushing its expansion in the US with a first customer launch in the state of New Jersey. 

ii view:

Playtech describes itself as the leading technology company in the gambling industry. Headquartered in the Isle of Man, its gambling software, services, content and platform technology are used across a wide array of online gaming. These include casino betting, sports betting, virtual sports, bingo and poker. Its products are used by the industry's leading retail and online operators, land-based casino groups and government sponsored entities such as lotteries. 

Employing over 6,000 people across 24 countries, it also operates its own high street and online gaming company Snaitech in Italy, along with financial trading platform Trade Tech. 

For investors, online strength and expansion potential in both North and Latin America offer positives. A possible sale of its financial markets business might also prove favourable. But for now, with outlook comments largely cautious in tone and the shares sat on an estimated price/earnings ratio (PE) comfortably above both the three- and-10-year averages, some degree of caution looks sensible near-term.   

Positives: 

  • Diversified product and geographical spread
  • Pursing both North and Latin American expansion

Negatives:

  • Snaitech revenue fell 46% in the half
  • Shareholder returns suspended

The average rating of stock market analysts:

Hold

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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