Analysis: Playtech prepares for UK tax hit
New deals expected in the Netherlands, Italy and the UK as Playtech seeks to absorb PoC hit with fresh business
While British-facing operators will undoubtedly feel the brunt of the looming UK Point of Consumption tax, little thought has been spared for how suppliers may be forced to contend with the issue.
Software supplier Playtech, despite its scale, admitted last week that is not immune to such market changes. Playtech CEO Mor Weizer (pictured) told eGaming Review that while the company has no need to compensate for the tax, the regulated market strategy it has been pursuing over the last 18-24 months will become even more important.
A large proportion of the supplier’s business is UK-facing and most of its largest licensees “ Ladbrokes, Gala Coral, Paddy Power and Betfair “ are all likely to come under increased pressure to perform as efficiently as possible under the new regulatory regime and subsequent 15% tax.
During last week’s analyst call, Playtech CFO Ron Hoffman revealed that 28% of its business was derived from UK companies and the worst case scenario would see the firm take a 12m revenue hit “ a sum that would wipe 8% off its net profit for 2013.
However, Weizer expects this figure to be much lower while new business in regulated markets such as the Netherlands and Italy will almost certainly move to offset that impact. “It’s in line with the strategy we’ve had over the last two years,” Weizer says.
The firm’s contract with land-based Holland Casino, announced in December last year, will see it supply various online gaming products when the soon-to-be regulated market opens in 2015. Weizer describes the deal as the first of many, stating his desire for Playtech to be the leading B2B provider in the Netherlands.
A template cast from the Holland Casino deal “ where Playtech offers the creation of a full online presence for land-based establishments “ is being touted in other countries, too. “We’ve seen an increasing desire from retail businesses to have a successful online gaming arm and it presents an amazing opportunity for Playtech,” Weizer says.
As yet unnamed gaming companies in the UK, Italy, Spain and the Netherlands have all expressed an interest, with Weizer keen to point towards Playtech’s experiences with RAY in Finland as an example of what can be achieved.
An altogether different approach is also bearing fruit in Italy, with Playtech collaborating with the country’s regulatory body AAMS to bring the unlicensed operators it has contracts with into line. Both AAMS and Playtech have given such operators until June to comply, with Playtech helping to facilitate their moves to a licensed structure in return.
Playtech’s presence in Italy dates back to 2008 and its collaboration with AAMS has not gone unnoticed. The firm is now in advanced discussions with further operators in the country, increasing its presence in the Italian market further still.
Although Weizer was happy to discuss the Dutch and Italian markets at length, one contract he would not be drawn on is the tender to supply egaming products to former Greek monopoly OPAP.
eGR understands Playtech to be going head-to-head with Openbet for the contract, but for now Weizer remains coy on the subject. Securing such a deal would see Greece become yet another European jurisdiction Playtech can call upon.
With smaller operators expected to wilt under the pressure of even tighter margins being ushered in by market regulation, the market share of the larger operators is expected to grow even further. With the majority of them signed up to Playtech’s product suite, Weizer can be forgiven for remaining bullish over his firm’s prospects in the face of changing tax regulations.
“The customers we have in the UK have the best opportunity to increase their market share following the structural change the market will go through,” Weizer says.
Having spent the last two years amassing clients across Europe and waiting for further jurisdictions to regulate, the move to focus solely on regulated markets is now reaping dividends.
In other news: