32Red bags Leeds United sponsorship deal as revenues surge 39%
Analysts issue buy recommendation on casino firm based on accelerating growth rate
32Red released an unscheduled trading update this morning, reporting a 39% rise in like-for-like net gaming revenues for the first 19 weeks of the year, as well as a new shirt sponsorship deal with Leeds United.
The sponsorship agreement – which will start in the 2016-17 season and run for three years – will give 32Red access to “Leeds United’s global fan base and extensive brand visibility”, according to a statement from the operator.
“We are delighted to be working with Leeds United Football Club, a true giant of English football with an amazing and passionate fan-base,” Ed Ware, 32Red CEO, said.
“We have a proud history of successful football club sponsorship deals and this is a fantastic opportunity to work with such an iconic club and showcase the 32Red brand. We look forward to our association with Leeds United over the coming seasons.”
The AIM-listed firm has previously sponsored Aston Villa and Swansea City, and has an existing shirt sponsorship deal with Rangers through the 2016-17 season.
The casino operator’s usually red logo will appear in blue on the Leeds’ shirt because of concerns over the club’s long running rivalry with Manchester United.
The deal was announced alongside a trading update, with like-for-like net gaming revenues up 39% year-on-year for the period to 11 May 2016 and up 71% when including revenues generated by the recently acquired Roxy Palace brand.
At its prelims on 10 March, 32Red said that it had seen a 35% increase in revenue in the first nine weeks of FY16, so today’s announcement suggests an acceleration in its growth rate.
The strong early returns for 2016 prompted Numis Securities to reiterate a buy recommendation on the company’s shares, with a target price of 200p (from 129p currently).
The stockbroker firm said in its analysis that 32Red’s success reflected an increasingly efficient marketing spend, improved CRM activities and reduced competition in its segment.
“We are encouraged by today’s trading update and we are confident that there is plenty more headroom for growth,” the Nomura analysis said. “The balance sheet is strong, with over ?10m of cash at year end, there is a clean drop-through of profits to cash flow and dividends.
“We are increasingly confident that the company will at least meet our forecasts, which assume a 26% increase in LFL revenue growth. We are not changing forecasts today, but there is clear upgrade potential if the current strong momentum is maintained,” the stockbroker concluded.
32Red shares were up 11% to 129p in early trading.