Sportech points to US growth as online arm suffers
2012 platform migration diminishes gaming returns - EBITDA from US operations increases 19.4% to £8.2m.
A challenging migration to Playtech’s egaming platform contributed to Sportech’s minor decline in overall revenues, the pools and tote betting operator has revealed in its results for the year ended 31 December 2012.
The company described 2012 as a “difficult period” for its egaming division, having underestimated the migration challenges presented by migrating its Littlewoods and Vernons brands, and casino, poker and bingo products from 888 and G2 onto Playtech’s platform.
EBITDA for egaming reduced to £1.5m in 2012, down from £1.6m in the previous year, while active players reduced by 39% to 29,000.
Overall revenues meanwhile, decreased by 5% from £118.2m in 2011 to £112.0m, due primarily to discontinuing unprofitable customer acquisition activities, while adjusted profit before tax remained roughly at the same level as last year at £15.7m (£15.8m in 2011).
The operator’s North America business also suffered from a small drop in revenues (£67.3m to £65.4m) but is in line for growth following the acquisition of internet and mobile horseracing betting provider eBet for up to US$12.6m in December and the award of the exclusive right to offer online betting on horseracing in Connecticut.
Regulatory progress in New Jersey should also boost the operator, given its existing licensure there, a data and operations centre, and the provision of tote betting services to the racetracks of New Jersey and six of the twelve casinos in Atlantic City.
Ian Penrose, CEO of Sportech (pictured), said investment in the North America market, including the appointment of David Schreff as its new regional chief operating officer, has seen half of its revenue now generated in there.
“Given our UK centric roots, it is pleasing that not only have we stabilised EBITDA in the UK for the first time in many years, but also that we are now generating half of our revenue from North America,” he said in a statement.
“We consider that our activities in the North American gaming market, exposure to other regulated gaming markets worldwide and strengthened management team have positioned the Group well to take advantage of the opportunities ahead. We will also benefit from the revised financing arrangements and improved cash flow. Whilst economic conditions remain challenging in our two principal markets of the UK and USA, we have started 2013 trading in line with management’s expectations.”
Simon French, an analyst with Panmure Gordon, said current trading was in line with the group’s expectations and there are a “number of upcoming events that should further improve the quality of the group’s earnings going forward”.
“In particular the launch of online horse racing betting in Connecticut in Q2 offer forecast upgrader potential… Harder to quantify is the positive impact on the group from the more permissive state regulation for online gaming in the US. In our view being licensed in 26 states to provide horseracing betting facilities and systems to c100 racecourse, casino and betting shop partners in the USA leaves the group exceptionally well positioned to capitalise on this more permissive approach.