Playtech CEO: Growing sport is the way forward

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PlaytechMorWeizer
owing the publishing of Playtech’s financial results for the six months ended 30 June 2016 earlier today (Thursday), CEO Mor Weizer spoke to Gambling Insider about the highlights of the report as well as the provider’s past, current and future M & A activity and future product and expansion plans.

Which areas of these results stand out as significant to you?

On a constant currency basis, revenues are up 24% and adjusted EBITDA grew by 40%. We locked in much of the company’s future growth by extending existing contracts. Seven of our top 10 licensees are now secured for at least three years, with others to follow. We signed up new licensees, including Fortuna, which we announced today, for core market growth in Central and Eastern Europe, namely the Czech Republic, Poland and Slovakia. This follows the launch of the Fortuna brand in Romania.

Recent licensees that launched include Marca, a media group in Spain, MaxBet, the largest casino group in Romania, PokerStars and Sun Bingo, which was migrated yesterday. The first half’s results included a lot on BGT, Quickspin and other bolt-on acquisitions that we believe will contribute significantly to our future results and performance. We have a very healthy pipeline of M & A discussions underway, both in the gaming and financial divisions.

Last but not least, we announced this morning a combination of our interim dividend that exceeds our 40% policy, bringing the total to €0.57 per share. That sends a very clear message to our shareholders and this is without impacting on our M & A capabilities whatsoever.

On that topic, what has been behind the thinking with the M & A activity you carried out during the period and what can you tell me about the M & A plans you have in the pipeline?

We strongly believe that M & A is an inherent part of our strategy. Playtech continues to focus on M & A to augment organic growth. Our M & A plan is healthy and we are in discussions for a number of potential acquisitions in gaming and financial divisions. We always look to maintain our market-leading position by strengthening our number of existing clients and extending beyond that. BGT is the perfect example of this. As we indicated before, we are focused on a number of key areas, such as omni-channel and sports, including product in content, games and business intelligence systems that are referred to as player engagement systems. This will allow our customers to better engage with their customers and control player acquisition and media buying in the most effective way.

With all the consolidation currently taking place in the market, what do you think the market will look like at the end of this process?

At the end of the process, I think we will find bigger groups on the back of certain mergers that will take place. I think a lot of CEOs are being pushed to consider M & A activity. I have always thought that we need to focus on what is best for the business. That is not just an acquisition, but the right acquisition for Playtech. Following the Paddy Power Betfair merger, GVC’s acquisition of BwinParty, the expected merger between Ladbrokes and Gala Coral and of course 888 and Rank’s attempt to buy William Hill, I do believe this trend will continue. I think it’s a good thing for the industry and shows the industry has matured. It’s exactly what we would like to see, given the fact that a bigger group presents a better opportunity, more firepower with marketing and accordingly, a better opportunity for Playtech.

Casino accounted for 52% of total revenue in H1. To what extent do you see that kind of trend continuing?

I believe casino will continue to perform strongly, helped also by poker and bingo, given the fact that side games are not insignificant. The amount of poker revenue accounted under casino is in the region of 25% to 30%. In bingo, it’s even more than that. The majority of revenues generated within the bingo channel are attributed to casino, but there is no doubt going forward that we will put a lot of emphasis on sports.

While we expect to grow casino significantly, we also expect our sports channel to grow. We believe it is critical to the future of retail operators that want to launch an online gaming arm. BGT is also critical to the future of retail. Bringing omni-channel into the equation, we believe sports will grow massively in the coming years. Sport has always acted as the gateway into gaming. Usually when people take our sports offering, they take the casino as well, given the platform, the omni-channel approach and the opportunity of converting people from sports to gaming, where most of the profits are generated for bookmakers. Therefore, we believe that going forward, casino will continue to perform strongly, assisted and followed by sports becoming bigger by far and more significant for us.

What are the chances you will look towards moving into the US market and what are your overall plans for international expansion?

As I’ve said before, Playtech is very keen to establish itself in each and every commercially viable regulated jurisdiction. We see a very positive trend, in which more markets across Europe and elsewhere, such as Mexico, will regulate online gaming. Playtech is taking the necessary steps in order to establish itself in these markets and Fortuna is a good example. Czech Republic, Poland and Slovakia are in the process of regulating. We have an aspiration to expand internationally and we definitely intend to do that.

For the US, online gaming is currently still small in the three states where it is allowed. Delaware and Nevada are I believe small opportunities for Playtech. New Jersey is growing, but is still a small opportunity for Playtech. We prioritise internally, and we are focused on markets that we believe are more appealing to Playtech, where it can be the leading B2B provider, and these are far more significant for Playtech. If other states, such as New York, California or Florida take the necessary steps to regulate online gaming, then dependent on the way it will be regulated and the products that will be regulated, that may be commercially viable and appealing to us. If this will be the case, we will not hesitate in establishing ourselves in each and every state or jurisdiction where it makes sense to become the leading B2B provider for local partners that we believe will become significant over time.

What do you see as the biggest challenges you will face in improving on these results in the second half of the year?

I think it’s just about ensuring we execute our strategy. We have a very long list of projects underway. We’ve just migrated Sun Bingo, so we are very keen and focused to ensure the migration will be successful. It’s been so far so good. The migration that happened last night was very successful. We intend to grow this business moving forward so we are going to put a lot of effort into that. With so many markets regulating at this point, including the Czech Republic, Portugal, Poland and the Netherlands, we need to ensure we have the relevant resources in each and every jurisdiction, securing our position with the right partners. It’s not so much a challenge, but this is what we are putting our efforts and focus on at the moment.
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