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Playtech hails strategic process with €105.1 in net profit for FY2023

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Playtech reported a year-on-year increase in revenue and adjusted EBITDA during its 2023 financial year, with CEO Mor Weizer hailing “strategic and operational” progress across the group.

Revenue from continuing operations at Playtech was up 6.6% to €1.71bn (£1.46bn/$1.85bn). This was driven by growth within both its B2B and B2C segments in 2023.

Looking back over the year, Weizer was keen to highlight US expansion. He picked several key highlights from 2023, including opening a third live casino facility in Pennsylvania and increasing its licence count to 11, with further applications pending.

Elsewhere, the B2C division delivered revenues exceeding €1.00bn for the first time. Here, Weizer focused on Snaitech, saying the brand remains well positioned to benefit from the under-penetration of the online segment.

“Underpinning this performance are our talented colleagues around the world,” Weizer said. “Despite the significant disruption from geopolitical conflict during the year, they have continued to deliver for our customers and we are truly grateful to them all.”

The Caliplay conundrum

However, against this background of revenue growth is the ongoing legal case with Mexican-facing Caliplay. 

The dispute has been rumbling on for some time, with one recent significant development coming in October 2023 when Caliplay launched legal proceedings to annul its partnership with Playtech.

Caliplay is a joint venture between Playtech and Mexico-facing operator Caliente. However, Caliplay is now seeking to end the legal relationship with Playtech. It made the process public as it says it impacts the running of its regulated business in Mexico.

Playtech hit back at the annulment request in November, announcing steps to resolve the dispute. It also said actions taken by Caliplay in Mexican court proceedings contravene contractual agreements under the strategic agreement established in 2014.

Now, Playtech has made further claims against Caliplay in terms of unpaid fees. The dispute includes a dispute over fees payable by Caliplay, mainly B2B licence fees and additional B2B services fees.

Playtech said Caliplay has not paid B2B licence fees due from August 2023 and additional B2B services fees due from July 2023. However, it recognised the outstanding amount of €86.5m within full-year revenue, saying it is highly probable cash will be collected in full.

Detailing its position, Playtech said it has an M&A call option – derivative financial assets – valued at €730.2mi. This makes up 22% of all Playtech assets. However, this is contingent on the court’s ruling, which could cancel the Playtech M&A call option.

The group believes the option has expired and first referred to its expiry having taken place in its interim report for the six-month period ended 30 June 2022, published on 22 September 2022. The group has not changed its position with regards expiry at both 31 December 2022 and 2023.

However, despite the ongoing case, Playtech said it still values Caliplay as a customer. The case is due to go to trial in October.

“Caliplay remains a highly important customer,” Playtech said. “The business is committed to continuing to maintain its open dialogue with Caliplay to discuss a path forward.”

B2B revenue up to €684.1m in 2023

Incidentally, a solid performance by Caliplay crops up several times when Playtech discusses its 2023 results. 

Beginning with B2B, which includes the Caliplay partnership, revenue here was 8.2% higher at €684.1m. Playtech said the Americas was the biggest driver of growth, with revenue up 46.4%.

In Latin America, Playtech said Caliplay in Mexico remains the key driver. However, it also hailed the success of Wplay in Colombia and early performance of Galerabet in Brazil. 

Playtech also made reference to “significant” growth opportunities in the US, with several operators launching across multiple states. North of the border, Playtech highlighted an “excellent” start to an expanded relationship with NorthStar in Canada.

Record revenue for B2C

As for B2C, revenue reached a record €1.04bn, a year-on-year increase of 5.5%. 

Playtech said Italian-facing Snaitech was the main reason for this growth, with revenue here up 5.2% to €9.47bn. This, the group said, was driven by growth across retail and online, adding that the Snai brand maintained its number one market share position.

There is also talk of targeted M&A to expand Snaitech, looking at Italy in particular for bolt-ons. In addition, Playtech said there is a large expected increase in online concession payment, making it uneconomical for many smaller operators. This, it adds, will result in further opportunities for M&A.

Elsewhere, Playtech made reference to the HappyBet brand, which posted further losses in 2023. However, some of this was related to historical litigation settlement expense, with losses expected to narrow in 2024.

Also part of this segment, growth was reported across Sun Bingo and other B2C operations. Playtech put this down to more effective marketing spend and higher retention of players due to improved user experience.

Revenue growth pushes net profit up to €105.1m

In terms of costs, expenses were higher overall for Playtech. The group’s main outgoing was distribution costs before depreciation and amortisation at €1.15bn, up 6.5%. 

Other costs of note included administrative expenses before depreciation and amortisation, which were level at €146.7m. Depreciation and amortisation was 14.3% higher at €194.4m for the year.

Playtech also noted €89.8m in costs for the impairment of property, plant and equipment and intangible assets. This, it said, relates to the impairment of Eyecon €7.8m, Quickspin for €9.6m and, mainly, sports B2B at €72.2m.

Breaking this down, the impairment of Eyecon was driven by under-performance due to the increasingly competitive UK online market. This carried value down from €17.5m to €9.7m

In terms of Quickspin, this came as the business goes through a transitional period, resulting in a decline in revenue. However, it did show signs of recovering following an internal realignment whereby it is now under management of the ‘ive business unit.

Finally, with sport B2B, this was due to the loss of two significant retail contracts in the year, carrying value down from €236.2m to €164.0m.

Despite higher costs, revenue growth meant pre-tax profit increased by 146.7% to €235.8m. After paying €130.7m worth of income tax, net profit was €105.1m, up 158.9%.

Playtech also took into account the impact of discontinued operations on profit in 2022, with these generating an additional €47.0m. However, even with this, bottom line net profit was 20.0% higher. 

In addition, adjusted EBITDA increased by 7.1% to €423.3m for 2023.

What can we expect in 2024?

As for current operations, Playtech said it has made a “solid” start to 2024. It noted strong underlying growth trends in B2B across regulated markets including the Americas and B2C.

As such, it set a B2B medium-term adjusted EBITDA target of €200.0m-€250.0m and B2C target of €300.0m-€350.0m. 

“In summary, we remain very confident in our ability to execute our strategy and to continue delivering value for our shareholders,” Weizer said.

What are the analysts saying?

Analysing the results, Neil Shah, director of research at Edison Group, offers an independent view on the figures. 

Shah agreed the results demonstrate good progress in strategic and operational endeavours. However, he also said challenges persist, notably the ongoing dispute with Caliplay.

“With the group acknowledging the outstanding amount of €86.5m within revenue for 2023, all eyes will be on Playtech in October when the case goes to trial and may result in a significant loss of revenue if Caliplay does not fulfil its payment obligations,” Shah said.

“Nevertheless, Playtech maintains a resilient balance sheet with leverage at 0.7x, bolstered by successful operations in the US and strategic partnerships. Divisionally, it saw strong growth, particularly in the Americas where revenue surged by 46%, and B2C performance remained solid with a 5% increase, led by brands like Snaitech.”

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