Playtech unveils “exceptional performance” at TradeTech in 1H-2020
Online gaming and finance giant Playtech issued a trading update (see full text below) this morning, indicating that the company brought in EBITDA of €160 million during the first six months of 2020, down 16% from €190.6 million in 1H-2019.
That was the bad news.
The good news is that Playtech reported that in July EBITDA returned to “normalised levels”, thanks to continued good performance at its Financials division TradeTech, and thanks to retail locations reopening and many sporting events resuming.
Playtech went out of its way to note that TradeTech had an “exceptional performance” in the first half of 2020 as well as a “strong July”, benefiting from an increase in market volatility and resultant growth in trading volumes. We had earlier reported that TradeTech saved Playtech’s Q1 results.
TradeTech includes Playtech’s financial B2B and B2C businesses. Its CFH and Alpha Capital Markets units provide market making, liquidity, technology and white label services to forex brokers and other institutional players. Playtech also operates directly in the Retail FX and CFD brokerage area via its Markets.com brand.
During the first half of 2020 Playtech saw the departure of some of the key management figures in TradeTech, about three years after each of the CFH and Alpha businesses were acquired. Alpha co-founder Muhammad Rasoul left the company last month, as was exclusively reported at FNG. That followed the June departure of CFH Group founder Christian Frahm, also exclusively reported at FNG. Markets.com continues to be run out of Cyprus by CEO Joe Rundle.
The full trading update issued by Playtech reads as follows:
05 August 2020
Playtech plc (‘Playtech’ or the ‘Company’)
Trading updte and H1 2020 results date
Playtech plc (“Playtech”) today provides an update on its first-half performance and current trading. Playtech will announce its interim results on 17 September 2020.
First-half performance & current trading
Playtech took early and decisive action in response to COVID-19 to ensure the health and wellbeing of its employees and to preserve cash flow, while continuing to provide customers with Playtech’s leading technology. Despite the pandemic severely impacting some of the Group’s businesses, Playtech had a resilient H1 2020 with Adjusted EBITDA of more than €160 million. This result was driven by the Company’s online businesses and the exceptional performance of TradeTech, which benefitted significantly from increased market volatility and trading volumes during much of H1.
Playtech had a strong performance in July with continued strength in online and TradeTech, in addition to seeing the benefit of retail locations reopening and many sporting events resuming. Playtech’s Adjusted EBITDA in July approached normalised levels.
Core B2B Gambling
Playtech’s online Casino (including Live), Bingo and Poker businesses performed very well in H1 2020. The significantly heightened levels of activity in these businesses have begun to normalise as government lockdown restrictions have been eased, however activity remains above pre-COVID-19 levels.
Playtech’s B2B Sports business is heavily weighted towards retail and as such was severely impacted by closures in its main markets, the UK and Greece, as well as due to the cancellation or postponement of major sporting events during the period. The vast majority of betting shops in the UK and Greece have now reopened and many sporting events have resumed, leading revenues in B2B Sports to recover albeit not to pre-COVID-19 levels.
Snaitech had a strong start to 2020 but lost significant revenue in H1 due to retail closures and the cancellation or postponement of sporting events. However, given the low fixed costs in this business and the revenues generated from online, as well as certain mitigating actions, Snaitech has been able to minimise the impact on its business. Snaitech’s retail outlets began to reopen from 15 June 2020 as local governments across Italy began to ease restrictions. By early July, the majority of Snaitech’s retail locations had reopened. Snaitech’s performance in July was very strong due to the reopening of retail outlets, the return of sporting events, continued strong performance in online and favourable sporting results.
Playtech’s white label business (predominantly Sun Bingo) had a strong performance in H1 2020. Playtech’s Retail B2C Sports business (HPYBET) has reopened most of its shops as restrictions have eased in Germany and Austria.
Playtech’s business in Asia was negatively impacted in the period by government restrictions put in place in the region in response to the COVID-19 pandemic while also benefiting, since late March, from a contract with a leading provider of Live Casino in the region.
TradeTech had an exceptional performance in H1 2020 as it benefitted from the increase in market volatility and trading volumes, in particular in the period to 30 April. TradeTech had a strong July.
Balance sheet & liquidity
As announced on 19 March 2020, given the ongoing current circumstances related to COVID-19 the Board determined that it was appropriate to maximise liquidity within the Company and suspended shareholder distributions until further notice. The share repurchase programme announced at the FY 2019 results was postponed with immediate effect and the 2019 final dividend was not proposed at the AGM. Together these measures saved the Company over €65 million of cash outflows.
Playtech takes a prudent and disciplined approach to its banking relationships. Despite being comfortably within its covenants, Playtech took a precautionary measure and proactively approached its lenders and agreed to amend the covenants in its revolving credit facility for the 31 December 2020 and 30 June 2021 tests. The leverage covenant has been amended to 5x net debt / Adjusted EBITDA for the 31 December 2020 test and 4.5x for the 30 June 2021 test. The interest cover covenant has been amended to 3x for the 31 December 2020 test and 3.5x for the 30 June 2021 test. The covenants will then return to previous levels of 3x net debt / Adjusted EBITDA and 4x Adjusted EBITDA / interest cover from the 31 December 2021 test onwards.
As of 30 June 2020, Playtech had over €600 million of available liquidity including its revolving credit facility which has been drawn down. In early Q3, Playtech received the remaining €36 million from the sale of Snaitech land in Italy.
Mor Weizer, CEO, commented:
“Thanks to the outstanding response from our people and the early actions taken to protect the business, Playtech has demonstrated outstanding operational resilience during this challenging period.
“In addition to navigating near-term headwinds, we’ve continued to focus on setting up the business for success in the long-term. During the period, we’ve worked hard to add new brands, expand relationships with our existing customers and entered the New Jersey market with our long-standing strategic partner bet365. It is pleasing to see the impacted parts of the business starting to demonstrate positive momentum and I am confident the actions we have taken will help us emerge stronger and cement our market-leading position.”