Playtech Update: Big Wins and Knockbacks

In terms of its online gaming operations, Playtech continues to focus on developing and expanding its omni-channel presence through Playtech ONE.

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Playtech, the FTSE 250 international online gaming company established in 1999, has in recent years dominated the industry as part of a triumvirate, along with Microgaming and NetEnt. Playtech’s catalogue of more than 500 casino games (with an emphasis on slots) is available in around 130 licensed Playtech sites, along with sports betting, mobile and social gaming platforms. In 2015 the company was estimated to control about 40% of the international online gaming market.

Playtech operates on a different model to its main rivals, in that it has a preference for licensing its games to standalone sites, rather than those which opt for the multi-provider approach (where the games of more than one developer can be played at the one online casino). As part of its model, it also acts as a provider for games produced by other developers, which can then also be played at Playtech casinos.

Win Some, Lose Some

The company has had some ups and downs over the last decade or so. In the early to mid 00s, it was perhaps not as rigorous in its licensing deals at it might have been, with the result being that some less than scrupulous online casino operators were able to offer Playtech games. When these sites gained reputations as bad payers, or for reneging on the deals players were offered, it reflected badly on Playtech, who were seen as not being able to provide a safe and secure gaming environment. The company did ultimately manage to restore its reputation, however, by revoking and refusing licences so that it now works with a smaller number of trusted and established operators.

This has also in time been counter-balanced by some significant industry wins. Playtech partnered with leading UK bookmaker William Hill to facilitate its entry into the online space. It also currently partners with another leading global name, Ladbrokes, who moved over from rivals Microgaming. At the beginning of 2017, Playtech also announced that it was extending its agreement with BetFred to be its major online casino platform supplier, after what has already been a ten-year relationship.

Hits and Misses

However, the online gaming industry, and the model on which major players like Playtech operate, is constantly evolving. For instance, there is some fear of saturation in the market (despite the fact that online gaming revenue is still predicted to grow by around 10% for the foreseeable future), which may lead to developers putting a halt on the number of new licences they grant.

This, in part, explains the recents attempts by majority shareholder Teddy Sagi and Playtech to diversify, notably into the financial sector — some of which have more successful than others.

In 2015, Playtech acquired TradeFX Limited, owners of the Market.com brand, online forex and CBD brokers. Although there have since been significant changes in how it operates, moving to straight through processing (STP) order execution, and which have lead to some recent downsizing and job losses, this acquisition is largely counted as a success.

However, an attempted takeover of Plus500, the innovative online share trading company based in Tel Aviv in which Playtech currently holds a 9.9% share, was aborted after it fell foul of regulators at the end of 2015. Likewise, an attempt at the same time to take over Dublin-based AvaTrade, another online trader, was also halted after concerns were raised by Ireland’s central bank.

There has been some market speculation that Sagi’s previous convictions for securities trading offences may have been the cause of the regulator’s caution (he holds a 21% stake in Playtech, down from around 33%), along with the UK Financial Conduct Authority’s increased concern about money laundering that is centred on both offshore-registered gaming companies and financial traders.

Where to now?

Despite the Plus500 and AvaTrade setbacks, Playtech’s appetite for continued growth and diversification in both the gaming and financial sectors has not been diminished, and no-one should be surprised to see further acquisitions being announced throughout 2017.

For instance, in February of this year it acquired the Australian software developer Eyecon, noted for its online bingo games. This follows on from the acquisition of Aristocrat Lotteries in 2014 and Yo Yo Games in early 2015, along with Sweden’s Quickspin and rival developer Best Gaming Technology (BGT) in 2016. In late 2016, it also announced that it will supply Finland’s state-owned gaming operator Veikkaus with online casino games. Furthermore, there is some speculation about an attempted takeover of another rival, Amaya, in the near future.

Market confidence in Playtech’s aggressive approach is reflected in its balance sheet—2016 H1 profits were up 15% when compared to 2015—and in the share price, where there was modest overall growth throughout 2016. On the London Stock Exchange, Playtech shares kicked off the year at 816.0000 and rose to a high of 948.5000 in October, before ending the trading year at 818.0000. 2017 has likewise started well, with a high thus far this year of 893.5000.

In terms of its online gaming operations, Playtech continues to focus on developing and expanding its omni-channel presence through Playtech ONE, which enables players to access games on any device and anywhere with a single log-in. As more online casinos shift to mobile-first approaches, and as worldwide mobile gambling growth is expected to remain constant at around 17%, Playtech is therefore ideally positioned to remain at the forefront in terms of both technology and its market presence.

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