Playtech plummets as it says full year will miss market views

Playtech said on Thursday that its performance for the full year will be around 5% below the bottom end of market expectations due to a slowdown in Asia and challenges with its Sun Bingo contract.

In a trading update for the second half to date, the company said that while daily average revenues in the gaming division are higher than those reported in the interim results, the Sun Bingo contract remains challenging due to lengthier seasonality and the re-launch of the new website.

In addition, the group has been hit by a slowdown in certain parts of Asia due to recent changing market conditions. While it had been expected that activity would return to normalised levels in a relatively short timeframe, Playtech is now not expecting any significant improvement this year.

It was a cheerier picture for the company's financials division, Tradetech Group, which is performing in line with expectations, with continued growth in underlying KPIs and TradeTech Alpha already making a positive contribution since the acquisition of ACM assets on 1 October. The group also said its non-Asian B2B business continues to perform broadly in line with expectations, with organic growth supplemented by acquisitions made in 2016 and 2017.

Nevertheless, with the impact of certain Asian markets and Sun Bingo taken into account, it now reckons the full-year performance will be around 5% below the bottom end of market expectations.

"Playtech will continue its strategy of focusing on both organic and inorganic revenue growth in regulated and to-be-regulated markets. The M&A pipeline remains very strong and the company is in active discussions with a range of gaming businesses consistent with executing this strategy and with the expectation that the relative contribution from Asia to the group will consistently reduce over time."

Canaccord Genuity cut its forecasts to reflect the latest trading update, with FY17 EBITDA coming down from €349.7m to €322.1m, pushing down its earnings per share estimate to 74 cents from 81.5 cents. For FY18, the brokerage cut its EBITDA and EPS estimates to €350.5m/79.0c from €379.4m/86.8c. Canaccord also cut its price target on the buy-rated stock to 1,090p from 1,140p.

"Clearly, there will be disappointment at this update. But we would see any weakness following the trading update as a buying opportunity, and view the Capital Markets Day on November 14 as an opportunity for Playtech to demonstrate some of its technical innovations that underpin future premium growth expectations."

At 0905 BST, the shares were down 23% to 761.79p.