The Isle of Man registered gambling software and turnkey provider Playtech followed its announcement of a takeover of elements of Tribeca this week with a solid third quarter trading update.
Playtech announces acquisition of Tribeca Tables
In a deal described as a landmark for the company, gambling software
provider Playtech has announced the purchase of part of rival poker
software provider Tribeca Tables for $75 million (£39 million)
The deal brings with it a number of Internet gambling sites currently
operating on Tribeca's software platform, including VCPoker, PaddyPower
Poker, Blue Square Poker and Scandinavian group, Expekt.
Playtech said the deal was in line with its strategy of extending
its geographical reach, after the United States effectively banned
online gaming financial transactions at last month.
"This is a landmark deal for Playtech, which in one move,
transforms the company into the world's leading poker network that
excludes U.S. players," said Playtech Chief Executive
Avigur Zmora.
Playtech also announced third-quarter income from non-U.S. players
increased to 53 percent from 49 percent a year earlier.
"On the basis that the company (Tribeca) will generate
about $16 million over the coming year from the migration date, the
consideration to be paid for Tribeca will be $75 million," Playtech
said in a statement.
"The maximum consideration that the company will be liable
to pay is $139 million, which will be paid in the event that the revenue
generated from this acquisition exceeds $29 million over the coming
year from the migration date," it added.
Playtech shares closed at 190 pence on Friday, valuing the group at
around 407 million pounds.
Playtech third quarter results
Highlights of the update include:
- Total revenues for this traditionally slow quarter increased by
103 percent compared to the same period last year and 4 percent on
the previous quarter to US$26.5 million. This breaks down as follows:
- Casino revenues increased by 95 percent compared to the same period
last year and 2 percent on the previous quarter to US$22.6 million.
- Poker revenues increased by 274 percent compared to the same period
last year and 26 percent on the previous quarter to US$3.4 million.
- Income from non-US players increased to 53 percent from 49 percent
for the same period last year and from 52 percent in the previous
quarter.
- In line with the statement issued on 6 October 2006, Playtech continues
to enforce its request from its licensees to shutdown all of US-facing
activity. To date almost all licensees have blocked their US-facing
activity, with the few remaining expected to conclude their US blocking
shortly.
Playtech has adopted a policy of not accepting royalties derived from
US players as of the date of the Unlawful Internet Gambling Enforcement
Act 2006. As a result of this, there will be a material impact on
revenue generation in the fourth quarter and into 2007, the management
reports in the update.
- During the quarter, an interim dividend of US$18.5 million was paid,
representing approximately 8.7 cents per share.
Current trading comments in the update reveal that Playtech has been
pursuing a policy to diversify its portfolio through both product
range and geography. As a result, the Board believes that the Company
has a robust model that will successfully adapt to the new legislative
environment created by recent US bans. With cash reserves of over
US$90 million, the management believes it is a strong financial position.
Current trading is strong on a non-US pro forma basis. Playtech continues
to increase the number of licensees in Europe and Asia. In October
2006, Playtech's non-US pro forma casino revenues increased by 5.5
percent to US$4,570k (September 2006: US$4,333k) and the Company's
non-US pro forma poker revenues increased by 11.4 percent to US$831k
(September 2006 US$746k).
As a result of the deal with Tribeca Tables Europe Limited, it is
expected that Playtech's poker revenues will significantly increase
in 2007.
The update reveals that Playtech currently has 41 licensees. Given
its decision to stop licensing its software to operators who accept
bets from US players, this figure includes two licensees who opted
to terminate their agreements with Playtech. A further three licensees
who are heavily reliant on income from the US are also expected to
end their relationships with Playtech soon. Given the above five licensees
had marginal non-US activity (total non-US royalties in September
2006 were US$46k), their termination will not significantly affect
non-US results going forward. As noted below, Club on Park has recently
migrated to the Playtech platform and new licensees are constantly
being recruited to strengthen its portfolio.
Among company activities covered in the update is a reference to Videobet
- the land-based spin-off of Playtech's successful online platform.
Videobet offers a server-based gaming system for land-based operators
as well as stand-alone or local network casino floor machines. Featuring
an improved version of Playtech's suite of exclusive games, Videobet's
platform includes a powerful, real-time backend with dynamic content
delivery and control over the entire operation down to each terminal.
The advanced graphics provided by the VGP (Videobet Gaming Platform)
combine the thrill of traditional gaming machines with the power and
flexibility of Playtech's online software technology. The VGP is flexible
enough to be deployed at virtually any location from betting shops
and casinos to hotel lobbies and cruise ships.
The Videobet games package, which currently includes casino and FOBT
games, is based on Playtech's popular online offerings. Coming soon
is the development of a land-based version of Playtech's popular Live
Gaming.
The Videobet product is now being integrated with the operation of
several licensees in the UK and in South America and is expected to
generate revenues during the fourth quarter of 2006.
Like most other forward thinking companies in the industry, Playtech
continues to devote significant resources to the development and launch
of games in the Asian market. With the launch of Pachinko during the
fourth quarter of 2006 and Solo Mahjong and Solo Mahjong Pro and a
new version of the live gaming software and functionality by the end
of the year, Playtech's penetration of the Asian market will be greatly
accelerated. Other Mahjong products, such as the Duo and Full Mahjong
tournaments will be launched during 2007 alongside the launch of other
Asian card games.
During the quarter, 365 Media Group PLC launched the Club on the Park
online gaming site on the Playtech platform. As previously announced,
365 Media Group PLC recently acquired the business, which was formerly
known as the Ritz Club Online. Both the online casino and online poker
rooms of Club on the Park have been migrated to the new Playtech platform
and the sites have been designed to convey to players a look and feel
reminiscent of a luxurious land-based casino. The Company will also
provide a fully branded mobile solution, fully supporting and replicating
the casino's look and feel onto compatible mobile phone handsets.
The Club on the Park brand is focused on the UK and European markets.
Both its casino and its poker operations are tightly integrated within
the Playtech platform using Playtech's proprietary integration package.
The third quarter has not been all positive news, however and Playtech
reports on litigation with an Isle of Man company called Cranway Limited,
which has issued proceedings in the English High Court against the
Playtech and a licensee of its software claiming infringement of EP
(UK) 0625760. Following an initial review of the case, Playtech intends
to vigorously defend the claim.
Avigur Zmora, Chief Executive Officer, commenting on the results,
said today:
"I am very pleased with the way the Company had handled
the implications of the passing of the Unlawful Internet Gambling
Enforcement Act 2006. There is no doubt that this legislation will
affect Playtech's revenue generation but the actions taken over previous
years to create a balanced business portfolio and the acceleration
of non-US business will ensure the Company's continued growth prospects
and success as we can already see on a non US pro forma basis. The
Board and I look forward to the next quarter and beyond with confidence."