M&A and UK recovery sees Jackpotjoy return to growth in Q3

13 November 2019

The newly formed Gamesys Group has reported a 22.9% year-on-year increase in revenue for the third quarter of the year, aided by a turnaround in the operator’s Jackpotjoy operating division.

Revenue for the three months to 30 September, 2019 grew to £92.5m (€107.9m/$118.9m), with revenue for Jackpotjoy growing 5% to £52.2m. This followed year-on-year declines for the division in the first quarter and first half of the year.

The division’s recovery in Q3 was due in part to an additional £2.3m in revenue from brands acquired through the operator’s purchase of assets from the business’ former technology partner. This sum was generated over the final three days of the quarter, from 27 September.

The division also benefitted from an uptick in revenue from its UK-facing brands. In recent quarters, the UK in particular had suffered from the impact of enhanced responsible gambling measures, though Gamesys noted that these had started to annualise, meaning their effects had less of an impact on quarterly numbers.

The Botemania brand - which accounted for 17% of the division’s revenue in Q3 - and Starspins were also highlighted as growing during the period.

This, however, was offset in part by a decline in Jackpotjoy’s Swedish offering, blamed on regulatory changes in the market. It now accounts for 2% of segment revenue, down from 5% in Q3 2018.

Vera&John, the group’s standout performer of 2019 to date, continued to grow strongly. Revenue was up 56.6% to £40.2m, despite the Vera&John and InterCasino brands pulling out of the UK market from 3 September.

"It is a very exciting time for all involved at Gamesys Group,” chief executive Lee Fenton commented. “The successful combination of two leading and complementary businesses with a unique technology offering, a strong pool of talent and an enhanced portfolio of brands, ensures the group is in a strong position to take advantage of future growth possibilities and we are already reaping the benefits in terms of operating performance.

“Q3 has seen excellent growth across the acquired Gamesys brands, an outstanding performance at Vera&John and a return to growth at Jackpotjoy UK which helps underpin our confidence in the outlook."

Revenue growth was accompanied by rising costs over the quarter, with total outgoings up 34.1% to £83.6m. This comprised predominantly of distribution costs, such as sales and marketing expenses, fees and taxes, which rose 39.1% to £50.7m.

Selling and marketing expenses climbed to £18.9m, while the rise in remote gaming duty in the UK to 21% of GGR, from 5 April, resulted in taxes growing to £12.4m.

Administrative costs, including salaries, amortisation, depreciation, legal and accounting fees, grew to £29.0m. A further £3.0m in fees related to the Gamesys acquisition were also incurred during the quarter.

Adjusted earnings before interest, tax, depreciation and amortisation was up significantly in Q3, almost doubling to £18.1m.

After interest expenses and charges related to the change in value of group assets, plus £42,000 in taxes, operating profit for the quarter stood at £9.7m, a 66.8% year-on-year increase. The operator also recorded an £8.1m benefit from the amortisation of acquired assets, leaving a net profit of £17.9m for the quarter, more than double the prior year’s figure of £7.8m.

For the nine months to 30 September, revenue was up 16.9% to £262.0m, which adjusted EBITDA growing to £79.5m. After costs were stripped out, operating profit for the period amounted to £8.5m, though the group incurred a £15.2m benefit from transaction-related costs, and £32.4m from the amortisation of acquired assets, leaving a nine-month profit of £58.5m.

For the year ended 30 September, Gamesys Group had a total of 248,945 average active customers per month, generating £110 per month per customer.