Stars hails ‘transformative’ year as SBG posts growth

17 September 2018

Stars Group CEO Rafi Ashkenazi has described Sky Betting & Gaming (SBG) as “key” to the company’s global expansion plans after the acquired business posted impressive growth across key financial metrics for the 12 months to the end of June 2018.

Total revenue at SBG amounted to £670.5m (€754.3m/$880.2m), up 30% on the previous year, largely driven by a 36.7% increase in sportsbook revenue.

Gross profit was also up 33.2% year-on-year to £500.1m while operating profit climbed 26.5% to £86.7m.
 
Sports betting remains the main source of income at SBG, with revenue from this division up by 36.7% year-on-year to £406.5m. Stars has already set out plans to use SBG’s position in this market to achieve its own growth targets.

In April, Stars announced it had agreed a deal worth $4.7bn to buy SBG from CVC Capital Partners. Stars finalised the acquisition in July and began the integration process.

However, Stars was then ordered to delay further activity pending the result of an enquiry into the acquisition by the UK Competition and Markets Authority (CMA).

In an earnings call, it was revealed that the CMA launched a formal review of the deal on August 23, with this due for completion on or before October 14. Should the ruling go in favour of Stars, it will be able to recommence integration.

Aside from SBG, Stars has recently signed off a deal to become the majority shareholder in Australia’s CrownBet Holdings and subsequently purchased William Hill Australia.

Ashkenazi said that this activity represents a “transformative year”, adding in the earnings call that Stars is now a “truly diversified global group” with a presence in all key regulated markets.

“I’m very excited by the potential that I believe will result from all of our 2018 acquisitions,” Ashkenazi said in the call.

He added in a statement: “We’ve executed on these transactions and looking forward into 2019, are now focused on integration and we are confident that we will deliver on our plans to grow market share both globally and in key markets.

“SBG is a key component of this plan and we are excited about its potential as the fastest growing and one of the largest online and mobile sports betting and gaming businesses in the UK, the world’s largest regulated online gaming market.”

Richard Flint, CEO of SBG, also spoke positively about the results, describing the 12 months as a “strong” period for the firm and saying the link-up with Stars will enable the company to take its products to a “truly global audience”.

Flint said: “We enter the rest of 2018 and head into 2019 as part of one of the world’s largest publicly listed online gaming companies, and I am excited about the opportunities that this combination presents.”

Reflecting on the results, Regulus analysts said underlying momentum at SBG remains “relatively strong and marketing share is still clearly being taken”.

Analysts also talked up the potential of more growth as a result of the acquisition by Stars: “SBG’s mass-market focused approach is still likely growing the segment as well as share, but both of these are becoming more challenging as maturity bites.

“Within this context Stars’ strategic ability to unlock new markets becomes increasingly important – critically while also preserving the unique operational characteristics that have made SBG the UK’s most successful domestic online gambling brand.”