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Playtech has highlighted its strong operational performance over past months, despite the impact of sports betting headwinds.

The B2B and B2C gaming operator delivered a “solid” trading performance between 1 January and 30 April, it said in its AGM trading update today (22 May).

These results, which Playtech said resulted from “strong underlying trends”, came despite the impact of customer friendly sports betting resulting in the period.

Analysts at Peel Hunt highlighted Playtech’s modest ambitions and progress, forecasting FY24 revenue and adjusted EBITDA growth of 2.5% and 4% respectively.

Peel Hunt forecast €450m in FY24 EBITDA, compared to €254m in FY20.

The investment bank also argued Playtech’s long-term strategy was paying off in Italy and Mexico, with additional plans developing at earlier stages of maturity.

As such, analysts reiterated Playtech’s “Buy” recommendation with a 700p target price.

Regulated market growth drives B2B performance

Playtech said its B2B division performed well during the first four months of 2024, driven by a combination of regulated markets revenue growth and more stringent cost control.

Regulated market improvements resulted from growth in North and South America.

Playtech further highlighted that both the US and Canada increased their contribution, although from a small base, while Mexico and Colombia continued to perform well.

Meanwhile, it said its Live products continued to benefit from the market’s fast expansion, delivering solid growth for the period.

The provider said Casino is also showing strength, while its higher-margin, less capital-intensive SaaS business showed continued momentum with strong revenue growth, further launches and new customer signings.

Snaitech suffers from headwinds

Playtech said its Snaitech B2C business, which is a significant operator in the Italian market, performed well on an underlying basis.

The company highlighted strong wagering activity across both online and retail as evidence of this.

This, Playtech said, was achieved despite tough 2023 comparables and customer-friendly sports betting results in Italy.

Playtech said: “Notwithstanding this, we remain well-positioned to continue to benefit from the structural shift to the higher-margin online business in Italy.”

Caliplay fees remain uncollected

Mexican B2C brand and Playtech’s largest client Caliplay is locked in a legal dispute with the provider as part of a bid to get out of its contract.

This has resulted in the non-payment of fees, which had mounted to €122m as of November 2023.

Playtech has publicly stated its optimism that it would be able to return the money through the courts.

The business added it believes it has visibility over the majority of revenue generated by Caliplay, and said it confirms the brand has continued to perform strongly.

Peel Hunt said: “We expect the Caliplay dispute to be resolved. However, if Caliplay were to continue not to pay Playtech throughout FY24E, we estimate that net debt would be €250m higher, net debt/EBITDA (inc. Caliplay) would be 0.7x (not 0.1x) and the FY24E EV/EBITDA (inc. Caliplay) would be 4.8x (not 4.2x).

“We estimate that Playtech’s revenue from Caliplay will be €190m in FY24E, with a significant amount of that dropping through to EBITDA.

“We believe that this is a larger amount than would have been contemplated by either party at the start of the relationship.

“Playtech could tolerate a modest reduction in its share without materially undermining its valuation in our view.”

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