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Playtech posts €112.3m net profit in 2021 ahead of potential TTB acquisition

| By Robert Fletcher
Playtech reported €112.3m (£93.4m/$123.3m) in adjusted net profit for its 2021 financial year, amid ongoing talks over a potential acquisition of the business by TTB Partners.
Inspired Q3

Revenue for the 12 months to 31 December amounted to €1.21bn, up 12.0% from €1.08bn in the previous year.

Breaking down this performance, B2C remained Playtech’s primary source of revenue for the year, with revenue from this part of the business rising 11.3% to €663.7m. Most of this B2C revenue came from the Snai brand in Italy.

Playtech said this was driven almost entirely by online growth, as retail continued to feel the impact of novel coronavirus (Covid-19) restrictions in some markets during the early part of the year. This included no retail activity for almost the entire H1 2021 period in Italy.

For B2B, revenue climbed 12.0% year-on-year to €554.3m, with Playtech highlighting growth in Mexico, Poland, Italy, Greece and the Netherlands in particular. 

However, the business said further growth in this part of the business was stunted by the decrease seen in Germany due to regulatory changes, while it also reported declines in the UK market.

Distribution costs were 9.7% higher than in 2020 at €788.8m, while administrative costs before depreciation and amortisation increased 6.8% to €98.5m and expenses related to the impairment of financial assets were 92.7% lower at €1.0m.

This left €317.1m in adjusted earnings before interest, tax, depreciation and amortisation (EBITDA), up 25.0% from €253.6m in the previous year.

After accounting for other costs, including €134.3m worth of depreciation and amortisation and €62.9m in finance expenses, this resulted in a pre-tax profit from continuing operations of €120.4m, an increase of 165.7% on 2020.

Playtech also reported a €13.8m loss, net of tax, from discontinued operations, as well as €1.5m in other losses, the majority of which was due to foreign currency translations. 

As a result, Playtech ended the year with an adjusted net profit of €112.3m, up 311.4% from €27.3m in the previous year.

Playtech noted, however, that certain expenses were adjusted, with its management saying that these represent more closely the consistent trading performance of the business. The adjustments dealt mostly with one-off items, material reorganisation-related items and acquisition related items.

Expenses were generally higher in the unadjusted results, but among the one-off items was a €583.2m gain on the fair value of financial derivatives.
As a result, Playtech’s unadjusted profit was €605.0m, after a loss of €52.7m the previous year.

“Our full-year results demonstrate the quality of Playtech’s technology and the momentum across the group,” Playtech chief executive Mor Weizer said. “Our strong performance is underpinned by our B2B business, in particular the tremendous growth we have seen in the Americas.

“We have made real progress in the execution of our US strategy, supported by new licences, new launches and new partnerships, and we continue to go from strength to strength in Latin America, buoyed by new strategic agreements across the region. 

“In B2C, the story is similar, with Snaitech continuing to outperform the market, achieving the position of the number one brand across sports betting and retail in Italy.”

Weizer also referenced a key number of events that took place during the year, including the sale of its Casual and Social Gaming arm and the disposal of its financial trading division Finalto to Gopher Investments, with this due to complete later this year.

In addition, Brian Mattingley was appointed as its non-executive chairman in June.

Looking ahead, talks over the potential acquisition of Playtech by TTB Partners are ongoing. TTB made an approach over a possible takeover in February, with Playtech agreeing to release TTB from certain restrictions to allow it to form and potentially make an offer.

Playtech said it had agreed to the request but warned that there was no guarantee this would lead to an offer. The tech giant also said it would likely be the case that any offer from TTB would be made in cash.

The restrictions placed on TTB – part of the City Code on Takeovers and Mergers – came as a result of its role in advising Gopher Investments, a minority shareholder in Playtech, over its potential takeover offer for the business. Gopher registered an interest in making a bid in November last year but dropped out of the running a few weeks later. 

The restrictions on TTB, which would have blocked it from making an offer itself, were due to remain in place for six months from the withdrawal date, through to 20 May. However, with these lifted, TTB was able to begin to form its own offer.

There is currently no deadline for any potential offer from TTB, while Weizer has declared his support for a possible bid.

“Discussions with TTB Partners are ongoing, and there can be no certainty as to whether an offer for the company will be announced, or the terms on which any offer might be made,” Mattingley said.

The emergence of a possible TTB offer came after Aristocrat’s proposed acquisition of Playtech failed to secure enough shareholder backing to proceed. In total, 174 shareholders representing 56.13% of Playtech – or 140.5 million shares – voted in favour of the bid at a court meeting, while 54.68% did so at a general meeting. 

However, both of these totals were well below the 75% threshold required for the merger to be approved. Shareholders representing 43.87% of the business voted against the deal.

At least 75% of voting shares needed to approve the Scheme if the 680 pence per share bid, which equates to a purchase price of around £2.70bn, were to proceed.

JKO Play had also been in talks over a possible offer to acquire Playtech, but withdrew from the process last month.

Prior to confirmation of the TTB talks, Playtech’s board said the business could be broken up and sold off in parts, a prospect first raised last month.

Meanwhile, Playtech said it is still exploring the option of a possible transaction in relation to its Caliplay joint venture with Mexico’s Caliente. Plans to spin off Caliplay are already in motion, through a combination and listing with a special purpose acquisition corporation (SPAC). 

This would be conducted in partnership with the SPAC entering a long-term commercial agreement with a leading media brand to accelerate its entry into US states.

“Clearly, it has been an eventful year for Playtech, and I want to take this opportunity to thank my colleagues for their hard work and commitment,” Weizer said. “In particular, I must reserve a special mention for our Ukrainian colleagues, and all our other employees who volunteer their personal time to provide extra support for the team in this extremely difficult time. It makes me very proud to be at the helm of this company.

“The macroeconomic picture is of course uncertain, but we have started 2022 strongly, and with our businesses continuing to perform we are confident in our ability to continue to deliver against our strategy.”

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