Jackpotjoy to play it safe as it takes the reins, Scandinavia proving ‘uneconomic’

Jackpotjoy said it would be focusing on the basics as it unveiled its first set of results as a London-listed company. However it said it was pulling back spend on its Vera&John brand in Sweden, where cost of business was proving too high.

Joanne Christie

The first quarter of 2017 saw Jackpotjoy, the renamed and rebranded Intertain, pass the finish line on the earnout period for the majority of the business it acquired from Gamesys in a deal that raised a few eyebrows back in 2015.

But if it its earnings call held yesterday to discuss those first quarter results was anything to go by, the newly-listed London Stock Exchange entrant will be plotting a steadier course going forward.

Jackpotjoy, which is now the parent company of Intertain, saw revenues rise 11% but posted a £3m loss for the period, although this was largely due to debt costs related to its acquisition of Jackpotjoy, Starspins and Botemania from Gamesys. 

Intertain’s acquisition of the B2C assets of Gamesys attracted some criticism from the market; due to the high purchase and earnout costs and the fact that post-acquisition Gamesys retained control of the underlying technology and platforms for what would become Intertain’s biggest website, Jackpotjoy.

Intertain’s other main brands, Vera&John and Intercasino, are run on proprietary software.

Last year, however, Jackpotjoy renegotiated the terms of the earnout with Gamesys by introducing a cap of £375 million on the earnout amount and securing an extra two-year non-compete clause until 2019, both of which were likely to have been factors in it being able to secure new loan facilities late last year following earlier unsuccessful attempts.

The company plans to pay the major portion of the remaining Gamesys earnout before the end of the second quarter, expected to be around £95m, with the remainder of about £40m due next year.  

Taking back control post-M&A
With all this behind it, the company said it was focused on reducing its debt further and was not planning on taking any major steps in new markets in the immediate future.

Andrew McIver, Jackpotjoy chief executive, told analysts: “Where we are at the moment is that now that we have taken control of the ship, as it were, I don’t think you’ll be seeing us launch into new markets during this coming 12 months as we focus on our existing markets now we have greater control of our business. I think that is going to be the focus, exercising that greater control.”

Although Jackpotjoy wasn’t the first of Intertain’s acquisitions, it was by far its largest and led to a major shift in the gaming company’s target market.

Formerly Canada-based, Intertain decided to move its main headquarters and listing to the UK – although as a subsidiary Intertain retains a Toronto listing. Post-acquisition the UK accounts for the bulk of its revenues.

But the process of doing so proved somewhat protracted and seems to have given it pause for thought when it comes to using M&A to enter new markets again, at least in the immediate future.

McIver said: “At Vera&John we have established a small bridgehead in Brazil just to see how that markets goes for us. Our choice (of business model) is by joint venture or organic growth but we have ruled out M&A, so that is an unlikely route.”

The company also said that it was planning a “strong sales push” of Vera&John to B2B partners in Asia, which McIver said the company had begun this week at the G2E Asia conference in Macau.

Scandinavia proving ‘uneconomic’
In some territories, however, it isn’t expanding in any form, let alone M&A; Scandinavia being a case in point. McIver said that the company was pulling back from Sweden, its main market for the region where it operates Vera&John, due to what he described as “a very tough environment”.

“A lot of new entrants have come into the space ahead of anticipated regulation with the hope that like the UK market they will see consolidation later on.

What that has done has pushed up the price of marketing and media and so we have scaled back our Scandinavian marketing efforts because we believe the CPAs are unattractive and uneconomic,” he commented.

“The tough operating environment in Scandinavia will remain until regulations come in place and that is currently anticipated for January 2019.”

Sweden is expected to regulate its igaming market within the next two years, even though it has been highly competitive for many years.

However the more startling fact is that Jackpotjoy is pulling back marketing spend on what is the main Scandinavian market for its Vera&John brand. 

A sign of how intense the competition for players is as Sweden-focused operators and affiliates all vie for position and a hoped-for exit with regulation looming on the horizon.

Steady as she goes, mobile on the up 
The  quarterly results were the first set reported by Jackpotjoy in its new form rather than as Intertain.

Revenues and EBITDA were both up over the period and the company said there was no change to its expectations for this year with indications given that second quarter figures were encouraging so far.

One particular highlight was the recent success of its mobile offering, the company’s chief financial officer Keith Laslop said.

“For the first time mobile ARPU [average revenue per user] is higher than desktop ARPU for Jackpotjoy UK. An average mobile player delivers 104% of the average desktop player.”

The precise structure and terms of Intertain’s acquisition of Jackpotjoy may not have been positively received by the whole market, but the results so far seem encouraging.

Still, the company won’t be rushing into major takeovers anytime soon.