JPJ chief confident of H2 earnings growth
JPJ Group executive chairman Neil Goulden expects adjusted earnings to return to growth in the second half of 2018 after the operator posted an “expected” fall in EBITDA for the first six months of the year.
JPJ, which operates the Jackpotjoy and Vera&John brands, posted an encouraging 10% year-on-year increase in total gaming revenue of £161.1m (€180.8m/$206.2m) for the first half of 2018, with Spain and “relatively new markets” offering cause for optimism.
Adjusted net income increased by 7% to £45.5m, but adjusted EBITDA dropped by 4% to £56.9m, with Goulden citing major marketing campaigns and the impact of point-of-consumption (POC) tax in the UK for the dip.
“Group revenue grew 10% with average active customers per month also increasing 7%, driven by good growth across our global footprint, in particular in Spain and a number of relatively new markets,” Goulden said, with Jackpotjoy having completed its final earn-out payment for Spanish-facing Botemania in the period.
“As expected, adjusted EBITDA was down 4% year-on-year, but is expected to return to growth in the second half of the year following the conclusion of the TV advertising campaigns and as we pass the anniversary of the introduction of the POC2 on gross gaming revenue in the UK.
“Looking ahead, I am confident that the group’s strong cash flow generation provides us with the opportunity to create additional value for shareholders as we continue to deleverage.”
In its trading update, JPJ also confirmed that it had signed a share purchase agreement for the sale of its social business for £18.1m, although no further details were disclosed.
“Post completion, the group will be exclusively focused on its core activity of real money gaming and the disposal will represent another positive step in reducing net leverage,” the company said.
JPJ’s share price had dropped by 4.6% by 11am this morning on the London Stock Exchange.
Analysts at Regulus Partners responded to the trading update by saying that the company had “done well” to emerge “relatively unscathed” from its “financial engineering”.
However, the analysts warned of future hurdles, especially in terms of building operational and technological capabilities that “will allow JPJ to grow in increasingly challenging domestically-licensed markets”.
Regulus Partners added: “JPJ has transitioned from a mess of assets with questionable governance via a segment-leading UK brand with very high leverage (especially including earn-outs), to a strongly cash generative and much more robust business. However, during this transition, growth in key markets has become significantly more challenging.
“Nevertheless, a bigger part is competitive changes, in our view – with ‘third generation’ gaming operators and best-of-breed betting operators growing gaming share at the expense of less agile competitors.”