AUS
NZ
UK
CA
USA
IND
As the Financial Conduct Authority (FCA) extends support to the British borrowers, FTSE-100 was trading at 6,158.00 down by 0.19% (as on 1st July 2020, before the market close at 3:55 PM GMT+1).
The critical factors that can affect the market today were:
- The FCA outlines that the date to request a payment freeze or set up an interest-free overdraft of up to GBP 500, has been extended till 31st October 2020.
- The British Chambers of Commerce has asked for immediate action as economic survey shows the domestic and export sales to be lower than that in the quarter?of?the 2008-09 recession.
- The British prime minister Boris Johnson announced GBP 5 billion spendings for hospitals, rail & roads, housing and schools.
Given the ongoing market conditions, we will discuss two gaming stocks - Gamesys Group PLC (LON:GYS) and Rank Group PLC (LON:RNK). As on 1st July 2020 (before the market close at 3.55 PM GMT+1), GYS surged by approximately 1.85% while RNK stock price increased by around 0.95%, against the previous day closing price. Let’s walk through their operational and financial updates.
Gamesys Group PLC (LON:GYS) – Robust growth through multiple gaming platforms
Gamesys Group PLC is an Online Gaming Company. In September 2019, the JPJ Group acquired Gamesys and thus changed the name. The business model of the Group is gambling and currently offers bingo, casino and other games. The gaming brands include Jackpotjoy, Starspins, Botemania, Virgin Games, Heart Bingo, Virgin Casino, Monopoly Casino, Rainbow Riches and Solid Gaming brands. All brands operate off proprietary software owned by the Group.
Annual result FY2019 (period ended 31st December 2019) as reported on 1st May 2020
The Group generated pro-forma revenue of GBP 565.3 million up by 15% year on year. The pro-forma adjusted EBITDA declined by 4% to GBP 158.9 million. The net income was GBP 9.1 million down from GBP 19.3 million in FY18, mainly due to the transaction-related costs of Gamesys acquisition. In 2019 the Group acquired Gamesy for an amount close to GBP 490.0 million.
The pro-forma revenue in the UK was GBP 357.2 million, which contributes 63% of the Group revenue. In Europe excluding the UK, the Group mainly operates in three markets Germany, Spain and Sweden. The pro-forma revenue in Europe was GBP 68.6 million and contributed 12% of the Group revenue. The pro-forma revenue in Asia was GBP 122.4 million.
KPIs for FY19
Average active players per month were 587,399 up by 18 per cent year on year. The total real money gaming revenue was GBP 544.8 million and average real money gaming revenue per month was GBP 45.4 million. The total real money gaming revenue was up by 13% year on year. The monthly real money gaming revenue per average active player was GBP 77, which was down by 4 per cent year on year due to new player acquisition and retention strategy.
Revenue Segmentation (Pro - forma) for FY19
(Source: Company Website)
Q1 FY20 trading update (three months period ended 31st March 2020) as reported on 23rd April 2020
The Group reported pro-forma revenue of GBP 155.3 million, which increased by 19% year on year. The revenue growth was underpinned by growth in Asia and the UK. The customers setting deposit limits increased by 45% post-lock-down. The Group has suspended the advertising across TV and radio channels until the social restrictions are eased; however, the Group will continue to advertise on online platforms.
Share Price Performance
1-Year Chart as at July-01-2020, before the market close (Source: EODHD/Others, Thomson Reuters)
Gamesys Group PLC shares were up by 1.75% to trade at GBX 874.00 per share (as on 1st July 2020, before the market close at 1.20 PM GMT+1). Stock 52 week High and Low were GBX 931.00 and GBX 482.50, respectively. The Company had a market capitalization of GBP 934.04 million.
Business Outlook
The Group has a strong portfolio of brands under the umbrella. The Group believes that the business might be impacted as people are spending time at home with family amid lock-down, and thus, they would switch to other recreational platforms for entertainment. The Group is well-positioned to benefit from growth drivers, such as a shift from land-based gambling, smartphone adoption, and ease with online banking. The regulatory issues in some of the markets remains a critical risk for the Group.
Rank Group PLC (LON:RNK) – Digital games revenue continue to grow
Rank Group PLC is the UK based multi-channel gaming operator. Grosvenor Casinos, Mecca and Enracha are the key brands of the Group. Grosvenor is the UK’s largest multi-channel casino operator and offers games such as roulette, blackjack, baccarat, poker and electronic slot machine games. Enracha is the community-based gaming brand for the Spanish market, which offers games, food and live entertainment.
Trading update as reported on 30th April 2020 (for the quarter to 31 March 2020)
In Q3 FY20, the like for like net gaming revenue for the digital platform was up by 21% year on year; however, grosvenor venues, mecca venues and international venues revenue was down by 5%, 17% and 12%, respectively. The digital revenues from all brands performed well. The venue business of the Group was severely impacted due to the lock-down.
The Group is benefitted by about GBP 1 million, following the government’s announcement of business rates holiday for the 2020-21 tax year. The Group estimated the normal monthly cash outflow to be reduced from GBP 25 million to GBP 17 million post-cost-cutting measures. Also, the support from government schemes can further bring down the monthly cash outflow to GBP 10 million. The Group has put 7,000 workforces on furlough out of 7,600 total strength. The net cash inflow from the job retention scheme in the UK and similar government schemes in Spain and Belgium is close to GBP 8 million per month. At 31st March 2020, the Group had a cash balance of GBP 166 million after excluding customer balances, and an undrawn credit facility of GBP 85 million.
Events which provided liquidity headroom
- The Group reached an agreement with HMRC to defer tax and duty of GBP 40 million from April 2020 until 30th June 2020.
- On 15th April 2020, Rank Group received repayment of GBP 25.2 million from HMRC for VAT paid on the slot machine revenue between 2002 and 2005. The Upper Tribunal decision was in favour of the Group.
Trading update
(Source: Company Website)
Share Price Performance
1-Year Chart as at July-01-2020, before the market close (Source: EODHD/Others, Thomson Reuters)
Rank Group PLC shares were up by 2.32% to trade at GBX 149.8 per share (as on 1st July 2020, before the market close at 1.20 PM GMT+1). Stock 52 week High and Low were GBX 328.79 and GBX 78.20, respectively. The Company had a market capitalization of GBP 571.96 million.
Business Outlook
The Group acquired Stride Gaming PLC in October 2019 for GBP 116 million and is currently undergoing an integration activity for the Stride and Rank’s digital platform. The integration is expected to be complete within the next two years, and it is expected to provide a yearly cost synergy of at least GBP 13 million. The Group believes the trading conditions will not be healthy when the venues reopen and thus preparing well in advance to cater the customers.
