Playtech posts net profit of 112.3 million euros in 2021 before potential acquisition of TTB – Annual results

Playtech reported adjusted net profit of €112.3m (£93.4m/$123.3m) for its financial year 2021, amid ongoing talks over a possible acquisition of the company by TTB Partners.

Revenue for the 12 months to December 31 was €1.21 billion, up 12.0% from €1.08 billion the previous year.

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

Playtech said this was almost entirely due to online growth as retail continued to feel the impact of new coronavirus (Covid-19) restrictions in some markets earlier this year. This included no retail activity for most of the first half of 2021 in Italy.

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

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

Distribution costs increased by 9.7% compared to 2020 to €788.8 million, while administrative expenses before amortization increased by 6.8% to €98.5 million and charges related to the impairment of financial assets decreased by 92.7% to €1.0 million.

That left 317.1 million euros in adjusted earnings before interest, tax, depreciation and amortization (EBITDA), up 25.0% from 253.6 million euros the previous year.

After taking into account other costs, including €134.3 million in depreciation and €62.9 million in financial charges, this resulted in pre-tax profit from continuing operations of €120.4 million, up 165.7% compared to 2020.

Playtech also recorded a loss of €13.8 million, net of tax, on discontinued operations, as well as €1.5 million of 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 €112.3 million, up 311.4% from €27.3 million the previous year.

Playtech noted, however, that some expenses have been adjusted, with its management saying these more accurately represent the company’s consistent business performance. The adjustments mainly related to non-recurring items, significant items related to the reorganization and items related to acquisitions.

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

“Our annual results demonstrate the quality of Playtech’s technology and momentum across the group,” said Playtech Chief Executive Mor Weizer. “Our strong performance is underpinned by our B2B business, particularly the tremendous growth we’ve seen in the Americas.

“We have made real progress in executing our US strategy, supported by new licenses, new launches and new partnerships, and we continue to strengthen in Latin America, driven by new strategic agreements in the region.

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

Weizer also referenced a number of key events that took place during the year, including the sale of its Casual and Social Gaming arm and the divestiture of its financial trading division Finalto to Gopher Investments, which is expected to be completed later this year.

Additionally, Brian Mattingley was named non-executive chairman in June.

Looking ahead, discussions on the potential acquisition of Playtech by TTB Partners are ongoing. TTB approached a possible takeover in February, with Playtech agreeing to release TTB from certain restrictions to allow it to form and possibly make an offer.

Playtech said it accepted the request, but warned there was no guarantee it would lead to an offer. The tech giant also said it would be likely that any TTB offers would be made in cash.

The restrictions on TTB — part of the City Code on Takeovers and Mergers — stem from its role in advising Gopher Investments, a minority shareholder in Playtech, on its potential takeover bid for the company. Gopher expressed interest in making an offer in November last year, but dropped out of the race a few weeks later.

Restrictions on TTB, which would have prevented it from making a bid itself, were to remain in place for six months from the date of withdrawal, until May 20. However, with these raises, TTB was able to start forming its own bid.

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

“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 an offer could be made,” Mattingley said.

The emergence of a possible TTB offering came after Aristocrat’s proposed acquisition of Playtech failed to garner enough shareholder support to proceed. A total of 174 shareholders representing 56.13% of Playtech – or 140.5 million shares – voted in favor of the offer during a court meeting, while 54.68% did so during a a general assembly.

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

At least 75% of the voting shares needed to approve the scheme should the offer of 680p per share, equivalent to a purchase price of around £2.70billion, go ahead.

JKO Play had also been in talks over a possible takeover bid from Playtech, but pulled out of the process last month.

Ahead of the confirmation of the TTB talks, Playtech’s board said the company could be broken up and sold in parts, a prospect first hinted at last month.

Meanwhile, Playtech said it was still considering the option of a potential transaction in relation to its Caliplay joint venture with Mexico’s Caliente. Plans to spin off Caliplay are already underway, through a combination and listing with a Special Purpose Acquisition Company (SPAC).

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

“Obviously, this 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 give a special mention to our Ukrainian colleagues and all of our other employees who volunteer their personal time to provide additional support to the team during this extremely difficult time. It makes me very proud to be at the helm of this company.

“The macroeconomic situation is of course uncertain, but we started 2022 strong, and with the continued performance of our businesses, we are confident in our ability to continue to deliver on our strategy.”