eGaming Review Power 50 2014: 10 to 4

10. GAMESYS

(2013 position: 06)

Gamesys remains one of the most private firms in online gambling and its most recent results only revealed profits up 25% to £58m for the year to March 2013. But data seen by the Power 50 panel shows signs of a solid financial performance during 2014 and there is no doubt the firm continues to power on within its core casino and bingo verticals.

However, it’s also been a year of investment as Gamesys has poured considerable resource into new projects including its long-awaited poker platform. Its social gaming division has seen a lot of investment and now generates considerable revenues on the free-to-play side. Its real money app was removed from Facebook earlier this year, but this was more a failing of the platform than of Gamesys’ marketing abilities. But there is the feeling that the past 12months haven’t seen Gamesys operating at full tilt with the US and social gaming providing costly and lucrative distractions respectively.

It made headlines with its launch in the regulated US market through its partnership with Tropicana, but this is yet to bear fruit. However, back in Europe it has launched new brands in the slots sector, and relaunched Virgin Games, as well as continuing to grow key bingo and casino brands both in the UK and in other key European markets. While it was not a bad year by any stretch of the imagination it was one where others have maybe impressed more. However, there is no discounting its key strengths and it rated highly for strategy and impact.

It retains some of the biggest and most profitable gaming brands in Europe and an in-house technology platform other firms would kill for. It is still a hugely impressive operator and one that is arguably the most attractive acquisition target in egaming.

09. UNIBET

(13)

It’s been a year of significant change at Unibet with the move from Microgaming to an in-house poker platform, a large scale UK launch, the disposal of its B2B arm Kambi and mobile development on both the sports and gaming side.

Full-year profits for 2013 were £63.4m from revenues of £268m, and EBITDA was up 38% in Q2 to £16.7m. It has focused on decreasing its reliance on the Nordics, where it remains one of the largest operators, and has made good progress in increasing revenues from other European markets in the period. Revenues from the Western European region were up to 40% of total revenue with 48% coming from the Nordics and 12% from other markets. UK revenues are still marginal, but growing at a healthy rate and it retains the ambition of being a top five player in the UK.

Its broad international player base means its mobile penetration lags behind some of the major UK-facing firms, but it showed 32% of revenues through mobile channels in its H1 results and the numbers are moving in the right direction. Mobile casino is looking a particular area of strength and helped drive significant organic growth in H1 with the launch of the innovative Spin City casino app helping to drive mobile revenues.

Strong growth in profitability, as well as revenues means Unibet breaks into the top 10 for financial rankings and it also scores highly both for reach and strategy with its recreational-focused marketing and smart ability to spot a product and regional niche recognised by the panel. It is well placed to make a big impact on the Dutch market in 2015 and it continues to push into a number of new regulated markets.

08. BWIN.PARTY

(05)

The past 12 months have not been kind to bwin.party as its share price has fallen almost as quickly as its revenues. A long-awaited partypoker relaunch late last year failed to boost performance in the vertical, while a gradual shift away from unregulated territories such as Greece has damaged the bottom line significantly.

Poor full-year results – a “low point” according to CEO Norbert Teufelberger – were followed by revenues and profits tumbling 7% and 24% in H1 respectively. A “fundamental reorganisation” of the management team is underway and talks about the structure of the business are ongoing, with options believed to include splitting it into unregulated and regulated units, floating its B2B arm, or even taking the entire company private.

Bwin.party holds onto a top 10 position due to its scale and reach. It remains the largest operator in continental Europe and has a powerful presence in Italy, Germany and Spain, and holds the market-leading position in the only sizeable US market, New Jersey. Its strategy and impact on the industry is diminishing with each passing month and it needs to turn things around quickly to arrest what has been a shocking decline in revenues. Teufelberger has talked up the improvement in its mobile product and progress can only be seen as a positive. Bets from mobile devices in Q2 represented around 35% of sportsbook revenue and 21% of gross gaming revenue – up from 9% in Q2 2013.

But its shift away from grey markets to regulated territories as part of its ‘volume to value’ strategy seemed to stutter, with dot.country markets still accounting for around 56% of revenues. There is a great deal of work needed in all verticals, but bwin.party is still operating at a significant scale and it would be foolish to write it off from making a comeback

07. BETSSON

(08)

Betsson operates around 25 B2C and B2B brands and remains a dominant force in the Nordics, which represent around 70% of revenues compared to 81% last year. The €130m deal to acquire Dutch online casino brands Oranje and Kroon was a typical move from a firm not shy of large-scale M&A, and should place the operator at the forefront of a re-regulated Dutch market.

Now running from a single technology platform after a long period of integration, Betsson looks and feels like an operator in charge of its own destiny. Several years of sustained growth back that up, with 2013’s full-year results showing a 12% revenue jump and more recent Q2 revenues 30% ahead of the same period last year.

The Netherlands is clearly a top priority – group CEO Magnus Silfverberg claims Betsson can be market leader – however the Italy-facing StarCasino brand is finally gaining traction after a tough start. The UK remains a possible target, too. Sports betting remains much less important than casino (64% of revenues) for Betsson, but it is growing faster. Full year 2013 results showed a 34% rise in profits from sportsbook, while a successful World Cup saw profits leap by a third in recent Q2s. Betsson has grown into a huge operation and a new, ultra-modern

700-capacity headquarters in Malta is a signal of intent. A major weakness, mobile, is being addressed by way of heavy investment and a raft of new casino and sportsbook apps have been released during 2014.

06. 888

(04)

888 has fallen two places on this year’s list, but this is due to the arrival of Rational Group in the top three and the resurgence of Betfair rather than any reflection of its performance in the previous 12 months. It was always going to be tough to continue its extraordinary growth, but a 13% rise in revenue and 27% rise in EBITDA in H1 show a business still fi ring on all cylinders.

Casino remains the bedrock of the business, despite poker making all the headlines, and record H1 revenues of $107.6m showed it remained in rude health. Both bingo and poker showed growth in the period and the company has shown some encouraging signs from its move into the sportsbook vertical. It stands to feel some pain from the new UK PoC tax, and the US remains an expensive long-term play, but it is well positioned in Spain alongside its UK business and has a good base of international revenue.

The firm retains a key advantage in owning its technology platform and game studio, which has helped grow revenues not just in poker but also in casino and bingo. It has also smartly invested in mobile and should feel the benefit from this in the coming 12 months. Despite being linked to a number of acquisition, merger and takeover rumours it has kept its powder dry in the pre-PoC positioning.

But it would be no surprise to see it becoming a more active player in the M&A market over the next 12 months. For now, it remains a hugely powerful operator in its own right with a firm grip on the global casino and poker markets and a solid upwards trajectory.

05. PADDY POWER

(03)

Paddy Power’s recent financials revealed a drop-off in certain key KPIs and received a less-than-enthusiastic response from analysts. The modest 1% growth in full-year online revenues announced in May was a sign of things to come and the Irish firm saw group online profits drop 18% in H1 2014 – or some 44% excluding Australia.

Away from the UK and Ireland, launching in Italy has proved a costly affair, but Paddy Power has quickly gained market share and expects to be profitable early in 2015. Australia-facing brand Sportsbet has gone from strength to strength and looks set to contribute well in excess of €40m in profits this year.

Underlying growth in turnover and customer acquisition specifically remain strong but questions have been raised over the firm’s heavy marketing spend and a perceived poor CRM performance. Whether falling sportsbook revenues are down to adverse sports results, as Paddy Power claim, or something more integral, is up for debate.

What cannot be argued, however, is the firm’s leading position in mobile, brand and social media where it continues to set the standard. Mobile accounted for 52% of total online revenues in the first six months of 2014 with 73% of sportsbook actives using Paddy Power mobile products in June. This was the highest of all the listed egaming companies, and likewise its brand and marketing capabilities have often been head and shoulders above its rivals over the past 12 months.

It remains the leading egaming brand on social media, leaving most of its competition in its wake in terms Facebook and Twitter engagement. And it is this marketing and technology component that assures it retains a high ranking on the list.

04. BETFAIR

(07)

The past 12 months have seen Betfair regain some of its swagger under CEO Breon Corcoran. Profits were up 24% for FY 2014, its fixed-odds sportsbook gained significant momentum and a rebrand saw it competing head-on with the likes of Paddy Power for the mainstream sports betting consumer.

Betfair has cleverly pivoted from an exchange operator to a genuine multi-vertical business, although it should be noted that in FY14 the exchange was still responsible for 62% of all revenue. But sportsbook and gaming are becoming strengths as opposed to marginal add-ons and the firm’s balance sheet suggests it would be unwise to rule out an acquisition in this area during 2015.

Growth has primarily been in the UK as Betfair looks to focus on “sustainable” regulated markets for future growth, but launches in Italy and Bulgaria are expected to be followed by other European markets. The operator pulled out of Australia, and its New Jersey site has fared poorly, but its US horse-racing business is performing well.

Full year revenue saw mobile sportsbook as the key driver of growth. It continues to be an area of strength for the firm with more resource being poured into cross-sell as its gaming division begins to play catch-up with its peers. Gaming revenues were up 45% in Q1 FY15, but still represent just 19% of total non-US revenue and it is a clear opportunity for the firm in the next 12 months.

Betfair has retained its unique assets, but expanded its operations in both product and territory. Few operators can match its combination of strong profitability, impressive growth, unique product set and sound balance sheet.