Playtech – Continued growth & a special dividend

In Brief: Playtech is a market leader in the gambling and financial trading industries.  Revenues & net profit up strongly on a constant currency basis.  Positive acquisitions will further accelerate growth and a special dividend as the icing on the cake!

Playtech PLC announced their Half Year 2016 results yesterday, highlighting the continued growth and profitability we’ve come to expect. Adjusted net profit and adjusted EPS up 54% and 40% respectively on constant currency basis.  There is a lot of positivity in the report, which I’ll attempt to break down.

Cash Flow

Two of my favourite words!  Playtech continue to be highly cash generative, and even with EUR162m spent on two acquisitions they were able to announce a 15% rise in the interim dividend as well as a special dividend of £0.40p per share.  This brings the yield on the full years dividend to a little over 7%, very appealing.
I am particularly pleased with the following line from the report:

able to return capital to shareholders with no impact
on M&A capabilities

As I will note further on, Playtech appear adept at identifying candidates for purchase to augment their business, and to be able to do so whilst retaining a healthy amount of cash on the balance sheet is testament to the strength of the company.  Paying for these in cash as opposed to issuing more shares is more advantageous for shareholders who do not see their holdings diluted.


In May Playtech announced the acquisition of two businesses, Quickspin and Best Gaming Technology (“BGT”) for 6x and 7x forecast EBITDA (Earnings before Interest, Taxes, Depreciation & Amortisation) respectively.  Valuations such as these in my opinion only further the case for a well run company.

BGT in particular looks attractively valued.  Half year revenues in 2016 almost matched 2015’s full year revenues (EUR12.5m vs EUR12.9m) suggesting strong growth which has been identified by Playtech:

The acquisition is expected to generate high single-digit earnings accretion for Playtech in the first full year of ownership


Poker revenues at constant currency were down 15% for the half-year, however management remain confident they can turn this around.  I will watch with a keen eye.  Ultimately this is immaterial to the success of the company given poker accounted for approx. 1.48% of total revenues for H1 2016, but it will be interesting to follow regardless.

My View

Playtech continue to impress, financing acquisitions in a shareholder-friendly way whilst rewarding them with excess cash.  In lieu of a large purchase (which may still be on the horizon), returning extra cash to shareholders is most welcome.

Disclosure: Playtech PLC is a constituent of the portfolio.

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