Playtech software group, the casino provider that supplies its excellent games to sites such as Casino.com and Omni Casino, is facing temporary financial woes after it issued a profit warning last week. Share prices on the FTSE 250 group dropped substantially by 20% – with Playtech essentially losing a fifth of its value. The trading update read that the Isle of Man based company would end the year with profits of 5% below the bottom end of expectations.
While Playtech profits hit an all-time high of £10.16 (R192) in June 2017, those numbers dropped to £7.71 (R146.2) last week, essentially surrendering all price gains of the year.
There were several factors that analysts pointed to which brought Playtech’s shares down so sharply. The first is the group’s poor performance in Malaysia, which makes up around 5% of its total revenue. Malaysia is currently unregulated in its gambling industry, but the government is moving towards placing restrictions on internet gambling sites and mobile gambling apps. Changes are expected to be made to Malaysia’s Common Gaming House Act of 1953 or new laws will be passed to ban online gambling altogether. The Deputy Prime Minister of the Asian nation, Ahmad Zahid Hamidi said that no decision has been made yet.
Another reason for Playtech’s drop in profits is its ongoing issues its contract with Sun Bingo, signed in 2015. The group has a five year deal with the Sun newspaper to provide technology for its online bingo sites. However, Playtech’s Chief Executive Officer, Mor Weizer said that the group had spent more money than it has previously planned to do on attracting new customers to Sun Bingo and, as such, was a year behind in the project.
Playtech said in its trading warning that it had seen “a recent slowdown in certain parts of Asia due to recent changing market conditions.”
“Whilst it has been expected that activity would return to normalized levels in a relatively short timeframe, we are now not expecting any significant improvement in 2017,” said the group.
Relating to Playtech’s contract with Sun Bingo, the group wrote that it “remains challenging due to lengthier seasonality and the re-launch of the new Sun Bingo site.”