Gamesys to increase geographic spread with bolt-on M&A

Gamesys Group is targeting diversified geographic revenue and could use its strong balance sheet to finance M&A activity over the coming year. Revealing its financial results for 2020, Gamesys confirmed 2020 operating cashflow of £214.4m, up from £75m in 2019. The London-listed operator revealed it would use this cash to implement a progressive dividend policy towards shareholders and to maintain adjusted net leverage ratio at below 2x company adjusted EBITDA. “The directors believe that this policy, coupled with the group’s continued strong cash generation, will provide returns to shareholders while retaining sufficient cash within the group to invest in organic opportunities and to potentially undertake bolt-on acquisitions to accelerate growth,” Gamesys revealed. “The group’s cash position will also provide flexibility to undertake returns to shareholders through share buyback programmes, should the directors consider it to be the best use of excess capital at that time,” it added. However, Gamesys Group CEO Lee Fenton would not be drawn on specific targets for the business. “We’re always being asked to be more precise on M&A,” he explained. “Of course, it’s not easy for us to be precise, the focus we’ve been quite clear about is enhancing our geographic diversification. We’ve been very successful over the last 18 months of bringing the business together in a very effective manner. “The management team and the board are extremely keen to get revenue more geographically diversified and we would hope that in three years’ time we’re getting revenue of scale out of four or five markets. “Our focus on M&A will be anything that helps us to realise that goal,” Fenton added. Gamesys reported a 29% rise in revenue during 2020, driven by a 78% spike in revenue from Asia and a 19% uptick in UK revenue. In contrast, the group’s operations in the rest of the world only grew by 6%, while European operational revenue fell by 1% due to “continued challenges” in the Nordics. Peel Hunt analyst Ivor Jones said: “On yesterday’s analyst call, we noted that management plans to have material revenue from four to five markets in three years’ time. “This would be a further improvement to a business which is over-dependent on the UK, over-exposed to Japanese regulatory risk and does not have scale, yet, in either the US or Spain,” he added.