Italy investment and PoC bill dent 32Red profits
H1 EBITDA down 45% but underlying business in good shape with revenues up 22% and current trading strong
32Red this morning posted a 45% decline in H1 EBITDA to £1.2m but the firm remains confident that sharp growth in revenues and active players leaves it in a strong position for the rest of the year.
The hit to EBITDA was accounted for by a £2m PoC tax bill and a £1m investment in the firm’s Italian operation.
These extra costs were balanced against strong revenue growth, which was up 22% to £18.6m for the six months ended 30 June, and CEO Ed Ware said the record revenue performance put the firm in a strong position moving forward.
“Excluding the impact of the newly introduced PoC tax in the UK, underlying EBITDA was up 57% reflecting the strong operational momentum in the business,” Ware said.
“This performance was underpinned by our strong brand, leading customer offer and return on investment-driven marketing expertise,” he added.
Ware said current trading remained strong, with like-for-like GGR up 52% on the prior year in H2 to date.
The operator was also encouraged by a 22% increase in active casino players to 62,214 and an immediate return from the recently-acquired Roxy Palace casino, which generated £2.5m of NGR since being acquired in July, with the operator adding the integration process had been “progressing well”.
On Italy, the firm said said it had stepped up investment in the market to “capitalise on the long term growth opportunities” it offered, with NGR increasing by 67% to £900,000 as a result.
The firm now has 8,443 active players in Italy, up from 5,793 in H1 2014, but conceded there remained a lag between player growth and revenue growth.
This lag was attributed to the smaller games portfolio it offered in its Italian casino, although the firm pledged to introduce new content later this year which it said would “boost the appeal and competitiveness of our offer”.
Of the other highlights, mobile accounted for 42% of total casino revenues, compared to 32% for the same period last year, although there was a slight dip in player yield to £380, from £400 in H1 2014.
Analysts reacted positively to the results, with Numis upgrading the firm to a ‘Buy’, saying it believed the strong revenue growth “reflects a sustainable step-change in the business”.
32Red’s share price was down 2.39p to 72.61p after early morning trading although remained ahead of its Monday opening price of 71p.