No dividend for Playtech investors

25th Aug 2011 12:12

Gaming software developer Playtech has chosen to pass on paying a dividend until the final results for the year, blaming the move on exceptional strategic mergers and acquisitions and partnership opportunities currently under discussion. The company saw its revenue creep higher, from €72.8m to €76.3m, for the six month period ending 30 June, while pre-tax profit was only marginally up at €37.8m (2010 H1: €37.7m). Net profit for the firm was up just 2% to €37.9m (2010 H1: €37.0m), but the company is confident of meeting expectations for the year. Roger Withers, non-executive Chairman, said: "Playtech has continued to make strong progress in an uncertain market, winning new licensees, exploiting opportunities in existing and soon to be regulated markets and identifying valuable acquisitions which will add to the group's offering."Despite the complexity and uncertainty of moves towards regulation in Europe and the US, Playtech has positioned itself, both independently and through its joint ventures, to benefit from the continued growth of the online gaming market. As more jurisdictions move towards regulation, Playtech is able to offer new and existing operators a market leading suite of products and services, helping them to navigate the complexities of changing regulatory environments."The company's casino revenues increased by 7% to €52.7m (2010: €49.1m), poker revenues decreased 33% to €10.7m (2010: €15.8m) and bingo revenues increased 59% to €7.1m (2010: €4.5m). Trading in the second half of the financial year has got off to a strong start, despite the third quarter traditionally being a quiet one for the company.Daily average software revenues for the first 54 days of the third quarter were up more than 23% in comparison to the comparable quarter in 2010, and up more than 2% versus the previous quarter. The company partially attributed this improvement to both the introduction of casino games and poker cash table games in Italy, and the defection of players to Playtech's poker licensees due to the suspension of the second largest poker operator. In addition, service revenues introduced for the first time through the July acquisition of PTTS are trading strongly and in line with expectations.The company's full year dividend was €0.19 in 2010, up 4% on the previous year. The group had cash and equivalents worth €64.3m, up €4.3m from the same period the previous year. Broker Peel Hunt said the figures were ahead of its expectations, but said the deferral of the interim dividend was a surprise. "Some may not like the deferral of the interim dividend but, given the group's acquisition track record and that ultimately Playtech is a growth story, we can see the logic behind the decision," analyst Nick Batram said.The broker rates the shares as a "buy" and has a target price of 393p.Panmure Gordon is also a buyer of the shares, and has a much higher target price of 494p."We anticipate upgrading our [full year] forecasts to c€120m EBITDA for 2011E and the stock is inexpensive trading on a 2011E P/E of 9.3x and an EV/EBITDA of 7.2x," the broker argues.The share price was down 4.98% to 300.75p at 12:35. NR