Playtech Suspends Share Buyback and Dividend Amid Coronavirus Pandemic

  • Playtech wants to adapt its financial stance in these uncertain and rapidly changing times
  • Attempting to cut costs without damaging the company in the long-term
  • Sports betting activity has been significantly impacted by the COVID-19 outbreak
glass jar with dividend label
Playtech has suspended its share buyback and withdrawn its dividend in a bid to protect cash flow amid the coronavirus pandemic. [Image:]

Turbulent time for gambling companies

Gambling technology company Playtech is protecting its cash flow by suspending its share buyback program and dividend payment for the foreseeable future. The FTSE 250-listed company provided a market update on Thursday morning in response to the fallout from the coronavirus pandemic.

protecting its cash flow by suspending its share buyback program and dividend payment

Playtech referenced the “uncertainty and rapidly changing nature” of the situation in its update. It plans to proactively manage its working capital and capital expenditure, in addition to identifying potential areas for cost-saving that would not have a detrimental impact on long-term success.

Dealing with the financial fallout

The Playtech board made the decision to maximize liquidity by suspending dividend payments to shareholders. It was during the 2019 results announcement that a share repurchase program was publicized, but this has now been postponed. 

To date, approximately €10m ($10.8m) of the total €40m ($43.2m) share repurchasing has already taken place. Without having to pay out the €0.12 ($0.13) per share final dividend and postponing the share repurchasing program, the company can save over €65m ($70.2m).

As of the start of 2020, the company held €333m ($359.6m) in gross cash when subtracting progressive jackpots and client funds. It also has access to €250m ($270m) through a revolving credit facility and it will receive another €50m ($54m) in cash from the sale of surplus land in Italy.

Unaffected areas of business

The FTSE 250-listed company spoke about how its online casino business has not yet been impacted by the situation. However, it will constantly monitor any and all changes.

With governments across the world telling their citizens to restrict movement and to largely remain in their homes, there has actually been an increase in activity for Playtech’s online bingo and poker businesses.

However, the company warns that if the coronavirus pandemic continues, player behavior may change. With a lot of people not able to work, they will not be doing as much discretionary spending.

Potential live dealer disruptions

There may be disruptions to the live casino dealer business due to the number of employees that work together in the same location.

Playtech’s live dealer studio in the Philippines has already been shut down, with traffic being diverted to its other live dealer facilities that remain in operation, including Riga in Latvia.

Playtech’s live dealer studio in the Philippines has already been shut down

However, there are risks that these other facilities may have to also shut in the near future. If this happens, there are contingency plans in place.

Sports betting losses

Naturally, the area of most concern for Playtech is that of sports betting. The majority of the major sporting events scheduled to take place over the next few weeks and months have been canceled across the world. One of the core aspects of Playtech’s business is retail offerings through the likes of self-service betting terminals. 

It was forecasted that this area of the business would account for about 10% of the company’s EBITDA in 2020. The company estimates it will report a loss of about €4m ($4.3m) in adjusted EBITDA each month from this sector of the business as this situation continues.

Playtech also has numerous subsidiaries across the world that are also trying to deal with these changing market conditions. 

Industry-wide issue

Many other companies that rely heavily on sports betting have seen their share prices nosedive in recent weeks. William Hill and Flutter Entertainment have suffered significant losses and issued profit warnings.

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