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.
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.
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.
