10/08/2021 - Gamesys Group plc: 2021 H1 Results - RNS

Gamesys Group plc

Excellent financial performance and operational execution

Revenue ahead 17%, adjusted EBITDA up 16%, leverage reduced

LONDON, 10 August 2021 - Gamesys Group plc (LSE: GYS) (the 'Group', 'Gamesys') announces its financial results for the six months ended 30 June 2021.

Financial summary

Financial highlights

• Excellent financial performance across the Group

1. Revenue grew by 17% with good momentum in the UK and Asia

• 1. Adjusted EBITDA1 increased 16% year-on-year, driven by strong revenue growth
  1. Adjusted net income1 increased 20% year-on-year
• Cash conversion of 94% from adjusted EBITDA1; adjusted net leverage ratio3 reduced to 1.17x
• 1. Operating cash flow of £103.5 million
• Cash balances at 30 June 2021 increased to £253.7m and post period-end, the Group paid down £100.0 million towards its outstanding term loan debt

Operational highlights

• The Group continues to execute successfully across key LTM performance indicators4:

1. Average Active Players per Month4 grew 16%, from 640,436 to 744,807

1. On a monthly average basis, Real Money Revenue per Month4 increased 23%, from £50.9 million to £62.8 million

• 1. As a result, Monthly Real Money Revenue per Average Active Player4 increased 5%, from £80 to £84
• In the UK, revenues increased 20% in H1 2021 with Virgin Games, Monopoly Casino and Rainbow Riches Casino driving strong performance

1. This release contains non-IFRS financial measures, which are noted where used. For additional details, including with respect to the reconciliations from these non-IFRS financial measures, please refer to the information under the heading 'Note regarding non-IFRS measures' on page 5 of this release and note 4 - 'Segment information' of the unaudited interim condensed consolidated financial statements on pages 19 through 21 of this release.
2. Per share figures are calculated on a diluted weighted average basis using the IFRS treasury method.
3. Adjusted net leverage ratio consists of existing term loans, deferred consideration, fair value of interest rate swap and currency swap, less non-restricted cash divided by LTM to 30 June 2021 adjusted EBITDA of £221.5 million.
4. For additional details, please refer to the information under the heading 'Key performance indicators - pro-forma' on page 11 of this release.

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• Asia continues to deliver significant double-digit growth with revenues increasing by 30% year- on-year on a constant currency basis5
• In Europe, revenues declined by 29% reflecting a more challenging regulatory environment in Germany, Scandinavia and, to a degree, in Spain
• Revenues in ROW fell marginally by 1% year-on-year, with growth in North America offset by a contraction in other smaller markets

COVID-19 and responsible gambling

• With the pandemic still present in all our operating markets, we remain fully committed to ensuring the health and safety of both our players and employees throughout our global communities. This will remain a top priority whilst the virus is still in existence across our markets worldwide
• We have continued to see 100% continuity in our global business operations, and this is a testament to the commitment and diligence of our teams across the globe. We remain committed to creating a working environment which allows for increased flexibility for all employees in the future
• We continue to take proactive steps to enhance our responsible gambling approach through ongoing investment in new capabilities and resources. This is strengthening our position as a best-in-class operator in protecting our recreational players
• We remain fully supportive of the UK Government's review of the 2005 Gambling Act and reiterate the need for a rigorous evidence-based approach to potential policy change to ensure the complete protection of vulnerable customers whilst also allowing the majority to continue to enjoy their play in a responsible way

Capital allocation, dividend and completion of combination of Gamesys and Bally's Corporation

• The Group has further strengthened its robust balance sheet in the first half of 2021, as exceptional cash generation supports ongoing deleveraging and the paydown of debt on 30 July 2021
• In the scheme document relating to the combination of Gamesys and Bally's Corporation, the Board reserved the right to declare an interim dividend of up to 15.0p. The Board has approved and declared an interim dividend for the year ending 31 December 2021 of 15.0p per ordinary share in the Group ('Ordinary Shares'). The interim dividend will be paid on 15 October 2021 to shareholders on the register on 10 September 2021 and the Ordinary Shares will become ex-dividend on 9 September 2021, subject to the scheme of arrangement not becoming effective before that date
• The combination of Gamesys and Bally's Corporation is expected to become effective in Q4 of the current financial year

Lee Fenton, CEO, Gamesys Group plc, commented:

"The Group has delivered another set of excellent results for the first half of 2021 with revenue growth of 17% and adjusted EBITDA1 increasing by 16% during the period. This performance reflected significant double-digit revenue growth in our key markets of the UK and Asia and our continuing strong cash flow has seen leverage reduce further. We are fully focused on operational execution, product innovation and the enhancement of safer gambling initiatives across all of our markets and we remain fully confident in the Group's ability to deliver long-term sustainable growth."

5 Constant currency amounts are calculated by applying the same EUR to GBP average exchange rates to both current and prior period comparative figures.

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Conference call

There will be a conference call for analysts and investors today at 1.00pm BST / 8.00am ET. To join the call, participants should dial one of the following numbers, using the password 'Gamesys', approximately 10 minutes ahead of the scheduled start time.

A replay facility will be available for 30 days and can be accessed by dialling one of the numbers below and quoting conference 5896372#

A transcript will also be made available on Gamesys Group plc's website at www.gamesysgroup.com/investors

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Chief executive's business review

Overview

I am incredibly proud that our dedicated workforce has continued to prosper and thrive despite the challenges which the COVID-19 pandemic still presents and that the Group has delivered a record set of half-year numbers. As I have said before, we now know that 'normal' is never likely to return in exactly the same way but we will continue to maintain a focus on the wellbeing of both staff and players. Replacing old practices will require dedication but our workforce has an unerring appetite to learn how we can best market to and serve our players in the new world. We have made significant strides towards establishing a hybrid working environment as our offices open up across our international footprint and look forward to enhancing the collaboration-focused environment we have established remotely when teams do gather together onsite.

UK

A record performance from the UK, the Group's largest geographic market, in H1 2021. Revenue growth of 20% in H1 2021 was very similar to 21% in H2 2020 and has been driven by popular and established brands building on leading positions (e.g. Virgin Games and Monopoly Casino), and new brands such as Rainbow Riches Casino boosting growth. Meanwhile, our player base continues to grow sustainably; average monthly actives grew by 10% over H1 2020.

Asia

A record performance in H1 2021 building on well-established momentum and against extremely strong comparatives. The Group is the clear online casino market leader in Japan and success reflects best- in-class operational expertise, investment in product, infrastructure, customer support and marketing. We are launching new brands into Japan and have expanded our game portfolio with new, internally developed, exclusive titles. Our B2B business in Asia continues to grow supported by increasing features and improvements for our partners.

Europe

Europe was impacted by regulatory measures across a number of markets, namely Spain, Germany and Sweden. Spain did however show signs of stabilising in Q2 2021, with Monopoly Casino continuing to build momentum in this market. Revenues were also impacted by a withdrawal from some peripheral markets.

ROW

In our ROW market, the standout performer in H1 2021 was Canada with triple-digit growth over H1 2020. Our largest market in ROW is New Jersey in the US and we have invested in headcount and the technology platform to support our operations. We have built a foundation for sustainable growth in North America as a whole. Revenues were impacted by the contraction in some smaller markets in H1 2021.

Regulatory update

When the UK Government announced that it was initiating a review of the 2005 Act we welcomed the opportunity to create a framework fit for the digital age that was built upon on balance, evidence, efficacy and proportionality as the key drivers of sound policy. We now await the findings of that review and what we hope will be continued steps to enhance the protection of vulnerable customers whilst also protecting the enjoyment of the vast majority of customers who never experience any harms whatsoever.

Outlook

At its core, Gamesys is focused on providing entertainment, recreation and community to the record number of players who enjoy our well known and trusted brands. We continue to significantly expand our player base and we are well placed to deliver sustainable and long-term growth.

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Note regarding non-IFRS financial measures

The following non-IFRS definitions are used in this release because management believes that they provide additional useful information regarding ongoing operating and financial performance. Readers are cautioned that the definitions are not recognised measures under IFRS, do not have standardised meanings prescribed by IFRS, and should not be considered in isolation or construed to be alternatives to revenue and net income/(loss) and comprehensive income/(loss) for the period determined in accordance with IFRS or as indicators of performance, liquidity or cash flows. Our method of calculating these measures may differ from the method used by other entities. Accordingly, our measures may not be comparable to similarly titled measures used by other entities or in other jurisdictions.

Adjusted EBITDA, as defined by the Group, is net income before interest expense including accretion (net of interest income), income taxes, amortisation and depreciation, severance costs, one-off tax (recovery)/charges, transaction related costs and foreign exchange (gain)/loss. Management believes that Adjusted EBITDA is an important indicator of the issuer's ability to generate liquidity to service outstanding debt and uses this metric for such purpose. The exclusion of severance costs, one-off tax (recovery)/charges, transaction related costs and foreign exchange (gain)/loss eliminates items which management believes are either non-operational and/or non- routine.

Adjusted Net Income, as defined by the Group, means net income plus or minus items of note that management may reasonably quantify and believes will provide the reader with a better understanding of the Group's underlying business performance. Adjusted Net Income is calculated by adjusting net income for accretion on financial liabilities, amortisation of acquisition related purchase price intangibles, severance costs, one-off tax (recovery)/charges, transaction related costs, foreign exchange (gain)/loss and deferred tax on purchase price intangibles. The exclusion of accretion on financial liabilities eliminates non-cash items and the exclusion of amortisation of acquisition related purchase price intangibles, severance costs, one-off tax (recovery)/charges, transaction related costs, foreign exchange (gain)/loss and deferred tax on purchase price intangibles eliminates items which management believes are non-operational and/or non-routine. Adjusted Net Income is considered by some investors and analysts for the purpose of assisting in valuing a company.

Diluted Adjusted Net Income per share, as defined by the Group, means Adjusted Net Income divided by the diluted weighted average number of shares outstanding, calculated using the IFRS treasury method, for the applicable period. Management believes that Diluted Adjusted Net Income per share assists with the Group's ability to analyse Adjusted Net Income on a diluted weighted average per share basis.

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