Month: August 2022

Group revenue was almost flat year-on-year for the operator, but ongoing challenges posed by Covid-19 property shutdowns and operating restrictions led to a net loss, whereas last year it was able to post a net profit of $57.9m.

Many Covid-19 measures were removed during the second half of the year, which Star said helped domestic revenue in Australia recover. However, an increase spending, particularly a one-off goodwill impairment of $162.5m, pushed it to a net loss.

This impairment charge related to the Star Sydney property, and concerned a number of different facts, including the future regulatory outlook for the venue, amid an ongoing review.

Star noted that the value of the business could be further affected depending on the outcome of the review.

In addition, interim chairman Ben Heap, appointed in May, said regulatory reviews also had an impact on Star in FY22. A review into operations at Star Sydney is due to complete by the end of August, while in June it was also announced that an independent review of Star’s suitability to hold a casino licence in Queensland will also take place.

“Covid-19 related disruptions and regulatory reviews have presented significant challenges,” Heap said. “I would like to acknowledge the commitment of our 8,000 team members and express my appreciation for their tireless efforts.

“The underlying strength of the business has enabled a strong rebound post Covid-related property shutdowns and operating restrictions.”

Heap also noted the effectiveness of Star’s ‘Renewal Program’, put in place to earn both the confidence and trust of stakeholders, as well as the addition of new executive-level staff to drive the business forward.

Robbie Cooke was in July appointed as managing director and chief executive, making him the fourth person to hold the post since late March. He will replace Geoff Hogg, who took the role on a temporary basis in June.

“Robbie is well-placed to lead Star and restore confidence in the organisation,” Heap said. “He has the expertise and experience to guide the company through its critical Renewal Program, a body of work already underway that will deliver a number of near and medium-term initiatives focused on governance, culture, training, and risk and compliance systems and technology, particularly with respect to AML/CTF and KYC obligations.”

Looking more closely at Star’s performance in the 12 months to 30 June, revenue amounted to $1.53bn, down 1.2% from $1.54bn in 2011 year, while gross revenue – gross gaming win before player rebates and promotional allowances of $7.0m – also reached $1.53bn.

The operator’s Star Sydney property was the primary source of gross revenue, generating $781m despite being closed for 102 days due to Covid-19 restrictions. Star Gold Cost posted $424m in revenue, while Star’s Brisbane site reported $326m in gross revenue. 

Turning to costs, spending was higher across all areas, with the largest increase coming in depreciation, amortisation and impairment, due to a one-off goodwill impairment charge of $162.5m. the highest outgoing was employment costs, which reached $597.1m, while government taxes and levies payments totalled £387.7m.

As such, loss before interest and income tax (EBIT) reached $147.7m, compared to $138.4m in earnings last year, and after including $42.3m in net finance costs, pre-tax loss was $200.0m, in contrast to a $79.8m profit in 2021.

Star received $1.4m in tax benefits and also accounted for $20.5m in change in fair value of cash flow hedges taken to equity, net of tax, meaning net loss was $178.1m, whereas last year it posted a $51.65 profit.

In addition, earnings before interest, tax, depreciation and amortisation was 45.0% lower year-on-year at $237.0m.

“The past year has demonstrated how resilient our business is and how quickly customers return when the properties are allowed to open and operate without restrictions,” acting CEO Hogg said. “This gives us great confidence moving forward.

“The fundamental earnings prospects for The Star’s domestic business remain attractive. They are underpinned by valuable long-term licences in compelling locations while the transformation of our properties into globally competitive integrated resorts continues.

“We would like to thank all of our guests and dedicated employees for their considerable support through these challenging times.”

Energy prices in Britain have significantly increased in recent months, while the price cap on bills is expected to rise again in the autumn and again in January next year, with businesses reportedly facing an average price increase of approximately 300% on existing rates.

BGC chief executive Michael Dugher warned that if these prices hikes were to go ahead as planned, this could harm land-based gambling operations across Britain and lead to job losses.

Britain has approximately 6,500 betting shops and 121 casinos, directly employing 44,000 people. However, more than 200 licensed betting shops have closed in the past five years, and Dugher said this number could rise if the government does not act over the rise in energy costs.

“The cost of simply doing business is rising at an exponential rate,” Dugher said. “If urgent action isn’t taken soon, continued energy price increases could have a catastrophic impact across the hospitality and leisure sector, including hitting our members.

“Casinos are a vital pillar of the hospitality and tourism sector in cities and towns across the UK. Just like the rest of the hospitality sector they are struggling to build back after the global pandemic and now they face a new crisis.”

Meanwhile bookmakers, which play a critical role on the UK’s hard-pressed high streets, face similar challenges. In short, any business which welcomes customers into a building must grapple with this energy emergency. 

The energy crisis comes amid continued delays to the white paper on gambling laws in the UK. The white paper has faced a series of delays since the Gambling Act 2005 review started in 2020, with the aim of bringing rules and regulations up to date with the modern market. 

The recent resignation of Prime Minister Boris Johnson further disrupted the process, with a Conservative party leadership contest currently ongoing to appoint a replacement. Reports suggested the white paper would not be published until a new prime minister is appointed.

A SPAC is a shell company created purely for the purpose of acquiring or merging with another company. The business lists on a stock exchange and then plans to acquire a private business through a reverse merger, allowing that business to itself to be publicly listed.

Allwyn previously stated that it estimates that the NYSE listing will result in a $9.3bn valuation.

Allwyn announced that the business’s registration statement, which it had previously submitted with the US Securities and Exchanges Commission (SEC) has been declared “effective” by the regulatory agency.

A registration statement is a disclosure document filed with the SEC regarding an investment – and must describe the offering and the company to potential investors. In this case the registration statement will illuminate information about CRHC, Allwyn and the business combination to prospective investors.

CRHC also announced two dates in connection with the upcoming acquisition, a “record date” of 15 August and a “meeting date” of 7 September. The September event will be a CRHC shareholders meeting in which a vote will take place on whether or not to approve the business combination.

The record date is the cut-off point for shareholders to be eligible to vote in the meeting – with shareholder acquiring stock in the business after the date ineligible to vote.  

In a release, CRHC stated why it believes its shareholders should vote to approve the combination.

“CRHC believes the global lottery industry has attractive characteristics, including high consumer participation across wide demographics, resiliency through market cycles and upside potential from increasing online penetration,” it stated.

“Allwyn is a leader in the $300 billion global lottery industry, operating lotteries through both retail and online channels in multiple European countries, including Austria, the Czech Republic, Greece, Cyprus and Italy.”

CRHC continued, elaborating on the lottery provider’s growth opportunities:

“CRHC furthermore believes Allwyn is well-positioned to grow through both organic and inorganic growth opportunities. Allwyn’s UK business, Allwyn Entertainment Ltd, was selected by the UK Gambling Commission as the preferred applicant in the competition for the fourth licence to operate the UK National Lottery,” it said.

“If the licence is awarded, this will further expand Allwyn’s footprint as one of Europe’s largest and fastest-growing lottery companies.”

The Commission’s decision to choose Allwyn as the new provider of the National Lottery ended Camelot’s 28 year tenure as operator – a role which it had had since the lottery first launched in 1994.

The decision led to a legal challenge by Camelot regarding whether the Gambling Commission lawfully awarded the licence to Allwyn. The process was frozen between April and June as a result of the lawsuit, but the process is now in motion after the suspension was lifted in June. While the process has resumed, the High Court is yet to rule on the case.

The upcoming listing is happening in the wake of the business’s rebrand in December last year from Sazka Entertainment to Allwyn Entertainment. Allywn said the new name reflected its evolution from a European into global lottery operator.

In June CRHC announced a slight delay to the SPAC merger, announcing it now believe the deal would finalise in Q3 rather than Q2.

Catena said the global economic situation dented performance in parts of its online sports betting and casino portfolio, just as the group had taken on extra costs to support new market launches and product upgrades.

To offset this impact, Catena reduced strategic investments from planned levels and while it did note an initial effect of these measures in Q2, it was insufficient to compensate for the full impact of lower margins, particularly under revenue share agreements with operators outside North America.

However, Catena chief executive Michael Daly said he remained optimistic about the future for the business, saying while margins will likely reduce in some markets, they will increase in others.

“Catena Media is an agile business with global reach in markets where the fundamentals for online sports betting and casino remain strong,” Daly said. “The changed economic environment will likely reduce user spending on entertainment in coming quarters, and we are pivoting aggressively to this new reality. 

“Our priority is to continue to remove costs where we can and to adapt the business to lower margins in key markets while continuing to develop the many attractive growth opportunities ahead of us. People will still be betting, and we will be finding those new bettors and bringing them to the table for our partners.”

Revenue in the three months to 30 June 2022 amounted to €28.9m (£24.4m/$29.4m), down 4.9% from €30.4m in the second quarter of the group’s 2021 financial year.

Search revenue accounted for €27.3m of total revenue, down 3.9% year-on-year, while paid revenue also slipped 20.0% to $1.6m. Revenue from through revenue-sharing arrangements accounted for 39% of total revenue, with revenue from cost per acquisition contributing 52% and fixed fees 9%.

In terms of business segments, casino revenue fell 18.5% to €17.2m, despite growth in the North American market, though the launch of legal online sports betting in Ontario, Canada, helped push sports betting revenue up 31.3% to €10.9m.

Challenging market conditions in the financial sector meant that finance revenue in Q2 fell 20.6% to €773,000.

Turning to spending and operating costs were 26.6% higher at €25.2m, with the reduction in planned strategic investments not being fully effective in Q2. Catena also noted €2.5m in finance-related costs, meaning pre-tax profit was €1.2m, down 82.6% year-on-year.

The group paid €771,000 in income tax, while it also noted €682,000 in negative currency translation differences and a further €1.1m worth of interest payable on hybrid capital securities. As a result, it posted a net loss of €1.3m for the quarter, compared to a €4.3m profit last year.

In addition, adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) was 39.7% lower at €9.1m.

Looking at how this impacted its performance in the first half, group revenue for the six months to 30 June was €74.1m, up 4.2% year-on-year.

Operating costs also increased 22.7% to €48.7m, while also accounting for €2.4m worth of net finance expenses, pre-tax profit was €23.0m, down 12.6% from €26.3m last year.

Catena paid €1.7m in tax and reported €677,000 in negative currency translation differences and €2.2m in interest payable on hybrid capital securities. This meant it ended the half with a net profit of €18.5m, down 13.2% year-on-year, while adjusted EBTIDA declined 13.7% to €34.7m.

Publication of the results comes after Catena earlier this month expanded a strategic review of its business to include all of its European operations. 

The initial review of specific parts of the business was announced in May in response to third-party interest in some of its brands. This attracted additional interest and extended the process beyond an expected time frame. 

In response, Catena expanded the review to the entire European business, where it will be seeking cost reductions, including running a consultation process for redundancies in the UK and Malta.

“In fast-changing economic conditions we are working diligently to obtain the best outcomes for Catena Media and our shareholders,” Daly said.

Entain was ordered to pay a total of £17.0m (€20.1m/$20.4m) yesterday (17 August) after the Commission identified a series of social responsibility and anti-money laundering (AML) failings across its online and land-based businesses.

This included £14.0m for failures within its LC International Limited online arm, which runs websites including Ladbrokes.com., Coral.co.uk and Foxybingo.com, and £3.0m for failures at its Ladbrokes Betting & Gaming Limited land-based division that operates 2,746 gambling premises across Great Britain.

Although the £17.0m was the highest-ever payment package ordered by the Commission, Will Prochaska, strategy director at Gambling with Lives, said this was not enough and that the regulator should consider other ways of punishing operators. 

Gambling Commission chief executive Andrew Rhodes yesterday suggested that Entain could potentially lose its licence in Great Britain if the group continues to breach rules and regulations in the market.

“We welcome the Gambling Commission’s action against Entain but it won’t be enough,” Prochaska said. “90% of industry profits come from 5% of customers who are addicted or at risk of addiction, so there is a structural problem in the industry that this payment won’t come close to solving. 

“In fact, we believe that the industry views payments from the Gambling Commission simply as a cost of doing business, and until operating licences are revoked they will not change their business model.

“1.4 million people in the UK are suffering from gambling addiction, and every day at least one person takes their life because of gambling – this is a public health crisis. 

“When Liz Truss or Rishi Sunak take over in September, they must publish the long-awaited Gambling Act Review in full and undiluted.”

Publication of the review has been delayed after Boris Johnson last month resigned as prime minister, with the gambling white paper currently with Johnson for final approval. 

Net gaming revenue came to HK$6.52bn (£690.5m/€818.4m/$831.7m). As well as being a steep drop from the first half of 2021, it was down by 75.1% from the first half of 2019, the last period before the outbreak of covid-19 began to affect operations.

However, despite this – and a further lockdown after the period ended, which led to the worst month for gaming revenue in since Macau opened up its gaming market to multiple licensees – the Galaxy board said they were still confident in the future.

“Despite the recent challenging experience in Macau, we remain confident in the longer term outlook for Macau in general and GEG specifically,” the board said.

Galaxy Entertainment chairman Dr. Lui Che Woo, meanwhile, expressed a similar sentiment but also noted that continued Covid-19 outbreaks could make the outlook more challenging.

“Going forward in the medium to longer term, we remain confident in the future of Macau. However, we do acknowledge that further potential outbreaks of COVID-19 may impact our future financial performance”

Part of this was due to what Galaxy’s board described as a “healthy” balance sheet, with net cash of HK$20.30bn at the end of Q2. Core debt, meanwhile, was HK$300m, level with the figure from a year earlier.

Gaming contributed HK$4.13bn in net revenue, down by 47.4%. This came on gross revenue of HK$4.77bn, down by 51.1%. Net gaming revenue is gross gaming revenue minus commissions and incentive payments.

Galaxy Macau – the operator’s flagship venue – reported gross gaming revenue of HK$3.95bn, down by 44.9%.

StarWorld Macau had more difficulty, however, with GGR down 72.5% to HK$631m. Galaxy’s City Clubs – a number of smaller gaming venues in Macau – were the most resilient locations, but revenue was still down 35.1% to HK$198m.

Non-gaming activities from Galaxy Entertainment’s resorts contributed a further HK$1.08bn, down by 23.3%.

Finally, Galaxy’s construction materials division brought in an additional HK$1.32bn.

The business reported earnings before interest, tax, depreciation and amortisation of HK$191m, which was a 90.4% decline.

New concessions

The business announced that it would bid for one of the new concessions to operate casinos in Macau, after having its initial concession extended by six months. The new bidding process for concessions follows the passage of a bill to reform Macau’s gaming sector. Consultations on the bill had proposed reducing the number of operators permitted to do business in Macau, but the final version opted to keep the number at six.

“We are well positioned to compete for one of the Macau’s gaming concessions, given our track

record of introducing innovative non-gaming elements into our resorts, our strong operational history, significant investment into Macau’s economy and our substantial CSR efforts including supporting SMEs,” Lui said. “We look forward for the completion of the concession bidding process by year-end.”

From 1 September, Veikkaus’ slot machines will only be available for playing in grocery stores from 9am to 9pm, with the terminals to be switched off outside these hours.

There will be no restrictions on the opening hours of other slot machines than those placed in grocery stores.

Veikkaus will also restrict the visibility of the game menu on all decentralised slot machines in stores, service stations, kiosks and restaurants. Customers will not be able to see the game menu on the screen or play games until they have authenticated themselves.

“Veikkaus wants to offer people the option of shopping without the slot machines being open for playing,” Veikkaus vice president of sustainability Susanna Saikkonen said. 

“Veikkaus also wants to offer its customers the option of imposing a total self-ban on their playing of slot machines. Self-bans can be activated, for example, in Veikkaus’ online service or by contacting our customer service.”

The new restrictions on slot machines in grocery stores are the latest measure introduced by Veikkaus as part of its long-term commitment to promote responsible gambling. 

Since July 2021, consumers playing any of Veikkaus’ slot machine games have been required to authenticate themselves using their Veikkaus card, phone or a payment card linked to their loyalty customer account.

Finland’s new Lottery Act will extend mandatory identification, which already exists for slot games, to include all forms of gambling, as well as payment blocking for all operators except Veikkaus.

Mandatory ID checks for coupon-based games such as Lotto and Eurojackpot is due to come into effect from 1 January 2023. However, Veikkaus in June requested this date be pushed back to 1 January 2024 to allow it more time to ensure its machines are capable of carrying out such checks.

Veikkaus said the additional year would allow it to upgrade all of its machines and ensure that mandatory checking methods would be in place at the start of 2024.

Group underlying profit for the 12 months ending 30 June was £40.4m, compared to the £82.4m loss the business made in the prior period.

The business said that underlying figures were used to allow like-for-like comparisons between different periods by excluding the impact of amortisation, profits or losses on sold or acquired businesses, currency fluctuations and other non-normal costs or revenues.

This came as underlying revenue almost doubled from 2020-21 to 2021-22, rising from £325.3m to £644m in 2021-22 – a 98% increase.

However, this revenue total is still below the 2018-19 levels of £715.4m.

The business blamed a variety of factors for this – including the continued low levels of international travel, a second-half decline in custom due to the Omicron variant of Covid-19 and inflationary cost pressures affecting consumer discretionary spending.

These conditions led the group to reduce its 2021-22 profit guidance forecast in June from between £47m and £55m to approximately £40m.

Rocky road

Rank CEO John O’Reilly outlined the challenging trading conditions.

“It was a challenging year for our UK venues businesses, with unexpectedly softer trading across the Grosvenor estate in the second half of the year,” he said.  

“Our nine London casinos, which account for over 38% of Grosvenor’s revenue in normal trading conditions, have seen very weak customer volumes with overseas visitors few in number, and only starting to return in the final few weeks of the year. The lower-than-expected Grosvenor trading in H2 led us to reset full year operating profit expectations as announced in Q4.”

“While we have been seeing improvements in London in recent weeks, the trading environment across the UK is likely to remain difficult in the months ahead with inflationary pressures squeezing consumer discretionary expenditure and cost increases, particularly in energy prices, putting pressure on profit margins.”

Digital time

While the land-based segment has not fully recovered from pre-Covid highs, Rank’s digital operations, which make up a minority of revenue, grew beyond past 2019 levels.

In the 12 months leading to 30 June, Rank received £183.3m in revenue from digital gaming, compared to £176.4m in the previous period and £144.0m in 2019. This represents a 27% increase from the pre-pandemic period.  

This compares to Rank’s land-based operations which saw a 209% rise in revenue to £460.7m from £148.9m. However, this still remains 19% below 2019 gaming revenue levels of £571.4m.

O’Reilly outlined the changes the group had made to the structure of its digital business: “Performance in our digital business continues to improve against a difficult market backdrop. The transfer of the Rank brands to our proprietary technology platform is supporting revenue growth and a strong improvement to operating margins which we expect to accelerate with the migration of the Grosvenor brand in the coming weeks.”

White paper

Rank’s financial report detailed the company’s thinking regarding the upcoming UK Gambling Act review white paper, which will aim to point the way for future legislative reform.

Following the publication of the white paper there will be a number of consultations with the Gambling Commission regarding specific policy proposals. The company articulated a number of recommendations in anticipation of this process.

Among the business’ suggestions were for the government to increase the number of slot machines allowed on casino floors, the legalisation of random-number generator and sports betting products on terminals within the casino, and the ability for casinos to extend credit to high-net-worth individuals.

The company also outlined its proposals for reforms to bingo rules: “Our proposals for land-based bingo reforms have been similarly modest.

“The existing ’80:20′ rule, which requires 80% of our machine mix in clubs to be increasingly obsolete Cat C or Cat D machines in order to provide the 20% balance of more popular B3 machines, is archaic. We have proposed the rule be removed and that the ability to offer side-bets on the main stage game of bingo be permitted,” the business stated.

Rank also urged that reforms to digital rules not be too penalising on the industry: “We have argued against the imposition of a statutory levy and against the blanket banning of free bets, both of which would curtail our competitive abilities,” it stated.

“We hope that any changes to affordability thresholds and online slot limits will provide a line in the sand which sensibly allows customers and operators to adjust to changes and deliver a safer gambling consistent experience without further regulatory creep.”

O’Reilly also stated that in general the business welcomed the upcoming reforms. “We were disappointed by the delay to the publication of the UK Government’s white paper on gambling regulation,” he said.

“The land-based casino and bingo sectors are in need of long overdue modernisation of the regulations which govern their operation, something which the government recognised in its objectives for the review. We expect Rank to be well positioned to benefit from the review when it concludes.”

Total revenue for the month amounted to $429.1m (£355.8m/€421.7m), marginally up from $423.7m in July of 2021 and also 10.1% higher than $389.8m in June this year.

Retail slots remained, by some distance, the primary source of revenue for operators in the state, with revenue from this sector at $213.9m, down 4.0% year-on-year. The Pennsylvania Gaming Control Board (PGCB) also noted a 0.3% drop in land-based table games revenue to $86.7m.

However, these declines were offset by year-on-year growth elsewhere, including within the igaming sector where revenue was 11.2% higher at $98.6m. This was made up of $71.9m in online slots revenue, $23.9m in internet table game revenue and $2.8m in online poker revenue.

Hollywood Casino at Penn National, a DraftKings partner, led the way here with $38.6m in revenue, ahead of the Rivers Casino Philadelphia, partnered with Rush Street Interactive, on $24.7m, then the Valley Forge Casino Resort, a FanDuel partner, with $17.5m.

Elsewhere revenue in the sports betting sector also increased 28.1% to $25.4m, helped by a 10.5% rise in the state’s handle to $336.5m. Online sports wagering accounted for $22.6m of revenue here, while retail betting generated $2.8m in revenue.

Valley Forge, along with partner FanDuel, retained its grip on top spot in the sports betting market with $12.2m in revenue, ahead of Hollywood Casino at the Meadows’ Barstool Sportsbook on $4.6m and Hollywood Casino at Penn National and DraftKings with $1.6m.

The PGCB also noted that video gaming terminal revenue for the financial year fell 3.7% to $3.6m, while fantasy sports contests revenue slipped 45.3% to $27.3m.

Funds were handed out to groups active in areas in which MGM operates, including Nevada, Michigan, Mississippi, New Jersey, New York, Ohio, Washington DC and Massachusetts.

The grants were the result of contributions made to the Community Grant Fund by MGM Resorts employees as well as guests at its properties.

The organisations that are awarded funds are decided by the Community Grant Councils, a voluntary committee of employees who represent their respective regions.

Since its inception in 2002, the foundation has raised more than $100m, and supported over 1,500 charitable organisations.

“Year after year we are amazed at the generosity of our employees and now guests. In 2022, MGM Resorts employees gave to 82 non-profit organisations that serve the communities where we live and work,” MGM Resorts’ executive director of community engagement Maria Jose Gatti said.

“On behalf of our grant recipients, thank you to those who gave to the Community Grant Fund, providing vital assistance to our communities, including medical care, mental health counselling, food and shelter.”