Month: August 2023

Mendelsohn said the 888 board remained focused on its sustainability and compliance initiatives. He termed this “fundamental” to the business the team was building.

The chairman added as a result the business expected full-year revenue to be lower than it was last year. He said this resulted from actions that were “both planned and necessary”.

Mendelsohn said the reduced revenue reflected “our combination of actions in reducing our exposure to higher risk offshore markets, implementing safer gambling regulations and removing revenue generated from unprofitable marketing spend”.

The company has in the recent past boasted large revenue from offshore markets. In H1 it reported 95% of Q2 revenue is now sourced from locally regulated or taxes markets.

“While this means overall revenues were lower in this period, it is significantly improving both the quality and sustainability of our business – and improving our future growth profile,” said chief strategy officer Vaughan Lewis.

Recreational customers take centre stage

Lewis pointed to the company’s efforts to ensure revenue is sustainable. He highlighted the UK as one market where this is a high priority. This is due to the ongoing implementation of the Gambling Act white paper.

Due to self-imposed implementation of safer gambling protections, such as affordability checks and slot limits, Lewis said most of the business’ GB growth “is coming from lower spending recreational cohorts”.

While Lewis said the business’ current player protections created frictions for its customers, he added 888 agreed with the goals of the white paper in mitigating it.

As such Lewis pointed to “improving the customer experience [and] creating a level playing field for all operators” as positive outcomes of UK regulatory reform for the business.

Progress in pipeline markets

Lewis said the 888 was “delighted” with its progress in its pipeline markets. He highlighted the growth of the company’s Africa-facing joint venture, 888Africa, as being particularly strong.

“We launched in September and at the end of the tenth full month, we have already passed one million customers and have seen continued strong revenue growth here,” he said.

As such Lewis hinted this is a group of markets in which the company may invest further in future.

“The success here gives us real confidence about the value creation,” he said. “We have recently completed the acquisition of BetLion to support our African expansion.”

888 acquired BetLion, which is an African bookmaker, at the beginning of August. The subsidiary has a presence in Kenya, Zambia and the Democratic Republic of Congo.  

Operator faces regulatory risk in 2023

The operator’s decision to highlight progress made on customer sustainability, regulatory compliance and a reduction in the size of its offshore segment comes in the wake of a series of scandals in 2023.

These led to 888 facing several significant periods of regulatory risk in the year.

In January, the business announced it had uncovered significant failings in its anti-money laundering and know your customer practices relating to its VIP activities in its Middle Eastern dot.com operations. This resulted in the resignation of CEO Itai Pazner.

In July, the Gambling Commission announced 888 Holdings GB licence, the source of the operator’s largest revenue stream, was under investigation.

This followed an investment in the company by a fund backed by former Entain CEO Kenny Alexander. HMRC are investigating due to historic actions in Turkey relating to the company’s offshore operations.

The supplier reported new quarterly highs for revenue and adjusted EBITDA during the six months to 30 June. Revenue reached $7.5m (£5.9m/€6.9m), which was 32.6% higher than in the previous year.

Galaxy, which provides casino table games and systems, said this was driven by growth in both its land-based and igaming businesses. The supplier also noted growth across its core Americas operations as well as in Europe, the Middle East and Africa. 

In addition, CEO and president Todd Cravens picked out a number of major new deals agreed in Q2. He said these will support further growth in Q3 and beyond, with Galaxy raising full-year guidance to reflect these expectations.

“Q2 was meaningful for more than just the numbers,” Cravens said. “We announced a 10-year agreement with Evolution, cementing the relationship with our largest customer well into future. 

“We also announced that, in September, we will become the exclusive distributor for EZ Baccarat in the US, Canada, the UK and online, an opportunity that we think can generate several million dollars in new revenue for us. 

“And, after the quarter, we saw the first installations of our GOS platform in the US and UK and we are very pleased with the results.”

Land-based and digital growth at Galaxy

Galaxy’s land-based operations remained its primary source of revenue, with the GG Core segment generating $5.3m. This was up 43.1%, primarily due to the shipment of perpetual right to use gaming systems to a single customer.

The supplier also noted growth within its GG Digital segment, which provides solutions to the igaming sector. Here, revenue increased by 12.4% year-on-year to $2.2m.

Galaxy put GG Digital growth down to customer growth in their traditional markets, as well as their entry into new areas.

Breaking down geographical performance, revenue in the Americas jumped 58.1% to $4.9m. As for Europe, the Middle East and Africa (EMEA), revenue was 3.9% higher at $2.7m in Q2.

Returning to net profit in Q2

Looking at spending and operating costs were 8.5% higher at $5.1m while net other costs, primarily interest expenses, stood at $2.1m. As such, pre-tax profit reached $373,446, in contrast to a $920,664 loss last year.

Galaxy paid $16,677 in income tax and accounted for $25,280 in negative foreign currency translation adjustment. This left a net profit of $331,489, compared to a $1.2m loss in Q2 of 2022.

In addition, adjusted EBITDA jumped 33.3% year-on-year to $3.2m.

Galaxy growth continues throughout H1

As for how Galaxy performed in the first half, the six months to 30 June followed a similar pattern as Q2. Revenue was 28.9% higher at $14.9m, with growth across both land-based and igaming.

GG Core land-based revenue climbed 39.1% to $10.5m, while GG Digital igaming revenue was up 9.9% to $4.4m. In geographical terms, Americas revenue hiked 52.5% to $9.3m and EMEA 1.8% to $5.6m.

Operating costs increased 12.1% to $10.2m and net other costs amounted to $4.2m. This resulted in a pre-tax profit of $489,715, compared to last year’s $1.1m loss.

Income tax payments totalled $22,252 and negative foreign currency translation adjustment was $8,643. As such, net profit for the half stood at $458,820, in contrast to a $1.3m loss at the same point in 2023.

Galaxy also noted a 26.0% increase in adjusted EBITDA to $6.3m.

Full-year guidance increased

Based on its performance during Q2 and H1, Galaxy raised its revenue guidance. For the 12 months to 31 December 2023, revenue is now set to reach between $29.0m and $30.0m. This is higher than initial estimates of $27.5m to $28.5m.

Galaxy also said adjusted EBITDA is expected to reach the upper end of a previously stated guidance range of between $13.0m and $13.3m.

“It has been a very busy six months for us and I want to publicly thank all my fellow Galaxians for their loyalty and dedication,” Cravens said.

Better Collective has added SvenskaFans.com, HockeySverige.se, Fotbolldirekt.se and InnebandyMagazinet.se to its list of sport media brands.

The Denmark-based affiliate said the acquisition is in line with the company’s strategy to become the leading digital sports media group.

Across the four purchases, Better Collective will gain a range of sports media and audiences, with SvenskaFans covering top-tier football and ice hockey in Sweden and monthly visits of around five million. 

HockeySverige.se is a global hockey-prominent news site featuring news and reports with around 2.2 million monthly visits.

Fotbolldirekt.se is a football outlet covering both Sweden and global leagues with 1.1 million visits. InnebandyMagazinet is also a football brand with 500,000 monthly visits and like the other three sites earns monetisation through advertising.

An important pillar

Jesper Søgaard, CEO of Better Collective, has called these acquisitions an important pillar in Better Collective’s strategy to acquire leading national sports media “with strong brands and a loyal and returning following”. 

“That’s why these sports media brands fit perfectly into our portfolio,” he added. “We expect the media to deliver additional growth for our business in Sweden, adding to our leading market position within affiliation and expansion towards general advertisement.”

Søgaard went on to further say that the company is excited “to bring onboard one of the strongest sports news teams in Sweden and make them part of Better Collective”.

“With our vision to become the leading digital sports media group, we want to be the go-to partner for any brand wanting to gain exposure and engagement among sport fans. This acquisition takes us one step further on that journey. “

Successful development

CEO of Everysport Group, Hannes Andersson, believes the performances of the sites leading to the sale represent success.

“We are proud to have developed the websites into some of Sweden’s largest news media in their respective sports,” he says.

“In addition, we have successfully commercialised the brands and in all cases also turned a negative financial development into good profitability. 

“Today’s deal confirms Everysport’s digital innovation and execution capabilities and is a logical next step for both the brands and the group. 

Andersson concluded by adding that the company is convinced that Better Collective “is a strong and long-term owner who will continue to develop the brands in a meritorious way. We wish both them and the employees all the best.”

New European editor

Better Collective recently announced the appointment of René Schrøder for its European editor role. Schrøder will oversee the company’s European sports media brands and will aim to enhance its position in the European markets.

The Commissioner said a series of weaknesses were identified in 888’s historical compliance approach. These included ineffective KYC obligations that failed to record and verify address details in certain cases.

Other failings related to overreliance on high thresholds for enhanced due diligence (EDD) intervention and lack of clarity in this approach. The review also noted a lack of consistency in the effectiveness of EDD checks.

The Commissioner said there was an inconsistent approach over keeping accounts open with restrictions as opposed to closing accounts.

In addition, the review flagged an overreliance on open-source checks and failure to ask customers to provide source of funds and source of wealth documentation.

Middle Eastern VIP scandal leads to CEO’s resignation

The William Hill operator suspended Middle East VIP activities in January pending the outcome of an internal compliance investigation. 

The business said certain best practices had not been followed over know your customer (KYC) and anti-money laundering (AML) processes for 888 VIP customers in the region. This led to Itai Pazner being removed as CEO of the 888 parent group.

While the case related to activities in the Middle East, the review ran in agreement with the Gibraltar Commissioner. The company operates across a range of market but is headquartered in Gibraltar.

This process led to 888 putting in place new policies and procedures to avoid similar issues in the future. Relevant accounts were also subject to an updated risk assessment process

Gibraltar regulator’s ruling on the case

Making its decision on the case, the Commissioner took into account a number of factors. These included 888 self-declaring the issue and the suspension of all accounts impacted.

The regulator also acknowledged how 888 immediately launched an internal compliance review, with systems and controls have been quickly improved in the period following the admission.

For the avoidance of doubt, the regulator also noted that no specific cases were identified that involved 888 dealing with the proceeds of crime or terrorist financing.

In lieu of a financial sanction, the Commissioner reached a regulatory settlement of £2.9m with the 888 subsidiary. 

Part of the settlement will be made available to the Centre of Excellence for Responsible Gaming at the University of Gibraltar.

“Gibraltar licensees are expected to factor the learnings from this case into their own risk assessments, systems and controls,” the Commissioner said.

“888 continues to be considered a fit and proper entity to hold licences in Gibraltar. 888 has enhanced its policies and procedures in remediating the identified historical deficiencies. 

“The Gambling Commissioner and Licensing Authority consider this matter closed and will be making no further comment on this matter.”

Pro-forma revenue falls in H1

News of the settlement comes as 888 posted its results for the first half of 2023. Pro-forma revenue fell 6.5% to £881.6m after a decline in its online segment offset retail growth.

The six-month period to 30 June was the second half-year since 888 acquired William Hill’s non-US assets for £1.95bn. Pro-forma results were reported as if the William Hill assets were also part of 888 in H1 last year.

Speaking in an earnings call, 888 executive chair Lord Jon Mendelsohn highlighted the impact of the business’ compliance and sustainability initiatives in the wake of a period of regulatory risk.

Mendelsohn said the 888 board remained focused on its sustainability and compliance initiatives. He termed this “fundamental” to the business the team was building.

The Australian Transaction Reports and Analysis Centre (Austrac) launched federal proceedings against SkyCity in December last year. This related to failings at its SkyCity Adelaide facility in South Australia.

At the time, Austrac said the venue demonstrated “serious and systemic non-compliance” with AML and counter terrorist financing (CTF) laws.

Each contravention alleged by Austrac could result in a maximum civil penalty of between $18m and $22.2m.

The case has been ongoing over the past eight months. While proceedings remain at a relatively early stage, SkyCity has made the provision in anticipation of penalties and legal costs.

Penalties will relate to specific failings

SkyCity said estimating potential penalties at this stage remains “challenging”. However, it did note Austrac’s civil penalty proceedings to date show penalties are based on the specifics of each case.

These, SkyCity said, relate to factors such as the nature and extent of contraventions. Austrac will also consider loss and damage suffered, steps taken and the size and financial position of the business.

“The size of any penalty SkyCity Adelaide is exposed to could vary materially from the amount of the provision and significant uncertainties remain,” SkyCity said. “Any eventual civil penalty applied to SkyCity Adelaide in relation to the proceedings may be significantly higher or lower than the provision. 

“The timing of any civil penalty to be paid by SkyCity Adelaide is also uncertain.”

Addressing Austrac’s concerns

SkyCity has already taken steps to address some of the issues flagged by Austrac during the proceedings.

In May, South Australia’s regulator, the Consumer and Business Services (CBS), ordered SkyCity to implement an independent review of its AML and CTF programmes. This covers the implementation of new enhancement programmes and the casino’s compliance with ongoing AML and gambling harm minimisation obligations.

Following the decision to open civil penalty proceedings against SkyCity, Hon Brian Martin’s review of SkyCity Adelaide’s suitability to hold a casino licence was placed on hold pending the case’s outcome.

Similar issues for Crown and Star

SkyCity is not the only major casino operator to face such issues in Australia. Both Crown Resorts and Star Entertainment have come under similar scrutiny in recent times.

Last month, Australia’s federal court completed proceedings against Crown for breaching anti-money laundering laws. The court ordered the operator to pay a penalty of AU$450m.

Star has been the target of multiple parliamentary inquiries into misconduct. In April, it engaged new cost and restructuring initiatives, warning it is experiencing “significant and rapid deterioration in operating conditions”.

Details of the initiative were revealed in December 2022, including restructuring the existing esports business. Allied also widened its focus to include a broader array of entertainment and gaming products and services.

In addition, the business rebranded from Allied Esports Entertainment to reflect its new direction.

Q2 was the second full quarter since the restructure, with Allied reporting both a rise in revenue and a decline in net loss. President and CEO Yinghua Chen said this was partly due to the changes rolled out as part of the restructure.

New subsidiaries, new markets

These included the establishment of new subsidiaries Allied Mobile Entertainment (AME) and Allied Experiential Entertainment (AEE). AME is focused on the mobile games market, while AEE operates within entertainment live events, experiential entertainment venue operation, management and consultation.

According to Chen these two subsidiaries have allowed, and will continue to allow, Allied to pursue a wide range of strategic opportunities.

“We expect that AME and AEE Entertainment will enable us to break into new markets, creating additional revenue streams and enhancing our financial performance within the next 12 months,” Chen said.

“This restructuring aims to optimise our resources and provide investors with greater clarity on our business outlook and direction.”

Multiplatform content drives revenue growth at Allied

Looking at Allied’s Q2, revenue in the three months to 30 June was $3.3m (£2.6m/€3.0m), up 182.3% from $1.2m in the previous year.

Of this total, $2.0m came from Allied’s multiplatform content operations. This was 6,927.8% higher than 2022’s figure, driven by the release of the second season of the “Elevated” content series.

In-person revenue also increased by 18.2% to $1.1m during the quarter, helped by a new naming rights agreement for one of Allied’s venues. 

Net loss slashed in Q2

Operating costs were 2.1% lower at $4.7m in Q2 while increased interest led to an additional $704,013 in income. As such, quarterly pre-tax loss was $691,218, a significant improvement in $3.7m last year.

Allied did not pay tax, nor did it note any foreign currency translation adjustments. As such, net loss for the quarter was $691,218, in contrast to $3.8m in 2022.

In addition, Allied noted adjusted EBITDA for the quarter improved from a loss of $2.7m to a $1.1m loss.

Allied net loss more than halves in H1

Turning to the first half, revenue in the six months to 30 June hit $4.5m, up 25.0% year-on-year. This included $2.5m worth of in-person revenue and $2.0m multiplatform content revenue.

Operating costs were cut 22.0% to $8.5m and Allied noted a further $1.5m in additional income. This left a pre-tax loss of $2.6m, compared to $7.4m in 2022.

After accounting for minimal foreign currency translation adjustments, net loss remained at $2.6m. This was less than half the $7.5m loss posted in the previous year.

In addition, adjusted EBITDA improved from a loss of $5.3m to negative $3.2m.

“We’re very excited about the remarkable progress we have made and the opportunities that lie ahead,” Chen said.

Bielski will oversee finance, investor relations and all matters relating to environmental, social and governance (ESG). His term as CFO will last an initial three years, beginning 1 October, and will also see him sit on Zeal’s management board.

He replaces Jonas Mattsson, who chose not to extend his mandate beyond his current term after eight years as CFO. Mattsson is leaving the business to spend more time with his family. He will officially step down on 30 September.

Mattsson is also CFO of the Lotto24 business and will be replaced in this position by Andrea Behrendt, initially until March next year. Behrendt is currently vice-president for group controlling at Zeal.

Bielski brings skills from various markets 

Bielski joins Zeal from solar power business Energiekonzepte Deutschland, where he has been CFO since December 2022.

Prior to this, Bielski had a seven-year spell as CFO at German loan portal Smava. He also spent time in senior positions, including chief strategy officer, with delivery platform Delivery Hero.

In addition, Bielski worked in the banking sector for both Goldman Sachs and Archer Capital.

“I would like to thank the board of Zeal for placing their trust in me,” Bielski said. “I am looking forward to taking on my new responsibilities and working together with the very ambitious board team.”

CEO Helmut Becker added: “I am looking forward to working with Sebastian. With his capital market expertise and broad experience in building high-growth businesses, he is a perfect fit for Zeal who can support us with our ambitious growth agenda.”

Recognising the work of Mattsson

Becker also paid tribute to the outgoing Mattsson. He said: “On behalf of the entire board, I would like to extend my gratitude and best wishes to Jonas for his outstanding contributions and his dedication to our company. 

“Jonas and his team have provided the financial foundation for the successful changes we have implemented in the past eight years, which ultimately allowed us to reach our strong position today as the leading ecommerce company defining the future of lottery. 

“While we are sorry having to say goodbye to a highly valued member of our board, we fully understand his reasons and wish him and his family all the best for the future.”

Mixed first half for Zeal

The change in CFO comes after Zeal last week posted its first-half results. Revenue was up 11% but a rise in marketing spend ate into its earnings.

The operator highlighted the impact of a series of campaigns in high jackpot phases as driving the business’ customer acquisition and subsequent revenue during the period.

Following a series of raids at the illegal gambling premises, detectives from the ESBU’s territorial administration in Ukraine seized 120 items of computer equipment with an estimated market value of UAH1.5m (£32,000/€37,000/$40,000).

So far, the ESBU’s pre-trial investigation found certain individuals linked to the operation organised gambling without the necessary licences.

Detectives have also established the ringleaders ran the syndicate without creating a legal company or entity, in violation of the law. The gambling establishments were principally found on the ground floors of residential buildings.

Gambling ring conceals activities from authorities

The operators of the gambling ring took steps to conceal their activities from the authorities.

The ESBU highlighted the businesses opened only to trusted customers and operated only after the city’s midnight curfew.

The government established the curfew as a result of the introduction of martial law following Russia’s invasion in February 2022.

Additionally, guards protected the establishment and monitored it under 24-hour video surveillance.

The police said they are currently in the process of building a list of all the persons involved in the scheme.

The investigation will continue on the basis of Part 1 of Article 203-2 of the Criminal Code of Ukraine (illegal activities of organising or conducting gambling games, lotteries).

As such detectives from the Territorial Department of the Security Intelligence Service in Kyiv will continue the investigation under the guidance from prosecutors from the Kyiv city prosecutor’s office.

Slot parlours only permitted in hotels

Under current law, it is only legal to place slot machines in three- to five-star hotels, while casinos can be in operation as four- to five-star hotels.

The law, which was established in July 2020, subjects slot parlours to a $1.2m licence fee and a 28% tax on revenue. The law also limits punters to 21 years of age and older.

Due to the costs of the ongoing war against the Russian Federation, crimes depriving the state of tax revenue have risen in priority over the last year.

The raid is just the latest enforcement action the ESBU has taken against illegal gambling establishments in the Kyiv region.

In June, detectives announced they had uncovered an underground casino and seven other gambling houses, seizing UAH100,000 of the course of the operation.

In May, the Bureau exposed a criminal conspiracy involving a Ukrainian bank and a large number of gaming operators.

Carter is a highly experienced executive having led SBTech for over four years, overseeing its acquisition by DraftKings.

He also spent time as CEO of Bragg Gaming Group after leaving SBTech in the wake of the DraftKings deal.

More recently, he has headed up Acquire VC Investments and also invested in slot games developer StakeLogic.

Carter will officially join GiG on 18 September. He will seek to transform the Platform and Sportsbook division into a stand-alone business. This includes aligning people, technology, product and process development with the group’s new approach.

“I am delighted to become the Platform and Sportsbook CEO of GiG at such an exciting time,” Carter said. “With its outstanding data led proprietary technology platform, sector leading regulated market coverage and diverse product portfolio, the GiG Platform is exceptionally well positioned to maintain its recent strong growth momentum.”

“I’m very much looking forward to working with the GiG Platform and Sportsbook team, building on the strong progress to date, and over time helping to unleash and extract the full potential of a standalone GiG platform.”

GiG chairman Petter Nylander added: “The board believes Richard has the relevant experience, given his success as CEO of SBTech.

“He has shown an impressive and deep understanding of the GiG business, its opportunities and provided thoughtful strategic considerations on how build on the recent success of the Platform and Sportsbook business and driving shareholder value.”

Business splits after strategic review

GiG revealed plans to split is business into two separate entities in February after launching a strategic review. 

The initiative will see Platform and Sportsbook split from the Media division. Each will run independently as publicly listed companies.

At the time, GiG said this would “sharpen the focus” of each segment. This in turn optimises growth opportunities and ensuring each business benefits from strategic and financial flexibility.

The GiG Media affiliate arm will continue to be led by CMO Jonas Warrer. However, when Richard Brown stepped down as group CEO, this kicked off the search for someone to lead Platform and Sportsbook.

During Brown’s tenure as CEO, the group has continued to expand into new markets. This included completing major acquisitions, selling off its B2C assets to Betsson and delivering record revenues in Q1 2023.

Juroszek becomes largest GiG shareholder

In a further development, the Juroszek family last month became the largest shareholder in GiG. The family, former owner of Polish betting operator STS Holdings, now has an 11.08% stake in the supplier.

The Juroszek family purchased the shares in what is described as an “undervalued” GiG after July’s announcement it would be selling a 70% stake in STS to the Entain CEE joint venture.

Mateusz Juroszek, who remains in place as STS CEO following the June acquisition, named the provider as one of the most attractive igaming businesses on the public market.

Under the new scheme, the business’ five-times-a-week lottery game has been renamed the Big Win, with a new prize structure in place from 15 August. Previously, the draw was simply known as the Health Lottery draw.

The operator said the biggest prize change made is in the Saturday draw, when the main prize in its free second chance price draw is to be increased to £475,000 from £250,000.

“To improve our appeal to players, we’ve increased our Saturday night free prize draw to the highest level possible for a society lottery operator,” said Health Lottery CEO Lebby Eyres.

 “We’ve also rebranded to give the draw its own identity,” she added. “As the Health Lottery’s portfolio of games has expanded beyond the original lottery draw, we decided it was time the main game was differentiated more strongly from our other products.”

The Health Lottery shakes up lower-level prize structures

 The rebrand has included other changes to the main draw’s price structure, including raising the price for four matching balls from £250 to £300.

Additionally, the rebrand will see a new Mega Monday promotion, in which online instant win players will be entered into a £500 raffle.

Users who have a direct debit on the site will also be automatically entered into a monthly raffle, with 10 players winning £100.

Eyres said this was done as part of a strategy to reward the lottery’s regular customers.

“We want to drive more engagement with our most loyal customers and relate to them better,” she said.

“From August, we will be asking them about different topics each month to obtain feedback on our rebrand, their journeys, instant win games, good causes and so on, with a view to making sure our product is as closely aligned with our players’ preferences as possible.”

Eyres, who is a former journalist and editor, drove the rebrand initiative after she joined the Health Lottery at the beginning of the year.

Controversy over percentage donated to charity

Historically, the lottery has faced criticism for donating only 20.3% of its ticket prize to worthy causes, compared to the 28% allocated by the National Lottery.

However, in 2020 the operator said it would be increasing the share donated to 25.5% due to the financial impact to the charity sector caused by the Covid-19 pandemic.