Five things we learned from Gamesys Group’s H1 2020 results

Gamesys Group has enjoyed an excellent start to 2020 after impressive revenue growth in the first two quarters despite dealing with the challenges of integrating the former JPJ Group business with the acquired Gamesys business.

The hallmarks of a smooth acquisition process were first revealed in March when the firm reported a 15% year-on-year rise in revenue for 2019, and later in April when revenue rose 19% in Q1.

However, it is perhaps the latest H1 2020 figures which shine the brightest light on the firm’s ambitions going forward, with strong Asia, US and UK growth punctuating stuttering European fortunes.

Below, we assess the five major talking points from the operator’s H1 2020 results.

Changing of the guard

The H1 2020 results were marked by news of two departures, the first being executive chairman Neil Goulden, who will step down and return to a non-executive director role in October 2020.

Goulden initially became executive chair of the then JPJ Group in 2017, after the departure of then JPJ Group CEO Andy McIver, and stayed on after the firm began discussions with the Gamesys Group.

As he explained to EGR Intel: “The intention was then that if everything goes according to plan and smoothly that I would step back to non-executive director after one year of the integration, which is the first of October, so it’s always been something that was our plan.

“We put out a terrific set of results, the second half of the year has started really well, we’re paying a first dividend and we’ve got an excellent executive team in place now.

“Now’s the right time to step back to be a non-executive director but it’s certainly my intention to stay on if the board wants me for the next few years,” Goulden added.

In another indicator of the success of the Gamesys acquisition, transition director Simon Wykes also confirmed he would leave the business on 30 September.

Land of the rising sun (and revenue)

When analysts assess Gamesys results, they often highlight revenue growth in the group’s Japanese and Asian operations, citing a significant opportunity even though the continent remains largely untouched by some of the larger international heavyweights.

The firm enjoyed a 92% revenue jump in H1 driven by growth in new customers across Asia and sustained momentum in its Japanese operations through the launch of a second brand (InterCasino) to complement its existing Vera&John brand. Gamesys has delivered excellent performance in what is still essentially a grey market.

Yet the industry still looks for the secret sauce behind this success, as if you could bottle it up and sell it to gambling operators.

“While not giving trade secrets away, it hasn’t happened by accident. We’ve had a small Asian business since we bought Vera&John back in 2014, but it was very small and all we have done is gradually just increase investment in that business,” Goulden explained to EGR.

“For me the most important thing in our Asian success is that we have servers out there. We have a whole development team in Manila, which develops games specifically for the Asian market.

“We’re not, as some UK operators would think, just sitting in the UK and saying, here’s our site available in the Far East. We have a content supply business, a B2B business and a B2C business which uses content we’ve developed specifically aimed at the Asian market,” he added.

Neil Goulden, Gamesys Group

Nordic pains?

Gamesys Group revealed a 4% decline in gaming revenue from the Nordics, driven by changing regulations on its market operations there.

The London-listed operator confirmed steady growth in Spain despite the introduction of restrictions on advertising and bonusing due to Covid-19 while its German operations performed strongly over the first half of 2020.

However, it was the Nordics which proved to be the most interesting European market in terms of business development during H1 after Gamesys confirmed the Scandinavian markets remained “challenging” for the multi-brand business.

Gamesys confirmed it would not “invest significantly” in customer acquisition across the region.

When asked why, Goulden was very specific in his summation. He said: “The message that we’re really giving with this move is that the rising cost of acquisition, given the government’s restrictions on bonusing and deposits leave you as a business with two options.

“You either manage a bit of a decline in the business, hang in there and see what happens or you lose money acquiring customers.

“With all the other opportunities that we have in the world, we’re not in the business of losing money to acquire customers, so that’s what’s led us to this decision,” Goulden explained.

As evidence, he suggested as much as 30% of the market has now shifted to offshore operators. A dire warning indeed and a stark change, given the firm’s long-standing operations across the region.

Rising responsibilities

Gamesys won many plaudits during the lockdown period for ceasing untargeted marketing to UK players and dropping its sponsorship of ITV’s Loose Women, but as the H1 results showed the firm’s RG operations continue to drive record player engagement.

Gamesys added 30% more staff to its responsible gambling teams during lockdown. UK active customers per month rose 19% over last year, but more interesting is player spend per head, which has decreased by 3%, a decline which Gamesys described as “healthy and sustainable”.

“That’s what we’re trying to build, a sustainable business with sustainable revenue where customers feel looked after,” Goulden explained.

Addressing UKGC Covid-19 measures in May, the group reported a 28% rise in chatroom engagement across H1, as well as a 34% increase in the number of players setting deposit limits and a 44% increase in “proactive outbound” calls to players.

The standout statistic, however, is that more than half of UK play sessions (53%) take place on a non-wagering basis, which given the group’s 16% annual UK revenue growth, is an interesting stratagem for accelerating customer acquisition.

The fourth wall?

With stuttering operations in Europe, the UK and Asian markets are increasingly becoming the key focus areas for Gamesys Group as it looks to generate further organic revenue growth.

Developing a fourth big market is a key focus for the business over the remainder of 2020, adding revenue to gains made in the UK, US and Japan.

On the US, Goulden said: “The market is predominantly sports betting-led. We believe that if we work on our platform, our development and our content, we will be attractive as a partner to US operators.”

Gamesys Group has been involved in the US market for some time now with operations in New Jersey based at the Tropicana Hotel and Casino in the Garden State.

The US market is already paying dividends for the group with a 37% year-on-year revenue spike during H1 through its Virgin Casino and B2B contract with Tropicana Casino in a result that boosted flagging rest of world (ROW) revenue, which was admittedly impacted by discontinued markets.

However, Gamesys is not content with just three major growth territories and is investing further international opportunity.

“In a year’s time I’d like very much to be able to report here’s the UK, here’s Japan, here’s the United States and here’s X,” he explained.

“That’s really where we are going, we don’t want to be wasting our time by trying to be everywhere. We want to be focused on new markets which will offer us growth,” Goulden concluded.