Bally’s CEO says weak yen affecting Japan performance as UK investment increases

Bally’s CEO Robeson Reeves has pointed to a devaluing yen and a “sentiment-driven” fall in customer volume in Japan as core reasons behind a softer Far East performance in Q2.

Speaking on an analyst call following the Q2 trading update, Reeves noted currency pressures, as well as investment dollars being spent in other markets such as the UK, resulted in a decline in Japan, a grey online gambling market.

Bally’s International Interactive division’s total revenue slipped 7.4% despite a 9% revenue gain in the UK.

When asked on why Japan, which the group serves with its Vera&John and InterCasino brands, had come up short during the reporting period, Reeves insisted the business model “still works”.

This week, the Bank of Japan raised interest rates to 0.25% as part of attempts to arrest the declining value of the yen, which now sits at ¥150.15 against the dollar.

The value of Japan’s currency had reached a year-to-date high of ¥161.70 versus the dollar earlier in July, while the pound recently soared to a 10-year high against the yen. However, sterling dropped sharply today (1 August) after the Bank of England lowered interest rates to 5%.

Reeves said: “It’s good to acknowledge the devaluation of the yen. Some of the government impacts is largely driving sentiment, so it is more of a demand. Capturing new audiences has been more challenging. That’s actually been the real issue that has definitely stifled all the sort of willingness to play.

“Every time, historically ,we’ve seen this, we’ve seen demand come back, and it ebbs and flows. The model still works. It still converts. What we’ve shown that even with revenue decline there, we’re still able to convert fairly efficiently down to an EBITDA level.

“Things are more expensive for these people because of the weakening of the yen. In the end, it’s not as large an audience searching for the product as previously seen. When you actually look at search volumes, there’s less engagement there.

“That can either be driven by sentiment in the market, but it also can be driven by, the cost of entertainment, becoming higher, because the weakening of the yen.”

Reeves also explained that the lower margin found in Asia comes as investment is being ploughed into the UK, with the market accounting for 74% of International Interactive revenue.

He continued: “I would say the reason why some margins aren’t as high, as you would expect given how much we’ve converting revenue to EBITDA in Japan; we’re actually investing in growth.

“We’re actually spending a bit more on brands in other markets, such as the UK, because we’re seeing opportunities there, and we think we can grow very consistently in that market.”

In the UK, where actives and average revenue per user rose 4% in Q2, Reeves explained that a more refined marketing and customer acquisition process was driving gains.

He said: “That’s all about having highly accurate marketing. We’ve definitely improved that code base of our native applications in that market, which has made it easier to drive a better customer experience.

“We’ve massively advanced real-time monitoring and player management that both helps us from communicating to our players in a near real-time fashion, and I mean sort of split seconds, and from a regulatory perspective.”

On 25 July, Bally’s shareholders gave the green light to a $4.6bn (£3.57bn) takeover by New York-based hedge fund and major investor in the business, Standard General.