William Hill Joint Venture Back on Track

By Roger Blitz, Financial Times of London

Playtech sought to quell market disquiet after its July profits warning, saying it would take steps to improve its corporate governance and insisting that its integration of its William Hill Online joint venture was back on track.

The online gaming software supplier lost a quarter of it value six weeks ago after its surprise announcement that it would miss earnings expectations .

The group blamed teething problems at the bookmaker's internet business, in which Playtech has a 29 per cent stake and a share of revenues.

Reporting a 29.8 per cent rise in gross revenues to €66.9m (£58.4m), which includes its WHO profit share, Mor Weizer, chief executive, said the integration was "progressing well and key parts are now in place". Excluding WHO income, Playtech's revenues rose 9.8 per cent to €56.7m.

Mr Weizer blamed its July share price collapse on market overreaction and said the underlying business was "resilient and performing strongly".

Playtech is looking to repair relations with investors by speeding up the search for non-executive directors and for a permanent finance director, a post that has been temporarily filled for more than a year, as well as recruiting an investor relations strategist.

Playtech's pre-tax profit for the six months to June 30 rose 36.5 per cent to €32.8m and the interim dividend was lifted 17.1 per cent to 8.9 cents.

Mr Weizer said Playtech, which has about 70 licensees, was continuing to make inroads in a range of markets. The group now has 15 per cent of Italy's poker network market and announced a deal with Olympic Entertainment Group in the Baltics and eastern Europe.

The shares rose 15p to close at 347¾p.

* FT Comment

Investors might well wonder what is going on at Israeli entrepreneur Teddy Sagi's gaming software business. The answer is probably too much. The size and complexity of the William Hill deal should have been management's over-riding priority, but new licence deals with Betfair and Netplay TV were too good to pass up.

There are analysts that recommend avoiding Playtech without more information from the company, but the same could be said for most online gambling stocks. Certainly, at about nine times estimated 2010 earnings, Playtech trades at a marked discount to peers, so once the governance issues are settled, there is value here.