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Edited Transcript of PTEC.L earnings conference call or presentation 22-Aug-19 8:00am GMT

Half Year 2019 Playtech PLC Earnings Call

London Aug 30, 2019 (Thomson StreetEvents) -- Edited Transcript of Playtech PLC earnings conference call or presentation Thursday, August 22, 2019 at 8:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Alan M. Jackson

Playtech plc - Non-Executive Chairman of Board

* Andrew James Smith

Playtech plc - CFO & Executive Director

* Moran Weizer

Playtech plc - CEO & Executive Director

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Conference Call Participants

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* Emmanuel de Figueiredo

LBV Asset Management LLP - CIO

* Gavin Kelleher

Goodbody Stockbrokers, Research Division - Investment Analyst

* Simon John Davies

Deutsche Bank AG, Research Division - Head of UK Midcap & Online Gaming Research

* Ted Nyhan

JP Morgan Chase & Co, Research Division - Analyst

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Presentation

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Alan M. Jackson, Playtech plc - Non-Executive Chairman of Board [1]

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Good morning. Just a few seats left. Good morning, everyone, and welcome to Playtech's 2019 Interim Results Presentation. I'm pleased to report that our core businesses have continued their strong performance, clearly demonstrating our technology leadership. Our Core B2B business delivered strong revenue growth in regulated markets, including double-digit growth in regulated markets outside of the U.K. I'll just pause for a sec.

Snaitech continued its impressive performance with a very strong H1 and continued to gain market share in the highly attractive Italian market. I'm also pleased to announce a further EUR 25 million share buyback program in addition to our interim dividend.

During the first half of the year, we continued to evolve the Playtech Board with 2 further nonexecutive director appointments. And I've also started Chairman succession planning to identify the right individual to oversee the next stage of Playtech's growth.

Given the group's continued strategic progress and growth of the core business seen in H1, management remain confident of further progress and growth in the second half of 2019. So with all that ahead of us, I'll hand over to Mor. Thank you all very much.

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Moran Weizer, Playtech plc - CEO & Executive Director [2]

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Thank you, Alan. Good morning, everyone, and thank you for coming. We are very pleased to present this performance from the group, and it demonstrates the growth momentum in the core parts of the business and the important progress we have made against our strategy. Our leadership in technology is driving the growth of our Core B2B and B2C Gambling divisions, with both parts of the business outperforming in the first half of 2019. These represent the core parts of our business and increased our regulated revenue to 87%.

Asia remains challenging, and I've taken further action in the period to preserve our position by introducing new commercial incentives to further promote Playtech.

Despite the performance in Asia, the continued strength of the group and the outperformance of the core parts of the group mean we can reiterate full year guidance this morning.

Today, there are 4 things we will be presenting on. Firstly, we have focused the group on a clear strategy to capture the opportunity in front of us in the gambling industry. Secondly, Playtech is the technology leader in our industry, and we continue to improve and evolve our technology to extend our reach to previously untapped commercial opportunities and markets. Number three, our leadership in technology and the flexibility of our business model allows us to capture the commercial opportunity in any market. This means we can continue to grow the business, driven by highly attractive, regulated, fast-growing markets.

Finally, we will outline how the relative outperformance of our regulated B2C business is delivering growth for the group. And now as part of Playtech, Snaitech has completely outperformed all our expectations. I will now hand over to Andy.

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Andrew James Smith, Playtech plc - CFO & Executive Director [3]

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Thank you, Mor. Starting with Slide 8 and the financial highlights. First half of 2019 saw Core B2B Gambling and Snaitech driving Playtech's performance. Core B2B Gambling saw revenue growth of 8%, with U.K. growth at 6% at constant currency, albeit benefiting from the hardware sale at the start of the year and double-digit regulator growth outside of the U.K.

Strong revenue growth and cost control drove the first half Core B2B Gambling margin to 29% or 5 percentage points compared to H1 2018.

Snaitech was the group's standout performer with adjusted EBITDA growth of 26% when excluding the impact of tax headwinds. Our synergy targets remain on track.

We continued to strengthen our balance sheet with diversified long-term finance in place following our second public bond raise in March.

Finally, we also improved our shareholder distributions with the completion of a EUR 40 million share buyback earlier in the year. And we have today announced the launch of a new EUR 25 million buyback in addition to a EUR 0.06 dividend per share.

Turning to Slide 9. Group revenue was up 69% with adjusted EBITDA up 31%, reflecting the 6-month inclusion of SNAI compared to only June included in the 2018 half year results.

Adjusted EBITDA also benefited from the impact of IFRS 16, which we will analyze in greater detail later. Net profit fell by 15% compared to growth in EBITDA, and we will also analyze this in greater detail later.

Turning now to look at Slide 10. We can see the relative contributions of the divisions in Playtech to put the business into context. As we've discussed previously, the different businesses within Playtech have different business models and margin profiles.

B2C, which is driven by SNAI, is the largest contributor at revenue level with a high-margin B2B Gambling business being the largest contributor at EBITDA level.

We'll now look at each division in detail. Turning now to Slide 11. Over the next few slides, we will explore the performance of the B2B Gambling business in more detail.

In the U.K., the B2B Gambling business grew 6% at constant currency and 7% when further adjusted for the impact of the increase in RGD in the U.K. from April. Regulated B2B markets outside of the U.K. grew double digit, driven by markets such as Mexico, Greece and Spain. It's worth noting that in line with our strategy, our regulated revenue outside of the U.K. is now approaching the size of the U.K. business.

Regulated revenues outside the U.K. would be the larger if we included Germany, which was regulated and is taxed -- which was sort of regulated as taxed, apologies.

Looking at the regulated versus unregulated performance, the contrast is stark, with regulated revenues growing 8% at constant currency and unregulated revenues down 29%. It's also worth noting that we saw some revenues move from unregulated to regulated in the half, which is a trend that we've seen historically, and we will continue to do so.

Looking now at the breakdown of B2B Gambling costs on Slide 12. As a reminder, from the start of 2019, the application of IFRS 16 became mandatory and effectively capitalizes certain lease obligations rather than accounting for them as operating costs. As stated at the full year results in February, the impact of IFRS 16 on Playtech is expected to increase adjusted EBITDA by EUR 20 million. The impact on net profit is expected to be immaterial with the increase in EBITDA being offset by high depreciation and interest costs.

Under the rules of IFRS 16, we were not required to restate 2018 numbers, but have done so here to ensure a like-for-like comparison.

In the appendix, we've also included costs both including and excluding IFRS 16 just so you can analyze in any way that you prefer.

As discussed at the full year results in February, we've scrutinized every area of Playtech with savings and optimization across the entire business. The actions taken in 2018 and this year have allowed us to reduce G&A costs by 8%, and sales and marketing costs by 13% compared to H1 2018.

On Slide 13, we will look at how our tight financial and operational control delivered a flat cost base in B2B Gambling, which, when combined with revenue growth, has driven improvements in the Core B2B Gambling margin excluding Asia.

Looking at the first highlighted box in the table, we can see that the total B2B Gambling margin has remained healthy at 42%, despite the lower contribution from higher-margin Asia. This margin also compares favorably to other B2B businesses with a similar mix of regulated and unregulated revenues.

As previously discussed, we see Asia as a cash business, and so when analyzing the inherent strengths of the B2B Gambling business, we exclude contributions from Asia deducting only direct costs from the Asian revenue and not portioning any central cost to Asia. This gives a contribution margin from Asia rather than EBITDA margin with all central costs apportioned to the non-Asia business.

Looking at the second highlighted box, due to the cost actions taken in the past 18 months, combined with an increase in revenues, the non-Asia B2B Gambling margin increased by 5 percentage points to 29%.

And finally, for this slide, we've increased our ex Asia B2B Gambling margin target to 35% in the medium term, reflecting both the progress made to date together with the benefit of IFRS 16.

Turning to Slide 14. The B2C segment is comprised of Snaitech; white label, which includes Sun Bingo; retail B2C sports; and casual gaming. We'll look at SNAI in detail in the coming slides.

Staying on this slide for a moment. Looking first at the white label line. The Sun Bingo represents the vast majority of both revenue and EBITDA. As a result of the amendment to the Sun Bingo contracts agreed in February, and as a reminder, this included an extension to the duration of the contracts for a period of up to 15 years.

The Sun Bingo is no longer loss-making from the P&L perspective. The remainder of the white label line comprised of a number of other brands, which have been significantly reduced as part of a housekeeping exercise where certain brands have been consolidated or ceased operating.

Retail B2C sport saw adjusted EBITDA fall from a loss of EUR 2.2 million in H1 last year to a loss of EUR 3.6 million in H1 '19, due to the start-up nature of that business.

Casual gaming revenue remained flat while EBITDA fell further due to the investment required to drive new games in H1 such as The Walking Dead and Breaking Bad. We're conducting strategic review of this business.

Turning now to Slide 15. We will look at the performance of SNAI. First, looking at the middle column. Total SNAI revenue decreased by 11% to EUR 396 million due to tax headwinds in Italy and a tough comparative, which included the 2018 World Cup. Adjusted EBITDA was down by only 2% due to mitigating actions taken by the business.

Looking at the far right column, we can analyze performance with the tax headwinds stripped out. In line with SNAI's strategy, the half saw 28% growth in online revenues, driving adjusted EBITDA up 16%.

As mentioned previously, looking at the bottom row, as a franchise business, I believe it's more appropriate to look at SNAI's margin on an underlying basis by stripping out the pass-through revenue. This leads to a margin in the mid-40s, which better reflects the quality of SNAI's business.

Turning now to Slide 16. As we can see, after factoring the taxation headwinds and impact of the 2018 World Cup, SNAI's underlying adjusted EBITDA for H1 2018 would have been EUR 59 million, which is the starting point when looking at growth in 2019. As can be seen from the bar on the right, on an underlying basis, SNAI enjoyed adjusted EBITDA growth of 26% to reach EUR 75 million, demonstrating the strength of the underlying business.

Turning now to Slide 17. I'm pleased to say, an agreement was reached in July for the sale of the former trot track area owned by SNAI for EUR 55 million. EUR 5 million of this was received last month with another EUR 14 million guaranteed to follow in 2020. The full remainder is also expected to be received in 2020, subject to the approval of the Milan Municipality.

Turning to Slide 18. TradeTech continues to benefit from its business mix of both B2C and B2B, with the B2B part of the business being less volatile. The overall performance in 2019 so far can be characterized as a period of 2 halves. The well-publicized low volatility across the industry in Q1 saw a weak performance in Q1, which was then followed by a strong Q2. Combining Q1 and Q2 saw a 69% fall in adjusted EBITDA versus the same period last year, which was a very tough comparative.

TradeTech's underlying KPIs remain encouraging.

Turning to Slide 19. There were significant movements in items below EBITDA with adjusted net profit falling 15% versus adjusted EBITDA up 31%. The main moving parts reducing net profits are higher D&A and finance costs due to the impact of IFRS 16, higher D&A costs from SNAI and higher tax from SNAI. Although as previously stated, SNAI's cash tax charge is significantly lower than its P&L charge. The drop in adjusted EPS was lower than the fall in adjusted net profit due to the lower number of shares outstanding following the buyback carried out early this year.

Turning now to Slide 20. Looking at the gross cash of EUR 576 million, it's worth noting that the actual amount is higher, but we've already deducted the EUR 297 million that we need to redeem the convertible bond in November this year.

As we stated previously, the gross cash number isn't actually a relevant number as it includes cash held on behalf of customers and progressive jackpots, money which does not belong to us and which is not ours to spend. The relevant starting point, therefore, is what we disclose as adjusted gross cash. This now stands at EUR 304 million, which can be found in the third row of the table presented here compared to EUR 313 million at the 31st of December 2018.

Some of you may have spotted that the cash needed for operations in gambling has been reduced from EUR 55 million to EUR 50 million through our continued focus on optimization in each and every part of the business.

Turning now to Slide 21. We have bridged from the EUR 313 million at December to EUR 304 million at the end of June, as I just mentioned on the previous slide. Starting with the EUR 313 million, we saw operating cash inflows of EUR 163 million; a EUR 42 million outflow relating to earnout payments, mainly Quickspin and CFH; CapEx and capitalized development costs of EUR 77 million; and returns to shareholders through dividends and buybacks totaling EUR 77 million.

Finally, we saw a net EUR 24 million cash inflow from the bond issue this year after taking into account costs and other finance expenses.

Turning now to Slide 22. As discussed earlier, further progress was made in the period on the continued strengthening of the Playtech balance sheet. The refinance of the EUR 297 million convertible bond maturing in November this year was completed in March, as we raised a EUR 350 million bond with the excess to be used for general corporate purposes.

Playtech now has both 5-year and 7-year bonds, which mature 2.5 years apart. Our EUR 297 million revolving credit facility still remains undrawn. In line with our progressive shareholder distribution policy announced in February, we completed a EUR 40 million share buyback in H1 and have announced a further EUR 25 million buyback today. We've also declared an interim dividend of EUR 0.061 per share.

On Slide 23, we can revisit some of the assumptions underpinning Playtech's 2019 adjusted EBITDA guidance. Core B2B regulated gambling and SNAI are performing well, and SNAI's adjusted EBITDA will be higher than 2017 levels despite taxation headwinds. There's expected to be a decline in B2B unregulated gambling revenue. Following the assumption in February that Asia would remain stable at approximately EUR 150 million annual revenue run rate, at the current run rate, Asia will contribute approximately EUR 115 million of revenue in 2019. On a full year basis, the current run rate of Asia is around EUR 100 million.

B2C sports and Casual gaming as well as TradeTech are expected to perform below the expectations we factored into our full year 2019 guidance at the start of the year.

Overall, we reiterate our adjusted EBITDA outlook of EUR 390 million to EUR 415 million as the strength of our Core B2B Gambling business and Snaitech are expected to partially mitigate weaknesses in other areas.

Finally for me, current trading is in line with our expectations.

And with that, I'll hand over to Mor.

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Moran Weizer, Playtech plc - CEO & Executive Director [4]

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Thank you, Andy. Now that Andy has given you the detail on the numbers, I will now return to the 4 themes that have shaped our progress in H1. Firstly, we are focusing our strategy and investment in the core parts of our business, where the strength and quality of our technology is delivering growth and strategic progress. We have taken the number of licensees in our B2B business to more than 150 for the first time.

Also, Snaitech is going from strength to strength as the outperformance of the business and the rollout of Playtech content has delivered market share gains, making SNAI the #1 brand in Italy when combining retail and online sports betting.

Complementing the core business is our Asian operations, which remain highly cash generative, and I have overseen additional actions in H1 to protect our premium brand there. I will also update you on progress at TradeTech, which performed well in Q2 as well as in July and August.

Looking at the second theme, I will reveal how the latest progress with our technology has delivered a simpler, more agile go-to-market. This has increased the distribution of our products to capture the entire B2B value chain.

As presented at the time of the full year results, we identified a previously untapped market for Playtech. This unaddressed portion of the market will now deliver additional revenue streams and has extended our reach beyond the scope of Tier 1 licensees, joint venture partners and local heroes.

This is the bottom and widest part of the diagram, illustrating more than 1,000 operating brands that currently feature no Playtech products or services. This market is made up of operators of different sizes, including big- and small-sized operators in regulated and soon-to-be-regulated markets.

Throughout 2017 and 2018, we have broken down the IMS capabilities into a set of services that are easily identifiable with well-defined integrations. Historically, Playtech has operated a one-size-fits-all approach. This is still the correct approach in newly regulated markets given the scale of some multiproduct and multichannel licensees such as Tier 1s and local heroes. This approach is giving us our current position as the leading provider of products and services across the industry.

Playtech's IMS platform is the result of 20 years of unparalleled scale, innovation and development. This latest launch of our software is the next stage of that development and will deliver a more agile distribution of our technology, ultimately making the data-driven capabilities in IMS more modular and allowing more operators to access the capabilities they need. This represents a significant barrier to entry for any other B2B or current B2C operator trying to replicate our services-driven technology proposition.

By using the latest API integration technology, this modular approach reduces the integration time from 3 to 6 months to a potential of 3 to 6 weeks with a fraction of the costs involved with integration and ongoing costs, making this a more attractive commercial opportunity for licensees and Playtech alike and a higher-margin opportunity for Playtech.

Not only is this already attracting previously inaccessible licensees to our software and services, but it will also change the way we interact with our customers. Don't be mistaken, we are not changing or replacing our model, but extending our reach. Some large-scale licensees will always require an integration that involves dedicated server infrastructure and the entire IMS.

However, by delivering a more agile solution, we are now able to extend our reach to licensees that have been operating for 10 to 20 years and in a quicker and cheaper way.

This will also increase our cross-sell capabilities with all and across all of our licensees. By evolving our technology, we have successfully extended our offering to deliver a technology solution for every possible licensee in every possible market. This has delivered a further diversification of our client base beyond Tier 1s and local heroes.

In H1, this strategy has successfully delivered more than 10 brands in H1 in attractive markets such as Sweden and Colombia and across other regulated and regulating markets.

Each opportunity is negotiated on its own commercial merits and in order to access the best and broadest selection of Playtech's products, prominence and dedicated tables are a still highly important part of the model and commercial agreement. I'm happy to say that we are excited about the results and look to extend our reach to new customers and accelerate the process in the coming 24 months in a phased development plan, which will see us increase the number of licensees we add every 6 months to ensure we maximize the opportunity.

Now taking a step back, we can see on Slide 31, the breadth of the new business we delivered in H1. We consider the scale of our offering as one of our real strengths, and for the first time, our B2B gambling business now has more than 150 licensees. Our distribution capabilities and the quality of our software continues to attract the leading brands and operators to partner with Playtech.

In H1, we delivered new agreements in all segments of our offering, including securing a new structured agreement in Latin America, which will be announced in the coming weeks following certain required approvals. This was alongside an extended agreement with a Dutch monopoly operator, and we launched a partnership with the Ontario Lottery in Canada to provide safer gambling solutions.

We also successfully migrated one of our -- of the leading casino groups in Portugal away from a competitor, and we launched and secured long-term partnerships in Spain with RETAbet and Swiss Casinos in Switzerland.

We are particularly delighted to present to you today the work we have done in H1 with GVC. For me, the new deal further illustrates the power and attraction of our technology, and it is a standout deal for 2 reasons: Firstly, the extension of our dedicated casino environment for GVC's Ladbrokes and Coral brands underlines the quality of our dedicated casino environment, which has become the gold standard for casino in highly competitive regulated markets.

Secondly, and no less importantly, the partnership includes the launch of our casino and live casino in highly attractive key markets across the globe. In H1 alone, we have launched in Spain, Greece, Belgium, Georgia and Brazil. And in the second half, launches will continue in Italy, Denmark, Sweden and other territories.

I'm very, very happy to say that we enjoy a fantastic relationship with our partners at GVC. The potential revenue opportunity for Playtech across all GVC's portfolio is greater than the previous Ladbrokes Coral contract. We are already seeing the benefits, and we are only halfway through the project.

My third thing to present today is our diversified exposure to highly attractive, fast-growing markets, which I believe not only differentiates Playtech from other listed gambling companies, but also will drive our structural growth over the medium term.

Over the last few years, I've consistently outlined the importance of many of these markets to our future growth prospects. Behind the U.K. and Sweden, we can see a pipeline of potentially large regulated markets, which have significantly low levels of online penetration and which will be providing the growth of the industry for years to come. Through new business with existing licensees and through new licensee relationships, we have established a pipeline in these markets, which underpins my confidence in our long-term success.

Looking at the markets listed on this slide. Playtech has market access deals in place with partners in 16 of the 18 markets listed. In some Latin American markets, we are actively monitoring developments as license has become available. And in the U.S., the next steps for us is to continue our flexible approach and actively pursue multiple commercial opportunities at once.

In regards to New Jersey, we have completed the extensive testing period with the regulator and now look to finalize commercial opportunities in that market. In addition to the New Jersey license, we have started the application process in Mississippi. Moreover, we have established an office in New York, which is the culmination of our work on the ground over the past 12 months.

One of the biggest strengths of our technology model is that we have multiple routes to market. As a B2B partner, we can operate a low-investment, low-risk approach as we only operate B2C brands in selected limited markets.

Given the distribution capabilities and scale of our technology solution, the Playtech business model can offer a tailored services and software solution to any customer and in any market, whether the market develops as a multiproduct license market with numerous operators or whether the market introduces a single license with a state-backed operator, allowing Playtech to capture growth opportunities in markets other B2B or B2C companies would not be able to, or in the case of Switzerland be forced to exit from with a changing regulation.

Our final theme today is the strong performance of our B2C segment. This has been driven by the quality of the Snaitech business, which we are very proud to report continues to perform ahead of our expectations. On the previous slide, we saw that Italy is a growth market with significant potential given its current low level of online penetration, and I expect it to be a significant growth driver for this business for years to come.

During the period, Snaitech achieved the top position for market share in Italy in June and July when combining retail and spend online. We believe that in a fully regulated market such as Italy, this is a true testament to the strength of the SNAI brand and its future potential.

The first half of the year saw us continue the rollout of Playtech's Videobet retail offering across the SNAI estate. As previously outlined, this will be alongside third-party solutions, which are commercially attractive for us. Also, in the first half, we continued to increase the penetration of Playtech content into SNAI's online offering.

Together, these factors, combined with SNAI unique position and marketing efforts in a highly attractive market meant that the Snaitech team was able to deliver outstanding growth numbers. The 36% growth in online stakes helped to drive a 26% growth in underlying EBITDA on a like-for-like basis when stripping out the impact of the new tax regime and the World Cup in 2018. This drove the underlying EBITDA margin to be 45% for the group.

We are very proud to present these numbers today and see a lot of reason for optimism in our ability to execute on the significant opportunity in front of us in Italy. The combination of Playtech's initiatives, the quality of the SNAI business and management team and the market dynamics in Italy mean we see this segment being a significant driver of the growth for our business alongside our Core B2B gambling offering.

Given the relative immaturity of the online market in Italy, we believe it offers structural growth opportunities not available in the U.K. and so will outperform over the medium term.

Turning to Slide 35. I want to give a detailed update on Asia. Given its importance to group cash flow and profitability, I've personally spent a lot of time in Asia over the last 6 months, ensuring we strategically do the right thing for the business, though. Having worked with -- closely with the team, I have great confidence in our team in the region who is overseeing the successful execution of the initiatives outlined in the full year results.

To summarize, in H1, we launched 2 new brands in Asia; introduced a new level of promotional tools such as Golden Chip and free spin mechanics; and extended the distribution of our Live product in Asia, which is proving popular.

Having said all that, the market remains highly competitive, and we recognize that we need to take further steps due to the changes in the market dynamics.

The actions outlined above have protected Playtech's position as one of only a few premium content providers. However, operators are focused on cheaper premium content. This has led us recently to introduce a new commercial model that provides more competitive pricing with higher volumes of traffic, incentivizing operators to attract traffic to Playtech products rather than others. The new model is being introduced as we speak following the time the team and I spent in Asia, and we will continue to monitor it closely.

Now moving to a short update on our financial division, TradeTech. As has been reported by other participants across the industry, they have started with record-low market volatility, especially during the first quarter. Assets during the previous period have traded in very tight ranges with euro-dollar trading at its narrowest quarterly range on record and market volatility being well below historical averages.

These negative market conditions, together with ESMA's product intervention measures introduced in August 2018, have naturally impacted the performance of our key metrics, as Andy discussed earlier.

As we also described during the full year presentation, ESMA's product intervention measures have negatively impacted volumes on both our B2C business and our full turnkey B2B offering from 1 August 2018 and onwards. With that being said, H1 '19 has seen an increase of over 40% in B2C volume compared to that reported in H2 '18 and a 5% increase of total volume in our B2B offering.

Despite the difficult market conditions, our B2C business has reported growth in both FDs and active customers compared to both H1 '18 and H2 '18, reaching total active customers of 21,600 during the period, representing continued growth in the fundamentals of the business during the period.

During June 2019, we have launched our newly developed platform, MarketsX, which, as we have presented during our Capital Markets Day and following result announcements, is tailored to service the most sophisticated segment of customers. MarketsX has currently been launched in 2 countries, Germany and the U.K., and further jurisdictions are planned ahead.

The launch of the new platform is part of a new strategic direction in our entire marketing and business approach to our B2C offering. And while it is still very early days, we see positive signs already to gaining higher-valued customers, and we already see an uplift in the average first deposit size across the B2C business. It is important to indicate that the change in the strategy will naturally impact future KPIs as we move to onboard a smaller number of customers but of a higher value.

We believe this is an essential change to our business as the regulatory and competitive environment has evolved over the years and as we further develop our product offering. We see strong momentum in the liquidity, execution and risk management offerings that resulted in an increase in volume of over 5% to $892 billion compared to $847 billion in 2018. This is supported by significant pipeline of new customers to these segments of our B2B business, establishing strong foundations for the future growth of our B2B activity.

Finally, I wanted -- almost finally. Finally, I wanted to share with you some of the near-term deliverables that myself and the rest of the management team are focused on. First, we will continue the momentum with our B2B offering by adding a total of over 20 brands in 2019, including an additional structured agreement. Second, we will continue to extend our reach with GVC with further brands and countries. Third, we will continue to grow our Snaitech business. We will be reviewing and scrutinizing our noncore and underperforming businesses. Fifth, we will be increasing our quarterly disclosure starting in Q3. We will execute the share buyback program that we announced today. And finally, I'm pleased to announce that this year's Investor Day will be held in our new offices in London and that the event will be focused on our Core B2B business, and we will also give you an update on our U.S. strategy.

Now before I say with all that, we will now take questions, and thank you, everyone. On a personal level, going off the scale -- on a personal level, Fabio, the CEO of SNAI, celebrated his 50th birthday yesterday. So unfortunately, he's not with us, and I want -- first to -- first, I know that this goes on record, so don't cut it when you upload it to the site, he needs to see that. But first I want to thank Fabio for his contribution to the group and the hard work and dedication and the heart and efforts him and his team put into the business.

But on a personal level, I want to say that, obviously, I know Fabio for many years, and I always thought of him as an amazing person, but only when we started working together, I realized how amazing he is, and how much I love him, and how much we like working together. So from here, I want to extend my best wishes for his 50th birthday. All the best health, wealth and happiness, only good things and say, you are now my family, my brother. Thank you very much, Fabio, and I look forward to seeing you soon. Thank you very much. And with that, we will take some questions now.

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Questions and Answers

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Andrew James Smith, Playtech plc - CFO & Executive Director [1]

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I'd like to remind you, microphones next to you. So whoever want -- [John], do you want to go first?

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Unidentified Analyst, [2]

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My first question on a bit of your noncore business, if that's okay, on Asia. Thank you very much for the update there. I guess there are -- it seems like there are sort of 3 different elements going. There's a competitive element you sort of touched on, there's also then the market's down, there's also been quite a lot of news around some of the regulatory side, diplomatic, et cetera.

So on the side you're in control of, how positive are you that the initiatives you're introducing could maybe drive growth from the current run rate? And on the side you're not in control of, how worried are you about those other aspects? And sort of a slightly second part, maybe for Andy, I'm not sure, I'm surprised given the drop in revenue, why the customer concentrations haven't changed. So any color on that would be useful as well.

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Andrew James Smith, Playtech plc - CFO & Executive Director [3]

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Why don't I do the second one first so that Mor can think about his answer. I think as we've discussed at previous results, don't forget the customer concentrations as customers move up and down, they potentially don't change that much. And also, we always broke out Moorgate anyway. So Moorgate was never just one, it was always the individual constituents.

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Moran Weizer, Playtech plc - CEO & Executive Director [4]

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So in Asia, let me give you the background, and I think that it is important to clarify that. And I will start with August last year, obviously, when we saw structural change through the market. As we indicated in the final results, we saw stability since then, and this was the case between August and the beginning of the year. In the first 4 months of the year, we saw actually the numbers picking up quite significantly, but this is not unusual or surprising given the fact that it's the Chinese New Year period, and a lot of promotions go into the product.

Only sometime late April, beginning of May, we started the numbers drifting back because the promotion, obviously, provide -- I mean, attract a lot of customers, and those are monetized throughout the following couple of months or few months and only sometime later, we -- the numbers started drifting back, first to a more normalized level. But when it drifted further and the method we sent here is all based on run rates. It drifted below the level we saw between August and the beginning of last year or the beginning of this year, I mean, August last year to the beginning of this year.

When, obviously, we further analyzed and we worked closely in the last 6 months. It started 6 months ago, we had some conversations. We wanted the Playtech to be promoted throughout the Chinese New Year, but it followed with some conversation when we saw the numbers drifting back. And once we analyzed that, we came to realize that actually the market is changing and the markets dynamics are changing.

Some parts of the market are not growing as much as before, which means that it becomes more competitor -- more competitive, and it is -- and it does become a matter of market share rather than growing the business or growing the business through market share rather than enjoying the organic growth of the market.

And given the nature of the market that is, by nature, driven by pricing, we came to realize that given the market change and the nature of the people in the market, it is now more driven by pricing. And we came to realize that we need to make a change that actually all the initiatives that had -- we had before that kept Playtech as a premium product are not enough. And we, for a short period of time, discussed with our distributors and with the operators the best route to market and the best way to address that.

And recently, we concluded a process as part of which we came up with a new pricing model that incentivizes the operators to grow the business or attract more traffic or divert more traffic from other premium content providers. Let's be honest, the other content providers are basically one, Microgaming, it does a very good job there. But it is cheaper, I will be very open and upfront about it and say they are cheaper. And obviously, we needed to give incentives for our operators to grow the business, so they will also send traffic not only to Microgaming, but to Playtech as well.

And I believe that this is a necessary step. We structured it in, I hope, we believe a sophisticated way enough to allow us to stabilize first and potentially grow it. And I don't want to get ahead of myself. I want to see stability. I want to send the message of stability and then talk about growth. But I can tell you that we did something that we never did before. Playtech remains a premium product. This is across the market. Some operators told us, "You are the best in the world." And we know that we have the one of only few very, very good products and very popular products.

The popularity of Playtech remains as is, but we are by far more expensive today or were more expensive and people actually diverted the traffic elsewhere. So I believe that the new model will be -- I have all confidence that the new model will lead to stability. And like I said, I don't want to get ahead of myself, first, let's see, stability, then talk about growth.

As for the second part of the question, obviously, there were some comments made throughout the region. We saw some reactions or some actions taken by the governments, both in the Philippines and Cambodia. And on that, I will say, it only refers first, let me just start with the comment, the comment -- there was a comment made by the Chinese ambassador to the Philippines. The government respond -- response was that no formal complaint was filed. Soon after that, they said that it will be discussed at a later stage. And sometime earlier this week or last week, end of last week, we saw the Philippine government basically sending a message that no new application or that new application are suspended.

It was followed by the Cambodian government issuing a similar statement that new applications will be suspended.

And on that, I will say, we obviously monitor the regulatory environment on a continuous basis. Day in, day out, we have conversations. I just actually had an update from our guys that the status quo remain for the time being. And I think that it is important to say that there are only a number -- a limited numbers, there are hundreds of operators across the region and there are only a very limited number of 58 licenses available that are currently -- operators that are currently -- operators and B2B companies that are licensed by PAGCOR the Philippine regulator, we are one of those. All of the operators we operate with hold a PAGCOR license, so currently does not affect our business.

Beyond that, obviously, I can't refer to something that I cannot be foreseen at this point in time. But we do, however, monitor the -- we monitor the developments on a continuous basis.

And I will say, however, that a lot of our competitors -- just last comment, a lot of our competitors operate from outside of the Philippines, and all of our customers already hold the license outside of the Philippines as well. So if they take further actions, they already seek alternatives, they have contingency plans. We are -- not that we have any appetite to move away from the Philippines, I think that it is an amazing jurisdiction to operate from. We have been established since -- in the Philippines since the early 2000s -- I mean, 2003 and 2004 when we first established ourselves.

And maybe last, last comment, I will say that only in July, not so long ago, I mean, a month and a bit, less than 1.5 months ago, the first gaming conference took place in the Philippines. Usually, there is a conference, big G2E conference in Macau. For the first time, the government decided that it's the right time to do a conference in the Philippines. It was a very big conference. It was sponsored by the largest and best endorsed by the government.

The CEO of PAGCOR was there, talking about the commitment, the importance of online gaming and the POGO licenses. And therefore, currently, you heard a lot of mixed messages. I think that it's better to wait and see.

How worried I am? Obviously, any regulatory change is something to attend and address or be prepared for. But I wouldn't say that it worries me too much at this point. Was long, I apologize, but I know that Asia is a major theme, and I wanted to give a comprehensive answer.

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Unidentified Analyst, [5]

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Understand. Well it certainly was. And the second one on SNAI, which, as you said has obviously performed very well, particularly on the cost side. Can you give a little bit of color on that? Is that, that your synergies are outperforming? It was quite a small number when you announced the deal. Is it you're getting more from that? Is it your mitigation for the tax changes are above expectation or more H1 weighted than before or it was other cost cutting? How do you understand the shape of costs there?

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Andrew James Smith, Playtech plc - CFO & Executive Director [6]

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No. The synergy target is on track. But no they -- in actual fact, the synergy targets last year we were putting out was EUR 7 million at this point, and we're slightly lower than that because we had to adjust that number to tax. So they're bang in line.

In terms of the mitigation, actually, that was very slightly lower in the half as well than we would have hoped because one of the large providers of machines was slow in changing its motherboards. We're now on track with that, but it started low in the half. So actually, it was real cost control, shall we say.

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Unidentified Analyst, [7]

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Okay. And then the final one is on the 1,000-site opportunity, and you've talked about the number of new licensees, which you started to disclose again. Could you just talk a little bit -- you mentioned the structural changes there in terms of the components of the IMS. Is there anything else in the other side of the business that you think needs to adapt or change to address that opportunity? I noticed you brought another small games studio, you've got this new product, Kingdom, the new game in the second half, is that connected to that? Or is that sort of Age of the Gods new version? How do you see the product side evolving?

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Moran Weizer, Playtech plc - CEO & Executive Director [8]

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Yes. Before I answer that, just go back to the SNAI. Obviously, it was driven by the core fundamentals of the business. But I do want to reflect the one thing, when I had the call yesterday to congratulate Fabio, then he said, he just added, listen, be strong tomorrow. We will deliver. We are the best, and we will be #1. Over time, we will become #1 in online. So we have full confidence in the team. Obviously, it's not just mitigation, not just course, the business is going from strength to strength. Online stakes grow. Retail stakes grow. It's a fantastic business. I just wanted to reiterate the message that I heard yesterday from Fabio.

On the 1,000 sites, actually, we present today something we hinted to in the final results. It is part of our refocus on the core B2B and core B2C, meaning Snaitech, but mainly the 1,000 sites refer to the first, meaning, the core B2B. It is a fundamental change that follows the change in the market, more people want flexibility. We wanted to extend our reach. We realized that the ongoing cost as well as the integration costs, not least the resources involved and the time it takes are extremely important these days as markets become regulated and more competitive.

And actually, this is the end result of 2 years' work. We have been doing that quietly without anyone knowing, without talking about that, which is quite unusual for me and team. But we kept it quite quiet, and we actually -- we already signed up in some and launched in the final results, but we wanted to proof-test it and to ensure that this is -- that it's -- we are ready to actually start onboarding a lot of customers in the coming quarters.

We are ready. Nothing needs to be changed. No further investment. The new studio we bought, the new games suite of -- the new suite of games that we develop are a part of an ongoing effort to launch new games, exciting games. Kingdoms Rise is a very, very sophisticated suite of games that follows our Age of the Gods suite of games that our some operators refer to as almost the standard of the industry today. But it's separated from the focus we put, breaking down the IMS.

On that, I will say, no further development is required, and we are ready to onboard. The intention is to grow the number of customers we launch a month, every 6 months. I don't want to get into the number because I don't want people to start clicking on the stopwatch and start asking us, so you said that 12, now it's 13. Why you don't increase it and why it's only 10 and not 12? In average, the number will grow every 6 months. We have a goal for the next 2 years, as I indicated.

The only change to our business going forward that will be required is obviously to extend the reach internally or to strengthen the teams internally that are already in place, the account management team, the tech support team, the sales teams as we start growing. It's mainly the tech support and the account management functions to support the increased number of customers.

But this is obviously a very, very limited, almost nonexistent cost to us, and it will only grow as we grow the number of brands we onboard. We committed to 20 brands this year on top of the other licenses, like Swiss Casinos and like RETAbet and the Dutch monopoly and many others.

It's on top of the work we do with GVC, extending the reach with them and many other customers. And it includes the 20s only this segment of 1,000 sites. We start small, we don't want to get ahead of ourselves. We don't want to start bombarding the market with numbers. It will grow over time, but definitely, we see that as a very important step by Playtech that gives us access to an unaddressed or untapped part of the market so far, but one that also allows us to streamline and to integrate in a quicker and cheaper way with other customers.

So for example, some of our local heroes were using the same technology. So you have to divide. The technology caters the entire business, but the 1,000 brands is a very specific opportunity for us that we intend to capitalize on.

One last comment on that, which I think is extremely important. We -- there are 2 very, very important elements to this offering. It's not just breaking down the IMS. It is a regulated, centralized private cloud that we invested into. No further investment is required. It's already set up, can cater for hundreds of brands if necessary, with a fraction of the cost before.

And on top of the centralized regulated private cloud, we have the IMS broken down into a set of services with most of the services having a direct API that allow customers to integrate with the IMS and work with us.

This means that not only we reduce the time it takes and the cost it takes to integrate in the ongoing costs, but it does that without changing the model of Playtech and without taking away the benefits of the IMS and that's the important part. When you combine the centralized private cloud together with the set of services, this is what differentiates Playtech. So far, we couldn't do that because we cater for market that required a dedicated infrastructure and the entire IMS.

Now we want to extend the reach smaller, mid-sized operators will use the technology and 1,000 brands alongside that, that will be able to enjoy the benefits of the Playtech solution and the very popular Playtech games.

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Ted Nyhan, JP Morgan Chase & Co, Research Division - Analyst [9]

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Ted Nyhan, JPMorgan. Three questions for me, if I can. Firstly, what is the potential revenue -- annualized revenue contribution from the new brands when they fully ramp up? Maybe I'll do them one at a time.

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Andrew James Smith, Playtech plc - CFO & Executive Director [10]

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When you said new brands, do you mean...

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Moran Weizer, Playtech plc - CEO & Executive Director [11]

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1,000 brands?

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Ted Nyhan, JP Morgan Chase & Co, Research Division - Analyst [12]

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I'm sorry, the 10 you signed this year.

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Andrew James Smith, Playtech plc - CFO & Executive Director [13]

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I don't want to give that number. It's -- I mean, obviously, the 1,000 possible in total. You can imagine that each one of them is relatively small on its own. So we're talking sort of single-digit millions, but obviously, as that ramps up over time, that number gets bigger and bigger.

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Ted Nyhan, JP Morgan Chase & Co, Research Division - Analyst [14]

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Is that single digit per brand or...

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Andrew James Smith, Playtech plc - CFO & Executive Director [15]

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No, no [800].

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Ted Nyhan, JP Morgan Chase & Co, Research Division - Analyst [16]

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Okay. And in terms of TradeTech, assuming a normal year from now as far as you can think of a normal year, what would be the kind of EBITDA range, just the sense of what we should expect there from you?

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Andrew James Smith, Playtech plc - CFO & Executive Director [17]

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I mean I don't think there's any such thing as normal in the business like that because obviously it's so highly dependent on the market. I think at the start of the year, [AAMS] had around EUR 40 million of EBITDA in there, just to call EUR 20 million each half. If you look back at last year, it did EUR 25 million in a very strong H1 and a much lower number in H2. This number looks like it will be the reverse.

So I think if you're looking -- all things being equal, if you tend to look at that EUR 20 million and half, that's not a bad starting point, but just to be absolutely clear, it's highly, highly dependent on market volatility.

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Ted Nyhan, JP Morgan Chase & Co, Research Division - Analyst [18]

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And obviously, your online growth at Snaitech was very strong this year. Give us a sense of what the market did -- market online growth was at Italy in H1?

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Andrew James Smith, Playtech plc - CFO & Executive Director [19]

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I don't have that stats and I can follow up with you. I would assume that we outperformed in market there.

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Moran Weizer, Playtech plc - CEO & Executive Director [20]

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We definitely outperformed the number, I can't remember the number. I know that we outperformed because I have a few numbers in my head and I don't want to just throw a number.

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Ted Nyhan, JP Morgan Chase & Co, Research Division - Analyst [21]

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Insofar as you're outperforming the market, do you think that's sustainable or is it just the kind of a one-off impact from enhancing the online proposition bringing in Playtech?

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Andrew James Smith, Playtech plc - CFO & Executive Director [22]

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No. I think it's sustainable given that -- if you look at 2 things: one, what Playtech brings to SNAI in terms of the expertise, which is one of the really reasons we did the deal in the first place. So that is always going to give us great confidence in that.

And second, the advertising band, which is too early to say much about that at the moment in terms of the impact, but I think given the fact that we have a retail presence and retail brand should boost our online as well. So those 2 things should give us confidence.

Simon?

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Simon John Davies, Deutsche Bank AG, Research Division - Head of UK Midcap & Online Gaming Research [23]

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Simon Davies from Deutsche. Three from me, please. Can I kick off just on the B2B business? Obviously, you have a very strong margin performance there. Can you try and put a number on the amount of fixed cost that has come out of that business over the last year, so we can get a feel for where margins should go?

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Andrew James Smith, Playtech plc - CFO & Executive Director [24]

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I mean last year, we gave the number of EUR 20 million. I'd prefer not to give an absolute number, so that you can calculate to that way, Simon, because the number you get -- we're taking out fixed costs all the time, but then we reinvest in those numbers, which is why I prefer far more to focus on the margin number than I do on a cost number because I don't think it's the right way to look at it.

So I think if you look at 2 years ago, that margin for the B2B ex Asia was less than 20%, it was more like 15%. And now we're talking about a number that's 30% pre-IFRS 16 over -- and 35%, including IFRS 16, you can see the steps we've taken. But if you look back at the full year 2018 results, you can see the kind of numbers we gave there. But to be clear, is -- I don't want to get the actual fixed number because of the reinvestments.

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Simon John Davies, Deutsche Bank AG, Research Division - Head of UK Midcap & Online Gaming Research [25]

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And second, just on the dividend, obviously, a big cut there, partially offset by distributions through share buybacks. Can you give some guidance on where you think dividend payout goes long term? And how much flexibility should we'd expect in terms of how your cash is returned?

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Andrew James Smith, Playtech plc - CFO & Executive Director [26]

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I think [our goal is] actually when we had the full year results. Because actually, it's not a cut then, it is exactly the same policies we had in the full year results. So what we said was, we were rebalancing shareholder distributions, so that the -- when you said partially mitigated, actually the shareholder distribution in the interim is actually increased by over 10% because what we did is, we halved the dividend or we based the dividend. We then paid that back in terms of shareholder buyback and increased the number. So the shareholder buyback would have been EUR 17 million. If it's been just same amount paid out on the dividend, we've added in an extra EUR 8 million of that to show the confidence in the business and also to reflect the -- of how we sold the first part of the [Toyland] which gives us additional confidence.

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Simon John Davies, Deutsche Bank AG, Research Division - Head of UK Midcap & Online Gaming Research [27]

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Should we think of the dividend being progressive from here on?

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Andrew James Smith, Playtech plc - CFO & Executive Director [28]

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I think, yes, you can do. I think we thought that at this moment in time, holding the dividend flat versus last year on the rebase level i.e., the half number, was the right thing to do with the increase being put into the share buyback.

Well over -- each time we come to announce a shareholder return, we'll always look at the best balance between the 2. So I think you should think of the overall distribution being progressive and the split between the dividend and the share buyback will depend on circumstances each time. But I think all things being equal, I would not expect the dividends to go down.

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Simon John Davies, Deutsche Bank AG, Research Division - Head of UK Midcap & Online Gaming Research [29]

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And lastly, can you talk a bit about the performance of the Live business? Obviously, quite heavy investment there over the last few years. Do you think you're finally gaining market share in that market? And roughly what proportion of casino revenues are now accounted for by Live?

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Andrew James Smith, Playtech plc - CFO & Executive Director [30]

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Yes. I mean just on the actual proportion, we've always said it's normally between 10%, 20%. Obviously with what's happened in Asia as well, where Live was -- as you know, there was more Live in Malaysia. But as actually, as that numbers come down, the percentage has come up as we've seen significant growth of Live outside of Asia, specifically in Europe.

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Moran Weizer, Playtech plc - CEO & Executive Director [31]

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Yes, beyond that, we actually only just started pushing Live. As you know, we soft launched it and then decided to further develop or actually put more efforts into the offering and then only recently, sometime in the second quarter of the year, we started really pushing Live. I have all confidence that this will, as I said, and while it takes a little bit longer, we are not magicians. It takes sometimes time and efforts and additional time and effort in order to make it right, but we believe that we are in the right place.

And from here, I think that you will see very significant growth that will be driven both by the combination of both existing customers as well as new customers. We won the Polish monopoly tender, we won the Dutch monopoly tender. We are extending our reach to other operators that operate with -- that currently use some of our competitor solution.

Having said all that, in the first half of the year, we saw very, very significant increase in our Live casino offering. Some of that is attributed to the fact that our existing customers pushed the Live offering and some of the customers moved from graphical engines to live casino, which is actually a trend you see across the industry. But also a lot of growth coming on the back of more initiatives, joint initiatives with Playtech, and we are extremely satisfied with what we saw or what we see so far this year.

Maybe last -- one last comment on that, we reorganized the structure and team and changed -- and made some changes to the team. And we believe that we are now in a very good position to start capitalizing on our investment.

So definitely see that there's one -- if I think about the future in terms of vertical sports that grew significantly this in one year 27%. Casino and live casino will be the growth drivers of our business from a product perspective.

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Andrew James Smith, Playtech plc - CFO & Executive Director [32]

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Gavin?

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Gavin Kelleher, Goodbody Stockbrokers, Research Division - Investment Analyst [33]

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Gavin Kelleher from Goodbody. Just 2 for me, please. Just on B2C Gaming outside of Snaitech and white labels, obviously, loss-making there in terms of the Austrian and German sports betting business and casual, you noted a strategic review on casual. Can you just give us a bit of color on that segment of B2C Gaming and will be loss-making next year? Or how should we think about it over the medium term?

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Andrew James Smith, Playtech plc - CFO & Executive Director [34]

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Is your question specifically on casuals, Gavin?

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Gavin Kelleher, Goodbody Stockbrokers, Research Division - Investment Analyst [35]

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Both parts -- both loss-making parts of B2C Gaming?

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Andrew James Smith, Playtech plc - CFO & Executive Director [36]

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Okay. I'll give you the numbers, and Mor can give you some more color. So I think the 4 -- ex now the 4 parts to B2C Gaming, let's go through them in turn. So this is Sun Bingo and other white label. So the Sun Bingo, we said we were profitable. The other white label used to be much bigger part. I mentioned in my speech, we've entered a housekeeping exercise, so that's actually a very low number, and the EBITDA there is virtually 0, anyway, give or take.

In terms of the German business, we will continue to see further losses in H2 this year, but Mor will talk shortly about how that business is going to do going forward. To be absolutely clear, it is because of the startup nature of that business. The asset is still a very, very good one, but it is a start-up investment.

Casualty is slightly different because that's a much more mature business. It's obviously had -- it's had a fantastic few years with Narcos, which although is still a good game, is -- the life cycle of that game will -- reduces. There's been investments into new games. But as you know, they haven't repeated the success of Narcos. And so I think we need to look at that business because, clearly, we're not going to accept the position where that business continues to make losses.

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Moran Weizer, Playtech plc - CEO & Executive Director [37]

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Yes. So just to follow-up on that, obviously, casual, as Andy said, we launched 4 games. It requires some investment and before we make the final conclusion, which I believe will happen in the -- later this year, we are monitoring it on a continuous basis to ensure we control the costs and the marketing investments made. This business is -- as you probably know, is driven by a very limited number of games for casual gaming companies that drive the entire growth. Narcos was one for us. And we are expecting to replicate that with the other games. We only just launched 4 games, and there are some other in the pipeline, but it requires some attention, given the fact that we were expecting to generate more revenues over a shorter period of time.

So obviously, in our own view, it's underperforming currently and requires our attention, hence the review of this business.

As for the HappyBet, we call it, this is the brand, you can go and look. Germany and Austria are, obviously, very big markets across Europe, very evident by the numbers of some of the offshore online gaming companies that operate or Paneuropean companies that operate and their presence in Germany. It's a market that, from a retail perspective, is dominated by one operator. It's a very -- it's a multibillion-dollar market. And even more so when you include into that Austria, the market is dominated by 1 operator, typical with only a number of others operating with significant -- and have a significant substance. We identified it as an opportunity.

We have already access to almost 200 -- just below 200 shops there between Germany and Austria. It's going from strength to strength.

We only just started. The losses are very, very limited when you compare that to what other companies do in other jurisdictions and compared to the existing revenue opportunity, I think that this outweighs what some others do in other jurisdictions. And we believe that over time, it will create a lot of value.

The reason we like this business, very big market, limited penetration in online in terms of the potential once regulated from a gaming perspective, if regulated because online sports betting is already regulated, very limited competition. And given our core key expertise and capabilities in sports, just to put it into perspective, the business growth grows in volume. We doubled -- we more than doubled the stakes year-on-year.

And the last reason, we are very, very excited about this opportunity and it is because it's a very similar model to SNAI. So it's a franchisee-based. Yes, we own some shops, but a lot of the others are franchisee-based or operate under a franchisee-based model. And we believe that over time, it will create a lot of value. I can tell you that we already been engaged by some operators that are interested in the German market. They wanted in, but we believe that maybe now is not the right time.

It's a very, very attractive market to be in over time. And yet, we obviously measure the performance on an ongoing basis, not to get ahead of ourselves and not too further -- and to control the return on investment into the market.

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Gavin Kelleher, Goodbody Stockbrokers, Research Division - Investment Analyst [38]

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Just one more for me. Just on New Jersey, you're going through testing at the moment. When do you get the kind of piece of paper approval, if you like? When is that expected? Or when can we expect you to launch in New Jersey?

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Moran Weizer, Playtech plc - CEO & Executive Director [39]

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Yes. So in New Jersey, you have to first apply. They need to deem the application complete, which they did in our case. The second phase -- it's not divided into phases, but we refer to that as phases. But the next step is to test the games and the products together with the one of the accredited testing facilities. I'm happy to say that we completed that. The only remaining step is actually to sign the long-form agreement with some of our customers and potential customers in order to launch.

Theoretically, once we are ready to launch, there is nothing to prevent us from getting the transaction waiver, which is a 2-year waiver, during which they do continue to analyze the business, and this is not Playtech-specific, obviously, this is the case across the New Jersey market and everyone goes through that.

So like I said, application complete, testing completed successfully. We are now in the process of actually finalizing the final -- the long-forms with some of our customers and we'll be in a position to launch. Whether it will be later this year, beginning of next, it is actually dependent on the resources on the other side, not just entirely in our hands. We are very keen, obviously, to do that to showcase that Playtech established itself. I think that our games will be very popular there. Our Live casino will be very popular there. Obviously, the SSBTs will be very popular there. We only just started.

We have the benefit of looking into -- we have the benefit of obviously acting decisively when the time is right and actually enjoy a number of commercial opportunities at once.

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Andrew James Smith, Playtech plc - CFO & Executive Director [40]

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I think we just had the last question now and then...

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Moran Weizer, Playtech plc - CEO & Executive Director [41]

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And I want -- I just to -- No, I think it is important. People put a lot of efforts into the U.S., but you look at the market, you look at the -- you look at the presentation, one of the slides, which I was -- even I was surprised by is the low level of penetration of 18 other countries or 17 other countries that are currently either regulated or regulating, like the Netherlands, like Colombia and others. And I think that people should not -- I should remind people that actually our business is very diversified. U.S. will be a focus for us going forward, but obviously other markets are extremely important for us.

We kind of -- we said it, but I don't think that it got the attention, it was -- it deserved. We just secured a long-term structured agreements in one of the neighboring countries to Mexico, in Latin America, where we will have a structured agreements with one of the leading largest sports betting companies in a similar fashion to Caliente. On Caliente by the end of next year, it will be one of 3 largest customers, I believe, on a run rate basis, the largest customer, just to put it into perspective, and the opportunity in Colombia is not far behind.

So U.S. is great, don't get me wrong. It will get a lot of focus now that we sorted out B2B. We're extending towards the 1,000 brands. B2C is going very well. Snaitech is doing a fantastic job. U.S. structured agreements, a lot of growth coming, and this is going to be our focus going forward.

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Andrew James Smith, Playtech plc - CFO & Executive Director [42]

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Yes. Last question. Thank you.

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Unidentified Analyst, [43]

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[Darren Droshi, Stockhues] Just one question for the time. Would you be able to give an estimate on the net gaming revenue opportunity with regard to those 1,000 new potential sites in comparison to the licensee-based net gaming revenue that you currently have access to?

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Andrew James Smith, Playtech plc - CFO & Executive Director [44]

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Yes. I think it's the question I answered earlier. I think for the ones we've signed already, it's a single-digit million number, but obviously, over time, that gets bigger and bigger. Each one individually is lower than some of the other wins we have in place, but the opportunity in terms of the number of customers is far, far higher. And actually, there's also scale benefit as you get more and more and more better there. Each one has a very significant drop-through to EBITDAs very high margin because it comes with an existing cost base.

One more.

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Emmanuel de Figueiredo, LBV Asset Management LLP - CIO [45]

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It's Emmanuel from LBV Asset Management. Just 2 quick questions. Mor, I mean, I noticed you were saying on Asia that you're not particularly worried about the regulatory issues there. But in a world where, as we know, trade tensions are growing everywhere, what do you think is the risk? And what can you do if China one day decides to start blocking the IPs of the Philippines and Malaysia? And if related to that, would you be willing to disclose what you think is your Chinese portion of your Asian revenues? That's the first question. And my second question, I think, for some time, some shareholders, including ourselves, have been a bit critical of your cash remuneration versus your shareholding, will that change or will it remain a relatively small shareholder versus your remuneration?

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Andrew James Smith, Playtech plc - CFO & Executive Director [46]

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I'll do the percentage of China. China's percentage of Asia is around 90% level. Yes. It used to be, obviously, the number in China used to be higher as an absolute number, but before used to have Malaysia in there as well. Malaysia is relatively small. So it's -- now there's not much of Malaysia in there. China is the vast majority, and there's just a few in the bits and the vast majority is China.

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Moran Weizer, Playtech plc - CEO & Executive Director [47]

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As for the regulations, obviously, any change -- any discussion -- I was asked this morning, whether it's good news or bad news because we own the license and others don't. And I don't want to be cute about it, obviously. The reality of it, yes, we have a license, it is very clear for the time being, they would not suspend existing licenses. I think the people should not forget the fact that it generates hundreds of millions to the Philippine government through PAGCOR, that is designated for education and health care. So obviously, all the money that goes from fees, which is in excess of $200 million a year, are reinvested by the government into national projects to do with education and health care.

This business exists for many years. We have gone through ups and downs in the region before, and obviously, I'm -- any change in regulation, if the Chinese wake up one morning and regulate and ban it, it's a different story. I'm not sure that this is the case. I don't think that this will be the case. But we follow and monitor there. We follow and monitor the developments in -- coming out of Asia.

Obviously, I would have preferred that the Chinese would have endorsed it and said that they are fine with it as long as certain guidelines will be followed, which may be the end result because it was all driven -- I'm not sure if you are familiar with the fact that the Chinese ambassador comment followed a comment by a Philippine government official that commented on the number of Chinese expats in the Philippines becoming an issue.

And the response to that was the Chinese ambassador answering that they are not happy with online gaming and the situation with the employees working the expats, the Chinese expats, and they made a comment on money flowing out of China to do with the employees, but obviously, it went beyond that.

So I would say given the nature of the business, given the nature of the market, I think that it's here to stay. I think that it will -- it may require changes. If worst comes to worst, then the Philippine government changes its mind, operators will require to do certain changes. If the government in China will change its mind, then obviously, we will have to adapt to that as well.

But I think that it is more likely than unlikely, there will be changes, but it will be in order to create a more controlled environment by the Philippine government to do with the employees and the way people conduct their business from the Philippines.

On the cash remuneration, you know that it has been outstanding. It's being discussed. I mean following the final results, we had at the AGM. Following the AGM, I was very much focused on Asia before I came up with this new pricing model. I'll be very, very open and honest.

You know me, what you see is what you get. I'm very straightforward, and I will say it, I had no conscience to go to shareholders and say, let's talk about options, let's talk about -- it was not the right time to do that. We needed also to get the -- it all happened towards soon after the AGM, when our close period started. So I would say this is something to look at. And I hope that in the near future, it will be sorted. No doubt we are familiar. We acknowledge it, and we hold conversations with shareholders with regards to that.

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Alan M. Jackson, Playtech plc - Non-Executive Chairman of Board [48]

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I'll just add one point. Doesn't matter what holding he has, whether it's huge or not, you won't find somebody that runs a business with greater dedication, greater understanding and greater event horizons. I note that part of your question and undoubtedly, as we move forward to the year-end, we'll have more to say on it.

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Emmanuel de Figueiredo, LBV Asset Management LLP - CIO [49]

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I can understand that I've been following Playtech, I think, for more than 10 years. Mor has always been very passionate, but I've never understood why he hasn't been a bigger shareholder, but I agree with you.

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Alan M. Jackson, Playtech plc - Non-Executive Chairman of Board [50]

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Good. Thank you all very much.

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Andrew James Smith, Playtech plc - CFO & Executive Director [51]

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Thank you.