British betting companies have come up against increasingly stringent regulations and higher taxes in established markets such as the UK and Ireland.
New regulations around fixed-odds betting terminals, an industry agreement to curb advertising during live sports games and tougher anti-money laundering rules have added to company costs and damped demand from customers.
While much of the focus has been around the impact on the big high street betting groups such as Ladbrokes, William Hill and Betfair, smaller companies are also finding it tougher to remain in the game.
Acquisitions are ramping up as companies attempt to improve their digital offerings and global reach, particularly as markets such as the US begin to deregulate.
Previously listed as Jackpot Joy, the group changed its name to JPJ Group in 2015, and will be rebranding once more to Gamesys Group after a £490m acquisition announced this week.
The purchase of Gamesys will take JPJ — which has a market capitalisation of about £580m — out of the small-caps realm and should position it firmly within the FTSE 250.
The acquisition followed a year of moderate growth, with gaming revenue up 13 per cent to £83m in the first three months of 2019, compared with the same period in 2018.
Although JPJ, like its competitors, has suffered from tougher regulation in established markets such as the UK and Ireland, its main gaming brands — Jackpot Joy and Vera & John — boast a loyal customer base of bingo-loving women.
Underlying earnings for 2018 were £112.7m, up 9 per cent, driven largely by the growth of online casino Vera & John. The group’s share price has risen by 25 per cent to 785p so far this year.
The acquisition of Gamesys — its current technology supplier — will increase the group’s value by more than 50 per cent and enable it to bring production in-house while also giving the company a much-desired foothold in the burgeoning US market via Gamesys’ operations in New Jersey.
Rank Group’s history has little to do with gambling. The company was a large conglomerate encompassing the Hard Rock and Deluxe Media brands until 2006, when it decided to focus on gambling through Grosvenor Casinos and its online Mecca Bingo offering.
The company’s gaming portfolio centres predominantly on one game — Bingo — which has suffered from reduced popularity in recent years, though Rank is endeavouring to broaden its appeal to the younger generation.
2018 was a challenging year in which group operating profit fell 25 per cent to £25.8m. However, since the start of 2019 its share price has risen by 11 per cent.
Analysts attributed the decline in profits to a decrease in demand following the implementation of harsher anti-money laundering and due diligence regulations.
Rank’s new chief executive, John O’Reilly, who joined the company in 2018, has stressed the need to increase and improve its digital offerings. The company bought Yo Bingo, an online platform in Spain, and two weeks ago announced the purchase of UK online operator Stride Gaming.
Stride has struggled with falling revenues and earnings but Rank hopes it will be able to harness the considerable synergies between the two businesses to double its digital operation and boost profits.
After a varied history selling hard disc drives and then swimming pools, four years ago Sportech focused its offering on betting technology, providing terminals and software for online outfits while running 16 global venues.
Sportech switched its focus towards the US in 2018, hoping to secure a foothold in the burgeoning market following regulatory changes that made sports betting legal at a federal level.
However, progress has been slower than expected as rules in some states still prohibit placing bets on sports games. Sportech has been lobbying legislators in Connecticut state to liberalise its laws.
The company has struggled to make significant inroads in the global market with its lottery technology, but hopes its acquisition of the UK-regulated Lot.to gaming platform this year will help it expand into the British market.
Its revenues for 2018 were £63.7m, 3.9 per cent lower than reported for 2017, while its gross profit for 2018 was £46m, down from £47.7m in 2017. In spite of muted growth, Sportech’s share price has risen by 20 per cent in 2019, to 128p.