Gamesys Interim Results Statement

Excellent financial performance and operational execution, pro-forma revenue up 27%

Ongoing focus on responsible gambling intensified during COVID-19

Maiden dividend declared, trading ahead of expectations

LONDON / ACCESSWIRE / August 11, 2020 / Gamesys Group plc (LSE:GYS) (the 'Group', 'Gamesys'), announces its financial results for the six months ended 30 June 2020.

Financial summary

Pro-forma financial summary^[6]

Financial highlights

• Excellent reported and pro-forma⁶ financial performance across the Group
  • Reported gaming revenue grew 101% year-on-year, reflecting continued exceptional growth in Asia and strong growth in the UK; on a pro-forma⁶ basis, gaming revenue increased 27% year-on-year
  • Adjusted EBITDA¹ increased 75% year-on-year; on a pro-forma⁶ basis, it rose by 17% as Asia and the UK delivered strong results
  • Adjusted net income^1,2,4 increased 68% year-on-year
• Strong operating cash flow of £100.7m; cash conversion rate of 106% from adjusted EBITDA¹
  • Cash balance of £136.0m at 30 June 2020 and adjusted net debt^[7] of £391.7m
  • Adjusted net leverage ratio^[8] of 2.83x at the end of 2019 has reduced to 2.27x at 30 June 2020 and we anticipate further deleveraging during the second half of 2020
  • The Board is pleased to declare an inaugural interim dividend of 12p per share to be paid in October, as well as the implementation of a broader dividend and capital allocation policy
• Good trading has continued into the early part of Q3 across our major markets; given the strong performance in the first 7 months of the year, the Board now expects to report FY20 gaming revenue and adjusted EBITDA¹ comfortably ahead of its prior expectations

Operational highlights (pro-forma)⁶

• Revenues in the UK reflected a strong performance across all our major brands and were up 16% year-on-year, with an acceleration of growth during Q2; good player retention establishing a strong bedrock of active customers to drive sustainable growth in the future
• Record performance in Asia, where revenues increased 92% year-on-year, driven by new customer growth, sustained momentum in Japan and the successful launch of our InterCasino brand
• European revenues fell by 4%, with steady growth in Spain despite the introduction of restrictions on advertising and bonusing due to COVID-19; elsewhere, Germany performed strongly although the Nordics remain challenging
• Revenues in ROW were up 2%, with the US recording revenue growth of 37% through Virgin Casino and the B2B contract with Tropicana Casino; overall performance in ROW impacted by the inclusion of discontinued markets, where we ceased trading in 2019
• Ongoing improvement in core KPIs^[9]:
  • Average Active Players per Month⁹ grew to 640,436 in the twelve months to 30 June 2020, an increase of 14% year-on-year
  • Average Real Money Gaming Revenue per Month⁹ grew to £50.9 million, an increase of 21% year-on-year
  • Monthly Real Money Gaming Revenue per Average Active Player⁹ of £80, an increase of 7% year-on-year

COVID-19 and responsible gambling

• The Group continues to focus on providing a recreational and entertaining experience for our community of players to enjoy, and we have seen significant increases in chatroom engagement and non-wagering sessions
• During the first half, we invested in additional resources and capabilities in our responsible gambling teams, including a 30% increase in budgeted headcount
• Between Q1 and Q2, we experienced a significant increase in both the number of players setting deposit limits and also in our proactive outbound calls to customers to discuss their play
• Upon entering COVID-19 lockdowns in Q2, we were the first operator to cease untargeted customer marketing in the UK, including the suspension of TV and radio campaigns
• Continue to monitor COVID-19 developments and government guidelines carefully, as the health and wellbeing of our employees and players remains our top priority
• We welcome the forthcoming review of the 2005 Gambling Act and look forward to contributing to an evidence-based assessment as to how to enhance the environment for responsible gambling
• Extremely proud of the productivity and focus that has been maintained by our teams across the Group, particularly during what has been a difficult time for many people and their families

Capital allocation

• The Group has a very strong record of cash flow generation and the Board expects a high cash conversion rate from adjusted EBITDA¹ to continue going forward. An adjusted net leverage ratio⁸ of 2.83x at the end of 2019 has reduced to 2.27x at 30 June 2020 and we anticipate further deleveraging during the second half of 2020
• We have consistently said that our long-term strategy is to reduce adjusted net leverage ratio⁸ to a target range of 1x to 2x adjusted EBITDA¹ and to commence dividend payments, with the retained ability to launch a sustained share buyback programme if the Board believes it is appropriate. Given we are very much on track to achieve our target leverage, the Board believes that now is the right time to commence returns of cash to shareholders
• The Directors are pleased to declare an inaugural interim dividend of 12p per share and the implementation of a broader dividend and capital allocation policy. The interim dividend will be paid on or around 15 October 2020 to shareholders who are on the register of members on 11 September 2020
• The Board intends to implement a progressive dividend policy going forward, in order to align the Group with its listed peers in the UK, which is expected to be split 33%:67% between an interim and final dividend. While adopting this policy, it remains the intention of the Board to use the Group's strong cash generation to reduce Group adjusted net leverage ratio⁸ to our target of below 2x adjusted EBITDA¹
• The Directors believe that this policy, coupled with the Group's continued strong cash generation, will provide valued returns to shareholders while retaining sufficient cash within the Group to further reduce leverage and potentially undertake bolt-on acquisitions to accelerate growth. The Group's cash position will also provide flexibility to undertake returns to shareholders through share buyback programmes, should the Directors consider it to be the best use of excess capital at that time
• The Board will continue to assess the availability of any excess capital and carefully evaluate any identified opportunities (debt repayment, returns to shareholders, etc.) against the long-term benefit of organic investment and value-enhancing M&A. We intend to remain flexible and agile in the implementation of our corporate strategy in relation to the balance between cash conservation, debt paydown, potential bolt-on acquisitions and returning cash to shareholders

Neil Goulden, Executive Chair, Gamesys Group plc, commented:

"The Group has produced a strong first half financial performance despite the clear and striking challenges posed by the COVID-19 pandemic. I would like to acknowledge the hard work and dedication of all our employees across the Group during this difficult time, without which we would not have been able to deliver a safe and enjoyable experience for our customers. Having led the Group through a transformational period - one that has seen us relist on the London Stock Exchange; subsequently obtain a Premium Listing; successfully merge with and rebrand as Gamesys; become a FTSE-250 constituent; and now introduce a progressive dividend policy - I believe the time is right for me to return to the position of non-executive Chair, which will be effective from 1 October 2020. Following the Gamesys Acquisition in September 2019, we now have an exceptionally strong executive team in place and have successfully integrated the two businesses and delivered strong, sustainable results. The business is in very good hands and I look forward to supporting Lee and his team going forward."

Lee Fenton, CEO, Gamesys Group plc, added:

"It has been very pleasing to oversee another strong half-year performance, with reported gaming revenues doubling across the Group year-on-year. Our strong brands, operational control and proprietary technology have allowed us to drive growth in established markets such as the UK, while also delivering strong results in fast-growing markets in Asia and ROW. At the heart of this has been our commitment to responsible gambling, which was vital during a period in which many of our players were living in lockdown. As a result, we took decisive action during the period to enhance our player protection, both through investing in new capabilities and resources, and also ceasing certain marketing activities. We believe that this enlarged and highly engaged customer base will be key to driving sustainable growth in the future, positioning us well for the exciting opportunities ahead."

Conference call

A conference call for analysts and investors will be held today at 1.00pm BST / 8.00am ET. To participate, interested parties are asked to dial +44 (0) 20 3003 2666 (standard access); +1 866 378- 3566 (Canada); or +1 866 966-5335 (US), 10 minutes prior to the scheduled start of the call using the reference "Gamesys". A replay of the conference call will be available for 30 days by dialling +44 (0) 20 8196 1998 or + 1 866 595 5357 and using reference 2751983#. A transcript will also be made available on Gamesys Group plc's website at www.gamesysgroup.com/investors

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SOURCE: Gamesys Group plc