William Hill And Playtech Joint Venture ConcernsJuly 23, 2009 10:40 am
William Hill moved to reassure its investors after its joint venture partner, Playtech announced that year on profits would be down due to integration problems between the two companies. The market was quick to react sending Playtech (PTEC.L) shares down by around 30%. At one stage £262 million was wiped off the value of the company when its shares plunged 109.25p to 343p. William Hill’s shares also experienced a fall of 8.5p to 191.75p.
A deal was struck last year between William Hill (Britain’s second biggest bookmaker) and Playtech (the gaming software development company) when William Hill had given up on trying to build its own online business and instead decided to join forces with the software development specialist. The result was the creation of a subsidiary company called ‘William Hill Online'(WHO), which would enable William Hill customers access to state-of-the-art casino and poker websites. Playtech, in addition to supplying its software and providing £145 million worth of affiliate business, would receive 29% of the stakes and profits from that company.
Following the share price plunge, Playtech announced that despite a slower than expected integration period and challenging economic conditions, they were now making “encouraging progress”and Investec analyst Matthew Gerard said: “While there have clearly been teething issues at the joint venture, we regard these as temporary”.
Wyn Ellis at Numis Securities concurred with this statement and added:”We had increasingly expected more downbeat newsflow in the near term as the integration has clearly been more difficult than management had expected, but we take heart from the ‘inline’ guidance from William Hill this morning,”
The analyst also expects WHO to make £86 million profit this year, £6 million ahead of the market consensus. A full update on the operating performance of WHO for the 26 weeks to June 30 will be released on August 4.