Bookies generally win, bookies sometimes lose, but the businesses that provide them with the software and technology should be the beneficiaries either way.
Playtech, which gets its income from providing software and services, produced a strong halfway performance. The stand-out was its casino division, where revenues were up by 29 per cent, driven by customer wins across various territories.
Sports was even better, but its 35 per cent rise was assisted by a strong one-off boost from the World Cup and this level of increase is unsustainable.
Bingo and poker were less strong, as these are highly competitive areas across the gaming industry. All this left earnings ahead by 28 per cent at €97.6 million.
The market was more encouraged by a promise that the full-year results would exceed market expectations, and the shares added 49p to 712p.
Trading is strong into the second half, even into the traditionally quiet summer, and the Ladbrokes venture, which kicked off in late April, is performing well.
As ever with Playtech, the main question in the market is over what it will do with its cash pile. There has been pressure from shareholders to return some of this to them, and the company duly handed out a £100 million special payment in March. But it ended the half with cash of €366 million.
A few new contract wins have been announced — including two yesterday with an unnamed Italian media company and Caliente of Mexico which will require some investment — plus £10 million to go into a small UK operator.
This rate of corporate activity is not going to make much of a dent on that cash pile. Playtech says it wants to increase ordinary dividends, and the halfway payment is up 14 per cent to 8.9 cents.
The board hopes that opportunities will arrive later this year as regulation spreads across world markets. This could mean that incumbent operators lack the financial firepower to handle the resulting expansion and will need well-funded partners or buyers.
The shares sell on 19 times earnings. Not cheap, and probably only a hold.
E214.m Revenue E8.9cts Dividend
MY ADVICE Hold
WHY Company is growing fast, there is enormous potential from regulation of gaming markets, but shares are highly rated already
Soco International is in an odd place in the oil and gas sector.
As a FTSE 250 exploration company working in places such as Vietnam and the Republic of Congo (Brazzaville), it should be focusing on building value by developing those assets and finding others.
It is, however, pledged to providing investors with a decent income, and a dividend yield that compares favourably with the big players in the sector, BP and Royal Dutch Shell, funded by the income from one field off Vietnam. The company last year pledged to pay out 50 per cent of the previous year’s free cashflow, with a 40p payment.
Its first half figures, largely as expected otherwise, include a 22p payment, which would be 60 per cent of free cashflow. The company is slightly ramping up capital spending this year, which would presumably constrain next year’s payment, but analysts expect 20p maximum, which would offer a yield near to 5 per cent at yesterday’s share price, off 8¾p at 426p.
Production at that Vietnam field is constrained but will rise in 2016, adding to that cashflow. For investors who want the excitement of exploration and income too, Soco offers a useful compromise.
13,960 boepd Production ave
MY ADVICE Strong hold
WHY Combination of income and exploration uplift
Xaar is a decently run company with good products and a strong market position that has been overhyped by the market. It then hit a series of negatives, most of them either predictable or well signalled.
Xaar makes digital printers adopted by makers of ceramic tiles. It had an exceptionally good 2013, on the back of the boom in Chinese construction. This year and next were never going to be as good.
Ian Dinwoodie, the long-serving chief executive, leaves next year. No replacement is yet in place, though the company insists that the process is well advanced. Its 75 per cent market share has attracted Japanese competitors and hit pricing.
Attempts to find new applications for its technology, such as printing on to PET bottles, are taking time to come through, not until 2016 now. This means a couple of lean years.
The new negative, from the halfway figures, is that as the Chinese economy is slowing down, so revenues will undershoot market estimates of £140 million this year by about £20 million. Analysts were cutting their earnings estimates by about 12 per cent. The shares fell 121pp to 439p, having already halved since the start of the year. Pre-tax profits were down 28 per cent in the first half, as expected, to £16.1 million, and margins fell below 50 per cent. The dividend is raised by 0.5p to 3p, easily covered by earnings.
Xaar offers investors a difficult choice. A multiple of 13 times earnings looks cheap, but the market will remain nervous. Only those with an appetite for risk and a long term perspective.
£60.4m Revenue 3.0p Dividend
MY ADVICE High-risk buy
WHY Shares more than halved; market jitters remain, though
And finally . . .
DCC is one of those companies whose market size, £3 billion, belies its low profile. This is partly because it is a fairly recent migrant from the Dublin market; it may reflect that bland corporate name. But as a distributor of various products, it is highly acquisitive and has spent €1.1 billion over a decade on its energy side. It has announced the biggest deal yet, the €106 million purchase of Esso’s unmanned petrol station network in France. This complements existing operations in Sweden, after an earlier deal.
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