It has been a torrid year for gambling firm Playtech (PTEC) and it looks like its troubles could continue in 2019. The gaming technology company shocked the market on Christmas Eve by revealing the hefty impact on 2019 profits of new shock gambling tax hikes in Italy.
The Italian Senate’s decision to increase online gaming tax in a session on Sunday comes out of the blue and leaves the share price roughly 10% lower at 359.8p.
They had traded as high as 880p in January.
FORECAST EARNINGS HIT OF €20M TO €25M
The setback means that Playtech now says its year to 31 December 2019 adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) will be between €20m and €25m lower than previous expectations.
Broker Canaccord Genuity slashed its 2019 EBITDA forecast from €416.6m to €393.4m in a note last week, although this cut also includes other factors, such as the UK’s remote gaming duty.
Coming into force from January at least means 2018 earnings guidance of €320m to €360m remains intact.
This is another painful blow for the company and its investors. Playtech is already struggling to fight off aggressive competition in China.
BIG BLOW IN ITALY
Italy is the second biggest gambling market in Europe, but the government’s hard stance on the industry puts Playtech's strategy in the country in doubt.
Playtech generates significant (circa 50% of the group's total) sales from Italy, where around a third of profits are earned. Earlier this year the company scaled up its business in Italy through the acquisition of Snaitech.
