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Research: Consumer
JPJ’s standalone H119 revenues increased by 14% to £169.5m, with an adjusted EBITDA of £54.0m. Including Gamesys, pro-forma H119 revenues were £265.6m. This was above our expectations due to another exceptional performance in the Vera&John division, which grew revenues by 58%. As expected, the UK (both JPJ and Gamesys) and Sweden continue to suffer the impact of rising taxes and restrictive regulations. The Gamesys acquisition is due for completion in Q319 and we raise our FY19 pro-forma forecasts by c 3%. Our FY20 and FY21 forecasts remain broadly unchanged. JPJ trades at 7.0x EV/EBITDA and 5.6x P/E for FY20, at the low end of the peer group.
Written by
JPJ Group plc |
Raising FY19 forecasts by c 3% |
H119 results |
Travel & leisure |
13 August 2019 |
Share price performance
Business description
Next events
Analysts
JPJ Group plc is a research client of Edison Investment Research Limited |
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JPJ’s standalone H119 revenues increased by 14% to £169.5m, with an adjusted EBITDA of £54.0m. Including Gamesys, pro-forma H119 revenues were £265.6m. This was above our expectations due to another exceptional performance in the Vera&John division, which grew revenues by 58%. As expected, the UK (both JPJ and Gamesys) and Sweden continue to suffer the impact of rising taxes and restrictive regulations. The Gamesys acquisition is due for completion in Q319 and we raise our FY19 pro-forma forecasts by c 3%. Our FY20 and FY21 forecasts remain broadly unchanged. JPJ trades at 7.0x EV/EBITDA and 5.6x P/E for FY20, at the low end of the peer group.
Year end |
Revenue (£m) |
EBITDA |
EPS* |
DPS |
P/E |
Yield |
12/17 |
304.7 |
108.6 |
103.9 |
0.0 |
6.3 |
N/A |
12/18 |
319.6 |
112.7 |
118.5 |
0.0 |
5.5 |
N/A |
12/19e** |
535.0 |
153.8 |
93.8 |
0.0 |
7.0 |
N/A |
12/20e** |
563.8 |
175.4 |
118.0 |
30.0 |
5.6 |
4.6 |
Note: *EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. **Pro-forma figures with 33.7m additional shares used in EPS.
Stand out performance from Vera&John
JPJ reported a 14% increase in standalone H119 revenues to £169.5m with an EBITDA of £54.0m. This was above our forecasts, due to an exceptional 58% revenue growth in Vera&John (42% of standalone revenues). During H119, international revenues comprised 53% of JPJ’s standalone revenues. As a result of higher than expected Vera&John growth, we are raising our standalone JPJ forecasts by c 5% and our pro-forma FY19 forecasts by c 3% (pro-forma includes a full year of Gamesys). Our FY20 and FY21 figures remain broadly unchanged and although we believe there could be upside to our international forecasts, we note that grey markets (particularly Japan) are far more lumpy and volatile.
UK trading in line; Gamesys completion in Q319
As expected, the Jackpotjoy division (mostly UK) declined by 6% in H119, largely due to enhanced responsible gambling measures and the impact of rising gaming taxes. As discussed previously, management continues to expect the negative impact of regulation to be lapped in H219 and we leave our UK forecasts broadly unchanged. Gamesys reported an 8% increase in revenues to £96.1m for H119, with an EBITDA margin of 30.8%, which is in line with our forecasts. Completion of the acquisition is expected in Q319 – please see our June 2019 update.
Valuation: 5.6x P/E for FY20e
At H119, adjusted net debt was £269.9m, which equates to 2.5x net debt/EBITDA. Including the Gamesys acquisition, pro-forma net debt would be £519.1m and we forecast 3.0x net debt/ EBITDA for FY19 and 2.0x at FY20 for the enlarged group. Based on our pro-forma forecasts, JPJ trades at 7.0x EV/EBITDA and 5.6x P/E for FY20. This remains at the lower end of the peer group and, as the company rapidly deleverages, we expect value to shift from debt to equity.
Exhibit 1: Financial summary
£m |
2017 |
2018 |
2019e |
2020e |
2021e |
||
December |
|||||||
PROFIT & LOSS |
|||||||
Revenue |
|
|
304.7 |
319.6 |
535.0 |
563.8 |
609.0 |
Cost of Sales |
(147.5) |
(158.9) |
(294.6) |
(299.0) |
(312.8) |
||
Gross Profit |
157.2 |
160.7 |
240.4 |
264.8 |
296.1 |
||
EBITDA |
|
|
108.6 |
112.7 |
153.8 |
175.4 |
200.1 |
Operating Profit (before amort. and except.) |
|
|
108.2 |
112.2 |
142.8 |
163.9 |
187.6 |
Intangible Amortisation |
(62.6) |
(60.3) |
(50.0) |
(50.0) |
(50.0) |
||
Exceptional and other items |
(104.9) |
(16.3) |
(20.6) |
(3.0) |
(3.0) |
||
Share based payments |
(1.4) |
(0.6) |
(0.6) |
(0.6) |
(0.6) |
||
Operating Profit |
(60.8) |
35.0 |
71.5 |
110.3 |
134.0 |
||
Net Interest |
(30.0) |
(19.5) |
(30.0) |
(22.0) |
(16.0) |
||
Profit Before Tax (norm) |
|
|
78.2 |
92.7 |
112.8 |
141.9 |
171.6 |
Profit Before Tax (FRS 3) |
|
|
(65.8) |
18.5 |
43.0 |
89.8 |
119.5 |
Tax |
(0.7) |
(0.5) |
(11.3) |
(14.2) |
(17.2) |
||
Profit After Tax (norm) |
77.5 |
92.3 |
101.5 |
127.7 |
154.4 |
||
Profit After Tax (FRS 3) |
(66.5) |
18.1 |
31.7 |
75.6 |
102.3 |
||
Average Number of Shares Outstanding (m) |
73.9 |
74.2 |
108.2 |
108.2 |
108.2 |
||
EPS |
104.9 |
119.5 |
93.8 |
118.0 |
142.7 |
||
EPS - normalised (p) |
|
|
103.9 |
118.5 |
93.8 |
118.0 |
142.7 |
EPS - (IFRS) (p) |
(90.0) |
19.5 |
29.3 |
69.9 |
94.6 |
||
Dividend per share (p) |
0.0 |
0.0 |
0.0 |
30.0 |
45.0 |
||
Gross Margin (%) |
51.6 |
50.3 |
44.9 |
47.0 |
48.6 |
||
EBITDA Margin (%) |
35.6 |
35.3 |
28.7 |
31.1 |
32.9 |
||
Operating Margin (before GW and except.) (%) |
35.5 |
35.1 |
26.7 |
29.1 |
30.8 |
||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
595.9 |
521.9 |
801.0 |
757.5 |
715.0 |
Intangible Assets |
589.0 |
514.7 |
781.0 |
740.0 |
700.0 |
||
Tangible Assets |
1.3 |
2.2 |
10.0 |
7.5 |
5.0 |
||
Other long term assets |
5.6 |
5.0 |
10.0 |
10.0 |
10.0 |
||
Current Assets |
|
|
93.2 |
124.0 |
165.8 |
177.0 |
169.3 |
Stocks |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Debtors (incl swaps) |
26.0 |
30.5 |
57.0 |
62.0 |
67.0 |
||
Cash |
59.0 |
84.4 |
86.8 |
92.0 |
78.3 |
||
Player balances |
8.2 |
9.0 |
22.0 |
23.0 |
24.0 |
||
Current Liabilities |
|
|
(98.5) |
(52.3) |
(100.0) |
(95.0) |
(90.0) |
Creditors |
(46.3) |
(47.8) |
(100.0) |
(95.0) |
(90.0) |
||
Short term borrowings |
(0.3) |
0.0 |
0.0 |
0.0 |
0.0 |
||
Contingent consideration |
(51.9) |
(4.5) |
0.0 |
0.0 |
0.0 |
||
Long Term Liabilities |
|
|
(386.7) |
(374.5) |
(566.5) |
(466.5) |
(366.5) |
Long term borrowings |
(369.5) |
(371.5) |
(546.5) |
(446.5) |
(346.5) |
||
Contingent consideration |
(7.7) |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other long term liabilities |
(9.4) |
(3.0) |
(20.0) |
(20.0) |
(20.0) |
||
Net Assets |
|
|
204.1 |
219.1 |
300.4 |
373.1 |
427.8 |
CASH FLOW |
|||||||
Operating Cash Flow |
|
|
102.0 |
106.8 |
92.5 |
159.4 |
184.1 |
Net Interest |
(30.9) |
(19.5) |
(25.0) |
(22.0) |
(16.0) |
||
Tax |
(1.0) |
(0.8) |
(8.0) |
(14.2) |
(17.2) |
||
Capex |
(3.2) |
(5.3) |
(10.0) |
(18.0) |
(20.0) |
||
Acquisitions (inc earn-outs) |
(94.2) |
(55.3) |
(462.0) |
0.0 |
0.0 |
||
Financing |
22.2 |
(2.3) |
240.0 |
0.0 |
0.0 |
||
Dividends |
0.0 |
0.0 |
0.0 |
0.0 |
(44.6) |
||
Net Cash Flow |
(5.2) |
23.6 |
(172.5) |
105.2 |
86.3 |
||
Opening net debt/(cash) |
|
|
305.6 |
310.7 |
287.1 |
459.6 |
354.4 |
HP finance leases initiated |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Closing net debt/(cash) |
|
|
310.7 |
287.1 |
459.6 |
354.4 |
268.1 |
NPV of outstanding earnouts/ other |
|
|
76.6 |
15.0 |
0.0 |
0.0 |
0.0 |
Currency swaps |
|
|
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Adjusted net debt |
|
|
387.3 |
302.1 |
459.6 |
354.4 |
268.1 |
Source: JPJ Holdings, Edison estimates. Note *Pro-forma figures with 33.7m additional shares used in EPS
|
|
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