Jackpotjoy plc — Market dominance brings the cash

Gamesys Group (GYS)

Last close As at 27/03/2024

1,850.00

0.00 (0.00%)

Market capitalisation

2,072m

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Research: Consumer

Jackpotjoy plc — Market dominance brings the cash

Driven by the market-leading Jackpotjoy division, Q1 gaming revenues rose 11% to £71.4m with an EBITDA margin of 40.9% and underlying cash conversion of c 100%. Q2 trading has started well across all divisions. Adjusted net debt/EBITDA of c 4.0x remains high, but Jackpotjoy plc (JPJ) is comfortably positioned to pay a major c £95m earnout in June and we expect significant deleverage from 2018. The market is pricing in a high degree of execution risk, with 2017 trading multiples of 6.9x EV/EBITDA and 6.1x P/E. Despite regulatory headwinds, we forecast continued strong underlying growth and we would expect a re-rating as debt repayments begin to drive value to equity.

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Consumer

Jackpotjoy plc

Market dominance brings the cash

Q1 results

Travel & leisure

16 May 2017

Price

570p

Market cap

£421m

€1.189/£

Net debt (£m) at 31 December 2016

305.6

Shares in issue

73.8m

Free float

95%

Code

JPJ

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

2.8

(9.1)

N/A

Rel (local)

1.1

(11.4)

N/A

52-week high/low

645p

534p

Business description

Jackpotjoy plc (JPJ) (formerly The Intertain Group) is a leading online gaming operator mainly focused on bingo-led gaming targeted towards female audiences. About 77% of revenues are generated in regulated markets. It moved its listing from the TSX to the LSE in January 2017.

Next events

Q2 financial statements

14 August 2017

Analysts

Victoria Pease

+44 (0)20 3077 5700

Katherine Thompson

+44 (0)20 3077 5730

Jackpotjoy plc is a research client of Edison Investment Research Limited

Driven by the market-leading Jackpotjoy division, Q1 gaming revenues rose 11% to £71.4m with an EBITDA margin of 40.9% and underlying cash conversion of c 100%. Q2 trading has started well across all divisions. Adjusted net debt/EBITDA of c 4.0x remains high, but Jackpotjoy plc (JPJ) is comfortably positioned to pay a major c £95m earnout in June and we expect significant deleverage from 2018. The market is pricing in a high degree of execution risk, with 2017 trading multiples of 6.9x EV/EBITDA and 6.1x P/E. Despite regulatory headwinds, we forecast continued strong underlying growth and we would expect a re-rating as debt repayments begin to drive value to equity.

Year end

Revenue (£m)

EBITDA*
(£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/15

194.6

70.4

46.1

73.0

0.0

7.8

N/A

12/16

269.0

102.2

65.6

88.4

0.0

6.4

N/A

12/17e

294.8

105.7

70.9

93.8

0.0

6.1

N/A

12/18e

322.3

113.8

84.4

109.2

0.0

5.2

N/A

12/19e

345.3

116.4

93.0

118.0

0.0

4.8

N/A

Note: *EBITDA, PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Jackpotjoy division continues to deliver

JPJ’s strong Q1 results were bolstered by the Jackpotjoy division, which grew 14% with an EBITDA margin of 51.2%. Q2 trading has started well across all divisions and management expects revenue growth in line with the wider market. At March 2017, average LTM active customers increased 15% to 239,452 vs. the prior year and average real money gaming (RMG) per month grew 17% to £20.9m. Our EBITDA forecasts are broadly unchanged, although we have adjusted our revenue figures to reflect a shift in mix. We introduce 2019 forecasts, which continue the 2018 trend of single-digit revenue growth, progressive taxes in key markets (notably Sweden in 2019) and lower finance charges.

Robust cash balance covers earnout payments

The major Gamesys earnout period finished in March and payments are due in June (c £95m) and 2018 (c £44m for Botemania). With £112m unrestricted cash balance in Q1 and an ongoing quarterly operating cash flow of c £25m, JPJ is comfortably positioned to internally fund its future obligations. We forecast stable net debt levels this year (£307.5 m in 2017), falling to £214.2m at FY2019. During 2019, we expect JPJ to reach its target 2.0x adjusted net debt/EBITDA and the company would then be in a position to commence dividend pay-outs.

Valuation: Execution risk priced in

Despite its market dominance, JPJ trades at a meaningful discount to its peer group, at 6.9x EV/EBITDA, 6.1x P/E and 15% free cash flow yield for 2017. The valuation reflects legacy concerns over the Gamesys relationship, high leverage, the lack of dividend and low stock liquidity. In our view, cash generation should lead to demonstrable debt reduction from 2018 and we would expect a re-rating as the market regains confidence in the business model.

Jackpotjoy division delivers in Q1

Overview

Q1 gaming revenue increased 11% to £71.4m, driven by 14% growth in the Jackpotjoy division. At March 2017, average active customers grew 15% to 239,452 vs. the prior year and average real money gaming (RMG) per month grew 17% to £20.9m, equating to £87 per customer.

The company reported an adjusted EBITDA margin of 40.9% vs 38% in FY16. We note that selling and marketing costs were 13.5% of total revenues (vs 14.1% in Q116 and 17.4% for FY16) and we expect marketing costs to rise during H2 with planned TV campaigns. Cash conversion of 80% (103% excluding a one-off item) resulted in a quarterly operating cash flow of £23.3m and an unrestricted cash balance of £112m.

For a detailed analysis of JPJ’s divisions, please refer to our initiation report, published in February 2017.

Jackpotjoy (71% of revenues)

JPJ reported a strong performance across all brands in the Jackpotjoy division, which grew 14% to £50.7m. Jackpotjoy UK comprised 67% of revenues vs 70% in the prior year. Together, Botemania (Spain) and Starspins comprised 18% of revenues, with particular growth stemming from the successful Botemania mobile launch in Q216. Given Spain’s 25% tax on gross gaming revenues, the divisional margins will be affected as Botemania revenues increase.

Vera&John (22% of revenues)

Gaming revenue from Vera&John was flat year-on-year in constant currency terms, but reported gaming revenue grew 13% to £15.7m. Adjusted EBITDA for the division increased 7% despite an increase in personnel and office-related costs. Trading in April was very strong and we forecast a 13.6% growth in reported revenues for 2017.

Mandalay (7% of revenues)

Q1 revenues declined 14% to £5.0m, with EBITDA falling from £2.0m to £1.7m, reflecting changes to on-site promotional spend in preparation for potential changes to the UK point of consumption tax (POCT) in Q317. Trading in Q2 has been strong and we forecast a return to quarterly growth this year, representing a flat revenue target for the full year.

Exhibit 1: JPJ gaming revenue split*

£m

2016

2017e

2018e

2019e

Jackpotjoy

188.2

208.3

229.7

247.6

growth

55.3%

10.7%

10.3%

7.8%

Vera&John

57.0

64.7

70.6

75.5

growth

35.4%

13.6%

9.0%

7.0%

Mandalay

21.7

21.8

22.0

22.2

growth

1.2%

0.1%

1.0%

1.0%

Total gaming revenue

266.9

294.8

322.3

345.3

growth

38.2%

10.4%

9.3%

7.1%

Source: Edison Investment Research. Note: *Excludes other non-gaming income of £2.1m in 2016 (revenue guarantee and platform migration).

Strong cash generation

As a consequence of the significant acquisition cost of Jackpotjoy from Gamesys, JPJ’s net debt is relatively high, at c 4x adjusted net debt/EBITDA, and two major earnout payments are still to be paid. Approximately £95m is due in June 2017, with a further c £44m remaining from Botemania (Spanish online bingo within the Jackpotjoy division).

But with an unrestricted cash balance of £112m in Q1, together with cash conversion of 80% (equating to c £25 operating cash flow per quarter), JPJ is comfortably positioned to fund these obligations. We note that, excluding an exceptional item, cash conversion was 103% in the quarter.

Our forecasts indicate net debt remaining stable in 2017, with high cash flow offset by earnout payments. We forecast net debt of £290.2m in 2018, with an adjusted net leverage of 2.7x, reaching the company’s target of 2.0x during 2019.

Under the terms of its covenants, the group is permitted to pay dividends once adjusted net leverage reaches 2.75x and the company has stated that it intends to begin paying dividends once the balance sheet is closer to sector average debt levels. We have not included dividends in our forecasts, but we believe cash returns could begin in 2019.

Forecast changes: Lower revenues but EBITDA broadly unchanged

We have decreased our 2017 and 2018 revenue estimates by 2.7% and 4.8%, respectively, with the strong growth in Jackpotjoy offset by lower revenue expectations for both Vera&John and Mandalay. Given the stronger margins in Jackpotjoy, however, our EBITDA forecasts are broadly unchanged.

We additionally introduce 2019 forecasts, which include revenue growth of 7.1% to £345m and EBITDA growth of 2.3%. Regulatory headwinds are expected to continue affecting EBITDA margins (with a projected margin of 33.7% in 2019), although earnings will benefit from rapidly declining finance charges.

Exhibit 2: Edison forecast changes

EPS (p)

Revenue (£m)

EBITDA (£m)

Old

New

% chg.

Old

New

% chg.

Old

New

% chg.

2017e

96.0

93.8

-2.3

303.1

294.8

-2.7

106.0

105.7

-0.3

2018e

111.5

109.2

-2.1

338.7

322.3

-4.8

114.9

113.8

-1.0

Source: Edison Investment Research

Exhibit 3: Financial summary

 IFRS

 

£m

2015

2016

2017e

2018e

2019e

Year end 31 December

 

PROFIT & LOSS

 

Revenue

 

 

194.6

269.0

294.8

322.3

345.3

Cost of Sales

(101.4)

(130.7)

(138.1)

(162.8)

(179.5)

Gross Profit

93.3

138.3

156.7

159.5

165.7

EBITDA

 

 

70.4

102.2

105.7

113.8

116.4

Operating Profit (before amort. and except.)

70.1

101.6

104.3

112.4

115.0

Intangible Amortisation

(50.6)

(55.5)

(55.0)

(55.0)

(55.0)

Exceptional and other items **

(109.7)

(52.5)

(9.7)

(5.2)

(4.9)

Share based payments

(2.9)

(2.3)

(2.1)

(2.5)

(2.5)

Operating Profit

(93.1)

(8.7)

37.5

49.6

52.5

Net Interest

(24.0)

(35.9)

(33.3)

(28.0)

(22.0)

Profit Before Tax (norm)

 

 

46.1

65.6

70.9

84.4

93.0

Profit Before Tax (FRS 3)

 

 

(114.2)

(40.7)

(1.0)

24.3

33.0

Tax

(0.5)

0.1

(0.7)

(2.5)

(4.5)

Profit After Tax (norm)

45.5

65.7

70.3

81.9

88.5

Profit After Tax (FRS 3)

(114.8)

(40.6)

(1.7)

21.8

28.5

 

 

Average Number of Shares Outstanding (m)

61.2

71.2

74.0

74.5

74.5

EPS - normalised (p)

74.4

92.2

94.9

109.9

118.8

EPS - normalised and fully diluted (p)

 

73.0

88.4

93.8

109.2

118.0

EPS - (IFRS) (p)

(187.5)

(57.1)

(2.3)

29.2

38.3

Dividend per share (p)

0.0

0.0

0.0

0.0

0.0

 

 

Gross Margin (%)

47.9

51.4

53.2

49.5

48.0

EBITDA Margin (%)

36.2

38.0

35.9

35.3

33.7

Operating Margin (before GW and except.) (%)

36.0

37.8

35.4

34.9

33.3

 

 

BALANCE SHEET

 

Fixed Assets

 

 

674.3

652.3

598.4

545.9

494.5

Intangible Assets

668.8

648.8

593.8

538.8

483.8

Tangible Assets

0.2

0.9

1.9

4.5

8.0

Other long term assets

5.3

2.6

2.6

2.6

2.6

Current Assets

 

 

63.9

139.0

80.5

70.8

97.8

Stocks

0.0

0.0

0.0

0.0

0.0

Debtors (incl swaps)

25.6

62.0

35.0

37.0

37.0

Cash

31.8

68.5

36.5

23.8

49.8

Player balances

6.5

8.6

9.0

10.0

11.0

Current Liabilities

 

 

(54.3)

(154.9)

(118.7)

(64.4)

(60.7)

Creditors

(23.1)

(41.3)

(40.0)

(34.0)

(34.0)

Short term borrowings

(25.2)

(26.7)

(26.7)

(26.7)

(26.7)

Contingent consideration

(6.0)

(86.9)

(52.0)

(3.8)

0.0

Long Term Liabilities

 

 

(394.8)

(397.1)

(333.4)

(289.4)

(239.4)

Long term borrowings

(189.3)

(347.4)

(317.4)

(287.4)

(237.4)

Contingent consideration

(203.6)

(33.3)

0.0

0.0

0.0

Other long term liabilities

(2.0)

(16.4)

(16.0)

(2.0)

(2.0)

Net Assets

 

 

289.0

239.4

226.8

263.0

292.3

 

 

CASH FLOW

 

Operating Cash Flow

 

 

23.3

83.0

98.7

108.8

114.5

Net Interest

(24.0)

(35.9)

(32.0)

(28.0)

(22.0)

Tax

(0.5)

(1.2)

(0.7)

(2.5)

(4.5)

Capex

(2.5)

(2.5)

(2.5)

(4.0)

(5.0)

Acquisitions (inc earnouts)

(355.6)

(156.3)

(101.0)

(57.0)

(7.0)

Financing

203.7

(10.0)

35.5

0.0

0.0

Dividends

0.0

0.0

0.0

0.0

0.0

Net Cash Flow

(155.6)

(122.9)

(2.0)

17.3

76.0

Opening net debt/(cash)

 

 

27.1

182.7

305.6

307.5

290.2

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)

 

 

182.7

305.6

307.5

290.2

214.2

NPV of outstanding earnouts/ other

 

209.5

140.7

70.0

18.0

10.0

Currency swaps

 

 

(4.7)

(38.2)

0.0

0.0

0.0

Adjusted net debt

 

 

387.5

408.1

377.5

308.2

224.2

Source: Company accounts, Edison Investment Research. Note:* Exceptional and other items include transaction related costs, severance costs, fair value adjustments on contingent consideration and gain on cross currency swap.

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Jackpotjoy plc and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Jackpotjoy plc and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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Research: Metals & Mining

Alkane Resources — Getting back on track at the TGO

After a testing H117 at the Tomingley Gold Operation (TGO) due to high levels of rainfall that affected gold production, Alkane’s third quarter results show a return to profitable operations, with net cash flow from operations of A$6.5m reducing after delayed December 2016 payments to a net A$2.0m at quarter’s end. As weather conditions improved in NSW, Q317 gold production recorded a q-o-q increase of 59%, with 18,721ozs Au produced at AISC costs of A$1,201/oz. Sales of 16,303ozs Au at an average realised gold price of A$1,694/oz resulted.

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