HL SELECT UK INCOME SHARES
Position sold
Fund changes
HL SELECT UK INCOME SHARES
Fund changes
Steve Clayton - Fund Manager
21 December 2017
We have recently made some changes in the portfolios. On both HL Select UK Growth Shares and HL Select UK Income Shares we have sold out of Playtech altogether. Playtech’s core activity is providing gaming operators with software and support services to help them run both their online operations, and the systems they use within their retail outlets too. The business has been very successful over a number of years, but we feel that cracks are beginning to show.
Regulation has long been a major influencer within the gambling industry, driving operators’ profitability and often their strategic direction too. Some of Playtech’s sales are made to unregulated operators in Asia and the company recently warned of a loss of business in Malaysia after a crackdown on local players who were offering Playtech games via internet gaming cafés. Whilst in its own right, the cost was not that dramatic, it raised the prospect of similar actions in the much larger Chinese market.
At home, it was recently announced that GVC Holdings is to merge with Ladbroke Coral. Ladbroke are a strategic customer for Playtech, who own a stake in the group and provide extensive services to them. GVC intend to introduce their own systems, displacing Playtech. In the short term, Playtech should make a profit on their investment, but face a longer term loss of revenues.
Playtech themselves are struggling with a contract they took on to run Sun Bingo. Playtech pay The Sun for the right to run the Sun Bingo game, but so far, have not been able to earn a profit on the deal and are currently locked in to a loss-maker.
Of all these events, we view the GVC/Ladbroke Coral deal as the most significant. Playtech have a high share of the UK online gaming support market, with most major operators using Playtech software behind the scenes. The argument has always been that without Playtech, operators will struggle to earn the returns they seek. GVC are clearly saying this is no longer so, and that operators can capture the margin currently earned by Playtech for themselves. That undermines the longer term case for the stock.
Accounting for dividends received, the fund lost 2.75% on its investment in Playtech.
More about HL Select UK Income Shares
Please read the Key Investor Information Document before you invest.
Important information: Investments can go down in value as well as up, so you might get back less than you invest. If you are unsure of the suitability of any investment for your circumstances please contact us for advice. Once held in a SIPP money is not usually accessible until age 55 (rising to 57 in 2028).
The maximum you can invest into an ISA in this tax year 2024/2025 is £20,000. Tax rules can change and the value of any benefits depends on individual circumstances.
Invest in an ISAYou can place a deal online now or top up an existing account first, using your debit card.