JUMBO INTERACTIVE LIMITED ASX announcement
27 January 2022
Jumbo Interactive acquires StarVale to expand UK business
onlyJumbo Interactive Limited (ASX:JIN or Jumbo) is pleased to announce it has entered into an agreement to acquire 100% of the StarVale Group (StarVale), through a newly incorporated wholly-owned entity, Jumbo Interactive UK Ltd (as the purchaser), subject to satisfaction of certain conditions under the agreement.
StarVale is a leading UK External Lottery Manager (ELM) and digital payments company, and the acquisition aligns with Jumbo's strategy to build scale in its Managed Services and Software-as-a-
useService (SaaS) business segments.
Overview of acquisition
The strategic acquisition of StarVale is transformational for Jumbo's international expansion strategy and follows the successful acquisition of UK-based Gatherwell Ltd (Gatherwell) in November 2019 and the conditional acquisition of Canada-based Stride Management Inc. (Stride) in August 2021. Once complete, StarVale will form part of Jumbo's Managed Services business
segment, along with Gatherwell and Stride1.
personalLancaster-based StarVale provides services to over 850,0002 active lottery players across over 45 charities and not-for-profit organisations, with many of these being major UK charities. StarVale
also comprises of DDPay Ltd, a wholly owned subsidiary and digital payments company that facilitates Direct Debit payments and provides cost effective Direct Credit payment solutions to StarVale's weekly lottery clients.
Jumbo Interactive CEO and Founder Mike Veverka said "We identified StarVale as one of our top acquisition opportunities in the UK given their scale and leadership position in the charity lottery market, strong brands, cultural alignment with Jumbo, and their talented leadership team. The acquisition helps accelerate our strategy to grow internationally and adds significantly more scale to our Managed Services business in the UK."
Starvale Director and Founder Phil Magleave said "I'm delighted that StarVale will soon join the Jumbo family and am looking forward to working with Jumbo to continue supporting our charity and not-for-profitclients raise vital funds for their 'good causes'. With ongoing changes in technology and increased digitisation expected in the lottery industry, the acquisition by Jumbo will expand its product range and the opportunities available to its valued clients - and grow what is
Foralready a highly successful business."
For the 12 months ended 31 December 20213, StarVale is forecasting to generate ~A$119 million4 (£63 million) in Total Transaction Value (TTV) with Adjusted Revenue of ~A$9.6 million4 (£5.1 million5) and Adjusted Net Profit Before Tax (NPBT) of ~A$3.8 million4 (£2.0 million5).
- Remains subject to regulatory approval
- Estimated number of players who have bought a ticket within the last 12 months (as at 31 December 2021)
- Management forecast (unaudited) for year ended 31 December 2021
- Based on exchange rate of £0.53 = A$1.00
- Adjustment principally relates to benefit from UK Government COVID job retention scheme
Jumbo Interactive Ltd | ABN 66 009 189 128 | Level 1, 601 Coronation Drive, Toowong Qld 4066 www.jumbointeractive.com
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ASX announcement
27 January 2022
Jumbo will conditionally acquire StarVale for ~A$32.1 million4 (~£17.0 million), and up to ~A$7.5 million4 (£4.0 million) to ~A$8.5 million4 (£4.5 million) of deferred consideration, payable following
only30 June 2023 and subject to achieving certain earnings hurdles.
The total consideration (excluding surplus cash funds of ~A$9.4 million4 (~£5 million) to be acquired) represents an implied enterprise multiple of approximately 7.3x6 StarVale's expected NPBT for the year ended 30 June 2023. The acquisition will be funded via a new debt facility and is expected to deliver low to mid-single digit Earnings Per Share (EPS) accretion in the first 12 months post-completion.
The acquisition provides Jumbo with another established and reputable ELM including a digital usepayments company with a high quality client base and proven track record of success.
Additionally, the acquisition provides:
- A unique opportunity to significantly broaden Jumbo's footprint and increase scale in the UK not-for-profit sector with access to over 850,0002 active players and over 45 charity and not- for-profit clients;
- A significant opportunity to leverage the Powered By Jumbo (PBJ) platform to drive further growth and efficiencies for clients, including access to larger customers, providing an internal market for further SaaS opportunities;
- Access to digital payments solutions capabilities including Direct Debit origination services through the acquisition of DDPay Ltd (a wholly owned subsidiary in the StarVale Group) which is expected to provide cost efficiencies for Gatherwell and our wider UK operations, and facilitate further access to the charitable giving market;
- Considerable local market knowledge, expertise and operational capabilities to drive further UK expansion, and increased resources, bandwidth and learnings to assist Gatherwell; and
- A compelling financial profile with strong revenue/profit economics and cash conversion.
personalCompletion of the transaction remains subject to UK Gambling Commission approval which is anticipated by the end of FY22. The current management team of StarVale, including the founder
Phil Magleave, will remain with the business post completion.
New debt facility
Jumbo has successfully secured a new $50 million senior debt facility for up to five years with an initial tranche of $30 million to be used for the acquisition of StarVale and a further $20 million available for future acquisitions and growth initiatives.
ForCapital management
The Board continuously reviews and assesses Jumbo's capital management framework in the context of the organic capital generation of the business, future capital requirements, the strength of the balance sheet and the desire to provide an appropriate dividend to shareholders.
- Estimated number of players who have bought a ticket within the last 12 months (as at 31 December 2021)
- Based on exchange rate of £0.53 = A$1.00
- Based on £16.0m (£12.0m upfront payment and £4.0m deferred consideration) and FY23 expected NPBT of £2.2m. Up to a further £500k in consideration (calculated on a sliding scale basis) may be payable if NPBT exceeds £2.2m.
Jumbo Interactive Ltd | ABN 66 009 189 128 | Level 1, 601 Coronation Drive, Toowong Qld 4066 www.jumbointeractive.com
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ASX announcement
27 January 2022
Jumbo's dividend policy is currently to pay out 85% of statutory Net Profit After Tax (NPAT) to shareholders as ordinary dividends. This was considered appropriate given limited alternative uses
onlyfor cash and the strong cash generation profile of the Lottery Retailing segment.
The Board has resolved to adjust its targeted dividend payout ratio to a range of 65% to 85% of statutory NPAT following the completion of the StarVale acquisition. The new dividend policy, which will be effective from FY23, will enhance Jumbo's flexibility to repay debt while maintaining a satisfactory dividend yield for shareholders.
Additional information relating to the StarVale acquisition is attached to this release. Jumbo CEO and Founder Mike Veverka and CFO David Todd will host a conference call today at 9.00am
use(Brisbane time/AEST) in relation to this announcement.
To register to access the conference call please click on the following link: https://s1.c-conf.com/diamondpass/10018908-as22ff.html
- Ends -
personalAuthorised for release by the Board of Directors. For further information contact:
About Jumbo Interactive
Jumbo is Australia's leading dedicated digital lottery company, making lotteries easier by offering its proprietary lottery software platform and lottery management expertise to the government and charity lottery sectors in Australia and globally, and by retailing lottery tickets in Australia and the South Pacific via ozlotteries.com.
Jumbo was founded in Brisbane in 1995, listed on the ASX in 1999, and has ~160 employees creating engaging and entertaining lottery experiences for its global player base.
For
Jumbo Interactive Ltd | ABN 66 009 189 128 | Level 1, 601 Coronation Drive, Toowong Qld 4066 www.jumbointeractive.com
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Disclaimer
only | This presentation contains summary information about the activities of |
Jumbo Interactive Limited (Jumbo) and its controlled subsidiaries | |
(Group) current as at the date of this presentation. It should be read in | |
conjunction with Jumbo's other periodic and continuous disclosure | |
announcements lodged with the Australian Securities Exchange (ASX), | |
including the Annual Report 2021 and the FY21 Financial Results released | |
26 August 2021, available at www.asx.com.au. | |
This presentation is for information purposes only and is not a prospectus or | |
product disclosure statement, financial product or investment advice, | |
recommendation or any other form of disclosure or offer or solicitation to buy | |
or sell Jumbo shares under Australian law or in any other jurisdiction. This | |
presentation has been prepared without taking into account any individual | |
userecipient's (Prospective Investor) investment objectives, financial | |
ersonal | circumstances or particular needs. Prospective Investors should seek legal |
and taxation advice prior to making an investment decision. | |
No representation or warranty, express or implied, is made as to the accuracy, completeness or thoroughness of the information contained in this presentation, nor as to the future performance of Jumbo shares.
All dollar values are in Australian dollars (A$) unless otherwise stated.
This presentation may contain certain forward-looking statements including statements regarding Jumbo's current anticipated belief, expectation or intent with respect to the Group's future performance. Such forward-looking statements are based upon information presently known, assumptions regarding numerous factors and subjective judgement, and are subject to various risks, contingencies and uncertainties which are beyond the control of Jumbo. Accordingly, the actual results or performance of the Group could differ materially from those expressed or implied in such forward-looking statements. Prospective Investors are cautioned not to place undue reliance on forward-looking statements. Except as required by law or regulation (including the ASX Listing Rules), Jumbo undertakes no obligation to update these forward-looking statements.
Past performance information given in this presentation is provided for illustrative purposes only and is not, nor should it be relied upon as, an indication or guarantee of future performance.
Jumbo Interactive Acquisition of StarVale Group, January 2022 | 1 |
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Jumbo Interactive Limited published this content on 26 January 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 26 January 2022 21:33:04 UTC.
