Probability boss says path to profitability is clear

Charles Cohen, chief executive of Probability (LON:PBTY), says his firm is in for the long haul – when it comes to exploiting the business potential of gambling on mobile phones.

“Our path to profitability is clear,” he tells Proactive, “and as the market keeps getting bigger, we set our sights ever higher.”

“We are in the process of creating and hopefully dominating what is set to be one of the most significant sectors in this industry (gambling).

“We’ve got the best technology in this sector and a great business model that blends b2c with b2b with international potential.”

And judging by its recent Q2 update, where the firm reported continued growth, this goal is not just wishful thinking.

It reported a 35% increase in net gaming revenue to £2.3 million and said player deposits were up 44% compared to the comparable quarter. 

Probability brings gambling games to smartphones and is a first mover into this space.

Since 2004, it has been looking to tap into the mobile generation in regulated gambling markets with a unique “direct to mobile” proposition that doesn’t require the customer to use a PC.

It now has a suite of 30 games, all optimised to work on thousands of different types of mobile phone and tablets. 

This summer saw it make a breakthrough in getting its LadyLucks app into the Apple store and the app now been downloaded more than 40,000 times in the last five months.

The firm’s current focus is the UK market, where Cohen believes it will be thoroughly “embedded” in a year, and in Italy where it is looking to be “well established” 12 months from now after it bought mobile gambling and sports betting platform Playoo earlier this year.

Probability’s slots games (basically a slot machine on a mobile phone) are being introduced to Italy later this year. 

The move should reap rewards, not least as Italy’s smartphone penetration is actually bigger than the UK’s.

Where sports betting dominates the UK’s gambling market, more than half of revenues last year was on slot machines (not sport) so Probability’s games should go down well with Italian punters, he explains.

And Probability doesn’t plan to stop at Italy in its quest to dominate the market, though for the time being, says Cohen, there are no other markets in Europe that are regulated or open, although that may change, he says.

“Sweden is looking like it’s going to do something in the next 12 months or so. France and Germany and Spain all have regimes that are evolving quickly,” he says.

Meanwhile, in its consumer business, Probability targets what it calls “casual” players who don’t see themselves as gamblers.

Interestingly these are mostly people who have never actually gambled online, according to Probability’s own data, and are attracted by its “friendly” branding.

Cohen believes the reason for this is simple:  

“With a mobile you tend to play for a few minutes here and there and you might spend a few quid. With online you are talking about a major commitment of time and very often money. It’s an entirely different impulse.

“The average mobile gambling session is just 12 minutes. This is entertainment rather than serious gambling. 

“Some investors worry about whether gambling companies are responsible and well run. That’s fair. Probability is one of only 20 or so companies licensed to operate in Gibraltar and we also have a UK licence, meaning we operate under some of the toughest regulations in the world. 

“We look after our customers from our base in Gibraltar. We’re not afraid to intervene if we think someone may be spending more than they realise or can afford.”

The firm’s B2B offerings work in a different way, in which it becomes an anonymous provider of gambling software for bigger firms via a remotely hosted platform.

Alternatively, it provides a complete white label service for those who want to build a mobile brand but don’t manage it themselves.

And Cohen says the B2B side of the business couldn’t be doing better.

Its games are already being used by high street names such as Paddy Power, William Hill and Ladbrokes and it already has 20 live white label brands. In Italy, Probability has some of the biggest names as clients, including gambling giants SNAI and Cogetech.

Cohen argues that the B2B business can grow alongside B2C without conflict.

The theory is that B2C gives Probability in depth knowledge of what customers want, which feeds into better game design and user experiences which are appreciated by the B2B customers.

Probability is also able to offer bigger jackpots and Bingo games by sharing liquidity between its B2B, B2C and white label businesses.

In addition, its tie up last month with American firm Glu opened up another intriguing opportunity and Cohen is keen to see whether there is an overlap between Glu’s players and his own.

The partnership allows Probability to access Glu’s popular game designs so it can base its own gambling games around them.

Separately, Glu will be able to “cross-sell” Probability’s gambling games to its players.

Cohen sees the tie-up as full of potential as does City broker Numis, which said it believed that Glu will, in due course, become a white-label B2B customer of the firm.

After the firm’s Q2 update, the broker was equally as bullish.

“Probability is in a sweet spot which keeps getting bigger as smartphones increase their share of the phone market, tablets replace desktops (even before the expected launch of the iPad mini) and 4G prepares to replace wired and Wifi connections,” analyst Ivor Jones said, rating the stock a ‘buy’.

“We believe that it is time for the share price to wake up and smell the espresso,” he added.

So there has already been much growth at Probability with plenty more to come.

The shares have put on around two per cent in the last six months to 78.5 pence, but with Numis targeting 150 pence, the potential for growth is obvious.

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