Double-digit revenue growth and a sponsorship agreement with Leeds United Football Club send shares in online casino operator 32Red (TTR:AIM) soaring 10% to 128p.
The three-year agreement, which starts in the 2016/17 season, gives 32Red access to Leeds United's fan base and brand visibility on its shirts and at the club's stadium.
The group has previously sponsored clubs like Aston Villa and Swansea City and hopes the new deal will help further develop its brand.
The £97 million cap also reveals a 39% rise in like-for-like net gaming revenue in the first 19 weeks of the year. This suggests growth is accelerating, as final results on 10 March showed revenues grew by 35% in the first nine weeks of the year.
If the contribution from the Roxy Palace Casino business it acquired last year is included, revenues are up by an impressive 71%.
‘This acquisition appears to be bedding down very well as 32Red brings its strong marketing capability to the business,’ says Numis analyst Wyn Ellis.
The strong trading is partly due to a heavy programme of marketing, but also an increased return on marketing spend. 32Red is targeting its marketing more efficiently and improving its CRM (customer relationship management) activities.
Ellis says he’s increasingly confident 32Red will at least meet Numis forecasts, which assume a 26% rise in like-for-like revenue in 2016.
‘The balance sheet is strong, with over £10 million of cash at year end there is a clean drop-through of profits to cashflow and dividends,’ he says.
Numis’ price target is 200p, implying 56% upside.