Saturday 22 October 2016

Dermot Smurfit heads for Las Vegas to take Game Account Network to the next level

Published 14/06/2015 | 02:30

Dermot Smurfit
Dermot Smurfit

Dermot Smurfit is in talks with "an extraordinary range of US casinos" as he seeks to move his gambling software company Game Account Network back into profit.

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The company lost £2.6m before tax last year, and now Smurfit is packing his bags and heading for the USA to help drive expansion forward.

"I'm moving my long-suffering wife and three children out of London and into the desert, we're moving to Las Vegas in August. We're going to spend 12 months over in America.

"I've been spending so much time in America working on expansion over there that I think it's cheaper to move my family than have a divorce!

"We have loads of potential customers in the pipeline... we've signed up seven US casinos. Three of them are live, the rest are going to be live before the end of the year."

The company's technology, which it licences to casinos and online operators, encompasses both real-money gambling and something Game Account Network calls simulated gaming - selling virtual currency to players who then use it to gamble on casino games purely for entertainment, not profit.

It's also just launched a "freemium" mobile game - a free download that offers customers the chance to make in-app purchases - and is hoping to start making consistent money from selling complex "remote gaming servers" that allow slot-machine makers to move their games online.

But the main priority is to get the company's technology into more casinos to stabilise the company's revenue stream, and in turn lift a share price which is almost half the IPO price of 135p.

The company floated in 2013 to try and take advantage of the legalisation and regulation of internet gambling in US states. It forecast the market would be worth $8bn in gross revenue within five years, if the pace of regulation remained at the same level.

But it didn't, and the company has had a tough few years. Smurfit, who's the largest investor, says the price drop came because some institutional investors sold out due to the "dramatic" slowdown in the pace of regulation. For an AIM-listed stock that doesn't have a large trade volume, the effect was dramatic. It meant a hefty drop in the value of the Smurfit family's investments in the company.

At the end of last year, Smurfit's uncle Michael Smurfit Snr owned 9.5pc of the company, a stake then valued at £2.7m, compared to a value of £7.2m at the end of 2013. But in 2015 the share price has recovered and that stake would now be worth £3.7m.

Another major investor is Smurfit Kappa CEO-designate Tony Smurfit, who owned 8.4pc of the company at the end of 2014 and is described by Dermot Smurfit as a mentor.

"He's a very, very smart guy. I routinely tease him that he's probably the smartest guy in the family, which winds up his dad - Michael Snr - a little bit. But Tony has been enormously supportive, he's fascinated by the business. He really understands why people do this and understands how the share price today is not a reflection of the value of the company."

Those aren't just words either, Dermot's been putting his money where his mouth is.

"During the course of last year, I bought at 70p... and more recently in April I bought at 42p.

"I consistently say to everyone, just follow my money. Clearly I'm a buyer, I'm not a super-wealthy Smurfit family member, I'm still working on that. So for me to put £20,000, £30,000, £40,000 in to buy my own shares, it's a big statement for me.

"The market cap is around £45m at the moment, we've invested the better part of £40m developing the technology platform. And not a lot of people appreciate how scarce it is to own a technology platform like this."

Game Account was born when the Jefferson Smurfit family company was taken private by Chicago-based private equity firm Madison Dearborn in 2002. Some of the younger members of the Smurfit family were invited to pitch investment ideas. Dermot Smurfit put up his hand and said he thought internet gaming - everything from online gambling to video games - was the way to go.

Before long, we'll find out whether it was a wise gamble.

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