Sources inform "Globes" that following a wave of layoffs, Playtech Cyprus Ltd. (LSE:PTEC), managed by CEO Mor Weizer, notified Azrieli Group Ltd. (TASE: AZRG) last week that it was reducing the amount of space it had planned to rent in the new business tower under construction on the Sarona site.
Under the original plan, starting in late 2017, Playtech was slated to operating on four and a half floors in the new Sarona tower. In addition, the company had an option to expand the agreement to an addition floor. Playtech notified Azrieli last week that it was retracting its plan to rent some of the floors reserved for it in the tower.
Playtech is seeking a release from the lease for two and half additional floors, and furthermore will not exercise its option for another floor. The announcement means that Playtech will rent only two floors of offices.
Sources close to the company explained that the notification follows a decision to cut back on Playtech's business in Israel. They assert that the decision was taken following reconsideration of the company's operating costs in Israel and the lack of profit in local business, compared with other countries in which the company conducts its far-flung business.
As part of this decision, TradeFx, Playtech's second subsidiary, fired 80 workers in Israel, leaving it with 100. TradeFx handles Playtech's financial activity, and operates the Markets.com website for online contract for difference (CFD) trading. Like Xwise, which fired 150 employees in Israel in May, TradeFx was acquired by Playtech from Sagi himself, in this case for €208 million.
Sources close to the company said that TradeFx was trying to increase its automation, i.e. to be less dependent on human capital; most of those laid off were sales and customer service personnel, not necessarily development personnel.
Playtech's 2015 financial statements show that its financial activity in TradeFx generated €60 million in revenue and earnings before income, taxes, depreciation, and amortization of €15.9 million (€14.2 million net), compared with €80 million in revenue and €30 million in EBITDA in 2014, a substantial decrease in business, which explains the company's layoffs in Israel. A Playtech spokesman said in response, "The company's decision are taken according to business considerations."
Playtech is not the only company linked to Sagi that is cutting back on its business in Israel. Crossrider Ltd. (AIM:CROS) last month laid off 20 of its employees in Israel, while recruiting the same number in Romania.
Crossrider specializes in optimization of Internet surfer traffic as an analysis tool for the digital advertising market. The company was hit hard by the crisis in the digital advertising sphere, and its share has plunged 73% since the company held its IPO. The company's current market cap is $52 million, and Sagi owns 72% of its share capital.
Adience, which Sagi owns privately, fired most of its workers, leaving it with only eight. Sagi acquired Adience in late 2014 for $20 million. The company developed a system for managing mobile app users, based on deep learning technology. The purpose of this technology was to understanding the users' needs, which are only growing, and are becoming more complex with time and in the increasing masses of information on the Internet.
As far as is known, what is left of Adience's business is expected to merge with the business of Stucco Media, another Israeli company, acquired by Market Tech. Stucco Media operates the UK Camden Market website, owned by Sagi. Stucco, acquired for $34.5 million in cash and shares, has developed a platform for marketing e-commerce websites.
Published by Globes [online], Israel business news - www.globes-online.com - on August 7, 2016
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