XLMedia issues profits warning

11 June 2018

XLMedia’s shares were down by almost a third today (Monday) after the company issued a profits warning.

The gambling-focused digital marketing services company, which trades on London’s AIM, said it expects to report lower revenues than expected of circa $130m (€110m). That would be lower than the $137m registered in 2017.

In a statement, XLMedia said it has been impacted by regulatory changes, namely the closure of the Australian market at the end of 2017.

“Uncertainty” regarding the regulatory status of certain European markets during 2018 has also been a factor.

The company said: “These regulatory changes have triggered a re-alignment in how operators and marketers can work which should lead to a clearer and more functional environment.

“There has also been some reduction in SEO performance in few specific territories.”

XLMedia said the recently acquired personal finance assets continue to perform well and expects total publishing revenues in this sector to continue to grow as a proportion of overall group publishing revenues during 2018.

It added that it retains a “solid pipeline of acquisitions targets under various stages of evaluation and the board remains optimistic of completing further transactions within 2018.”

In March XL Media announced in its report for 2017 that pre-tax profits had grown by 27% to $39.3m compared to 2016 as revenues increased by 33% to $137.6m across the same period.

The company expanded into the cyber security market during 2017 with the acquisition of US cyber security comparison website Securethoughts. It bought bingo comparison site WhichBingo.co.uk for an undisclosed sum in April.

XLMedia also announced a $43.6m fundraise in January this year, earmarked to support further growth.

Paul Leyland of Regulus Partners said XLMedia’s travails are symptomatic of the gambling industry’s exposure to regulatory changes.

He said: “Gambling companies (not all but possibly a critical mass in certain sectors) have developed a bad reputation for both underlying regulatory volatility and not clearly explaining the risks (by no means limited to .com-exposed operators).

“This might appear to be most painful on days of reckoning, but it is also likely to be an increasing problem when dealing with stakeholders who might be more alarmed by and averse to this sort of thing than ‘risk on’ small-cap investors (eg, governments, regulators, large regulated businesses).”

Related article: XLMedia hails record performance in 2017