chief praises revenue growth despite headwinds

21 August 2019 Group chief executive Charles Gillespie has praised the affiliate marketing provider’s revenue growth in the second quarter despite earnings being squeezed by “regulatory headwinds” and a comparatively quiet sporting schedule.

Sales totalled €4.42m (£4.02m/$4.87m) in the three months through to the end of June – a 17% rise year-on-year, with all of the growth being organic.

A healthy 22% rise in new depositing customers to 19,487 in the quarter helped to boost net cash generated from operating activities from €870,000 to €1.62m.

However, earnings before interest and deductions (EBITDA) and EBITDA margins slipped, with Group citing the increase in UK remote gaming duty from 15% to 21% on April 1, as well as the introduction of more stringent ‘Know Your Customer’ requirements for operators in the UK, its biggest market, as significant developments.

EBITDA totalled €940,000, down from €1.14m in the corresponding period in 2018, with EBITDA margin falling from 30% to 21%. Adjusted EBITDA excluding non-recurring costs totalled €990,000, down from €1.39m, with adjusted EBITDA margin slipping from 37% to 23%.

However increased personnel expenses, which more than doubled year-on-year to €1.83m, hit quarterly operating profit, which declined to €856,000. While profit declined from €5.22m to €244,000, the prior year included a €4.77m gain in the fair value changes to financial liablilty, providing especially tough comparatives.

In the first six months of 2019, revenue has grown year-on-year by 34% to €9.67m, with almost all of the rise attributable to organic growth, while there has been a 46% increase in new depositing customers to 46,752.

Although EBITDA margins have reduced slightly, EBITDA and adjusted EBITDA excluding non-recurring costs are up from €2.14m to €2.70m and €2.70m to €2.75m, respectively, in spite of the Q2 challenges.

New cash generated from operating activities has totalled €2.67m, up from €2.39m in the first half of 2018.

Personnel expenses soared to €3.44m in H1, offsetting declines in revenue-related costs and non-recurring financial expenditure. Despite this operating profit for the period grew strongly, rising 31.6% to €2.36m. However the €4.77m fair value change gain again proved a tough comparative, with net profit for the period, after finance expenses and taxes, down to €1.16m. 

“The group continued on its growth trajectory by delivering revenue of €4.42m, representing growth of 17% compared to Q2 2018, despite regulatory headwinds and no major sporting events occurring during the quarter,” Gillespie said.

In May, Group announced that it would invest in the development of products for the US market in the year ahead after reporting a 52% rise in year-on-year revenue in the first quarter of 2019.

The super affiliate noted that it had received approval from the Pennsylvania Gaming Control Board and the West Virginia Lottery to provide services to licensed gaming operators in the second quarter. In the most recent three-month period, the company also opened a second US office in Charlotte, North Carolina.