cites organic growth after posting profit in 2018

27 February 2019 Group has cited organic growth, in combination with M&A activity, as a key driver of a year-on-year increase in revenue for 2018, and for helping it post a profit for the period after making a loss in its 2017 financial year.

Revenue for the 12 months through to December 31, 2018, amounted to €16.2m (£13.9m/$18.4m), up 63% on €9.97m in the previous year.

The Nasdaq Stockholm-listed group has said that acquisitions played a major part in this increase, in combination with organic growth over the year. Organic growth for 2018 was 37% and, when excluding paid revenue, this stood at 46%.

Search revenue was responsible for the majority of overall revenue, contributing €13.6m of the total, up from €7.57m in 2017. Paid revenue amounted to €2.62m, compared to €2.4m last year.

The company noted an increase in expenses for the full year, with this amount up from €7.36m to €11.89m. Much of this was down to higher personnel expenses, the performance-marketing business spending €3.9m compared to €1.3m last year.

The group said that it has scaled-up its operational resources in terms of management, personnel, full-time consultants and board of directors to support its wider growth plans.

There were also increased expenses across direct costs related to paid revenue, with this rising from €2.38m to €2.58m, while depreciation and amortisation also climbed from €342,000 to €627,000. Elsewhere, non-recurring costs related to financing and investing increased from €222,000 to €849000, with other operating expenses up from €3.1m to €3.97m.

However, despite the higher expenses, Group plc was able to post a healthy profit of €5.4m for the year, a stark improvement on the loss of €4.7m that was reported at the end of 2017.

Operating profit increased from €2.6m to €4.3m, while profit before tax was also up from a loss of €4.8m to a positive of €5.5m. Adjusted EBITDA, excluding non-recurring costs, for the full year amounted to €5.8m, up 84% on €3.2m in 2017, while EBITDA climbed 69% year-on-year to €4.98m.

Reflecting on the results, chief executive Charles Gillespie praised the performance, highlighting record revenue figures for the fourth quarter as a particular highlight.

Q4 revenue amounted to €4.9m, up by 81% on €2.7m in 2017, while adjusted EBITDA increased 93% year-on-year to €1.4m and EBITDA 92% to €1.6m. experienced a loss of €477,000 for the quarter, but this was an improvement on the loss of €2.8m in the same period last year.

“The group’s assets have continued to perform across the board, but particularly well in terms of organic search on the back of the Google algorithm updates from the second half of 2018,” Gillespie said.

Gillespie also acknowledged regulatory changes in regions around the world that are likely to impact the business moving forward. In terms of the US, Gillespie is positive about opportunities in the US, despite the Department of Justice’s updated opinion on the Wire Act.

“The legal standing of the updated opinion is highly contentious, has been vigorously attacked by former DOJ officials, politicians, legislators, attorneys general and the mainstream media, and already faces multiple court challenges,” he said.

“We see the long-term effects of the new opinion being limited, but the short-term impact will be a headwind on states looking at regulating sports betting this year.

“Despite the re-interpreted Wire Act, we have seen sports betting bills being introduced in 25 states so far in 2019. The proposals vary, many of which do not include provisions for a viable online gambling market in their current forms, but the amount of activity is extraordinary, and the general trend is positive.”

Gillespie also gave opinion on changes in the European regulatory landscape, including in Sweden where the new, regulated market went live on January 1. Gillespie said that group assets are performing well in terms of new depositing customer production, but player value has somewhat decreased as the market absorbs the new taxes and fees required to operate.

In December, the plc listed €16m in senior secured notes on the Nasdaq Stockholm exchange in a move Gillespie said would boost its credibility and support its expansion plans in the US.

In terms of new regulations in the UK, where Remote Gaming Duty will increase from 15% to 21% as of April 1 this year, Gillespie said this represents “a small headwind in terms of player values” in what is the group’s largest market.

“Despite the short-term regulatory challenges, we remain confident in our ability to deliver substantial growth over the next 12 months,” he said. “A key focus area for 2019 is diversifying away from the UK into other regulated markets.

“We are also re-doubling our efforts to maintain our lead in terms of technology by investing further into our internal tools.

“We remain determined to continue to build long-term value for the group by becoming a leader in performance marketing in the United States while further strengthening our position in Europe.”