Nektan boosted by B2C performance in H1
Nektan has cited growth within its core white label operations as the key driver of a 48% year-on-year rise in revenue during the six months to December 31, 2018, with the company's chief executive Lucy Buckley describing H1 as a "landmark" period for the business.
Net gaming revenue for the first half amounted to £13.0m (€15.2m/$17.1m), compared to £8.8m in the corresponding period in the previous year. This also represented a 17.6% sequential increase in the second half of Nektan's 2017-18 financial year, ended June 30, 2018. This was aided by strong growth in Nektan's core B2C white label division, which saw customer stakes rise 36% to £346.2m. This comes despite first-time depositors remaining relatively flat year-on-year, at 75,334.
Cost of sales for the period were up 47.2% to £4.5m, leaving a gross profit of £8.5m, up 48.1% year-on-year. Once marketing, partner and affiliate costs of £6.1m and administrative expenses of £2.1m were stripped out, Nektan was left with adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) of £336,000, an improvement of on the £916,000 loss in the prior year. Nektan said this swing to profitability reflected its focus on efficient growth, with a view to achieving European EBITDA break-even by the end of its 2018-19 financial year on June 30, 2019.
Once depreciation, amortisation and other exceptional items were subtracted, Nektan posted an operating loss of £201,000, an improvement on the previous year's £1.9m operating loss. The business' post-tax loss from continuing operations amounted to £868,000, though this increased to a net loss of £4.8m once a £3.9m loss from discontinued operations, namely the US arm Respin, were factored in.
Lucy Buckley, who took over as CEO at Nektan in December, has said the first six months of the financial year has been a landmark period for the supplier, citing the BetVictor contract win as one of several big highlights during the period.
“Having signed some significant partnerships during the period, we are increasingly being seen as a major mobile and online casino technology business, providing premium gaming content from some of the best game developers in the world to some of the biggest gaming brands globally,” Buckley said.
“Achieving EBITDA break-even during the period is a key milestone for Nektan and our key focus for the remainder of FY19 is on maintaining and improving profitability.”
Buckley also updated on progress of Nektan divesting its majority stake in its Respin US subsidiary, saying this is still ongoing and will help reduce the cash burden on the business. Buckley said Nektan will keep a material stake in the US as the supplier sees it as an important emerging market.
“Whilst we believe in our US mobile casino product, and are excited about the macro trends in the market, the proposed sale of the majority shareholding of our US subsidiary is a major contributor to our profitability plan by removing Nektan funding for the US going forward, but retaining a material stake in the emerging US market,” Buckley said.
“In Europe, Asia and Africa, our emergent B2B division is generating new high margin revenue by licensing our proprietary technology to leading operators," she explained. “Nektan is in a strong position to build on the success of the first half of FY19 and we look forward to providing further updates.”
Despite this, Nektan said that B2C trading in Q3 2019 was flat year-on-year and down from the second quarter. This, it said was due to a range of factors impacting first-time depositors on its white label network, namely increased UK regulation around player marketing and verifications, as well as a delay in the the business being awarded an operating licence in the newly-regulated Swedish market.
"However, the Board expects trading to improve in the next quarter as we now have a record number of 152 casino brands on our network and are continuing to sign up new white label partners, as well as enhancing our player retention and loyalty tools," Nektan added. "Our B2B division grew significantly in H1 FY19 and the pipeline is very positive, especially in high growth regions such as Asia and Africa. We also continue to seek regulation in jurisdictions that we believe will be value accretive and lead to improved trading in the next quarter."