Nektan issues profit warning ahead of full year results

24 June 2019

Nektan has issued a profit warning to investors as its decline in player deposits continued into the final quarter of its financial year.

The gaming technology platform and services provider, whose clients include BetVictor and News International, published a trading update in relation to its financial year ending June 30, noting that big rises in revenue will not be matched by earnings.

It said it expects to deliver year-on-year, double digit revenue growth and a significantly reduced EBITDA loss in FY19 compared to the previous year.

However, the Gibraltar-headquartered group's target of achieving EBITDA break-even in FY19 will not be achieved due to the slower trends experienced in Q3 continuing into Q4. It said earnings were impacted by a number of factors such as first time deposits and deposits, including the continued effect of increasing UK regulations around player marketing and verification. It had previously predicted these metrics would improve in Q4.

Forecasting a brighter FY2020, the company said it expects to go live with a number of new clients in the coming months.

"In our B2C business, management has taken a number of actions in conjunction with the company's partners, that are delivering positive underlying results," Nektan chief executive Lucy Buckley said. "We expect this to translate into better performance including increased margins. “This, combined with a pipeline of new partners and product launches, underpins the board's confidence that Q1 FY20 should see a return to quarter-on-quarter growth that has been delivered by the Company in nine out of the last 12 quarters.

“Nektan's B2B business continues to make exciting progress; our pipeline of opportunities is continuing to develop and has seen engagement with an increasing number of larger market participants globally. We expect a number of these to go live during the remainder of 2019, which has the scope to have a transformational impact on our business.

“We continue to focus on moving to profitability and look forward to providing a more detailed update in our Q4 FY19 trading announcement in July 2019."

In its most recent quarterly statement, issued in April, Nektan reported a 5.9% year-on-year increase in revenue in Q3.

While revenue for the three months ended March 31 was up from £5.1m (€5.9m/$6.7m) in the prior year to £5.4m, this represented a 15.6% decline from the second quarter of the current financial year. The supplier only released figures on revenue, staking and customer numbers in its trading update, meaning there was no update on its bottom-line performance.

As Nektan mentioned in its results for six months ended December 31, 2018, this was down to factors such as seasonality, tighter UK regulations around player marketing and verifications and a delay in its Swedish operating licence being granted.

These issues impacted its core white label operation in Q3, with B2C net gaming revenue down 17.7% year-on-year and flat sequentially at £5.1m. First time depositors were down 12.2% from the prior year at 31,914, and down from the 36,328 reported in Q2, while customer stakes fell 1.0% from FY2018 to £141m, a 16.0% month-on-month drop.

A further 10 white label clients were signed up during Q3, with 152 sites currently live.