Stride talks up UK growth prospects as full-year losses fall

21 November 2018

Bingo operator Stride Gaming has claimed that its proprietary technology will help increase its UK market share once the increase in remote gaming duty is implemented in April 2019, after growing revenue and cutting losses for the year ended August 31.

The company reported an 8.7% year-on-year increase in net gaming revenue to £89.0m for the year, driven by the strong performance of the group’s proprietary technology platform. Revenue generated through the platform grew 23.8% to £60.5m, accounting for 68% of total revenue.

Over the year player deposits were up 6.8% to £157m, though yield per player fell marginally to £144. Funded player accounts also declined, falling 6.1% to 137,000, which Stride blamed on its strategy of focusing on increasing player lifetime value and reducing the number of customers using free bets. Since August 2017, these bets have been subject to point of consumption tax on the value of the free plays.

The operator also reported growth in mobile play, with 69% of revenue generated through mobile and touch devices, up from 66% at the end of the 2017 financial year.

Adjusted earnings before interest, tax, depreciation and amortisation fell 18.2% year-on-year to £16.1m, which Stride blamed on gaming duty being applicable to free bets. On a like-for-like basis, adjusting for the effect of the new tax, underlying adjusted EBITDA would have been up 1.5% from FY 2017. The tax also contributed £3.8m towards the cost of sales for the year, which rose 37.9% to £16.0m.

"Against a very challenging trading environment, we are pleased to report very satisfactory 8.7% growth in net gaming revenue and an adjusted EBITDA of £16.1m,” Stride chief executive Eitan Boyd (pictured) said. “This was achieved after absorbing £3.9m of additional fiscal and regulatory costs, and further demonstrates the strength of our experienced and dedicated team, scale, proprietary technology and unique in-house ecosystem.”

Distribution costs, including licensing, processing, royalties for third-party games and platforms and marketing, rose to £35.8m, or 41.9% of group net gaming revenue. Stride said that it was focused on migrating players from third party sites to its proprietary platform in a bid to reduce costs, which contributed to marketing expenses rising 8% year-on-year to £22.3m. Administrative costs, including staff-related expenses, were up 11% at £18.0m.

Stride also saw its results impacted - both positively and negatively - by a number of exceptional items. The company was fined £7.1m by the UK Gambling Commission for failings relating to the social responsibility and anti-money laundering processes of its Daub Alderney subsidiary earlier this month. After initially complaining about the size of the fine, Stride has decided not to appeal the decision, and has now made a full provision for the penalty charge in its 2018 accounts.

The operator received a £6.0m payment from Rank Group for QSB Gaming, a Spanish-facing iGaming operator in which Stride held a 24.2% stake. For the reporting period, it realised a total profit of £10.4m from the disposal. It also made a loss of £4.4m from the discontinuation of its social gaming business InfiniApps, which has been put up for sale.

Finance expenses for the period amounted to £0.6m, with an additional £0.5m paid in tax, which ultimately saw the company report a post-tax loss of £5.0m, down significantly from losses of £25.6m in the prior year.

Looking ahead, Stride said that it expected to capitalise on the disruption resulting from the remote gaming duty increase in the UK. It explained that it expected to take market share from competitors unable to mitigate the increased financial burden, as well as taking advantage of opportunities arising from market consolidation.

"We have started the new financial year in a strong cash position with net cash of £26.6 million. We recently concluded lengthy discussions with the UKGC, not least so we can singularly concentrate on optimising the undoubted opportunities for us in the UK market, a market which, while challenging, remains the largest single regulated gaming market in the world,” Boyd continued.

He said that trading since the start of Stride’s current financial year had been satisfactory and in-line with expectations.

"Looking further ahead, the board is confident in the quality, flexibility, efficiency and robustness of the group's operating model and ability to continue to grow in both relative and absolute terms despite the trading environment,” Boyd added.