Global Gaming struggles in Q2 following Swedish licence loss

Regulatory issues hit Global Gaming hard in the first half of 2019, with the company seeing revenue and profits badly hit by the revocation of its Swedish operating licence.

During a period chief executive Tobias Fagerlund (pictured) described as “the most turbulent and difficult” in the operator's history, second quarter revenue fell 42% year-on-year to SEK132.2m (£11.4m/€12.3m/$13.8m). Global's Swedish licence was revoked by the country's gambling regulator on 17 June as a result of significant failings in its player protection and anti money laundering controls. This cost the company an estimated SEK20m over the final 13 days of the month. 

“When we got to the month of June, we positively thought we could realistically expect to be back into black figures already in the second quarter, thus achieving the intended turnaround,” Fagerlund said. “Everything changed on the morning of 17 June, when the Swedish Gambling Authority announced that they had withdrawn – with immediate effect – the gaming license that lay at the foundation of the group’s Swedish operations.

“Those who have followed the extensive media coverage of the decision know that we do not share the Swedish Gambling Authority’s opinion and have therefore appealed it.”

The group posted revenue of SEK 132.2m, down from SEK 227.8m year-on-year. Operating expenses related to gaming activities fell 31.3% to SEK63.0m, while marketing expenses fell by 51% to SEK34.1m. Personnel expenses, however, increased from SEK 17.7m to SEK 26.9m, while the company also incurred an SEK11.6m cost on write-down of capitalised development expenses. Fagerlund said that the regulator’s decision affected expenses as well as revenue, as the company had to mitigate the effects of terminated contracts with suppliers.

“In one fell swoop, most of the group’s revenue was wiped out and, as a not unexpected direct consequence, reactions from suppliers and partners were not late in coming,” Fagerlund said. “As an example, the company auditor, KPMG, terminated their contract without any further explanation or notice. These events forced us to act quickly. And act we did.”

This saw Global Gaming make significant personnel cuts, which will see its total headcount fall from 190 full time employees and consultants to as low as 90 by the fourth quarter of the year. The company’s technology hub in Sweden will be completely shut down, while its Malta office will see staff and activity.

The operator has also signed an agreement with Finnplay, allowing it to move operations under its own licences to the supplier’s platform.

“This enables us to act more quickly and in multiple markets so we can focus on what we historically have been best at: reaching customers and generating traffic,” Fagerlund explained. “The collaboration gives us a flexibility we are going to need not only to have control over fixed costs but also to improve margins.”

In addition, it has re-entered Sweden with Nano Casino, a new brand operating under Finnplay subsidiary Viral Interactive’s licence. Viral, as the licence holder, is fully responsible for operating the site, with Global serving as marketing partner.

“Along with a long list of legal experts, we are of the opinion that Viral Interactive’s operations rest on a very solid and secure legal basis, and that the conditions for the licence to conduct online casino operations granted to them by the regulator are met.”

The company will also work to develop a more expansive strategy going forward, moving into new markets with new brands.

“Although we will do everything in our power to be active in Sweden, including with our brand NinjaCasino, we need to have a much broader approach, which we need to adopt in the foreseeable future,” Fagerlund said.

Global Gaming reported SEK 294.3m revenue in the first half of the year, with the Ninja Casino brand accounting for 93% of the group’s revenue. Operating expenses in gaming activities totalled SEK 147.7m, down from SEK 179.1m the previous year. Marketing expenses declined 12.5% to SEK 116.9m, while personnel expenses increased 75.8% to SEK 53.1m as total expenses increased to SEK 201.1m. As a result the operator swung from a SEK 70.3m profit last year to a loss of SEK 54.5m.

“Despite the draconian measures and drastic organisational changes we are facing, we cannot fail to notice that, internally, our fighting spirit and will to prevail are very much alive, which in itself creates conditions we should not underestimate,” Fagerlund said. “The future will undoubtedly place great demands on us as an organisation, as well as on me as its CEO. We must live with the consequences of past mistakes but we can also learn and grow stronger because of them. What I can promise is that we will do our utmost to get back to profitability and growth – and I believe we’ll be successful.”

On 8 August, an appeal for temporary relief from the regulator's ruling was rejected, the latest in a series of court defeats suffered since the licence revocation.