NetEnt blames Nordic struggles as revenue dips in first half

Casino games supplier NetEnt has put a year-on-year decline in revenue and operating profit in the first half of 2019 down to ongoing weak development in Nordic countries, again citing Sweden as a market of particular concern.

Revenue for the six months through to June 30, 2019 amounted to SEK837m (£71.7m/€79.8m/$89.6m),, down 3.4% from SEK867.3m in the corresponding period last year.

NetEnt said that this decline was down to a weak performance across the Nordic region, primarily in Sweden. In that market, NetEnt saw player numbers fall and reported a lower average revenue per user (ARPU) since new regulations were introduced at the start of 2019.

Outside of Sweden and NetEnt saw more success, with revenue from its activities in regulated markets up 1.7% year-on-year in the second quarter. In total it generated 49% of revenue from locally regulated markets in the second quarter.

NetEnt signed 16 new licence agreements during the first half and also launched casinos with 19 new customers.

The supplier was able to slightly cut overall spend in H1, with expenses down from SEK584.4m in the first half of 2018 to SEK581.4m. This was mainly due to a decrease in personnel expenses, which fell from SEK268.3m to SEK248.5m.

Other operating expenses also fell from SEK214.7m to SEK191.5m, but costs related to depreciation and amortisation were up year-on-year from SEK101.m to SEK141.3m.

Lower revenue during the first half led to a decrease in operating profit, with the SEK256.1m posted for the six-month period down 9.5% from the prior year.

Profit before tax also slipped from SEK209.7m to SEK261.8m. Despite paying less tax of SEK21.6m compared to SEK24.6m last year, profit for the period declined 15.8% to SEK240.2m.

For the second quarter of NetEnt's financial year, ended June 30, 2019, revenue was down 4.1% year-on-year at SEK419.4m. Increased depreciation and amortisation costs saw total operating expenses rise marginally to SEK289.3m, leading to operating profit declining 12.6% to SEK130.0m. While the operator saw profits boosted by financial income, its post-tax profit was down 13.9% at SEK119.9m. 

Reflecting on the results, chief executive Therese Hillman said both quarters of the first half were similar in terms of operating performance, with revenue and profit down in each quarter due to regulatory headwinds in the Nordic markets.

However, Hillman (pictured) remains optimistic about NetEnt’s future, saying that the supplier continues to invest in long-term growth.

“Now we take the next step in developing our technical platform as we are creating an open platform with new types of functionality and aggregation of third-party content for operators, services that will be launched on a broader scale during 2020,” Hillman said. “The transformation of live casino continues at full speed and we added several new functions during the quarter to make our product more competitive. The customer response is positive, and we expect growth in the coming quarters from this segment, but it will take a few more quarters before we can see more meaningful revenues.

“The industry is going through significant changes, and we see opportunities to strengthen our position in all our markets. Through our strategy to invest in increased game production, a technical platform featuring more functionality, and live casino – supported by our brand, global distribution and customer relations – we have the right basis to defend, and over the longer term increase our market shares.”