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Better Collective sees revenue and profit grow in H1

| By iGB Editorial Team
Affiliate marketing group Better Collective has reported a year-on-year increase in revenue and net profit for the first half of 2020, despite its business being negatively impact by the novel coronavirus (Covid-19) pandemic in the latter part of the period.

Affiliate marketing group Better Collective has reported a year-on-year increase in revenue and net profit for the first half of 2020, despite the business being negatively impact by the novel coronavirus (Covid-19) pandemic in the latter part of the period.

Revenue for the six months to 30 June amounted to €36.2m (£32.6m/$42.7m), up 17.7% from €30.7m in the corresponding period last year.

Revenue share agreements accounted for 67% of Better Collective's revenue in the first half, with 16% coming from cost per acquisition (CPA) deals, 6% from subscription sales and the remaining 11% from other sources.

The group noted that the increase in total revenue came despite an 18% year-on-year decline in new depositing customers (NDCs) to more than 186,000, which it said was primarily due to Covid-19 and its impact on the sporting calendar.

According to Better Collective, the cancellation and postponements of major sports events as a result of the pandemic led to approximately 90,000 fewer NDCs during H1 2020, compared to pre-Covid-19 estimates.

Following the outbreak of Covid-19 and related shutdown of sports activities in March 2020, Better Collective implemented a cost savings programme to counteract the impact in revenue. This included making certain roles redundant, temporary salary reductions and its founders and board of directors not taking a salary.

However, as this program did not come into effect until midway through the reporting period, total costs excluding special items and amortisation for the six-month period increased 21.9% to €21.2m.

Personnel costs were up by 30.3% to €11.7m, with the average number of staff rising from 291 to 411, while direct cost relating to revenue – including cost of pay-per-click, hosting fees of websites, content generation – also climbed 19.9% to €4.6m.

Depreciation costs jumped 133.2% year-on-year to €786,000, but other external expenses were slightly down from €4.3m to €4.2m.

In terms of amortisation, spend here was up 28.0% year-on-year to €3.2m, while special items – including income from the sale of the pocket ves.com website – led to an additional €208,000 in income.

Earnings before interest, tax, deprecation and amortisation (EBITDA) were up by 15.3% to €15.1m, while Better Collective posted an €11.9m operating profit for H1, up 12.3% from €10.6m last year. The group also reported an additional €1.3m in financial income, but this was offset by €2.1m in financial expenses.

Profit before tax reached €11.2m, up 14.3% on €9.8m last year, and after paying €2.6m in tax, this left Better Collective with a net profit of €8.6m for the period, an increase of 16.2% on the previous year.

Reflecting on H1, Better Collective’s chief executive Jesper Søgaard was upbeat about the results, but warned that the Covid-19 pandemic will continue to impact its operations for some time to come.

“Various measures have been implemented at our offices in alignment with local guidelines to keep employees safe,” he said. We have seamlessly transitioned to remote work to the necessary extent and experience no loss of efficiency.

“Resources have been redistributed internally to focus on the business areas that have remained active throughout and to prepare for sports returning to the arenas.

“The cost reduction program implemented for Q2 has proven effective, resulting in a cost reduction of around €3m for Q2 2020 compared to Q1 2020. The cost base will expectedly increase from 1 July, with the lapse of intermediate measures and with the return to a more normal level of activity.”

Focusing on the second quarter, and as the impact of the sporting disruption was felt, this saw revenue fall 3.2% to €15.3m. However, the group said some betting activity was channelled to other sports that went ahead, while casino games saw a momentary increase in Q2 and esports grew significantly.

Revenue share accounted for 66% of overall revenue in the three months to 30 June, with 16% coming from CPA, 5% subscription sales, and 13% from other income. NDCs declined 36% year-on-year to 36,000 for the period.

The cost savings program led to savings and expenses flattening in some areas, with direct costs related to revenue down 5.0% to €1.9m and staffing spend only slightly higher at €4.9m. Depreciation costs jumped 114.0% to €368,000, but other external expenses were cut by 14.3% to €1.8m.

Amortisation spend was 33.3% higher at €1.6, but this was offset by an increase in income from special items, which amounted to €608,000 for the quarter. Better Collective also noted that EBITDA including special items was up 3.0% year-on-year to €6.9m.

Operating profit stood at €5.3m, only slightly down from €5.4m in Q2 last year, and after accounting for €645,000 in financial income and €1.9m in financial expenses, this left Better Collective with €4.8m in profit before tax.

The group paid €873,000 in tax during Q2, which corresponded to a net profit of €3.9m, up 5.4% from €3.7m last year.

“In general, the market development has so far been in line with the assumptions we made mid-March, when we decided to provide an extraordinary business update based on this unprecedented situation,” Søgaard said. “I am very proud that we could maintain our financial earning target both for Q2 isolated and for the first half of this year.”

He said the European business had returned to Q1 average trading levels in June, meaning the business was cautiously optimistic about the second half of the year. However, Søgaard added, there remained uncertainty around US sports, and NDC growth, after losing momentum in H1. 

“We expect the remainder of 2020 to be somewhat affected by the lost momentum. Therefore, we see greater uncertainty than usual regarding our revenue growth targets.”

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