Gaming Realms slips to loss despite licensing growth in 2019

Mobile-focused games developer Gaming Realms has reported a comprehensive loss of £5.4m (€6.6m/$7.1m) for 2019, despite its licensing business driving a year-on-year increase in revenue.

Total continuing revenue for the 12 months to 31 December 2019 amounted to £6.9m, up by 11.3% from £6.2m in the previous year.

Licensing revenue accounted for the majority of this overall total, with the £4.1m generated in 2019 being 86.4% higher than £2.2m 2018. Gaming Realms put this down to the implementation of its strategy of growing both its games content and distribution to more operators in Europe and the US.

However, social publishing revenue was down 28.2% from £3.9m to £2.8m as a result of tighter cost control during the year, which the developer said saw both marketing and operating expenses fall.

In terms of how this impacted overall costs for continuing operations, marketing spend for the year was down from £665,363 to £212,473, though operating expenses climbed 66.4% to £1.5m.

Administrative spending was also up by 16.3% from £4.9m to £5.7m, but Gaming Realms noted that costs related to impairment of financial assets were down to £200,000, while share-based payments fell from £67,824 to £9,972.

Loss before tax from continuing operations stood at £4.7m, compared to £6.0m in the previous year, while after taking into account tax credit, this loss came in at £4.6m, an improvement on £5.6m in 2018.

However, when looking at discontinued operations, which related to B2C real-money gaming and affiliate marketing, Gaming Realms noted a loss after tax of £783,451, in comparison to a profit of £6.6m in the previous year.

In July 2019, Gaming Realms completed the sale of its Bear Group B2C subsidiary to River iGaming, marking its exit from the UK real-money B2C market as it looked to focus more on game development and licensing activities.

The developer’s affiliate marketing business was sold in March 2018 for £2.4m – a deal that helped push profit up in the same year.

As such, when coupled with loss from continuing operations, total loss for the year amounted to £5.4m, compared to a profit of £929,304 in 2018. When also taking into account a loss of £305,671 from translation of foreign operations, total comprehensive loss totalled £5.7m, down from a profit of £1.4m.

Reflecting on the results, Gaming Realms executive chairman Michael Buckley was upbeat, focusing on how the developer had disposed of certain businesses in order to drive its licencing arm. Buckley gave comment after Patrick Southon left his role as chief executive in February this year.

“In 2019 we disposed of the B2C business to allow the group to concentrate solely on the development and licensing of our Slingo online gaming content,” Buckley said.

“During the year we increased our games portfolio, secured key partnerships with industry leaders and broadened our international reach and audience. I am delighted to report that this progress has continued into the current year.”

In terms of current performance, Buckley said licensing revenues for Q1 of 2020 were 90% ahead of the same period of 2019, while the developer is operating ahead of the board’s forecast.

Buckley also referenced the ongoing situation with novel coronavirus (Covid-19), saying the business has taken every precaution to ensure the safety of its staff and those it works with.

“While it is impossible to predict the duration of this situation, we continue to experience a high level of demand for our products which supports the board’s confidence in the future prospects of the business,” he said.