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Scout mulls further cuts despite posting net profit in Q1

| By Robert Fletcher
Scout Gaming Group returned to a net profit in the first quarter after a significant reduction in operating costs but warned it could make further spending cuts.
Paf 2023

The fantasy sports provider announced late last year that it had finalised the restructure of its B2B operations. This led to the closure of 11 partnerships and cutting the total number of co-operations to 13.

This followed the news in September that Scout had raised SEK101m (£7.6m/€8.7m/$9.4m) in a share issue process to help save the business. Scout also initiated a major restructuring of personnel – laying off 68 of 131 full time workers.

The restructure has seemingly begun to pay off, with the provider posting a net profit in Q1, despite revenue falling. However, chief executive Niklas Jönsson warned of potential cost reductions as part of its long-term plan.

“One key success-factor for the group to reach profitability is a continued cost control,” Jönsson said. “The first quarter does not fully reflect the already executed cost reductions which we already have performed. We are continuing our transformation of the group. 

“Management is in a process to evaluate further reductions in costs, but these need to consider the organisation’s capabilities to deliver to the existing partners which are live and to those who are becoming live in the coming months.”

Scout Q1

Revenue for the three months to 31 March reached SEK6.5m, down 3.0% from SEK6.7m in the corresponding period last year.

B2B revenue was 125.0% higher year-on-year at SEK5.4m, with Scout putting it down to an increased focus on this vertical. The provider noted that by the end of the quarter, it had 12 integrated and active B2B partners.

Turning to B2C, revenue fell 62.1% to SEK1.1m, primarily due to a reduction in what Scout described as “non profitable” marketing campaigns. However, Scout said its B2C business has the potential to generate “profitable” growth under the controlled measures being rolled out and expects to realise these in 2023.

In terms of spending, operating costs were 45.5% lower at SEK16.5m. Personnel costs fell 31.4% to SEK9.6m and other external expenses 56.1% to SEK6.8m. As such, operating loss was 58.1% lower at SEK9.9m.

When also accounting for an additional SEK17.0m in profit from undisclosed financial items, this left a pre-tax profit of SEK7.0m, in contrast to the SEK21.7m loss last year. Scout did not pay any income tax in Q1, meaning net profit was also SEK7.0m.

In addition, earnings before interest, tax, depreciation and amortisation (EBITDA) improved from a loss of SEK23.6m to an SEK9.4m loss.

“We believe the journey which we are on has shown a lot of positive signs and we are in the transition to become a profitable company and to create shareholder value. A lot of work remains,” Jönsson said.

“More efficiencies to achieve and a sharp focus and engagement from all of us in the organisation is required.”

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