Restructuring costs set to push Net Gaming to loss in Q2
Affiliate marketing business Net Gaming Europe has revealed it expects to report a net loss for the second quarter of 2020, primarily as a result of costs related to a restructuring of the business.
Revenue for the three months to 30 June is forecast to amount to €3.6m (£3.2m/$4.1m), which would be an increase of 4% on the same period last year, and a 14% improvement on the first quarter.
Reported earnings before interest, tax, depreciation and amortisation (EBITDA) are set to be down 23% year-on-year to €1.6m, but after being adjusted for non-recurring costs related to reorganisation and rebranding, EBITDA is likely to be up 4% to €2.1m.
Net Gaming also noted that it expects to post a loss after tax amounting to €1.2m, compared to a profit of €1.2m in Q2 last year. However, when adjusted for non-recurring costs and exchange rate fluctuations, profit after tax should come in at €1.4m for the quarter.
“The underlying operations have shown positive development during Q2, with sequential organic growth of 14%, but also compared with the previous year,” chief executive Robert Andersson said.
“It should be noted that a large proportion of the items having a negative impact on Q2 earnings are non-cash items and of an accounting nature.”
The restructuring will see its Swedish office closed, with the business to be centralised in Malta, which Net Gaming says will create a more efficient and cost-effective organisation. This will ultimately result in annual savings of €300,000, though the business will not start to realise these savings until the third quarter of 2020.
In total, non-recurring restructuring costs for the quarter are expected to reach €500,000. The business will also record a €500,000 impairment loss on assets related to the PokerLoco brand, which will be shuttered as part of the company's shift in focus.
Refinancing also added a further €300,000 in non-recurring costs of approximately, related to a consent fee, charged to net financial items. Net Gaming said net financial items were adversely impacted by exchange rate fluctuations between the Euro and Swedish Krona, with the negative effect approximately €1.2m in the first two months of Q2.
“The offensive initiatives and the reorganisation we are now implementing create the conditions for future growth and a brand new Acroud that will stand stronger in the future,” Andersson said. “With sports betting on the doorstep and a company that is now optimised for the future, we feel strong as we embark on the growth journey we have begun.
“As proposed to the AGM, we also hope to be able to change our track to the new Acroud AB, which will be a new milestone.”
The forecast comes after Net Gaming last month also announced a 21.3% year-on-year decline in first quarter revenue, though Andersson said that a refocused business had sufficient untapped potential to grow from Q2 onwards.
Revenue for the three months ended 31 March 2020 fell to €3.2m, with Net Gaming saying that it continued to suffer as a result of stricter regulations being implemented across its core European markets.