Nektan plc (LON:NKTN), an international B2B and white label gaming software and services provider, announced today its unaudited results for the six months ended 31 December 2017.
Financial Summary:
|
Unaudited six months ended 31 December 2017 £’000 |
Unaudited six months ended 31 December 2016 £’000
|
|
|
Total revenue |
8,815 |
5,727 |
|
Adjusted EBITDA loss* |
(1,647) |
(1,498) |
|
Adjusted EBITDA loss* – Managed Gaming Solutions |
(918) |
(1,498) |
|
Operating loss ** |
(3,165) |
(512) |
|
(Loss)/profit before taxation ** |
(4,172) |
1,188 |
|
Basic & diluted (loss)/earnings per share (pence) |
(12.6) |
4.9 |
*Adjusted EBITDA loss exclude depreciation, amortisation, income or expenditure relating to exceptional items, profit on brand disposals and non-cash charges relating to share based payments and impairments
**In 2016 operating profit included the profit on brands disposal of £1,950k and profit before taxation includes the profit on brand disposals and the fair value adjustment on increase in equity ownership of £2,322k
Summary:
· Revenue up 54% versus six months ended 31 December 2016 and 17% versus six months ended 30 June 2017
· Significantly reduced losses in the Managed Gaming Solutions division with an adjusted EBITDA loss of £918k (H1 FY17: £1,498k)
· First global platform deal signed in B2B technology services with Tyche Digital opening up significant new pipeline of opportunities that Tyche is developing
· First revenues in the European B2B division with 5 deals now live
· Nektan takes first mobile cash bet at casino in US
· Raised £1.76m through a placing and subscription of new shares in December 2017
Post period-end:
· Continued trading momentum in European business with revenue from diversification from white label and gaming service provision business
· Over 100 casino brands now live from 52 partners, including new European-focused partnerships
· Nektan’s Evolve Lite Platform live in Asia with 247 Asian games and a number of contracts signed through the Tyche Digital integration
· Following its launch in the US in August, its US business is progressing and is currently installing in three land-based casinos
Gary Shaw, Nektan Plc Interim Chief Executive Officer of Nektan, said: “The European business continues to deliver strong trading momentum. We are developing our mobile first casino product, diversifying our portfolio of services to include additional B2B gaming solutions in Europe, US and now Asia.
Our European white label services business now consists of over 100 casino sites. We continue to leverage our partnerships with numerous global game providers including Realistic Games, Pragmatic Play™, Booongo Gaming and Pocket Games Soft, to deliver the Nektan Technology platform into further new geographic markets with localised content.
I am particularly pleased that we are maintaining a central cost base to develop these revenue opportunities. We are expecting continued margin improvements, as our business partners develop new markets utilising our core technology platform, and to become a successful global technology supplier.”
CHIEF EXECUTIVE’S STATEMENT
Overview
Over the period under review, Nektan continued to make significant operational and strategic progress in Europe, its key market and continued to develop its US business, whilst utilising its technology assets to expand further into wider global markets, which is continuing following the period-end.
In line with our strategy to transition from a white label operator to an international gaming software and services provider, the Group has made strong progress in realigning its structure to focus on Managed Gaming Solutions (Europe) and B2B Software & Games Licensing (Europe, US and Asia), which are powered by a single, proprietary technical platform.
The managed casino network continues to deliver growth momentum for our casino partners, with a significant and expanding base of active registered players as we selectively expand the casino network with quality partners, helping to ensure that we deliver sustainable profitable growth.
Real Money Gaming is Nektan’s core focus in Europe in our Managed Gaming Solutions turnkey business, leveraging our Gibraltar gaming licence, proprietary back office platform (“Evolve”) and operational expertise to offer a rewarding and entertaining player experience, that remains attractive to players, across a network of over 100 managed casinos.
During the six months to 31 December 2017, the Evolve casino network registered 77,055 first time depositors (H1 FY17: 49,252), demonstrating the importance and flexibility of the Evolve platform to support and deliver additional growth. Nektan strives to be the best in all operating disciplines across casino management, maximising player entertainment and engagement through the intelligent use of our back-office platform and associated services across customer relationship management, payments, customer service and player marketing.
Nektan is leveraging its proprietary technologies and access to high-quality casino game titles to supply European interactive casino operators through traditional B2B software and gaming licensing arrangements. Several new agreements have been signed with leading game providers which allow Nektan to deliver content on a global basis with one integration via Nektan’s Evolve platform. This is very relevant for many of the leading companies in the sector as a single integration with Nektan now facilitates entry into multiple global markets.
Financial Review and KPIs
Both during the period and post-period end, the Group has experienced growth in Net Gaming Revenue (“NGR”), as well as other KPIs, demonstrating the operational progress being achieved. The Directors regard, in addition to revenue and adjusted EBITDA, the growth in first time depositors and cash stakes as reliable measures of performance:
· NGR increased 59.3% in the period to £8.6 million (H1 FY17: £5.4 million);
· First time depositors grew 56.5% in the period to 77,055 (H1 FY17: 49,252); and
· Cash stakes increased 56.1% in the period to £254.5 million (H1 FY17: £163.0 million).
The results for the period include six months of Respin as a wholly owned subsidiary compared to the prior period when Respin was equity accounted for. The impact of Respin was a £729k charge in EBITDA. It should also be noted that the prior year included a profit on the fair value adjustment on the increase in equity of Respin of £2,322k and a profit on the disposal of certain brands of £1,950k.
Taking the Managed Gaming Solutions business segment separately, gross profit increased from £3,530k at 61.6% of revenue to £5,728k at 65.0% of revenue. Adjusted EBITDA for Managed Gaming Solutions improved from a loss of £1,498k in the prior period to a reduced loss of £918k in the period.
Marketing, partner and affiliate costs increased from £3,261k, or 56.9% of revenue, to £4,503k, or 51% of revenue, demonstrating efficiencies as the business grows. Administrative costs increased from £781k to £4,391k but the prior year included the profit on brand disposal of £1,950k as well as exceptional items of £134k (2017: £201k) and Respin of £736k (2017: £nil).
Loss before tax in the period was £4.2 million (2016: profit of £1.26 million) and loss per share totalled 12.6p (2016: earnings per share of 4.9p). The profit in the prior period being due to the profit on brands disposal of £1,950k and fair value adjustment on increase in equity ownership of £2,322k.
Funding
The Company raised £1.76 million in December 2017 through a placing and subscription of new shares from both existing and new shareholders. In 2018, it is likely that the Company will require further funding as it nears break-even in its Managed Gaming Solutions business.
Our business model and strategy
Nektan’s core market is the regulated mobile real money gaming (“RMG”) sector. In the early stages of the Group’s development, it focused specifically on white label casinos. Nektan is now applying its proprietary technology into new markets via partnerships with local market operators. The technology is built for rapid deployment and continual development to address the current trend for expeditious consumer adoption of new mobile devices and apps.
Our first global platform deal allows our business partner to address a geographic market opportunity leveraging their local knowledge with technology that is already developed and can be quickly adapted creating incremental opportunities for Nektan via the partner with little cost.
We are now beginning to replicate this model across markets where we will further utilise our core technology and develop partnerships across additional jurisdictions. Our key selling point is that we have, via our white label business, already integrated the majority of global game providers and due to the flexibility of our platform we can readily and easily apply localisation. In Asia, we have 247 localised games from global providers. Having control of our central platform allows Nektan to determine its own roadmap and which partnerships it will develop.
Outlook
In Europe, the focus within our Managed Gaming Services business is to continue growing through acquiring new partners, rolling out new casinos and making further improvements in our operations, both in terms of efficiency and product offering, ensuring we attract and retain players for the long term.
Our B2B business is a complementary addition to our European managed casino network. We expect both our current and future platform deals, as well as games licensing and distribution, to bring additional customers, players and revenue to the Group as the business builds.
Furthermore, our North American Respin business, is installing its product and continuing to attract interest from potential casino customers.
The Company continues to leverage its assets, expertise and networks across the Group to maximise revenue in, and deliver profitable growth to, shareholders. We look forward to updating on further progress in due course.
On behalf of the Board, I would like to thank all of Nektan’s employees for their continued hard work and commitment.
Gary Shaw
Interim Chief Executive Officer
