Gaming Realms banks on B2B to drive growth after H1 revenue fall

Gaming Realms banks on B2B to drive growth after H1 revenue fall

Thursday, September 27, 2018 Posted by News Team
Finance
Operator transitions to B2B after agreeing sale of B2C gaming assets

Gaming Realms has said that licensing its content, including the Slingo Originals game range, and proprietary platform can propel it to growth after reporting a 27% year-on-year decline in revenue for the first half of 2018. 

Revenue for the six months ended June 30th fell to £11.0m, though this includes a £4.1m contribution from its consumer-facing brands, which were sold to Oslo-listed River Gaming in July this year. 

Discounting the B2C brands, Gaming Realms generated revenue of £6.8m, down 11% from H1 2017. The majority came from the retained real-money gaming brands, which accounted for £4.1m of the total, up 18% year-on-year.

Following the sale of the B2C assets, Gaming Realms has said it aims to focus on growing its content and technology licensing business, and revenue from licensing agreements rose 175%. However, this represented an increase from £0.2m in H1 2017 to £0.6m. 

Social publishing revenue for the period was down 48% at £2.1m, reflecting an 88% decline in social marketing spend to £0.2m. 

The operator blamed its revenue decline on the poor performance of the social division. It pointed to the signing of six Slingo Originals content licensing agreements in New Jersey and Europe, as well as the launch of a white label gaming site for the Health Lottery as signs of growing interest in licensing its products and brands. 

Total marketing spend decreased sharply, falling 57% to £2.8m, or 53% to £2.1m once the B2C assets sold to River Gaming were stripped out. 

Operating expenses for the period were down 13% at £4.7m, while administrative expenses and share-based payments dropped to £3.8m and £154,968 respectively. 

Adjusted earnings before interest, tax, depreciation and amortisation for the six months came in at £195,462, following a loss of £1.5m in the previous year. Once the disposed assets were removed, adjusted EBITDA for H1 2018 was £94,180. 

Once finance expenses and taxes were taken out, Gaming Realms posted a loss of £2.7m from its continuing operations. The B2C assets posted a small profit of £48,084, for a total loss of £2.6m. 

Following the end of the reporting period on June 30th, Gaming Realms agreed a deal to sell a 70% stake in its B2C real-money gaming brands to River UK Casino, a newly-formed subsidiary of River Gaming, for up to £23.1m. The acquirer paid £4.2m of the total in August 2018, with a further £4.2m to be paid once the business is audited in June 2019, with the final £14.7m subject to an earn-out. 

The shift to a B2B business was reflected in an 88% in the 9 weeks post-period end, while a new mobile-optimised gaming platform has also been launched. The Slingo Originals games have been launched for GVC Holdings and Rank Group, on time and on budget, with the roll-out described as having been “very well received” by customers. 

Real-money gaming revenue, excluding the disposed brands, was up 10% in the 9 weeks following the end of the reporting period. 

"Our strategy moving forward is to leverage our real money gaming platform and our market leading 'Slingo Originals' games library into the UK and international gaming markets,” Gaming Realms chief executive Patrick Southon said. “We believe that licensing our platform and content to leading brands and gaming operators will deliver high margin revenues, and we have been very pleased with the results of our efforts over the first half of 2018. 

“We look forward to delivering news about more developments on our strategy during the second half of the year.”

Gaming Realms also provided an update on its outlook for the 2018 financial year. 

The operator said it would focus on developing new Slingo Originals content to enhance its content portfolio, as well as licensing these titles to new clients. It would also look to expand its real-money B2B partnership base, which it said would allow it to diversify revenue streams, and provide more money for marketing spend. It will also work to ensure it can maximise the River Gaming earn-out.

In the second half, it expects to incur capital expenditure of around £2.5m on game and platform development, though it believes that the consideration for its B2C brands will ensure it has enough cash resources to cover the costs. 

Gaming Realms will also “continue to evaluate strategic opportunities” for non-core activities such as the social publishing business.

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