XLMedia revenue hit by regulatory headwinds in first half of 2018

XLMedia revenue hit by regulatory headwinds in first half of 2018

Monday, September 24, 2018 Posted by News Team
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Affiliate marketing specialist spent $45.8m on acquisitions in H1 2018

Affiliate marketing specialist XLMedia has said that it expects to meet its full-year profit projections for 2018 despite seeing revenue and profit for the first half of the year fall 13% and 14% respectively.

The company generated revenue of $59.1m for the six months ended June 30th, 2018, down from $67.9m in H1 2017. This decline was due to regulatory developments affecting the business, including the tightening of Australian gambling laws that effectively closed the country’s online casino market in late 2017. 

During H1 2018, XLMedia was also affected by operators suspending activity in Germany, and others reducing marketing spend amid regulatory uncertainty. Other customers reduced their UK advertising spend as they adjusted campaigns to comply with stricter gambling advertising controls. 

“Whilst these developments affected our performance, we believe this should lead to a clearer and more functional environment, and to long-term stability in the market and higher quality earnings for the company,” XLMedia noted.

The majority of revenue derived from XLMedia’s publishing business, with the total of $32.4m representing a 9% year-on-year increase. This growth was primarily down to acquisitions, the company said, with H1 performance impacted by reduced activity, as well as technical issues and spamming attacks on its sites. 

In the first half of the year XLMedia acquired websites and domains for an aggregate consideration of $45.8m. Among the deals agreed are the $10.5m acquisition of WhichBingo, and a series of Finnish gambling information sites for $18m. In total, the publishing business accounted for 54.8% of total revenue. 

XLMedia’s media business saw revenue fall 31% year-on-year to $23.5m, driven by the company ceasing low-margin activities, lower mobile traffic within its gaming assets and regulatory changes. The company will look to drive sales across Asia, focusing on Korea, as well as developing financial and ecommerce apps for the US market, as the focus shifts away from gambling. However, the company added that it sees scope for growth in gambling products in regulated markets.

Cost of sales were down 22% to $25.6m, though selling and marketing expenses climbed 36% to $3.7m for the six month period. General and administrative expenses also rose to $11.6m, leading to a marginal increase in total costs to $16.2m. 

XLMedia paid total taxes of $2.7m, down 31% from H1 2018, with net profit for the period down 9% to $14.1m. 

"The Group produced a solid profit performance in the first half, albeit against a backdrop of regulatory pressures and challenging market conditions in the online gambling sector,” XLMedia chief executive Ory Weihs said. “However, we are now seeing positive signals and expect to meet profit expectations for the full year.

"Since the beginning of this year we have been focusing on implementing our strategy and executing acquisitions in order to accelerate growth, allocating over $45 million of capital for acquisitions,” Weihs said. “Our newly acquired assets perform as expected and we are confident they will deliver a strong return.”

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