Inspired Entertainment narrows 2018 loss but warns of FOBT impact

Inspired Entertainment narrows 2018 loss but warns of FOBT impact

Tuesday, December 11, 2018 Posted by News Team
Supplier says 2019 revenue will fall by up to $11m as a result of FOBT stake cut

Inspired Entertainment has seen its net loss more than halve as a result of a 15.4% increase in revenue for its 2018 financial year. 

Revenue for the 12 months ended September 30th grew to $141.4m, with $7.8m of the increase due to favourable currency movements, aided by growth across the server-based gaming (SBG) and virtual sports business units. 

SBG revenue was up 11.3% on a like-for-like basis to $103.6m, with a $15.1m increase in service revenue offset by a $5.2m decline in hardware sales revenue. This was primarily due to a $14.3m increase in incremental revenue resulting from the roll-out of terminals with OPAP Group in Greece. By the end of September 2018, Inspired had installed more than 5,500 gaming machines throughout the country. 

Virtual sports, meanwhile, saw revenue grow 8.1% to $37.8m, driven by new customers in Greece (OPAP), Ireland (Boylesports), Finland (Veikkaus) and Poland (Fortuna), with the company now supplying 97 operators across all channels around the world. 

This was offset in part by a $1.7m reduction in revenue that resulted from long-term virtual sports licences coming to an end, as well as an $0.7m decline resulting from a delay in renewing a major customer’s contract. 

Cost of sales for the quarter was up 9.6% to $30.8m, with cost of services up 36.9% largely due to increased SBG service costs in Greece arising from the continued roll-out with OPAP, and higher expenditure on servicing SBG terminals in the UK. 

This was partially offset by a 29.6% decline in cost of hardware, as a result of declines in sales in Greece and Colombia, and staff-related expenses fell 1.3% to $60.1m on a like-for-like basis. Inspired also incurred an impairment expense of $7.7m resulting from the revaluation of certain assets. 

Depreciation and amortisation was up 18.6% at $41.8m, resulting in a net operating profit of $7.3m, down 38.7% year-on-year. 

Earnings before interest, tax, depreciation and amortisation was up 32.9% from the prior year at $54.1m. Once finance-related expenses had been taken out, Inspired posted a net loss of $20.6m for the year, down from a $49.1m loss in 2017. 

Inspired executive chairman Lorne Weil said he was pleased with the 2018 performance, but noted that the company’s focus would shift to the US market from 2019 onwards. 

This is due in part to the reduction in maximum B2 machine stakes in the UK, which will be cut from £100 to £2 from April 2019. Inspired said that this would negatively impact 2019 revenue by up to $11m. As it looks to mitigate this impact, the supplier will look to build on its success in Greece to establish a strong presence in the US.

"While we continue to focus on maintaining that growth, we are also intentionally targeting growth across our businesses in North America,” Weil explained. “I am optimistic that we can execute on this strategy much as we have done in Greece, where, in less than two years, we have grown the Virtual Sports business exponentially, recently adding another channel of content, and have become the largest supplier of terminals in the marketplace."


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