Nektan Reports Losses in 2019

The global services provider Nektan, has announced a year-on-year rise in operating losses for 2019 despite also reporting an increase in revenue for the year. The white label and gaming content provider experienced an increase in revenue over this period, but this was not sufficient to prevent the losses.

A calculator on top of a pile of euro notes and coins.

Nektan has reported losses for 2019, despite having increased revenue throughout the year. The sale of its B2C subsidiary in the UK may contribute to further losses in the coming months. ©Bru-nO/Pixabay

Nektan’s net gaming revenue for the 12 months until the 31st of December 2019 came to a total of £22.6m (€27.8m/$29.6m), an increase of 13.5% on the £19.9m that was taken in the previous year.

The majority of this income came from the company’s B2C division, with this arm of the business bringing in £21.6m in net gaming revenue. This figure is an increase of 10.0% on the year before.

Earlier this month, sold its UK B2C business to Grace Media for a figure of £200,000 as the company is attempting a restructure. As a result of this, the contribution of the B2C division of the business to the revenue will all but disappear in the coming months. Mark Phillips and Julie Swan of PCR London were appointed as joint administrators of Nektan Gibraltar subsidiary after a court order, and the pair were charged with finalizing the deal.

In addition to this, Nektan also saw a dramatic 308.3% increase in its B2B net gaming revenue, to £1.0m. The reason behind this is likely the recent decision by the company to focus more on this element of the business instead.

Nektan also reported a 16.3% decline in first-time depositors, with 131,128 people deciding to wager their money for the first time using its services over the course of the year. The provider did note, however, that there was a 6.8% increase in B2C cash wagering to £597.8m.

When it comes to Nektan’s spending throughout 2019, total administrative expenses were up 33.9% compared to the same point in the previous year at £1.5m. This is mainly because of a full impairment of £919,000 against the goodwill arising on its acquisition of Mfuse. Additionally, there was another full impairment of £147,000 which involved investment in Respin, and a £332,000 impairment provision for amounts due from certain partners in respect of net house loss.

Nektan also reported a slight increase in the amount that it spent on marketing, partners, and affiliates. The figure rose 1.1% from £1.5m in 2018 to £1.6m in the year that just went.

This increase in spending for the company meant that Nektan was hit elsewhere, with the operating losses for the year standing at £5.1m. This is an increase of 54.6% from a loss of £3.3m in the previous year. The adjusted earnings before interest, tax, depreciation and amortization loss also grew from £1.3m in 2018 to £2.0m in 2019.

Loss before tax from continuing operations also grew last year, from £5.0m to £6.5m. loss for the year from discontinued operations was another facet of the financial report that experienced year-on-year growth. This figure grew from £1.9m to £2.8m, which equates to a 47.4% increase. Nektan noted that this loss from discontinued operations included a loss for the period of £800,000 and a £2.0m loss that resulted from the disposal of assets.

The overall loss for the year increased by 31.4%, from £7.0m to £9.2m. Nektan attributed these losses to increased trading losses, the impact of restructuring efforts and the loss on disposal of £2.8m, compared to a loss of £1.9m from discontinued operation in 2018.

Shaw’s Response to the Financial Report

When reflecting on the financial results for 2019, the interim chief executive for Nektan, Gary Shaw, was careful to highlight how the provider was able to perform well against a “backdrop of challenging conditions in the UK B2C market” and cited the growth in the B2B arm of the company as a key factor moving forward for Nektan.

“Significantly, this financial year saw Nektan develop and deliver commercial opportunities in emerging international markets, which have the potential to grow our revenue, margin, and profitability in the coming years,” Shaw, who took over from former CEO Lucy Buckley in August last year, said.

“We believe that our proprietary technology is unique, and we continue to attract major global partners who wish to use the feature-rich gaming content we have worked so hard to populate our platforms with.”

“By working closely with the best developers of casino games globally, we can provide our partners with engaging, socially responsible and compliant content, suitable to the geographical location of their players and the local mobile technology.”

“The growth in B2B we have seen during this financial year reflects the progress we have made in adding more content and providing this to a growing list of partners.”

“With the restructuring completed we enter 2020 with a clear focus on our strategy – to deliver enhanced casino technology and gaming content into emerging international markets with leading operators. A truly global approach supporting local and international partners in new territories underpins our year ahead.” Shaw added.

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