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NetEnt Profit Slumps in 2019 despite Red Tiger Acquisition

Casino game developer NetEnt recorded a slight revenue increase to SEK1.79bn (£143.3m/€170.4m/$186.1m) in 2019 as the firm’s acquisition of Red Tiger Games helped offset “weakness” in Norway and Sweden, though the company’s profit plummeted.

The provider’s SEK1.79bn in revenue was made up nearly entirely of royalties, which amounted to SEK1.71bn, a decline of 1.0% year-on-year. Setup charges brought in an additional SEK56.2m in revenue, a 10.2% rise, and other revenues rose almost seven-fold to SEK26.2m.
The company’s CEO, Therese Hillman, said that revenue increased in the U.S but dropped in Norway and Sweden.

Red Tiger, which was acquired by the NetEnt in September 2019, brought in SEK 126m in revenue.

“Since the acquisition, Red Tiger has exceeded our expectations and now forms a vital part of our ongoing improvement efforts within the NetEnt Group,” Hillman said.

NetEnt’s operating expenses also rose, however, by 7.1% to SEK1.26bn. Personnel expenses dropped 8.4% to SEK491.1m but remained the company’s biggest expense. Other operating costs shot 3.9% to SEK446.7m.

Depreciation and armotisation expenses, also added to NetEnt’s operating costs in earnings report, up 51.8% to SEK326.5m, leaving an operating profit of SEK528.7m, a 12.0% decline.

Red Tiger’s financial income was SEK 73.0m, up 17.4%. However, this was exceeded by financial expenses, which more than tripled to SEK128.5m, leading to a pre-tax profit drop of 24.1% to SEK472.1m.

After tax, which came to SEK44.3m, the Stockholm-listed company recorded SEK428.9m in profit, down 25.7% from the previous year. Following exchange rate differences, mainly from a weaker Swedish Krona compared with the British Pound, NetEnt’s total earnings for the period attributable to shareholders came to SEK566.9m, a 3.1% drop.

For the 4th quarter of 2019, the firm’s revenue came to SEK512.0m, the highest quarter ever for NetEnt and up 10% year-on-year.
Geographically, the UK contributed to 19% of the company’s game win (player bets minus wins), from which royalty fees are calculated. Sweden contributed 7.0%, while other Nordic nations brought in 13% of NetEnt’s game win. Other non-Nordic European nations contributed 44% and the rest of the world brought in 19%.

Slot games were the vast majority contributor of game win with 94%, while table games made 6%. Although the company did not reveal its total game win, the chief executive said the figure rose 4.9% in euro currency terms. NetEnt did not break down game win by type of game or region for the entire year.

Operating expenses stood at SEK351.4m, up 10%. This was made up of SEK122.2m in personnel expenses, SEK100.7 in depreciation and armotisation expenses and SEK128.5m in additional operation expenses.

This led to an operating profit of SEK160.6m, up 9.8%. However, following a net financial loss of SEK33.6m, profit before tax came to SEK127.0m and net profit to SEK112.6m, 10.2% decline year-on-year.

Hillman said the Red Tiger acquisition made sure NetEnt is well-poised for 2020.

“Backed by our ongoing focus on efficiency and the acquisition of Red Tiger, we are entering the new year in a stronger position,” Hillman said. “Our global distribution and two strong brands give us the right basis to increase our market shares in online casino. We see good conditions for NetEnt to deliver growth in 2020, supported by our combined game portfolio and Live Casino.”

Source: https://www.igamingbusiness.com/news/netent-profit-declines-2019-despite-red-tiger-acquisition

About the author

Ezra Ondara

Ezra Ondara

Ezra Ondara is a football fanatic, and betting pundit. He specializes in product reviews and casino/gambling content, with interest in the aviation industry and space science. When he’s not at his desk crafting content, he is watching the English Premier League or space exploration videos on YouTube, or out of town with his family. Ezra values relationships and he’s committed to providing valuable content for readers.

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