Scout Gaming Group said a decision to implement a major reorganisation of the business began to take effect during the second quarter, though the fantasy gaming provider still reported lower revenue and a wider net loss.
Former Scout chief executive Andreas Ternström in March announced the provider would initiate a cost review after he was “not at all satisfied” with the supplier’s slow growth and rising expenses in Q4 of 2021.
Ternström stepped down as CEO in June and was replaced on a temporary basis by Niklas Jönsson, who continued to oversee the reorganisation of the business. Jönsson had previously been chief financial officer.
Just weeks after Ternström left, Scout announced itwas taking drastic action to keep the business afloat. It planned to cut half its workforce – including employees in Ukraine – and dilute its shares by 90% after identifying a SEK17m black hole in its finances, as well as securing a bridge loan to ensure it could continue to do business in the short term. Shareholders will vote on the dilution plans next month.
Updating the market on Scout’s position, Jönsson said Q2 was an “intensive” period, during which he and the board initiated and implemented many “existential decisions”. Jönsson said some of these have already had an impact on the business, though the full effect will not be seen until Q4.
“I can conclude that the company’s expenses and work force has been way too high compared to the revenue which have been created on a longer period of time,” Jönsson said. “We have therefore changed the organisational structure and management to adapt to the new business.
“The restructuring programme which was launched during the second quarter to handle the challenges above has already given effect and full realisation of the effects will be seen in the fourth quarter.
“At that time, we have since the beginning of the year halved our work force to a total of 63 employees within the group, in the effort to streamline the organisation and better support our customers, through more efficient delivery process.”
Looking at Scout’s performance in Q2, revenue for the three months to 30 June amounted to SEK4.3m (£344,725/€407,046/$410,482), down 47.5% from SEK8.0m in the same period last year.
Revenue from B2B operations fell 38.5% year-on-year to SEK1.6m, while B2C revenue was also down by 70.4% to SEK2.1m. Scout noted it currently has 17 B2B partners integrated and active.
Total operating expenses 3.7% marginally higher at SEK30.9m and while financial items cost was cut from SEK1.1m to SEK694,000, pre-tax loss reached SEK27.3m, wider than SEK17.0m last year.
As Scout did not pay any tax during the quarter, its net loss also stood at SEK27.3m, compared to SEK17.0m in the previous year. In addition, negative adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) widened from SEK13.3m to SEK23.3m.
In terms of the first half, revenue for the six months to 30 June reached SEK16.3m, down 40.3% year-on-year. B2B revenue declined 10.0% to SEK4.5m and B2C revenue fell 47.5% to SEK6.4m.
Operating costs were 6.5% higher at SEK64.4m, though financial items expenses were down 82.8% to SEK1.2m. This left a pre-tax loss of SEK47.0m, compared to SEK26.3m in H1 of 2021.
Again, Scout did not pay any tax, so net loss was also SEK47.0m, wider than SEK26.2m last year, while negative adjusted EBITDA widened to SEK41.6m from SEK28.2m.
After the end of the period, Scout launched its fantasy product with Bet365 in 120 markets around the world, while the provider also struck a new deal with Norwegian state-owned operator Norsk Tipping.
Jönsson said these two deals, along with increased interest from other operators, said the provider can look positively at the future. However, he also warned that work with cost control and prize pool sizes will be in focus at least until the business shows a positive result.
“I look forward to the future of Scout with several promising projects and integrations aimed at increased growth,” Jönsson said. “However, it will involve a lot of work, continued streamlining and razor-sharp focus from all of us in the organisation to realise our plan.”
