UK – Kambi outlines cost saving package to mitigate financial impact of pandemicBy Phil - 9 April 2020
Kambi Group has announced a range of cost saving measures it has recently taken as it seeks to strengthen its financial platform and increase its ability to withstand the impacts of the COVID-19 outbreak and the significantly reduced global sporting calendar for an extended period.
Kambi has previously outlined its strong balance sheet which will enable it to see out a period of reduced sporting action. While this remains the case, Kambi has decided to take various proactive measures to further solidify this platform and protect its staff, partners and investors for the longer-term.
Despite the impact of COVID-19 on the sporting calendar in the last two weeks of the first quarter, Q1 revenue was strong and is expected to be in the range of €27.5 to 28m. Opex is expected to be €21m to 21.5m, giving EBIT of €6m to €7m. The cash balance at the end of the quarter was in the range of €45m to 47m.
The sporting calendar has been severely impacted by COVID-19 since mid-March. In the last three weeks, we have seen a level of sporting activity driving revenues in the range of 25 to 30 per cent of those in Q4 2019. The timing of a return to normalised activity levels is of course uncertain at this stage, but we do note with interest recent reports that football leagues including the English Premier League and the German Bundesliga are preparing for a return to action in the coming months.
The cost saving programme will result in savings across the whole business, including significantly reduced travel and marketing costs, a freeze on staff recruitment and a substantial reduction in data costs associated with fewer sporting events.
Kambi has also decided to apply for the financial support packages recently announced by the Swedish and UK governments, both of which are designed to protect jobs. Furthermore, with effect from 1 April 2020, Kambi Board members, the CEO and Executive Management have agreed to salary deferrals of 20 per cent, 15 per cent and 10 per cent respectively.
Based on these savings and several smaller initiatives, operating expenditure in Q2 2020 is anticipated to be in the range of 10 to 20 per cent lower than in Q4 2019. The cost saving package will also result in associated savings in capitalised development costs of 20 to 30 per cent compared to Q4.
In the unlikely event that the sporting calendar does not increase from its current level, and based on the cost saving measures taken so far, we would expect the average quarterly cash outflow to be in the range of €7m-€9m, although we anticipate the figure in Q2 to be significantly more favourable for Kambi due to expected working capital movements.
Kristian Nylén, Kambi CEO, commented: “Kambi is conscious of its duty to protect the company, its staff, partners and investors at all times, but particularly during a period of such uncertainty. The cost saving measures we are announcing today enable us to do just that for a significant period of time. Kambi is a technology company powered by skilled and experienced people, all of whom have helped establish Kambi as the global market leader, and who will be pivotal to us pushing on further in the coming years. Therefore, it is in Kambi’s long-term interests to retain these staff while also reducing our costs, including payroll, and I firmly believe we have found the right balance in order to achieve this goal. When sports resume, we are ready to gear up to normal activity immediately, and in the meantime, we are being creative and agile in order to offer a high-quality and compliant service to our partners and their end users.”