NAGA Group adjusts 2021 and 2022 financial forecasts
Social trading focused online broker NAGA Group AG (ETR:N4G) has announced that it is making changes to its forecasted results for both 2021 (not yet reported) and the current 2022 fiscal year, as well as providing a preliminary trading update for the first half of the year 2022.
The company reported that the overall Group performance across all divisions was strongly impacted primarily by the rapid crypto slump in the second quarter in the trading activities segment. In addition, substantial investments were made in trading activities, marketing and technology in the crypto platform NAGAX segment, which NAGA said will pay off later than planned due to the current market situation.
However, the management team remains confident that investments in trading activities as well as products will develop positively. NAGAX is now fully developed with the web platform, mobile apps and the NFT platform and will soon enable cryptocurrency payments in conjunction with NAGA Pay.
Benjamin Bilski, founder and CEO of NAGA said:
“The significant slump in the crypto market came abruptly and especially it has affected smallcap tokens more than still Bitcoin or Ethereum. Nevertheless, we strongly believe that the crypto market will come back in the medium term and for this moment NAGA is very well prepared. We, like many peer group companies, have viewed digital currencies as an absolute growth driver. Fundamentally, the market has improved in cryptocurrencies, however, the current extremely negative overall situation in the global financial market is simply affecting the segment too much.”
The NAGA management team announced that it will now focus more on the profitable brokerage business. Particularly positive is the trend of monthly new registrations on the platform, which have increased significantly. For the month of July, it is already foreseeable that the 30,000 customer mark will be significantly exceeded. In addition, the brokerage business has already generated more than €33.5 million in revenue in the first half of 2022, which is significantly higher than the previous year’s level of €22.3 million in revenue.
“The fact that we were able to increase brokerage revenue by more than 30% in such difficult market conditions and record the best registration rates since the start of the company makes us feel positive. In fact, we expected significantly more revenues from the crypto segment in the current fiscal year 2022, but will not be able to maintain this. In the second half of the year, the absolute focus will be on the brokerage business. In addition, we will save some costs and thus target a profitable second half-year for the overall group, as we will focus even more on optimizing our marketing campaigns. This focus has already shown first very positive results,” concludes Bilski.
NAGA informed that the audited annual financial statements 2021 are expected for mid-August 2022. The delay was mainly due to resource bottlenecks on the audit side as well as complex IFRS issues regarding the accounting of crypto holdings (more on that below).
On the accounting side of things, NAGA stated that some approaches previously chosen by the company, on the basis of expert advice, are currently being examined, such as proprietary trading in and the holdings of cryptocurrencies held as of the balance sheet date. On a revised basis those are to be recognized in accordance with international accounting standards (IFRS), and are expected to be different due to the partially different approaches to these items to be corrected by the group auditors of the company.
As a consequence, the NAGA Group Management Board said it has to reduce the last reported provisional group 2021 sales of €55.3 million (previous year €24.4 million) to the originally expected range of €50 million to €52 million, whereby this range might also be slightly exceeded. The Board also stated that the most recently reported provisional Group EBITDA for 2021 of €12.8 million (originally forecast range: €13 million to €15 million; previous year €6.6 million) will be adjusted to a range of €2.5 million to €5.0 million.
Against the background of the current negative developments in the crypto markets and the reporting of the crypto business area, which began this year, the Management Board said it is also withdrawing the annual forecast for the current 2022 financial year, in combination with the above-mentioned accounting issues.
So far, group sales of between €95 million and €105 million and the achievement of a group EBITDA of between €25 million and €30 million had been forecast for 2022. Although revenues in the core brokerage business area will significantly exceed the previous year’s level in 2022, this will not be sufficient to compensate for the revenues originally expected from the crypto segment. The Management Board said that it cannot issue a new, reliable forecast for the 2022 financial year at this time.
NAGA shares fell by about 13% after the announcement was released, to a new 52-week low of €2.05 per share.