SA game developer to axe jobs after big loss

Adelaide game developer Mighty Kingdom will lay off an unspecified number of staff in a bid to save $350,000 a month after posting a $10.8m loss last financial year.

Sep 30, 2022, updated Sep 30, 2022
Photo supplied. Image:Tom Aldahn/InDaily

Photo supplied. Image:Tom Aldahn/InDaily

The struggling company, which has previously stated that it employs more than 160 developers, informed the ASX on Tuesday it would be immediately implementing “cost control” measures in a bid to reach cashflow breakeven by the third quarter of FY23 (January).

Among the measures flagged are a “reduction of FTE within the developer and administration teams”, along with “tighter cost control around all areas of the business” and “significant savings” in IT and subscriptions.

The company, chaired by former ABC boss Michelle Guthrie, expects the strategy to deliver an “initial recurring cost saving of approximately $350,000 per month”.

InDaily asked Mighty Kingdom how many staff would be laid off during this round of cost cutting and was told the company does not yet have a “definitive number”.

“Mighty Kingdom has entered into a consultation phase with its staff and at this stage we don’t have a definitive number,” the company said in a statement on Wednesday.

“We will continue to work through this process with the staff group over the coming days.”

In its ASX statement, Mighty Kingdom insisted the job losses would have a “limited impact on the company’s discretionary project milestones” and said the overall changes were aimed at “[delivering] a more sustainable business model”.

The gaming workers union, Gaming Workers Australia, said it was “working with members impacted by this announcement”.

“We are in consultation with Mighty Kingdom and are advocating strongly for our members,” the union said on Twitter.

“For confidentiality reasons, we cannot comment on individual cases. Anyone impacted by this announcement who has not already should contact us immediately for a private discussion.”

The move comes after Mighty Kingdom – Adelaide’s largest independent game developer which has historically focused on mobile titles – last month reported a net loss of $10.86m in FY22, up 51 per cent from its $7.14m loss in FY21.

The company’s preliminary final report showed that last financial year it was spending more than double its total revenue ($4.89m) on staff wages ($12.39m).

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The business has come under significant financial pressure this year due to game release delays, unexpectedly poor sales results and a nosedive in the share price, which closed at $0.03c on Thursday – down from 0.26c when it listed on the ASX in April 2021.

Mighty Kingdom’s financial situation came to a head in July when its quarterly cash flow report showed it only had $3.96m in available funding for future operating activities – enough to sustain it for just over three months.

Layoffs looked all but inevitable after the company announced a significant restructure on August 4 and flagged cost cutting measures to address its negative cash flow problem. It is also undertaking a share placement to raise $7m in working capital.

Mighty Kingdom CEO Phil Mayes conceded at the time the company had endured a period which was “very disappointing both corporately and from a shareholder perspective”, with the restructure representing a “very significant change in Mighty Kingdom’s outlook going forward”.

The company also appointed three former media executives to its board as part of the restructure and has now established a finance subcommittee to “assist in ensuring accurate forecasting moving forward”.

In its ASX statement on Tuesday, the company said it had made “significant inroads” in securing more work for hire and co-development revenue.

“After an extensive internal review, we are actioning cost saving initiatives that we see as a turning point in the Company’s advance towards cashflow breakeven and future profitability,” CEO Mayes told the ASX on Tuesday.

“This process, in conjunction with an anticipated strong revenue lift by the end of this calendar, will ensure our people are placed in the best possible positions and are able to work as efficiently as possible to deliver shareholder returns.

“We look forward to the positive effect these changes will have as we leverage our world class creative team and reputation to unlock long-term value for our shareholders.”

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