Following the recent turmoil in the Ukraine, Ukraine’s hryvnia tumbled 4 percent on Wednesday to 10 per dollar as political uncertainty mounted, with ripples spreading to Russia where the rouble fell to five-year lows and bank shares took a hit. Swedish mobile gaming developer and publisher G5 Entertainment has its development offices in Moscow and Kharkov so we decided to reach out to CEO Vlad Suglobov to hear how the company is affected.
Nordic Investor: Could you shed some light as to how the current depreciation of the Hryvnia does affect you? How much of your development costs is in Hryvnia? Would be great to get a feeling for your FX sensitivity, i.e.: how does a 10% change of the Hryvnia affect G5 ?
Vlad Suglobov: Our staff in Moscow naturally has salaries fixed in RUB while staff in Kharkov has salaries fixed in UAH. With the exception of just a few people, all our staff is located in Moscow and Kharkov. We do not keep any reserves in RUB or UAH, so we do not need to hedge against the changes in these currencies’ rates. Recent changes affect our bottom line positively. However, as previous history of such devaluations show, sooner or later employers of highly qualified staff (as is the case with most employees in IT companies) need to adjust salaries some way back to the previous rates. This has to do with the fact that many IT companies (not only G5) have revenues in EUR or USD, middle class in Russia and Ukraine tends to consume certain amount of imported goods, and real estate and rents are often get fixed in EUR or USD in larger cities. So please don’t set hopes high. With 39% y-o-y revenue growth it does not matter if we can save 10% of our fixed expenses on labor costs. G5 is not making money on cheap labor, but on high added value that our games generate.