Report
Press release
Full Year Report 1 January – 31 December 2006
All figures in this report are stated in Swedish kronor (SEK). Figures in brackets refer to the corresponding period in the previous
financial year.
Fourth quarter;
* Group revenue increased by 100 per cent to SEK 137.6 (68.6) million and operating profits increased by 183
per cent to SEK 35.4 (12.5) million
* Betsson Online more than doubled its revenue to SEK 112.8 (54.2) million at the same time as operating
profits more than trebled to SEK 25.5 (7.9) million
* Betsson Online continued to show growth in all products and in all markets
* The number of active customers increased during the quarter by 46 per cent till 92 600
* Net Entertainment’s income grew by 52 per cent to SEK 31.0 (20.4) million and operating profits totalled
SEK 12.6 (9.3) million
* Group profits after tax amounted to SEK 44.3 million, equivalent to SEK 1.12 (0.40) per share
Full year;
* Group revenue increased by 93 per cent to SEK 391.5 (203.2) million
* Operating profit for continuing operations increased to SEK 59.7 (40.6) million
* Profit after tax for the year from continuing operations amounted to SEK 60.5 (174.8) million, which is
equivalent to SEK 1.55 (4.84) per share. The result for the previous year included SEK 135 million in regard
to revaluation of financial instruments
* Cherry was spun off to the shareholders
Events after the end of the financial year:
* First quarter of 2007 has experienced a strong start with continued growth in all products an in all markets
* The spin off of Net Entertainment to the shareholders is planned during the first quarter of 2007
Fourth quarter
Group revenue increased by 100 per cent to SEK 137.6 (68.6) million compared with the fourth quarter of the previous
year. Betsson Online reported record revenue and more than doubled income to SEK 112.8 (54.2) million.
The group’s operating profits increased to SEK 35.4 (12.5) million. Operating margin increased to 25.7 (18.2) per cent.
Profit before tax increased to SEK 34.8 (15.0) million.
Profit after tax for continuing operations totalled SEK 44.3 (15.7) million, which is equivalent to SEK 1.12 (0.40) per
share.
Profit after tax for the quarter, including discontinued operations, amounted to SEK 44.3 (16.9) million, equivalent to SEK
1.12 (0.43) per share. The profit from discontinued operations refers to the previously included traditional gaming
activities within the Cherry Casino business unit and amounted to SEK 0.0 (1.2) million.
Full year
The Betsson Group’s income increased during the year by 93 per cent to SEK 391.5 (203.2) million. Betsson Online
more than doubled its revenue in comparison with the same period of the previous year. Net Entertainment’s income also
increased significantly compared with the previous year.
Operating profits totalled SEK 59.7 (40.6) million. The operating margin was 15.2 (20.0) per cent.
Profit before tax amounted to SEK 57.6 (182.2) million. In the previous financial year, the revaluation of financial
instruments gave a positive effect on net financial items of SEK 135.0 million. Profit after tax from continuing operations
amounted to SEK 60.5 (174.8) million, which is equivalent to SEK 1.55 (4.84) per share.
Profit for the year including discontinued operations amounted to SEK 62.5 (178.0) million, which is equivalent to SEK
1:59 (4:91) per share. Profit from discontinued operations refers to the previously included traditional gaming activities
within the Cherry Casino business unit and amounted to SEK 2.0 (3.2) million.
Return on equity was 13 (44) per cent and return on capital employed was 10 (40) per cent. Equity per share amounted
to SEK 12.41 (12.38) on the balance sheet date.
Restructuring
Betsson Online’s primary activities have been carried on since the end of 2005 from Malta, where Betsson Online’s head
office is also located. In the final quarter of 2006, all IP rights including trademarks were also transferred to the company
on Malta. This transfer was effected at actual value according to independent valuation by external parties. The transfer
has meant that Betsson was able to cancel deferred tax liabilities previously recorded against these rights, which resulted
in a positive recorded tax expense in the final quarter. The fact that almost all online operations and associated rights are
now gathered on Malta has resulted in and will continue in future positive tax effects for the Betsson Group as the
effective tax rate on Malta is 4-6 percent.
During 2006, Net Entertainment has successively relocated the marketing, sales and product development functions to
Malta. This has been undertaken as a result of customers’ wishes and requirements and as a consequence of the
licensing requirements on Malta. Net Entertainment has also initiated the process to transfer its IP rights to its Maltese
company. Once the restructuring has been completed, the only functions that will remain in the Swedish company will be
the senior management functions and functions for the development of the company’s games and gaming systems. The
reorganisation will give positive tax effects for the Net Entertainment Group in the long-term.
Business Area Betsson Online
The Betsson Online business unit offers Internet gaming to end users in a global market via the gaming portal betsson.com
and via the casino websites CasinoEuro.com and CherryCasino.com.
Betsson currently offers the following product groups:
- Sports betting, which offers a wide range of opportunities to make bets, both on sports and other events that are of
interest for European players.
- Betting Exchange, which is a marketplace for betting. Here, in contrast to Betsson Sport, players bet against each
other. Betsson receives commission from the player who wins a bet.
- Casino with a wide range of casino games of world class that do not require any downloading. Both traditional and
innovative games such as Black Jack, Roulette, Casino Hold’em, video poker, slot machines and much more can be
found here.
- Poker with several different poker games connected to Ongame, the largest poker network in the world with over six
million registered poker players.
- Lotteries with the Trio scratch card lottery which gives players high winning payments and on average every third card
wins a prize.
Net Sales and Income
Betsson Online report a record quarter and continued to show growth in all products and in all markets. Net Sales
increased by 108 per cent to SEK 112.8 (54.2) million compared with the fourth quarter of the previous year. Net Sales for
the full year more than doubled to SEK 314.0 (154.5) million.
Operating profit for the quarter also attained a new record and increased by 223 per cent to SEK 25.5 (7.9) million. The
adjustment of the marketing mix which was implemented during the second and third quarter – involving changing the
marketing and retargeting on other markets – has had a very positive effect on revenue and earnings.
The business unit’s operating profit for the full year increased to SEK 28.6 (16.7) million.
Since 13 October, Betsson has shut down the opportunity for US players to use the company’s casino-sites. Betsson.com
had already been shut down for US players. The reason for this is the change in the legal situation in the USA which makes
payments for gaming on the Internet impossible. Revenue from customers in the USA amounted to less than three per cent
of Betsson Online’s total revenue. The US market has been a non-priority market for Betsson for a long time now, and
Betsson’s main market lies in Europe.
Customers
The removal of US customers from the customer register has been carried out after the end of the financial year so that the
customer base shall reflect the actual situation as per the end of the year. The Internet casino Casinodomain.com, which
had predominantly US customers, was shut down completely during the fourth quarter and all US customers have been
removed from the Internet casinos CasinoEuro.com and CherryCasino.com. Furthermore, a merger of the customer
registers of betsson.com, CasinoEuro.com and CherryCasino.com has been carried out. After these adjustments, where
approximately 225 000 US customers were deleted in the customer base, the number of registered customers as at the
end of the year totalled 543 600. During the fourth quarter 122 000 new customers have registered.
The number of active customers grew by 46 per cent to 92 600 during the fourth quarter and has increased by 109 per cent
in the last year.
The number of active customers per product (the figures for the previous quarter are in brackets) totalled;
* Sports betting (including the betting exchange) 47 000 (26 500)
* Casino 37 000 (25 200)
* Poker 38 400 (28 800)
* Trio 8 000 (5 900)
An active customer is defined as a customer who has played during the last three months.
Business Area Net Entertainment
Net Entertainment is a leading supplier within the B2B sector for online games whose brand name is associated with
innovation and quality. Net Entertainment develops gaming software which is licensed to an international clientele which
consists today of more than 40 gaming companies.
Net Entertainment’s Net Sales increased by 52 per cent during the quarter to SEK 31.0 (20.4) million. Operating profits
amounted to SEK 12.6 (9.3) million. Net Entertainment licenses software and sells consulting services internally within
the group to Betsson Online, which is included in Net Sales above. Excluding intra-group sales, Net Entertainment’s Net
Sales increased by 66 per cent to SEK 23.8 (14.3) million.
Net Sale for the full year grew by 44 per cent to SEK 99.8 (69.2) million and operating profits rose to SEK 40.8 (35.9)
million. Excluding intra-group sales to Betsson Online, net sale increased by 58 per cent to SEK 76.2 (48.2) million in the
full year.
Johan Öhman has been appointed CEO of Net Entertainment from 1 November as part of the preparations leading up to
the proposed spin-off of Net Entertainment to Betsson’s shareholders. Johan Öhman was previously sales manager of
Net Entertainment and has been employed by the company since 2003.
Personnel and organisation
The average number of employees in continuing operations for the full year period was 112 (64) within the group. There
were a total of 146 (90) persons employed at the end of the year.
Dividend payments
The Board of Directors proposes that the Annual General Meeting decides that no cash dividend shall be paid. The Board
of Directors proposes instead that Net Entertainment is spun off to the shareholders.
The Board of Directors of Net Entertainment proposes that the Annual General Meeting decides in favour of a dividend
payment of SEK 0.25 per share for the 2006 financial year. The Annual General Meeting of Net Entertainment will be held
after the spin-off from Betsson.
The Board of Betsson will request authorisation from the 2007 AGM entitling the Board to effect a repurchase of the
company's own shares. Pursuant to such authorisation, the Board of Directors shall be entitled, should it deem appropriate,
to decide upon the repurchase of not more than 10 per cent of the company's shares during the period until the next AGM.
Any repurchase will take place on the stock market or through an offer to all shareholders. It is proposed that the Board's
authorisation will also include the possibility to transfer repurchased shares,
Annual General Meeting
The Annual General Meeting of Betsson AB (publ) will take place on Tuesday, 22 May 2007 at 15:00 at Konferens
Spårvägshallarna, Birger Jarlsgatan 57, Stockholm, Sweden.
Shareholders who wish to attend the Annual General Meeting must be both registered in the register of shareholders
maintained by VPC AB as per Tuesday, 15 May 2007 and also notify their intention to attend the Annual General Meeting
by 12.00 on Friday, 18 May 2007.
Notification to attend the Annual General Meeting shall be made either in writing to the company and sent to its address at
Birger Jarlsgatan 57B, 113 56 Stockholm, by phone to +46 (0)8-506 403 00, by fax to +46 (0)8-735 57 44 or by e-mail to
[email protected].
Shareholders who wish to raise an issue at the Annual General Meeting must submit this in writing to: The Chairman of
the Board, Betsson AB (publ), Birger Jarlsgatan 57 B, 113 56 Stockholm, Sweden at least seven weeks prior to the date
of the Annual General Meeting (3 April) in order to guarantee that the issue can be included in the Notice of the Annual
General Meeting.
Election Committee
As stated previously, the election committee is made up of the following persons:
- Rolf Blom, Chairman of the Election Committee, nominated by the previous owners of / sellers of betsson.com
- Gabriel Catrina, nominated by Straumur Burdarás
- John Wattin, Chairman of the Board of Directors of Betsson AB
The task of the election committee is prior to the coming Annual General Meeting to submit a proposal in regard to the
number of members of the board who shall be elected by the Annual General Meeting, the directors’ remuneration, the
composition of the board, the chairman of the board and the chairman of the Annual General Meeting. Furthermore, the
election committee shall submit a proposal for new instructions for the election committee for the next Annual General
Meeting.
Shareholders who wish to submit a proposal to the Election Committee can do so via e-mail to [email protected].
Events after the end of the reporting period
Straumur Burdarás’ representative on Betsson’s Board of Directors - Skuli Valberg Olafsson – resigned from the board at
the end of January at his own request. The reason for his resignation was that Olafsson’s responsibilities and workload as
COO of Straumur Burdarás Investment Bank has significantly increased, which was preventing Olafsson from devoting the
necessary time to his position on the board of Betsson.
Straumur Burdarás has proposed to the Election Committee that Emil Sunvisson be elected as a member of the board and
representative for Straumur at the next extraordinary general meeting or annual general meeting. It is proposed that Emil
Sunvisson be co-opted as a member of the board until such an election is held.
Net Entertainment has had its product CasinoModule™ voted as one of the top 20 international gaming products of 2006
by the publication International Gaming & Wagering Business. The 20 best gaming products were chosen by a panel of
independent judges and selection was based on the following criteria: innovation, efficiency, user-friendliness, assessment
by end users, integration, long-term value and profit potential.
Prospects for 2007
The beginning of 2007 has seen a strong start for Betsson Online with continued growth in all products in all markets.
Betsson is not presenting any forecast for 2007.
In order to further emphasise the fundamental rights to offer and market gaming within the European Union, in October
2006 the EU Commission initiated an examination of three member states’ infringements in respect to restrictions in the
national gaming legislation in the respective countries. The examination may result in improved opportunities for Betsson
and other gaming companies in the long-term.
According to Betsson’s partner in Turkey a bill has been presented in Turkey, which if accepted, could deteriorate the
conditions for offering gaming services from abroad to consumers in Turkey. Betsson’s partner has – as one of four – a
license, issued in northern Cyprus which is part of Turkey, to operate online games. It is today unknown if the Cypriote
license is comprised by the bill and if the bill will be passed. In addition, the bill conflicts the EU-law adopted in the case of
Placanica. Thereby it is also in conflict with the agreement Turkey has entered with EU, as preparation of Turkey’s entrance
into the Union. Approximately 20% of Betsson’s revenues come from the Turkey.
The distribution of the subsidiary Net Entertainment to Betsson’s shareholders is expected to be decided at an EGM
during the first quarter of 2007.
Financial reports
Information will be issued during 2007 in accordance with the following plan:
- Interim report 3 months, 22 May 2007
- Interim report 6 months, 21 August 2007
- Interim report 9 months, 8 November 2007
Betsson also intends after the spin-off of Net Entertainment to issue certain KPIs (Key Performance Indicators) on a
monthly basis.
Annual Report and Accounts
Betsson’s Annual Report and Accounts for 2006 are expected to be available on the company’s website,
www.betsson.se, from mid-April 2007.
Parent company
The activities of the parent company, Betsson AB (publ), are focused primarily on group-wide management. The company
supplies and sells internal services to other group companies in respect to finance, accounting, administration and
management, and also has certain external rental income.
Revenue (including inter-group items) for the full year totalled SEK 9.8 (4.5) million and earnings after financial items
amounted to SEK –2.5 (117.2) million. Net financial items for the previous year included valuation of financial instruments at
actual value which increased net financial items in 2005 by SEK 135.0 million.
The parent company’s investments in non-current assets totalled SEK 33 000 during the year. Liquid assets as per the
balance sheet date amounted to SEK 9.6 (1.5) million. The company does not have any bank loans or bank credit facilities.
Equity as per the balance sheet date totalled SEK 707.2 (732.3) million. The parent company’s equity has decreased during
the year by SEK 31.4 million in connection with the spin-off of Cherryföretagen AB to Betsson’s shareholders. Betsson AB
has received SEK 9.9 million in dividends from its subsidiary company Net Entertainment in 2006
Accounting policies
Betsson applies IFRS which have been adopted by the EU. This Full Year Report has been compiled in accordance with
IAS 34, Interim Financial Reporting. The accounting policies remain unchanged from the 2005 Annual Accounts. Further
information about the Group’s accounting policies and valuation principles can be found in Note 1 of the 2005 Annual
Accounts.
Discontinued operations
The group’s traditional gaming business area Cherry Casino was during September 2006 distributed to the shareholders
in Betsson, under the name of Cherryföretagen AB. The transaction of the business to Cherryföretagen AB has been
conducted at booked values.
In accordance with IFRS 5 “Non-current Assets held for sale and Discontinued Operations”, the result of the period for
the distributed business has been accounted for in the group’s Income Statement within the post “Income for the period
from discontinued operations”. As a consequence all Cherry Casino’s revenues and costs during the applicable time
period, as well as for the comparative periods, have been excluded from the Income Statement. In addition to this, a
representative portion of the Group-wide costs have been allocated. Information on the effect the business area Cherry
Casino has on the cash flow has been accounted for in the cash flow analysis.
As of the Balance sheet December 31 2006 the business area Cherry Casino is excluded. The Balance sheets for
comparative periods are the previously published, which means that Cherry Casino’s balance sheet items are included in
the groups balance sheets for accounted comparative periods.
Segment reporting
The business area Net Entertainment has previously accounted for result of external investments within IT- and internet
gaming companies, as well as cost associated with the handling of these investments. Some of these investments have
been conducted by the parent company Betsson AB or by the subsidiary company Intact Technology Stockholm AB. The
investments have however been assigned to the business area Net Entertainment in the segment reporting.
Prior to the upcoming dividend of the Net Entertainment group to the shareholders of Betsson a purification of the
accounting of Net Entertainment has been conducted. The comparative figures for previous periods will now better reflect
the business that will be distributed. On these ground the investments etc. that have not been conducted within Net
Entertainment NE AB and its subsidiaries have been moved from the business area Net Entertainment to Group -wide in
the segment reporting. Even comparative figures for previous periods have been recalculated. For information, the
quarterly figures are accounted for after the retroactive adjustments for Betsson’s different segments from the first
quartile 2005 and ahead on page 8 below.
For additional information we refer to the interim report’s compilations of the group’s Income statements, Balance Sheet,
compilations of equity, cash flow analysis, notes and key figures for the period and comparative figures, as well as to the
Annual Report 2005.
The report has not been subject to a special audit by the company’s auditor.
Stockholm, 21 February 2007
Pontus Lindwall
President and CEO
For further information, please contact
Pontus Lindwall, President and CEO, telephone: +46 (0)8 556 967 10, +46 (0)708 27 51 55, [email protected]