Report
Press release
Interim period 1 January 30 September 2006
All figures in this report are in SEK. Numbers in parenthesis indicate the corresponding period of the previous year.
Third quarter:
* The groups operating profit increased to SEK 19.6 (14.3) million
* Betsson Online has reached a new revenue record, an increase by 55 percent to SEK 70.4 (45.3) million,
while the operating profit increased to SEK 6.9 (6.3) million
* The number of active customers on Betsson.com increased by 4 percent to 51 000 during the quarter
* Betsson Sport increased number of active customers by 32 percent
* Net Entertainments revenues increased by 29 percent to SEK 23.8 (18.4) million
* Net Entertainment signed 7 new licensing agreements
* Business area Cherry Casino was distributed to the shareholders
Interim period:
* The groups net sales increased by 88 percent to SEK 253.9 (134.7) million and the periods income after tax
for continuing operations amounted to SEK 16,2 (159.1) million, which corresponds to SEK 0.42 (4.50) per
share
* Operating profit for continuing operations amounted to SEK 24,3 (28.1) million
Events after the end of the period
* Betsson is closed for American players
* Betsson applies for Swedish gaming licenses
* Betsson sues the Swedish state for SEK 80 million
* The fourth quartile has started out strong
Third quarter
The group's Revenues alt Net sales increased by 55 percent to SEK 89.1 (57.5) million, compared to the third quarter
last year. Revenues for both Betsson Online and Net Entertainment increased dramatically.
Betsson Online turned around the negative result from the second quarter and reported a profit during the third quarter.
Operating profit for Betsson Online amounted to SEK 6.9 (6.3) million.
The groups operating profit increased to SEK 19.6 (14.3) million. The operating margin decreased to 22.0 (24.9)
percent.
Income before tax increased to SEK 20.3 (17.5) million. Last years annual net financial income included capital gains
SEK 2.9 million from sale of shares during the third quarter.
Income after tax for continuing operations amounted to SEK 15.1 (13.4) million which corresponds to 0.38 (0.35) SEK
per share.
The distribution of Cherry Casino to Betssons shareholders took place in September. Costs reported earlier during the
year relating to financial advice and consultations in connection with splitting the group could, because of the
distribution, be relocated to transaction costs which are reported directly against Betssons equity as well as listing costs
that are charged to Cherry Casino. The positive income is reported in group-wide income during the quarter.
Income after tax for the quarter including discontinued operations amounted to SEK 16.4 (15.1) million, which
corresponds to SEK 0.41 (0.38) per share. The result for discontinued operations refers to the traditional gaming
operations that used to form a part of business area Cherry Casio and amounted to SEK 1.3 (1.7) million.
Interim Period
The Betsson groups revenues increased by 88 percent to SEK 253.9 (134.7) million during the nine month period.
Betsson Online doubled net sales compared to the same period last year. Net Entertainments revenue also increased
robustly compared to the previous year.
Operating profit amounted to SEK 24.3 (28.1) million. The operating margin decreased to 9.6 (20.9) percent.
Income before tax amounted to SEK 22.8 (167.3) million. Last year the transition to IFRS affected net financial income
positively by SEK 135 million. Income after tax for continuing operations amounted to SEK 16.2 (159.1) million which
corresponds to SEK 0.42 (4.50) per share.
Income after tax for the period including discontinued operations decreased to SEK 18.2 (161.2) million, which
corresponded to SEK 0.46 (4.54) per share. The result for discontinued operations refers to the traditional gaming
operations that used to form a part of business area Cherry Casio and amounted to SEK 2.0 (2.1) million.
Return on equity was 4 (41) percent and return on total capital 4 (37) percent. Equity per share was SEK 11.26 (11.93)
at the closing date.
Business Area Betsson Online
The business area Betsson Online offers Internet gaming to end users in a global marketplace through the gaming portal
betsson.com as well as through internet casino CasinoEuro.com et al.
The gaming portal betsson.com offers the following product groups at the moment:
- Betsson Sport, offering a wide variety of possibilities for wagering, both on sports and other pleasures of interest to
European players.
- The betting exchange, a marketplace for wagering. Unlike a traditional bookmaker, customers play against each
other. Betsson receives commission from those winning a wager.
- Betsson Casino with a large variety of world-class casino games that do not require download. Here there are both
traditional and innovative games including Black Jack, Roulette, Casino Holdem, video poker games, gaming
machines and much more.
- Betsson Poker with several different poker games connected to Ongame, the largest poker network in the world with
over six million registered poker players.
- Drawings with the scratch card Trio that gives the player a high level of repayments and winnings in average on every
third lottery ticket.
Internetcasino CasinoEuro.com et al.
The internet casino is offered through CasinoEuro.com, CherryCasino.com and CasinoDomain.com. The casino sites offer
casino gaming and poker in more than 17 countries. Focus is on CasionEuro.com, which is run from Malta with Europe as
its primary market.
Betsson has, since October 13th, closed the companys casino sites to American players. Betssons other sites were
already closed to American players. The reason is the changed legal circumstances in the USA which make payments for
gaming impossible over the internet. Net sales from customers in the USA amounted to less than three percent of Betsson
Onlines total net sales. The American market has never been a prioritised Market for Betsson, which has its main market
in Europe.
Net Sales and Income
Net sales for Betsson Online increased during the third quarter by 55 percent to SEK 70.4 (45.3) million. For the whole
interim period the net profit was doubled to SEK 201.1 (100.4) million.
Betsson Online turned, in the third quarter, the previous quarters loss to an operating profit of SEK 6.9 (6.3) million. The
lower result during the second quarter was primarily a result of increased costs for marketing which did not bring the
expected results in some markets as well as many favourites winning in the football World Championships. During the
third quarter marketing has been decreased and retargeted at other markets, which has had a positive influence on net
sales and income.
Operating profits for the whole period amounted to SEK 3.1 (8.8) million
Betsson.com is planning to launch several new products during the autumn, including Bingo. The new products are
expected to attract both new and existing customers.
Betsson.com
The number of registered customers on betsson.com increased by 16 percent to 404 000 during the quarter. During the
same time the number of active customers rose by 4 percent to 51 000 and have increased by 102 percent during the last
year.
The number of registered poker players increased by 17 percent to 280,000 while the number of active poker customers
decreased by 4 percent to 28,800 during the quarter. The main reason for the drop was increased competition within
poker gaming in some of Betsson's main markets. Compared to the third quarter 2005 the number of active poker players
were 37 percent more.
The number of active players within Betsson Sport amounted to 21,600 compared with 16,400 in the previous quarter,
which corresponds to a growth of 32 percent. The growth can be ascribed to a successful launch of Betsson's own sports
wagering system.
The number of players at the betting exchange decreased during the quarter by 7 percent to 4,800. The number of active
casino players at Betsson Casino on September 30th was 13,100, compared with the previous quarter, a decrease of 5
percent.
The recently introduced scratch card Trio has been used by 5,900 players during the quarter.
CasinoEuro.com
The number of registered customers in the online casinos at September 30 was 242,000, an increase of 17 percent from
the previous quarter. The number of active customers increased by 8 percent during the quarter, to 12,000 and has during
the last year increased by 58 percent.
Net Entertainment
Net Entertainment is a leading provider within B2B for online gaming. The brand is associated with innovative thinking and
quality. Net Entertainment develops gaming software for licensing to an international circle of customers, today consisting
of around 30 gaming companies. During the quarter, Net Entertainment signed a number of new licensing agreements.
Revenues consist of royalties and other proceeds from sales.
Net Entertainments net sales increased by 29 percent to SEK 23.8 (18.4) million during the quarter. Operating profit
was SEK 9.2 (10.4) million Net Entertainment licenses software and sells consulting services internally within the Group
to Betsson Online. Excluding internal group sales Net Entertainments revenues increased by 54 percent to SEK 18.6
(12.1) million.
The result was affected by increased efforts in development and sales. The investments will result in a wider product
portfolio improved sales efficiency with a wider revenue base as a result. During July revenues were lower than
expected.
For the entire reporting period, the net sales increased by 41 percent to SEK 68.8 (48.8) million and the operating
income increased to SEK 28.2 (26.6) million. Excluding internal group sales to Betsson Online, net sales increased by
55 percent to SEK 52.2 (33.9) million during the reporting period.
Personnel and organisation
The average number of employees in the continuing operation was during the period 98 (57) in the Group. At the end of
the quarter there was a total of 112 (80) employees.
EGM, distribution of business area Cherry Casino
The EGM on the 6th of September sustained the Board of Directors motion to distribute all shares in business area Cherry
Casio (under the name Cherryföretagen AB) to Betssons shareholders. Cherryföretagens (business area Cherry Casino)
B share was noted on Aktietorget on 12th September.
Through the distribution the groups equity was decreased by SEK 51.7 million, of which SEK 4.5 million was made up of
transaction costs and SEK 2.9 million was attribute to the minority interest.
Election Committee
In accordance with the decision taken at Betssons annual general meeting on 15th May, the members of the election
committee have been appointed. The election committee will consist of the following persons:
- Rolf Blom, Chairman of the Election Committee, appointed by the ex owners/sellers of betsson.com.
- Gabriel Catrina, appointed by Straumur Burdarás
- John Wattin, Chairman of Betsson AB
The task of Election Committee is to prepare a proposal for the General Annual Meeting 2007 relating to the number of
board members that are to be elected by the meeting, the composition of the board, the chairman of the board as well as
the chairman of the Annual General Meeting. The Election Committee shall also submit a proposal for a new instruction
for the Election Committee for the next Annual General Meeting.
The Annual General Meeting for Betsson AB will be held on Tuesday the 22nd of May 2007, 3 pm, at Konferens
Spårvagnshallarna, Birger Jarlsgatan 57, Stockholm.
Shareholders whishing to put forward proposals to the Election Committee can do this through e-mail to
[email protected].
Events after the end of the reporting period
Betsson has renewed its applications for licenses to arrange gambling in Sweden. The applications refer to gaming
shops, gaming machines, online poker, online casino and international casino. The intention is to become a
competitive alternative to Svenska Spel (Swedish Games) on the Swedish market.
Betsson has submitted an application to sue the Swedish state for SEK 80 million. In 1997 the state adopted a law which
banned the wheel of fortune games. The restriction of law was aimed at Betsson who suffered a great loss as a
consequence of the law. It is now clear that the enforced law against the wheel of fortune is illegal, as the state broke EUlaw
when enforcing the law. Betsson considers it is right to get compensation for the damage the company has suffered
and thus now sues the state at Stockholms District Court.
2006 Prospects
The business area Betsson Online is expected to at least double their turnover during 2006.
The fourth quartile has taken off strongly. Betsson Online is expected to show a considerably better result for the forth
quarter in comparison to the third quarter.
The EU commissions review of the gaming monopoly in seven member states, including Sweden, may in the long term
result in increased possibilities for all business areas.
Betsson has not issued a forecast for the full year 2006.
The distribution of the subsidiary Net Entertainment to Betssons shareholders is expected to be decided at an EGM
during the first quarter of 2007.
Financial reports
The Full year report of 2006 is estimated to be published on February 21 2007.
Accounting principles
Betsson is applying IFRS that have been enacted by EU. This interim report has been prepared in accordance with IAS
34. The accounting principles are the same as for annual accounts 2005. Further information on the Groups accounting
and valuation principles can be found in note 1 of the Annual Report 2005.
Discontinued Business Areas
The groups 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 groups Income Statement within the post Income for the period
from discontinued operations. As a consequence all Cherry Casinos earnings 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 September 30 2006 the business area Cherry Casino is excluded. The Balance sheets for
comparative periods are the previously published, which means that Cherry Casinos 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 Betssons different segments from the first
quartile 2005 and ahead on page 7 below.
For additional information we refer to the interim reports compilations of the groups 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.
Audit
The report has not been subject to a special audit by the companys auditor.
Stockholm, November 13 2006
Pontus Lindwall
President and CEO
For further information, contact:
Pontus Lindwall, President and CEO, telephone +46 (0) 8 556 967 10, +46 (0) 708 27 51 55, [email protected]