Report
Press release
INTERIM REPORT January 1 June 30, 2006
All figures in this report are in SEK. Numbers in parenthesis indicate the corresponding period of the previous year.
Interim Period:
* The groups net sales increases by 39 percent to SEK 265.8 (190.5) million
* Operating profit amounts to SEK 6.3 (15.1) million
* Costs for distribution of dividends in Cherry Casino affects the result by SEK 5.6 million
* Profit after financial items amount to SEK 3.6 (150.7) million
* Profit after tax amounts to SEK 1.8 (146.1) million, corresponding to SEK 0.05 (4.30) per share
Second quarter:
* Cherryföretagen AB changed name to Betsson AB
* Betsson Onlines revenues increased by 71 percent to SEK 61.9 million
* The number of active customers at Betsson.com increased by 3 percent
* The number of active customers at Betsson Sport increased by 127 percent
* Betsson increases efforts in product development, launch Bingo
* Net Entertainments revenues increased by 39 percent to SEK 22.9 million
* Net Entertainment signed 6 new license agreements
Events after the end of the period:
* Cherry Casino will be distributed to the shareholders in September
The Group
Interim Period; January-June
The Betsson groups revenues during the reporting period increased by 39 percent to SEK 265.8 (190.5) million. The
Internet-based operations Betsson Online (previous Cherry Online) and Net Entertainment substantially increased their
net sales compared to the same period the previous year.
Operating profit amounts to SEK 6.3 (15.1) million. The result includes costs of SEK 5.6 million for financial advisory
services and consulting in connection with the division of the Group. Betsson Online decreased their result to SEK -3.8
(2.4) million, while Net Entertainments profits increased to 18.9 (16.3). The operating margin fell to 2.4 (7.9) percent.
The profit/loss before taxes amounted to SEK 3.6 (150.7) million. Last year, the transition to IFRS affected the net
financial income positively by SEK 135.0 million. Profit/loss after tax amounted to SEK 1.8 (146.1) million, which
corresponds to SEK 0.05 (4.30) per share.
Return on equity was 0 (38) percent and return on total capital 1 (33) percent. Equity per share was SEK 12.09 (11.64)
at the closing date.
Second quarter
Revenues increased by 25 percent to SEK 132.6 (106.4) million. Revenues for both Betsson Online and Net
Entertainment increased significantly.
Operating profits fell to SEK -2.6 (11.1) million. The result was affected by costs in connection to the planned issue of
shares and separate listing of Cherry Casino amounting to SEK 4.6 million.
Betsson Online reports a negative result for the second quarter, primarily as a result of increased costs for development
and marketing. Marketing did not give the expected outcome, and during the third quarter has been reduced and
changed.
Business areas
Betssons operations are divided into three business areas:
- Betsson Online - Internet gaming on a global market primarily via Betsson.com and CasinoEuro.com
- Net Entertainment - development of gaming software for licensing to international gaming companies
- Cherry Casino - traditional casino gaming and gaming machines in Sweden, Denmark and on cruise ships
Betsson Online
The business area Betsson Online consists of the gaming portal betsson.com and the online casino. The gaming portal
betsson.com offers at the moment the product groups:
- 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.
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 CasinoEuro.com, which is run from Malta with Europe as
its primary market.
Net sales and profit/loss
Net sales for Betsson Online increased during the second quarter by 71 percent to SEK 61.9 (36.2) million and the
operating profit amounted to SEK -5.3 (3.4) million. For the entire reporting period, the net sales increased by 137% to
SEK 130.7 (55.1) million and result amounted to SEK -3.8 (2.4) million.
The lower result during the second quarter is primarily a result of increased costs for marketing and development. Poker
and casino gaming activity on Betsson.com was lower, while interest for sport betting was large. The result from sport
betting was however marginal as a result of many favourites winning during the World Championships in football.
Marketing did not give the expected outcome on some of Betssons markets. This has now been reduced and directed to a
greater extent toward other markets. During the quarter several marketing activities of a one-time nature were also
performed for the purpose of strengthening Betsson's new brand launched during the last quarter.
Betsson.com plans to launch several new products during the fall, including Bingo. The new products are expected to
attract both existing and new customers.
During the quarter, Betsson.com obtained a licence in Northern Cyprus as one of four international gaming organisers,
which gives competitive advantages on the Turkish gaming market.
Betsson.com
The number of registered customers at betsson.com increased by 16 percent during the quarter to 345,000. The number
of active customers also increased during the period by 3 percent to 49,000 and has increased in total by 142 percent
during the last year.
Betsson.com was named by Internetworld to Swedens best gaming site 2006, motivated by an innovative interface, good
game feel, excellent clarity and a good-looking design.
For Betsson Poker the quarter was not satisfying. The number of registered poker players increased by 7 percent to
241,000, while the number of active poker customers decreased by 15 percent to 29,900 during the quarter. The primary
reason for the decrease was increased competition in poker on several of Betssons core markets. Competition from the
World Championships in football and seasonal effects have also contributed to the decrease. Compared with second
quarter 2005, the number of active poker players has increased by 83 percent.
The number of active players in Betsson Sport totalled 16,400, compared to 7,200 the previous year. This is a growth of
127 percent. The increase is due to a successful launch of Betssons own sports wagering system and the strong interest
in the football world championships.
The number of players at the betting exchange increased during the quarter by 30 percent to 5,200. The number of active
casino players at Betsson Casino on June 30th was 13,800, compared with 16,900 at March 31st, a decrease of 18
percent.
Online Casinos
The number of registered customers in the online casinos at June 30 was 206,000, a decrease of 2 percent from the
previous quarter. The number of active customers increased by 14 percent during the quarter to 13,900. Two internet
casinos were closed down during the quarter.
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 six new licensing agreements. Revenues
consist of royalties and other proceeds from sales.
Net Entertainments net sales increased by 39 percent to SEK 22.9 (16.5) million during the quarter. Operating profit
was SEK 8.3 (9.0) million. Net Entertainment licenses software and sells consulting services internally within the Group
to Betsson Online. Exclusive internal group sales increased Net Entertainments revenues by 62 percent to SEK 18.2
(11.2) 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.
For the entire reporting period, the net sales increased by 49 to SEK 44.6 (30.5) million and the operating result
amounted to SEK 18.9 (16.3) million. Excluding internal group sales to Betsson Online, net sales increased by 55
percent to SEK 33.9 (21.9) million during the reporting period.
Cherry Casino
The business area Cherry Casino operates table games (blackjack and roulette) at more than 240 restaurants in
Sweden, gaming machines and table games on 38 cruise ships in the Nordic market and on 8 vessels in the Mediterranean via a partly-owned company, and gaming machines at 8 gas stations in Denmark in a joint venture with
Danish Shell.
Cherry Casino is the market leader in restaurant casinos in Sweden with 37 percent of the active gaming tables. Cherry
Casino's share of the maritime gaming market in the Nordic Region is estimated at 34 percent of the number of vessels
which have gaming activities.
Revenues for second quarter decreased to SEK 52.6 (58.9) million and the operating profit was SEK 1.8 (1.7) million.
For the entire reporting period, net sales amounted to SEK 101.1 (113.2) million and the profit/loss to SEK 2.2 (2.2)
million. The decrease in net sales is primarily due to the decreasing market for Swedish restaurant casino games.
Other information
Personnel and organisation
The average number of employees during the period was 268 (266) for the Group. Number of employees increased in
Net Entertainment and Betsson Online, while the number of employees in traditional gaming activities dropped. At the
end of the quarter, there were 750 (832) employees.
New share issue through the exercise of warrants and convertible debentures
During the second quarter, the companys incentive program has been exercised. Through conversion of its debenture
loan during April, 800,000 B shares were added and an additional 694,994 B shares were issued through the exercise of
share warrants during May. Total, equity has increased by SEK 6.1 million, of which SEK 3.0 million was put into share
capital.
Annual General Meeting
The Groups Annual General Meeting on May 15, 2006 determined to re-elect the board members John Wattin, Per
Hamberg, Anders Holmgren, Anna-Carin Månsson and Patrick Svensk and newly elect Kicki Wallje-Lund and Skúli
Valberg Olafsson. Board member Ragnar Thorisson had declined re-election. John Wattin was re-elected as chairman of
the board.
The assembly authorised the board to, with or without preferential right to share holders, make a decision to issue at the
most a total of 3,000,000 shares of series B during the period until the next Annual General Meeting, and to change the
companys firm name to Betsson AB (publ).
Information concerning the parent company
The parent company, Betsson AB (publ), provides and sells internal services to other group member companies in the
areas of finance, economy, administration and management, and in addition has certain external licensing revenues.
Net sales for the reporting period amounted to SEK 4.2 (1.3) million and the loss after financial items amounted to SEK -
13.5 (128.4) million. The previous years net financial income includes the measurement of financial instruments at fair
market value, which increased the net financial income from 2005 by SEK 135.0 million.
The parent company's investments in fixed assets amounted to SEK 24,000 during the reporting period. Cash and cash
equivalents amounted to SEK 16.2 (1.5) million at the closing date. The company has no bank loans or bank credits.
In preparation for the proposed distribution of the business area Cherry Casino, the parent company has provided SEK
31.4 million in an unconditional shareholder contribution to the subsidiary Cherryföretagen AB (publ) in the form of
supplying operations in connection with establishment of the Group.
Events after the end of the reporting period
The Board of Directors decided on August 17, 2006 to call an additional shareholders meeting in Betsson AB to
consider the proposal to distribute all shares in the subsidiary Cherryföretagen AB (business area Cherry Casino) to the
shareholders. The additional shareholders meeting will be held on September 6, 2006 and if the motion is sustained,
the shares in the subsidiary will be noted at the Stock Exchange from September 12. More information about the
division is provided in the press release published August 17, 2006.
2006 Prospects
The business area Betsson Online is expected to at least double their turnover during 2006.
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.
Financial reports
The interim report for the first three quarters 2006 will be published on November 13, 2006.
Extraordinary shareholders meeting
An extraordinary shareholders meeting to consider the proposed distribution of Cherryföretagen AB (the business area
Cherry Casino) will be held on September 6, at 15:00 CET in the companys offices at Birger Jarlsgatan 57 B, 3rd floor,
Stockholm, Sweden.
Shareholders who wish to participate in the shareholders meeting must be recorded in the register of shareholders held by
VPC AB (the Swedish Securities Register Center) no later than August 31, 2006, and must notify their intention to
participate no later than September 4, 2006.
Registration to attend the extraordinary shareholders meeting should be made to the company by post to Birger
Jarlsgatan 57B, 113 56 Stockholm, Sweden, by telephone at +46 8-506 403 00, by fax at +46 8-735 5744 or by email to
[email protected]. Shareholders whose shares are nominee-registered must temporarily register their shares in their own
name to be entitled to participate in the Meeting.
The Boards complete proposal for the issue of shares and listing prospectus for Cherryföretagen will be available for
download on the companys website www.betsson.se from August 23, 2006. These documents will also be available in the
companys head offices at Birger Jarlsgatan 57B, Stockholm, Sweden, and can be ordered from the company starting
August 23, 2006 by telephone at +46 (0)8-506 403 00 or by email to [email protected].
Accounting principles
The accounting principles remain unchanged from the year-end accounting 2005. This interim report has been prepared
in accordance with IAS 34 Interim Financial Reporting. Further information on the Groups accounting and valuation
principles is found in note 1 of the annual report for 2005.
For further information, please refer to the summaries included in the quarterly reports of the Groups statement of
income, balance sheet, summary of assets, cash flow statement as well as notes and key business ratio for the period
and comparison period as well as the annual report for 2005.
Stockholm, 18 August 2006
Pontus Lindwall
President and CEO
For further information, please contact:
Pontus Lindwall, President and CEO, tel. +46 (0)8-556 967 10, +46 (0)708-27 51 55, [email protected]
Review report
I have reviewed the interim report for the period 1 January 2006 - 30 June 2006 for Betsson AB (publ). The Board of Directors and
managing director is responsible for the preparation and presentation of this interim financial information in accordance with IAS 34 and
the Annual Accounts Act. My responsibility is to express a conclusion on this interim financial information based on my review.
I conducted our review in accordance with the Standard on Review Engagements SÖG 2410, Review of Interim Financial Information
Performed by the Independent Auditor of the Entity issued by FAR. A review consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and other review procedures. A review has a different emphasis
and is substantially less in scope than an audit conducted in accordance with ('RS') and other generally accepted auditing practices. The
procedures performed in a review do not enable us to obtain a level of assurance that would make me aware of all significant matters that
might be identified in an audit. Therefore, the conclusion expressed based on a review does not give the same level of assurance as a
conclusion expressed based on an audit.
Based on my review, nothing has come to our attention that causes us to believe that the accompanying interim financial information is
not, in all material respects, prepared in accordance with IAS 34 and the Annual Accounts Act.
Stockholm, 18 August 2006
Gunnar Liljedahl
Authorised Public Accountant, Ernst & Young