Report
Press release
Interim report January 1 September 30, 2007
All figures in this report are in SEK. Numbers in parenthesis indicate the corresponding period of the previous year.
Third quarter
- Continued strong growth with all time high revenues and profits
- The groups net sales increased by 147 percent to SEK 177.2 (71.7) million
- The Nordic countries net sales increased by 25 percent compared to Q2
- Operating profit increased to SEK 53.7 (10.4) million.
- Betsson.com launched Italian-, Spanish- and Greek-language sites
- CasinoEuro.com launched new frontpage with increased functionalities
- Substantially more markets were added in the Sportsbook
Interim Period
- The groups net sales increased by 139 percent to SEK 488.9 (204.8) million.
- Operating income increased to SEK 146.4 (-3,9) million.
- The Groups income after taxes for continuing operations amounted to SEK 136.3 (-2,1) million, which
Events after the end of the interim period
- Strong introduction to Q4 with increased gaming revenues and activity levels compared to Q3
- Betsson.com has launched Betsson Trader, a unique financial betting product
- Betsson.com has launched a new locally customiseable frontpage with increased functionalities and improved
- Betsson.com, CasinoEuro.com and CherryCasino.com have launched a sequence of new casinogames
- Substantially more Livebetting markets have been added
- Betsson has established a Responsibly Gaming Department and strengthen its position as leader within the
Today, Thursday November 8 at 09:00 CET, Betssons Group president, Pontus Lindwall, will have a telephone
conference presenting the interim report. The presentation will be followed by a Q&A session. The presentation will be
held in English.
To participate in the telephone conference, call: +46(0)8 5352 6457 (Sweden) or +44(0)20 7138 0843 (UK). Use code
753 24 33 to participate.
The presentation can also be followed at 09:00 by Webcast (sound and PowerPoint presentation) on www.betsson.se
under Financial Info. The presentation can also be followed at www.financialhearings.com, Betsson.
A copy of the presentation will be available on www.betsson.se from November 8.
Third quarter 2007
During the first half of Q3 Betsson to focused on profitability before growth to meet the seasonal effect that normally
begins in the end of March and continues through mid-Q3. During this period the gaming volume is lower compared to
the rest of the year. During the later part of the third quarter, Betsson strengthen the growth efforts by increased
marketing and different kinds of offers to the customers. The strategy during Q3 has been successful and the company
has reached all time high in both revenues and operating profit. Revenues increased by 14 percent compared to Q2 - an
increase which was reached despite of difficulties on the Turkish market.
Turkish legislation against online gaming has during the third quarter continued to complicate Betssons participation on
the Turkish market. The gaming volume from Turkey declined significantly, which resulted in Turkey's share of the
group's total revenues during the third quarter only amounted to roughly 10 percent. Meanwhile, the group's revenues
and operating profit have increased during the quarter compared to Q2.
On other markets, excluding the Turkish market, Betsson has increased gaming volume during Q3. On the Nordic
markets gaming revenues increased by 25 percent during the quarter compared to Q2.
Revenues during the quarter amounted to SEK 177.2 (71.7) million, which represents an increase of 147 percent
compared to Q3 2006. Operating profit increased to SEK 53.7 (10.4) million and operating margin increased to 30.3
(14.5) percent.
Interim period January-September 2007
The Groups revenues increased 139 percent SEK 488.9 (204.8) million compared to last year and operating profit
increased to SEK 146.4 (-3.9) million. Operating margin increased to 29.9 (-1.9) percent.
Income before taxes increased to SEK 147.5 (-4.1) million.
Income after tax from continuing operations amounted to SEK 136.3 (-2.1) million which corresponds to SEK 3.45 (- 0.05)
per share. The interim periods income after taxes, including discontinued operations, amounted to SEK 147.8 (18.2)
million, corresponding to SEK 3.74 (0.46) per share. The income from discontinued operations refers to the previously
included business areas Net Entertainment and Cherry Casino, and amounted to SEK 11.5 (20.3) million, corresponding
to SEK 0.29 (0.51) per share.
Return on equity was 25 (0) percent and return on total capital 22 (-1) percent. Equity per share amounted to SEK 14.61
(11.26) at the closing date.
Gross Profit
Some Internet gaming companies describe Gross Profit as Revenues from Gaming Operations (i.e.Gross Winnings
Revenues etc), thereby describing license fees to game suppliers and expenses for bank and credit card payment
services as deductions on revenues. Betsson describes these fees and expenses as Operating expenses from gaming
activities, but has implemented the gross profit as income standard in the report to make comparison with other gaming
companies easier.
The gross profit from the Groups gaming operations is composed of the net of received gaming wagers and paid winnings,
minus gaming taxes, license fees to game suppliers, and the net of income and expenses for bank and credit card
payment services for depositing gaming wagers and paying winnings. Bonus does not affect the Groups gross margin.
Instead, the net cost of free games is reported as a marketing cost under other external expenses.
During Q3 2007, the gross profit amounted to SEK 147.3 (55.9) million. Operating margin in relation to gross profit
increased to 36.5 (18.6) percent. For the entire nine-month period, gross profit increased to SEK 397.9 (163.2) million,
and operating margin in relation to gross profit increased to 36.8 (-2.47) percent.
Gaming operations
Betsson offers Internet gaming to end consumers on a global market through the gaming portal betsson.com and the
casino sites CasinoEuro.com and CherryCasino.com.
Products
Betsson currently offers the following products:
- Sports betting, which offers a wide variety of possibilities for wagering, both on sports and other happenings of interest
- The betting exchange, which is a marketplace for wagering. Unlike sports betting, here customers play against each
- Casino with a large variety of world-class casino games that require no download. Here there are both traditional and
- Poker with several different poker games connected to Ongame, the largest poker network in the world with close to
- The scratch card Trio, which gives the player a high payout and winnings on average from every third card.
- Bingo, which was launched int the end of March for the Swedish market, offers several different bingo games. A bingo
- Betsson Trader, which is a financial betting product was launched mid October.
Betsson Trader is a unique financial game where the customers easily can bet on the stock market in a similar way as the
customers would bet on sports. Betsson Trader enables the customer to place bets on The Nordic Exchange. By placing
bets on the Betsson Trader, instead of buying and selling stocks, the customer has a lot to win. The customer will not
experience the complications or costs that a normal stock transaction will bring, e.g. declaration, tax on capital gain or
transactions fees. No large investments are required to have the possibility to get good return on the investment, since the
Betsson Trader can generate up to 20 times the invested money. So far, customers have shown interest and appreciation
of Betsson Trader.
Customers
At the end of Q3 2007, the number of registered customers was 869,000, an increase of 12 percent compared to Q2 2007
and an increase of 34 percent compared to Q3 2006. In the figures of the third quarter last year American customers were
not yet cleared out of the customer data base. This was done in the end of 2006, when approximately 225,000 clients were
deleted in the database.
The number of active customers decreased during the quarter by 4 percent to 90,800, but has increased by a total of 43
percent compared to Q3 last year. The decline in active customers during the quarter is primarily from Turkish players
difficulties using the site. Excluding Turkish active customers, the number of active customers increased by 8 percent
compared to Q2.
Profitability per active customer has increased during Q3 2007 compared to Q2 2007. This can partly be explained by the
previously large number of active Turkish customers who generally played for smaller amounts per player than the
average player.
An active customer is defined as a customer who has played for money during the last three months.
Betsson actively performs marketing through various media, and through result-based cooperation and partnerships to
increase the number of customers. At the same time, Betsson has an active loyalty program to keep existing customers
playing.
Markets
Betsson.com is established in 14 countries, with the Scandinavian countries composing the most important geographical
market. CasinoEuro.com is available in 16 languages and CherryCasino.com in 13 languages. Betsson still has its
strongest footing in Scandinavia, but is now growing more and more rapidly throughout the rest of Europe.
Personnel and organisation
The average number of employees during the period was 101 (61) for the Group. At the end of the period, there were
113 (66) employees.
Acquisition of own shares
Betsson has during August and September acquired its own shares. The company has acquired a total of 244,000 Bshares
at an average rate of SEK 58.02.
The AGM 2007 decided to pass a resolution authorising the Board of Directors to decide on the acquisition of a
maximum of 10 percent of the total number of shares in the Company. The Meeting also proposes that the Board of
Directors be authorised to pass a resolution on the sale of the Companys own shares, as payment upon the acquisition
of companies or businesses. It shall also be possible to sell shares to finance such acquisitions.
Parent company
The operations of the parent company, Betsson AB (publ), are primarily directed toward Group administration. The
company provides and sells internal services to other Group member companies in the areas of finance, accounting,
administration and management, and in addition has certain external rental income streams.
Net sales (including intra-Group items) for the reporting period amounted to SEK 5.3 (6.9) million and the loss after financial
items amounted to SEK -11.0 (-8.0) million.
The parent companys investments in fixed assets amounted to SEK 0 (33,000) during the reporting period. Cash and cash
equivalents amounted to SEK 8.7 (9.6) million at the closing date. The company has no bank loans or bank credits. During
the period, the parent company paid cash dividends of SEK 19.8 million, distributed shares in subsidiaries to shareholders
for a book value of SEK 4.0 million and acquired own shares of SEK 14.2 million. For more detailed information, see the
income statement and balance sheet on page 10.
Events after the end of the interim period
At the request to the board of a Class A shareholder, 190,000 Class A shares have been converted into class B shares.
The total number of outstanding shares after conversion is 39,553,720 of which 5,420,000 Class A shares and
34,133,720 Class B-shares.
2007 Prospects
The first nine month of 2007 has been strong and in line with the companys expectations. The fourth quarter has also
begun strong with increased sales, active customers and registered customers compared to Q3
In March, the European Court of Justice confirmed through the Placanica ruling that national legislation prohibiting
practicing gaming operations without license or governmental permit constitutes a limitation on freedom of establishment
and freedom to provide services within the EU. Later in March, the EU commission announced that it had taken
measures to stop the prevention of free movement on sports betting services in Denmark, Finland and Hungary. The
European Court of Justice and the EU Commissions point of view and actions can in the long term result in improved
opportunities for Betsson.
Turkey has adopted legislation against Internet gaming. The legislation, which purpose is to protect the state-owned gaming
company IDDAA, is according to legal experts a violation of Turkeys agreement with the EU, which is intended to facilitate
Turkeys transition towards a possible EU membership. The Turkish legislation complicates Betssons operation on the
Turkish market.
During the forth quarter, Betsson.com intends to widen its product offering to include additional gaming products. During
the year, Betsson has launched its site in several new geographical markets, including Greece, Spain and Italy. The goal
is to grow both organically and through acquisitions in these new markets.
Betsson aims to grow faster than the market, maintaining an operating margin of at least 30 percent.
Financial reports
Betsson plans to release financial reports during 2008 according to below;
* 2007 Q2 and Full Year Report 2007 February 15, 2008
* 2008 Q1 and Interim Report January-March 2008 April 29, 2008
* 2008 Q2 and Interim Report January-June 2008 August 1, 2008
* 2008 Q3 and Interim Report January-September 2008 October 31, 2008
Betsson has decided to postpone the monthly reporting of KPIs. The company has a strong but also dynamic growth which
makes the interpretation of monthly KPIs difficult.
Election Committee
In accordance with the decision taken at Betssons annual general meeting on 22nd of May, the members of the election
committee have been appointed. The election committee will consist of the following persons:
Rolf Blom, Board Member of Betsson AB, appointed by Lars Kling and Per Hamberg
Niclas Eriksson, Vasastaden Holding AB, appointed by Rolf Lundström and Bertil Knutsson.
Magnus Briggert, Publicistgruppen Magnus Briggert AB, appointed by Per Hamberg and Lars Kling
John Wattin, Chairman of Betsson AB
The task of Election Committee is to prepare a proposal for the General Annual Meeting 2008 relating to the number of
board members that are to be elected by the meeting, remuneration of the board members, the composition of the board,
the chairman of the board, auditor(s), remuneration of the auditor(s) and 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 Monday the 12th of May 2008 in Stockholm, Sweden. Time and
place will be communicated later.
Shareholders whishing to put forward proposals to the Election Committee can do this through e-mail to
[email protected] or by mail to Betsson AB, Election Committee, Regeringsgatan 30-32, SE-111 53 Stockholm,
Sweden.
Accounting principles
Betsson applies the International Financial Reporting Standards (IFRS) as adopted by the EU. This interim report has
been prepared in accordance with IAS 34, Interim Financial Reporting. The accounting principles remain unchanged
from the year-end accounting 2006. Further information on the Groups accounting and valuation principles can be found
in note 1 of the annual report for 2006.
Discontinued operations
The Groups business area for development and licensing of online gaming products Net Entertainment was
distributed as dividends to Betssons shareholders at the beginning of April 2007 and was listed at NGM Equity. The
Groups traditional gaming operations in the business area Cherry Casino were distributed as dividends to shareholders
under the name Cherryföretagen AB and listed at AktieTorget in September 2006.
Net Entertainment was consolidated in the Betsson Group through March 2007, and Cherry Casino was consolidated in
the Group through August 2006.
In accordance with IFRS 5, Noncurrent Assets held for sale and Discontinued Operations, the periods income for the
distributed business Net Entertainment is reported in the groups Income Statement within the item Income for the
period from discontinued operations. This means that income and expenses for the business area Net Entertainment
were excluded from all items in the income statement for the actual period and comparison periods. Income and
expenses for the business area Cherry Casino were also excluded from all items in the income statement for comparison
periods.
The cash flow statement reports separately the effect of business area Net Entertainment on the interim and comparison
periods cash flow, as well as business area Cherry Casinos effect on the comparison periods cash flow.
The business area Net Entertainment is excluded from the balance sheet from April 2007. The balance sheet for
comparison periods are those already published, which means that Net Entertainments balance sheet items are
included in the Groups balance sheet for the reported comparison periods, while Cherry Casinos balance sheet items
are included in the Groups balance sheet for all comparison periods through August 2006.
For additional information, please refer to the summaries included in the interim report of the Groups statement of
income, balance sheet, equity summary, and cash flow statement as well as notes and key ratios for the period and
comparison period and the annual report for 2006.
Risks and uncertainties
Gaming on most national markets is regulated by law, and all gaming operations are in principle subject to authorization.
Political decisions can therefore affect Betssons operation. Betsson is dependent on the legal situation for the gaming
industry, particularly within the EU where the majority of the companys customers are active. The European Court of
Justice has, in a series of much noted and landmark rulings (the Schindler, Läärä, Gambelli, Lindman and Placanica
rulings), determined that governmental restrictions on the gaming area are in principle considered restrictions on the EUs
basic principles. Nevertheless, a number of member states maintain restrictions in order to complicate or render impossible
the operations of private online companies.
It is likely that within the near future several European gaming monopolies will be challenged by national legal proceedings.
It is currently difficult to have a clear view on how the legal situation will affect the commercial conditions for online
operators. In the context it should be emphasized that Betsson does not offer its services to customers residing in the USA
after a legislative proposal prohibiting relaying payment transactions from Internet gaming in the USA came into effect in
October 2006.
Persons suffering from gambling addiction could sue companies within the Betsson Group for their gambling addiction.
Even if such claims would most likely be rejected, they could create significant expense and even reduce confidence in the
Betsson Group, leading in the long term to reduced revenues. Betsson is accredited by the organisation G4, which works to
prevent gambling addiction. As a part of this, Betsson has modified its sites to offer full support for G4s established
guidelines. In addition, Betsson has established a Responsibly Gaming Department. Skilled and experienced personnel
have been recruited in order to strengthen Betsson's position as leader within the area of Responsible Gaming
Betsson is exposed to seasonal variations, since gaming decreases during the summer. Betsson is not insensitive to
market swings. These fluctuations do not however significantly affect the company.
The Groups operation on Malta has, until now, been partially exempt from VAT. The Maltese authorities are currently
reviewing their regulations, but it is difficult to predict which, if any, regulatory changes may be made. If portions of the
companys operations become subject to VAT, it will most likely affect the result negatively.
For more, see the section on risk in the 2006 Annual Report.
Stockholm, Sweden, 8 November 2007
Pontus Lindwall
CEO and President
This report has not been subject to a special audit by the company's auditor.
For further information, please contact:
Pontus Lindwall, President and CEO, phone +46 (0)8-556 967 10, +46 (0)708-27 51 55, [email protected]