Report
Press release
Interim report January 1 - March 31, 2007
All figures in this report are in SEK. Numbers in parenthesis indicate the corresponding period of the previous year.
Continued strong growth for all products on all markets during the period
* The Group's net sales from continuing operations (that is, excluding Net Entertainment) increased by 123
percent to SEK 156.0 (70.1) million
* Operating profit/loss from continuing operations increased to SEK 45.5 (-1.5) million
* The number of active customers during the quarter increased by 35 percent compared with Q4 2006 to
125,200
* A unique customer loyalty program covering all products was introduced
* Launching of Bingo, several new casino games, and live betting in Sportsbook
* The extraordinary general meeting on March 30 decided to distribute Net Entertainment
* The Group's result after taxes from continuing operations amounted to SEK 41.7 (-2.1) million, which
corresponds to SEK 1.06 (-0.06) per share
Events after the end of the interim period
* The Board has now adopted a new dividends policy with the ambition to distribute up to 75 percent of the
company's result after taxes to shareholders
* The shares in Net Entertainment were distributed as dividends to shareholders and the company was listed
at NGM on April 5
* Betsson.com launched its French-language site
Interim period January-March 2007
The Group's revenues from continuing operations (that is, excluding Net Entertainment) increased by 123% to SEK 156.0
(70.1) million compared with the same quarter last year.
The Group's operating profit from continuing operations increased to SEK 45.5 (-1.5) million. Operating margin increased
to 29.2 (-2.1) percent.
Profit before taxes increased to SEK 45.6 (-2.3) million.
Profit/loss after tax from continuing operations amounted to SEK 41.7 (-2.1) million which corresponds to SEK 1.06
(-0.06) per share.
The Group's profit after taxes including discontinued operations amounted to SEK 53.2 (5.0) million, corresponding to
SEK 1.35 (0.14) per share The result from discontinued operations refers to the previously included business areas Net
Entertainment and Cherry Casino, and amounted to SEK 11.5 (7.1) million, corresponding to SEK 0.29 (0.20) per share.
Return on equity was 8 (0) percent and return on total capital 7 (0) percent. Equity per share amounted to SEK 12.41
(12.51) at the closing date.
Work with distribution of the Group into three independently noted companies Betsson, Net Entertainment, and
Cherryföretagen which was begun at the end of 2005, is now completed. The purpose of the division was to clarify the
value of each operation by creating three clear investment alternatives. The background to the proposal was that the Board
determined that the three business-areas could develop more rapidly and stronger on their own. The individually-noted
companies together today have a higher value on the stock market than what the Betsson Group had before the
distribution.
Net result
Starting with this period, the result level Gross Profit has been added to Betsson's income statement. The purpose of
implementing the income measure is to simplify comparisons with other gaming companies.
The gross margin from the Group's 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 Group's gross margin.
Instead, the net cost of free games is reported as a marketing cost under other external expenses.
The gross margin for the interim period amounted to SEK 125.6 (56.2) million. Operating margin in relation to gross
margin increased to 36.1 (-2.7) 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:
- Sportsbook, which offers a wide variety of possibilities for wagering, both on sports and other happenings of interest to
- The Betting Exchange, which is a marketplace for wagering. Unlike sport betting, here customers play against each
- Casino with a large variety of world-class casino games that do not require download. Here there are both traditional
- 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 high payout and winnings on average from every third card.
- Bingo, which was launched at the end of March for the Swedish market and offers several different bingo games. A
During the period, Betsson launched Bingo, introduced several new casino games, and increased the number of poker
tournaments. During the period, the company has launched live betting within Sportsbook, increased the number of
playable markets, and introduced local Sport pages.
Customers
At the turn of the year, blocked American customers were removed from the customer database, so the database would
reflect the actual situation at year end. The Internet casino Casinodomain.com, which had predominately American
customers, was closed entirely during Q4, and the Internet casino CasinoEuro.com and CherryCasino.com have removed
their American customers. In addition, the customer databases for Betsson.com, CasinoEuro.com and CherryCasino.com
have been merged. After these adjustments, where about 225,000 customers were removed, the number of registered
customers at the turn of the year amounted to 543,600. At the end of Q1 2007, the number of registered customers was
686,000, which corresponds to an increase of 26% compared to the previous quarter.
The number of active customers increased by 35% during the period to 125,200, with a total increase of 119% during the
last year.
The number of active customers distributed by product (previous quarter given in parenthesis) was:
* Betting (Sportsbook and Exchange) 69,000 (47,000), 47 percent growth
* Casino 52,800 (37,000), 42 percent growth
* Poker 45,200 (38,400), 18 percent growth
* Trio 8,400 (8,000), 5 percent growth
* Bingo was launched first at the end of the quarter, so relevant numbers are missing.
An active customer is defined as a customer who has played for money during the last three months.
Betsson actively works with marketing through various media, and through result-based cooperations and partnerships to
increase the number of customers. At the same time, Betsson has an active loyalty program to keep existing customers.
During the quarter, the company launched a unique customer loyalty system that covers all of Betssons gaming products.
The company has also introduced new tools such as chat to streamline customer support internally and externally. Today
Betsson offers phone, chat and e-mail support.
Markets
Betsson.com is established in 10 countries, with the Scandinavian countries composing the most important geographical
market. CasinoEuro.com is available in 16 languages. Betsson still has its strongest footing in Scandinavia but is now
growing more and more rapidly throughout the rest of Europe.
Discontinued operation, the business area Net Entertainment
Net Entertainment is a leading B2B supplier of turnkey solutions for Internet-based casino games. Net Entertainment
develops gaming software for licensing to an international customer group, today consisting of around 40 gaming
companies.
Net Entertainment's result for the interim period is reported net after taxes as Incomes for the period from discontinued
operations. Net profit for discontinued operations amounted to SEK 11.5 (7.1) million. The previous years result also
included the net loss for Cherry Casino of SEK 0.2 million.
Net Entertainment's revenues (including sales to Betsson) increased by 52 percent to SEK 33.2 (21.8) million during the
quarter. Operating profit amounted to SEK 12.5 (10.6) million. The periods operating profit/loss absorbed costs of SEK
1.9 million in conjunction with the companys listing on NGM. For more information about Net Entertainment's operations,
development and financial position, see Net Entertainments interim report for Q1 2007, published on the companys
website www.netent.com.
Personnel and organisation
The average number of employees in the continuing operations during the period amounted to 96 (60) for the Group. At
the end of the period, there were 106 (69) employees.
Extraordinary General Meeting
On March 30, Betssons extraordinary general meeting decided to distribute Net Entertainment as dividends to Betssons
shareholders and list the company on NGM from April 5. The shareholders meeting also decided to elect Emil Sunvisson
as a new ordinary member of Betssons Board of Directors. Sunvisson represents Straumur-Burdaras Investment Bank.
Dividends
The 2006 year-end report proposed that no cash dividends would be paid. Betssons earnings trend during Q1 has been
very strong. The Board of Directors of Betsson AB have therefore changed their proposal and are recommending for the
general meeting on May 22, 2007 to pay cash dividends of SEK 0.50 per share.
Events after the end of the reporting period New dividend policy
The Board of Directors has today at a board meeting adopted a new dividend policy for Betsson AB that will be valid from
2008. The ambition of the Board is for Betsson's to pay dividends of up to 75% of the Group's profit after taxes, assuming
that a reasonable financial structure can be maintained.
2007 Prospects
2007 began strong and the first half of Q2 is in line with the companys expectations.
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 sport betting services in Denmark, Finland and Hungary. The
European Court of Justice and the EU Commission's point of view and actions can in the long term result in improved
opportunities for Betsson and other gaming companies.
Turkey has adopted legislation against Internet gaming. The legislation, whose purpose is to protect the partially stateowned
gaming company IDDAA, is according to legal expertise a violation against Turkeys agreement with the EU, which
has the purpose to regulate Turkeys road to possible EU membership. The Turkish legislation complicates Betsson's
participation on the Turkish market.
During the year, Betsson will widen its product offering to include new gaming products, some unique and some already
established in the market. At the same time, Betsson will launch a number of new geographical markets, primarily in
Europe. The goal is to grow both organically and through acquisition on these new markets.
Betsson aims to grow faster than the market, maintaining at least an operating margin of about 30%.
Financial reports
Information will be issued in 2007 according to the following schedule:
Q2 2007 Interim report, August 21, 2007
Q3 2007 Interim report, November 8, 2007
Betsson also intends to communicate certain Key Performance Indicators (KPIs) on a monthly basis now after the
distribution of Net Entertainment. Betsson intends to begin this reporting after the summer.
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 is found in
note 1 of the annual report for 2006.
Discontinued operations
The Group's business area for development and licensing of online gaming products the business area Net
Entertainment was distributed as dividends to Betsson's 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, Non-current Assets held for sale and Discontinued Operations, the periods result 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 the effect of business area Net Entertainment on the interim period and comparison
periods cash flow, as well as business area Cherry Casinos effect on the comparison periods cash flow, separately.
The business area Net Entertainment is included in the balance statement at March 31, 2007, since the company was
distributed in the beginning of 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 the
comparison period Q1 2006.
Segment reporting
Historically, Betsson has chosen to divide the company for the purposes of segment reporting into the business areas
Betsson Online, Net Entertainment, Group-wide and previously also Cherry Casino.
With the distribution of Net Entertainment, only one business area remains in the Group - Betsson Online, which has its
base on Malta and operates Internet consumer gaming. The previously disclosed expenses for Group functions now only
affect this business area. As a result, reporting of the Betsson Groups business area organisation has been omitted.
For additional information, please refer to the summaries included in the interim report of the Groups statement of
income, balance sheet, equity summary, cash flow statement as well as notes and key ratios for the period and
comparison period as well as the annual report for 2006.
This report has not been subject to a special audit by the company's auditor.
Stockholm, 22 May 2007
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]