BETSSON: FULL YEAR REPORT 1 JANUARY - 31 DECEMBER, 2007
All figures in this report are in SEK. Numbers in parenthesis indicate the corresponding period of the previous year.
Betsson has as from this report adapted changed accounting principles regarding net sales to the updated interpretations of IFRS concerning gaming. As effects some previously accounted costs are now reported as revenue reductions. Consequently the revenues in this report differ from the previously submitted revenues, see next page 2.
Forth quarter
- The group's net sales increased by 77 percent to SEK 189.7 (106.9) million,
(corresponding to SEK 196 (115) million according to previous principles)
- ATH net sales during the quarter, 15 percent higher than Q3
- Number of active clients increased to 107 000, an increase of 18 percent compared to Q3
- Operating income increased to SEK 43.5 (22.8) million
- The quarter's operating income is charged with one-off costs of SEK 15 million, which refers to the three first quarters of 2007.
- Cash funds increased by SEK 63 million during the quarter and the balance at year end equals SEK 233 millions
- Betsson.com launched two new products: Betsson Trader and Betsson Games
Full Year
- The group's net sales increased by 121 percent to SEK 649.0 (293.6) million
(corresponding to SEK 685 (320) million according to previous principles)
- Operating income increased to SEK 189.8 (18.9) million.
- The group's income after taxes for continuing operations amounted to SEK 179.4 (32.0) million, which corresponds to SEK 4.42 (0.82) per share
Events after the end of the interim period
- The Board suggests that SEK 5 per share will be distributed to the shareholders.
- January net sales were six percent higher than the previously ATH December 2007
- Strong introduction of February with net sales that well exceeds January
- The highest Casino Jackpot ever in Betsson's and Swedens´s history - SEK 10, 5 million - was won by a Swedish player.
Today, Friday February 15 at 08:30 CET, Betsson's Group president, Pontus Lindwall, will hold a presentation of the interim report at Operaterrassen in Stockholm. The presentation will be followed by a Q&A session. The presentation will be held in English.
To take part of the presentation by phone, call: +46(0)8 5052 0270 (Sweden) or +44(0)845 634 0041 (UK). Use code
634 53 61 to participate.
The presentation can also be followed at 08:30 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 February 15.
The Group's business area for development and licensing of gaming software for online gaming - the business area Net Entertainment - was distributed as dividend to Betsson's shareholders following a decision made by the extraordinary general meeting on March 30. The company has been listed on NGM Equity since April 5, 2007.
The business area Net Entertainment's result for the period January-March 2007 are included in this interim report for Betsson. Net Entertainment's result has been excluded from revenues and expenses in the income statement, and is reported as net in the item “Income for the period from discontinued operations”, in accordance with IFRS. The accounting principles used are described in more detail on page 6 of the report.
Change of accounting principles
IFRIC noted (July 2007) that when a gaming company takes a position against a player, the resulting unsettled wager is a financial instrument that is likely to meet the definition of a derivative financial instrument and should be accounted for in accordance with IAS 39. This means that Betsson shall report net figures for the Sportsbook and Betsson Trader.
IFRICs guidelines regarding loyalty programs for clients (June 2007) establish that the part of the revenue which is allocated for the clients bonus points shall not be taken up as revenue until the client uses its points. Betsson has implemented this guideline in advance. In previous reports Betsson have accounted full revenues and reported the bonus points as expenses.
Above changes of accounting principles affects the group´s reporting of revenues and expenses, as some expenses reduce revenues. The income of the group is not affected by the change of accounting principles, but rather the way the financial figures are presented. All prior quarterly figures from 2007 and 2006 have been recalculated. These figures have been translated in accordance to the new guidelines and are presented on page 10.
Revenues, reported according to previously used accounting principles, during the quarter amounted to SEK 196 (115) million and for the full year SEK 685 (320) million.
Forth quarter 2007
During the forth quarter Betsson has increased the investments in growth by boost marketing and a variety of customer offers. The strategy has been successful and the company has increased the net sales and the number of active customers. The company has also expanded the supply of different payment-methods which is an important pre-requisite for growth. The net sales from all the markets in the Nordic countries have increased compared to previous quarter. The other markets have also, as a whole, shown growth in comparison to last quarter.
The corporate group's net sales during the quarter increased to SEK 189.7 (106.9) million. This corresponds to an increase of net sales by 77 percent compared to same quarter previous year.
From the end of the year Betsson reserves all progressive jackpot-winnings to the full amount. This proceeding results in a more even earning trend, especially since the market trend is going towards higher jackpot-winnings. The change leads up to an additional deposition of SEK 6 million during the quarter. In total the company had nearly SEK 20 million reserved for jackpot-winnings by year end.
Income during the quarter is charged with write-down adjustments of balance sheet items mainly regarding second and third quarter and dissolution of reserves concerning first, second and third quarter. Total net effects of these adjustments has charged the forth quarter with SEK 4 million.
The forth quarter is also charged with a lump-sum of SEK 5 million regarding costs for guidance and consulting concerning advanced drafts of acquiring another gaming company. The acquisition could not be finalized.
The net effect of these items is SEK 15 million which was charged to the forth quarter.
After above adjustments has been made the operating profit amounts to a SEK 43.5 (22.8) million and the operating margin amounts to 22.9 (21.3) percent. The operating profit for the forth quarter, filtered for items of non-recurring character, amounted to SEK 58 million, corresponding to an operating margin of 30.6 percent.
Full Year 2007
The Group's revenues increased 121 percent SEK 649.0 (293.6) million compared to last year and operating profit increased to SEK 189.9 (18.9) million. Operating margin increased to 29.3 (6.4) percent.
Income before taxes increased to SEK 192.7 (17.8) million.
Income after tax from continuing operations amounted to SEK 179.4 (32.0) million which corresponds to SEK 4.55 (0.82) per share. The interim period's income after taxes, including discontinued operations, amounted to SEK 190.9 (62.5) million, corresponding to SEK 4.84 (1.59) 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 (30.5) million, corresponding to SEK 0.29 (0.77) per share.
Return on equity was 34 (7) percent and return on total capital 29 (4) percent. Equity per share amounted to SEK 15.85 (12.41) at the closing date.
Gross Profit
Many 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”,(except for Sportsbook and Betsson Trader which are identified as financial instruments and accounted net), but has implemented the gross profit as income standard in the report to make comparison with other gaming companies easier.
Despite this Betsson has chosen to continue to account net sales, as the figures appear as a result of the transactions towards the customers. On this level the success of the gaming can be measured. The gross profit also includes the result of transactions with third parties, such as suppliers of games and payment solutions. On this level the success of Betsson negotiations with its suppliers can be measured.
The gross profit 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 to players and loyalty scheme do not affect the Group's gross margin. Instead, the net cost of these items is deducted from net sales.
During Q4 2007, the gross profit amounted to SEK 145.6 (86.7) million. Operating margin in relation to gross profit increased to 29.9 (26.3) percent. For the full year, gross profit increased to SEK 520.8 (232.2) million, and operating margin in relation to gross profit increased to 36.5 (8.1) 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, this offers a wide variety of possibilities for wagering, both on sports and other happenings of interest to European players. Every weekend Betsson offers the largest number of gaming markets in the world, as well as a large number of Livebetting markets.
- The betting exchange, which is a marketplace for wagering. Unlike sports betting, here customers play against each other. Betsson receives commissions from those who win a wager.
- Casino with a large variety of world-class casino games that require no download. Here there are both traditional and innovative games including Black Jack, Roulette, Casino Hold'em, video poker games, gaming machines and much more.
- Poker with several different poker games connected to OnGame, the largest poker network in the world with close to twelve million registered poker players and 32 card poker in another network. Also mobile poker is offered
- The scratch card Trio, which gives the player a high payout and winnings on average from every third card.
- Bingo, which was launched in the end of March for the Swedish market, offers several different bingo games. A bingo host is present in the chat, where players also chat with each other.
- Betsson Trader, which is a financial betting product was launched mid October.
- Betsson Games consists of a number of entertaining games where both luck and skills matters. Betsson Games was launched in mid November. The product range covers product such as virtual horse-races to dies game.
Customers
At year end 2007, the number of registered customers was 996 000, an increase of 15 percent compared to Q3 2007 and an increase of 83 percent compared to Q4 2006.
The number of active customers increased during the quarter by 18 percent to 107 000, and has increased by a total of 16 percent compared to Q4 last year. The number of active customers last year consisted of a large number of Turkish gamblers. Due to changed Turkish legislation this number has radically decreased.
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 15 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
The average number of employees during the year was 106 (71) for the Group. At the end of the year, there were 136 (95) employees.
Investments
During the year the group has invested SEK 36.1 (18, 0) million in the continuing operation. The majority of the investments relates to development of platforms for games, integration of games and payments solutions and IT-hardware necessary to manage gaming via Internet.
Acquisition of own shares
Betsson has during August and September acquired its own shares. The company has acquired a total of 244,000 B-shares 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 Company's own shares, as payment upon the acquisition of companies or businesses. It shall also be possible to sell shares to finance such acquisitions.
Conversion of Class A shares
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 (excluding own shares) after conversion is 39,309,720 of which 5,420,000 Class A shares and 33,889,720 Class B-shares.
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 full year amounted to SEK 13.3 (9.9) million and the income after financial items amounted to SEK 128, 5 (-2.5) million.
The parent company's investments in fixed assets amounted to SEK 3 030 (33) thousand during the reporting period. The majority of the investments relates to office-equipment and furnishing. Cash and cash equivalents amounted to SEK 76.3 (9.6) million at the closing date. The company has no bank loans or bank credits. During the year, 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. The holding company has also accounted for anticipated dividend income of EUR 14 million from Betsson Malta Holding regarding the financial year 2007. For more detailed information, see the income statement and balance sheet on page 12.
Events after the end of the reporting period
During January 2008 Betsson has initiated operation in Peru together with a local partner. Betsson view the project as a possibility to evaluate operating in South America.
Betsson has released Bingo on the Norwegian, English, Turkish and Danish languages. In addition to this Betsson has increased the number of gaming possibilities in the Sportsbook live betting.
During January Betsson has been certified as PCI-provider. This means that Betsson has been authorized to handle larger volumes of payments by credit card over the Internet.
The first quarter 2008 has started strongly. The sales during January were the highest ever and exceeded the sales of December. The sales figures of February have so far exceeded the sales figures of January.
EU has initiated a new legal procedure against Sweden as the state owned company enjoys sole right to arrange poker tournaments on the Internet. This right is questioned by EU Law. The Swedish Gaming Act (“Lotterilagen”) victimizes operators from other EU-member states as they can not receive a license for corresponding types of games.
The highest Casino winning in Sweden´s history of SEK 10,5 million was won by a player on Betsson Casino. The winning gave good publicity to Betsson.
Transfer of value to shareholders
The Board suggests that the annual general meeting decides that SEK 197.8 millions, corresponding to SEK 5 per share should be transferred to the shareholders, of which SEK 3.50 refers to the year 2007 and SEK1.50 is an extra payment.
The Board intends to propose the AGM that the transfer to the shareholders shall be executed through a share redemption programme. The board´s complete proposal will be presented in due time before the AGM.
The proposed dividend is in line with the board's adopted new dividend policy for Betsson AB that will be valid from 2008. The ambition of the Board is to pay dividends of up to 75% of the Group's profit after taxes, assuming that a reasonable financial structure can be maintained.
Annual General Meeting
The Annual General Meeting of Betsson AB (publ) will take place on Monday, 12 May 2008 at 15:00 in Stockholm, Sweden. Place of the AGM will be communicated separately later.
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, 6 May 2008 and also notify their intention to attend the Annual General Meeting by 12.00 on Friday, 9 May 2007.
Notification to attend the Annual General Meeting shall be made either in writing to the company and sent to its address at Regeringsgatan 30-32, 111 53 Stockholm, by phone to +46 (0)8-506 403 00, by fax to +46 (0)8-735 57 44 or by e-mail to info@betsson.se.
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), Regeringsgatan 30-32, 111 53 Stockholm, Sweden at least seven weeks prior to the date of the Annual General Meeting (24 March) in order to guarantee that the issue can be included in the Notice of the Annual General Meeting.
Annual Report
Betsson's Annual Report of 2007 is expected to be available on the company's website, www.betsson.se, from mid-April 2008.
Election Committee
The election committee consists 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 election committee represents owners with more than 65 percent of the total votes of the company.
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.
Shareholders whishing to put forward proposals to the Election Committee can do this through e-mail to valberedning@betsson.se 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 Full Year report has been prepared in accordance with IAS 34, Interim Financial Reporting. The accounting principles remain unchanged from the year-end accounting 2006, except de altered principles regarding the revenues mentioned on page 2.
The revised principles of revenue reporting resulted that revenues of year 2006 is reported at SEK 294 million in comparison to previously reporter SEK 320 million. Revenues of the three first quarters of 2007 are reported at SEK 459 million in comparison to earlier reported SEK 490 million.
The basis of calculations regarding reserves of progressive jackpot-winnings have been changed, see page 2.
Discontinued operations
The Group's business area for development and licensing of online gaming products - Net Entertainment - was distributed as dividends to Betsson's shareholders at the beginning of April 2007 and was listed at NGM Equity. The Group's 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 period's income for the distributed business Net Entertainment is reported in the group's 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 Casino's effect on the comparison period's 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 Entertainment's balance sheet items are included in the Group's balance sheet for the reported comparison periods through March 2007, while Cherry Casino's balance sheet items are included in the Group's balance sheet for comparison periods through August 2006.
For additional information, please refer to the summaries included in the interim report of the Group's statement of income, balance sheet, equity summary, and cash flow statement as well as notes and key ratios for the period and comparison period.
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 Betsson's operation. Betsson is dependent on the legal situation for the gaming industry, particularly within the EU where the majority of the company's 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 EU's 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 G4's 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 Group's 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 company's operations become subject to additional VAT, it will most likely affect the result negatively.
2008 Prospects
Betsson estimates the market for internet gaming will continue to grow rapidly. The pressure on countries within the EU to alter their legislation and to allow competition has increased strongly during 2007. A number of countries have notified that they are working on a new legislation which is compatible with EU requirements. It is uncertain when such legislation will be introduced on Betsson's main markets. However, it is clear that when it happens it will give Betsson increased possibilities for marketing and presence on the market.
The confident for Internet as a trading site increases as more people use Internet to perform their bank business, stock deals, insurance business and purchase of commodities. The increased confidence is important for the Internet commerce, especially in countries where the trust for Internet commerce up to this point has been low. This development is a fundamental driving force for the development of online gaming.
During 2007 Turkey introduced new legislation towards online gaming. The sole purpose of the law was to protect the gaming company IDDAA controlled by the authorities. The law is a breach of the agreement between EU and Turkey according to legal experts. The purpose of the agreement is to regulate Turkey's possible entry into the EU. The Turkish law aggravates Betsson's operation on the Turkish market.
Norway has express intentions to ban online games. Betsson evaluation is that the proposed law is difficult to implement. If the law would be adopted and come into effect it would most likely affect Betsson negatively in the short term. Norway is one of Betsson three largest markets.
The first quarter 2008 has started strongly which is commented above.
The online gaming market is estimated to grow by 20 to 30 percent during 2008. Betsson has the ambition to grow faster than the market.
Financial reports
Betsson plans to release financial reports during 2008 according to below;
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
Stockholm, Sweden, 15 February 2008
Pontus Lindwall
CEO and President
This report has not been subject to a special audit by the company´s auditor.
The information in this press release is information which Betsson AB (publ) shall publish in accordance to the law of securities market and/or the law of trading with financial instruments. The information was delivered for publication the 15th February 2008 at 07:30 CET.
For further information, please contact:
Pontus Lindwall, President and CEO, phone +46 (0)8-556 967 10, +46 (0)708-27 51 55, pontus@betsson.com
‘
Betsson AB invests in companies which develops and operates sites for gaming directed toward end consumers. Betsson AB owns Betsson Malta Ltd that owns the websites Betsson.com, CasinoEuro.com and CherryCasino.com. The Betsson Malta Ltd offers poker, casino gaming, sports betting, lottery, betting exchange, bingo and financial betting. Customers are primarily from Scandinavia and the rest of Europe. Betsson is listed on the OMX Nordic Exchange in Stockholm, Mid Cap.
(For full report see attached file.)
