UNIBET FEELS THE PINCH

17 August 2007

First fall in profits for three years

Investors in the European gambling group Unibet will be disappointed by the first fall in profits in the last three years, announced by the company this week. Apparently the bookie took a hammering in what is described as a "punter's quarter" recently.

Unibet shares dipped by over 15 percent after the firm reported quarterly profits that fell nearly 60 percent from GBP 5.6 million (US$11m) to GBP 1.7 million. Gross winning revenues fell to GBP 16.5 million compared with GBP 18.4 million in the same period last year.

The company reported a 4 percent drop in margins from an average of around 7 percent for the period, although turnover for the quarter rose to GBP 117.2 million compared with GBP 108 million in the same three month period in 2006.

Half-yearly gross win figures rose to GBP 38.8 million, up from GBP 35.8 million in the corresponding period last year.

Profit before tax for the six-month period fell to GBP 10.5 million from GBP 13.6 million in 2006.

The good news was that sportsbook margins were more in line with traditional performance at the 6.8 percent level, and the third quarter has started “....with a return to normalised margins”, the company said.

Turnover for the six month period this year rose to GBP 224.5 million, compared with GBP 200 million over the same period in 2006.

CEO at Unibet, Petter Nylander said margins had suffered badly as a result of many favourites winning in the major football, ice hockey and tennis tournaments during the period. He also noted that the increased competition in online poker throughout Europe and the continued activity of monopoly Svenska Spel in Sweden had led to higher costs for Unibet’s poker product across Scandinavia as a whole.

Nylander said: “Our expectation is that this situation will stabilise during second half of 2007. Management has during the quarter initiated a number of new marketing initiatives, strengthened the regional market leadership and started several process and productivity improvements.”

The ongoing legal issues related to liberalising sports betting in France and Sweden and Unibet’s cycling team not being allowed to take part in a number of races across Europe had led to “legal counseling being more intense than ever”, Nylander added, commenting: “Even if the difficulties in France continue, our view is that the French and European gaming market will inevitably be de-monopolised.”

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