SPORTINGBET FIGHTS BACK

19 October 2007

Serious loss, but latest results show an impressive fight-back from last year's US debacle


Sportingbet’s full-year results published this week showcase an impressive fight-back from the US debacle last year which saw the UK listed online gambling group lose significant American business (estimated at up to 75 percent) when it left that market (see previous InfoPowa reports) Despite that, the company has still managed to post an operating profit in the year to the end of July.

Andrew McIver, group chief executive, said: "Given the enormity of the change and restructuring that has taken place at Sportingbet, I am pleased to report a strong increase in gross win in the continuing business and especially pleased with the growth in our core European sports betting business of 48 percent.

"As we move into the current financial year, trading across the group is significantly ahead of the prior year and in line with management expectations for the period."

Sportingbet saw operating profits from continuing operations rise 76.2 percent to GBP 7.4 million from GBP 4.2 million the year previously. However, after one-off charges related to the US exit are taken into account, the company recorded a pre-tax loss of GBP 311.6 million compared to a profit of GBP 69 million the year previously. The loss from continuing operations came in at GBP 32 million after exceptionals.

“We needed to make sure we were firing on all cylinders in our core markets,” said David Hobday, chief operating officer on the firm's enforced US departure.

Unfortunately there has been damage to lives as well as business as a consequence of the major restructuring undertaken by the company. Sportingbet has seen job losses of 550 people over the period with about 100 of these in the UK and Europe either on the corporate level or on the operational side. McIver said this was genuinely regretted but: “We had no choice whatsoever. We made the changes as swiftly as we could.”

The company transferred all its licensable activities to the Channel Islands, its staff to Dublin, and concentrated on building its remaining presence in the UK, Antigua, Channel Islands, Ireland, Italy and Australia.

Sports betting is now the main driver for the company, said Hobday. European sports-betting turnover rose to GBP 600 million from GBP 474 million last year while Australian sports-betting turnover rose to GBP 439 million from GBP 347 million. European gross profit stood at GBP 50 million compared to GBP 30 million a year previously. However, Australian profit dropped slightly to GBP12.4 million (previous year: GBP 12.9 million).

Total turnover for continuing operations rose to GBP 1billion from GBP 890 million the year previously, with gross profit up at GBP 121 million (GBP 107 million last time).

In Europe, the group reported a 14.3 percent rise in the number of online sports gamblers, to 436 779 up from 382 160 in the previous year. The number of sports bets placed by these customers rose by 30.6 percent to 46.1 million, up from 35.3 million last year – at a rate of 106 bets per customer per year. The average sports bet was GBP 13.10, down from GBP 13.80 in 2006.

The group's yield per sports customer jumped by 31.6 percent from GBP 95 to GBP 125, in part as a result of increased margin, but also from the number of bets made per customer.

Casino customer numbers climbed by 10.5 percent to 142.6 million, up from 129.1 million in the previous year – placing an average bet of GBP 5.06 – again down from GBP 5.54.

Spain and Turkey which contributed GBP 142 million and GBP 125 million in turnover respectively are Sportingbet's key European markets. The company pointed out it had moved to either strengthen its partnerships in territories such as Spain, or bought out its partners as in Turkey over the past 12 months. It has also made a further investment in its Italian operations.

Hobday said Australia was seen very much as a “standalone” business, through the company was hoping to convert more of its telephone business to the internet in the year ahead.

Poker gross profit of GBP 27.8 million showed a dip compared to GBP 30 million last year despite the migration of Paradise Poker to the Boss Media network and the extreme loss of liquidity caused by the departure from the American market. However, Hobday observed that despite this there were indications that poker “continued to see growth”.

Sportingbet continues to engage in regulatory matters in Europe, and McIver commented that there were signs that the industry’s opponents were “swimming more upstream” than previously. However, he cautioned that these things can “turnaround very quickly”.

Despite further regulation over the year in Turkey, Sportingbet continues to take bets from Turkish citizens. The company said it “remains unclear whether any judgement obtained in Turkey pursuant to the legislation introduced in February 2007 could be enforced outside of Turkey”.

Looking forward, the company said sports turnover in August was up 7 percent year-on-year and 23 percent in September. It added that poker had seen signs of increased rake. The company plans to focus on its current product offerings, as well as re-engineering its website with 'customer involvement' a priority. The company said its secondary objectives would include geographic diversification and the consideration of targeted acquisitions where commercially logical.

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