mybet shares slump as Q1 revenue hit by casino and poker decline

German gaming operator mybet Holding has reported an 8 per cent drop in total revenue to €17.9m for the first quarter of 2014, with growth from the company’s sports betting product unable to offset a decline in casino and poker revenue.

mybet said that despite the decline, revenue was “slightly above” the company’s target levels following strong performances in January and February, although March fell short of expectations due to unexpectedly high single payouts  and a weaker than expected margin.

Q1 2014 Revenue

Sports betting revenue increased by 1 per cent to €10.7m following a 1 per cent rise in betting stakes to €49.9m. More than half of betting stakes (55 per cent) were generated over the internet, with the remainder generated via terrestrial channels in betting shops. Retails betting stakes rose 7 per cent year-on-year, while online stakes were down 3 per cent.

mybet said that a large number of measures for online customer acquisition were scaled back substantially or terminated altogether in the second half of 2013 in order to preserve the company’s liquidity.

“However in 2014 it is emerging that restoring the former level of new customers acquired per month is not as easy as anticipated,” the company said. “That explains why the planned new customer totals for online operations were not achieved, particularly in March; this is mainly the cause of the fall in revenue volume from online operations.”

The company claims that it will make up this lost ground from Q3 onwards, through an adjusted package of measures for online operations and a focus on mobile products.

Active sports betting customers were down 22 per cent to 44,900 which the company attributed to the loss of the French and Spanish markets, from a total registered customer base of 1.2m.

mybet said that its Italian sports betting business had not developed as hoped during the quarter, with negotiations on the sale of the company currently in progress. mybet has resolved to write off assets totalling €0.7m retroactively from December 31st 2013.

Without the negative effects of the Italian business, the sports betting segment would have achieved a positive result, instead of a negative EBIT of €0.1m.

The slight growth in the sports betting revenue was not enough however to offset a downturn in the company’s casino business due to regulatory changes and the discontinuation of the lotteries segment.

Online casino and poker revenue was down 16 per cent to €5.5m during Q1, with the prior year results including revenue from France which was terminated mid-2013 due to a legal dispute.

Horse race betting revenue rose 36 per cent to 1.4m following strong growth in the online business, while other revenue contributed a further €0.3m. This includes C4U-Malta, a payment processor which commenced operations in Q4 of last year.

mybet said that the economic and strategic significance of C4U is to be further developed in future, although no impact at revenue and income level is expected until at least the second half of 2014.

Personnel expenses fell by 8 per cent to €2.5m as a result of restructuring measures and the deconsolidation of its Spanish operations, while cost of purchased materials were down 5 per cent to €12.0m. Other operating expenses were down 23 per cent to €3.3m following the company’s cost-cutting programme and the scaling back of marketing expenditure which was down 56 per cent year-on-year.

As a result, operating profit nearly tripled to €0.3m, with net profit for the period amounting to €0.2m, down 40 per cent year-on-year.

Q1 2014 Results

“The management of mybet Holding SE believes it took some important decisions with a bearing on the future in the first quarter of 2014, in preparing for sustained market success,” said mybet’s sole management board member Sven Ivo Brinck. “However it should be added that such transformation processes are very time-consuming.

“The company is already in a position to keep improving its performance. It will nevertheless take some time before mybet is able to realise its full potential.”

The company warned however that the second quarter is generally the weakest phase of the year for sports betting providers, with the Bundesliga coming to an end. As a result, it expects a negative result for Q2, although the company has maintained its revenue forecast for the full year of between €70m and €75m.

mybet added that the World Cup in Brazil should help to cushion the downturn in gaming volume during Q2, although the cost of acquiring new customers is likely to rise sharply due to higher levels of advertising activities.

mybet also confirmed that it will dispose of its 50 per cent interest in DIGIDIS, which operates casino products in Spain under a joint venture agreement.

As at March 31st, the company held cash and cash equivalents of €9.5m, compared to €8.0m at the end of last year, due mainly to the early payment of the balance of the purchase price for the JAXX Group worth €2.8m.

Shares in mybet Holding SE (Co. Data) (XETRA:XMY) were trading down 7.61 per cent at €1.246 per share in Frankfurt as at 14:19 on Thursday.