Entraction Poker Growth Offsets Falling Casino Revenues

Sweden's Entraction Holding AB said Thursday that it will step up efforts to increase contributions from its casino product as the company reported third quarter revenues of SEK98.8 million, an increase of 15% versus a year ago, as a result of the continuing strong performance of its core poker offering.

Entraction's poker network has continued the strong growth experienced in the early part of this year, with net revenues climbing 20% to SEK69.9 million, largely due to existing partners increasing sales from new markets such as Spain and Russia.

Royalty income rose by 72% to SEK9.3 million for the quarter following increased gaming liquidity from existing and new partners, while revenues from Entraction's newly launched bingo network amounted to SEK0.3 million.

Despite casino revenues falling 8% to SEK14.9 million for the period, the company believes that there is "immense potential" for its casino product which will benefit from existing suppliers adding new games as well as the launch of live casino from Evolution Gaming in early 2010.

Revenues from betting increased 21% to SEK1.8 million in the quarter, with betting margins falling slightly to 6.6% on unfavourable football results which have severely impacted the betting industry. Entraction said it will be enhancing its betting product with the introduction of live betting in early 2010.

The number of active players during the quarter increased by 6% quarter-on-quarter to 131,842 from a total registered customer base of 1.8 million.

Operating profit rose by 18% to SEK12.6 million with earnings negatively affected by one-off costs of approximately SEK2 million arising from hardware problems which caused service disruption in parts of the gaming system.

The company's commitment to developing the gaming platforms has resulted in increased personnel costs, up 17% year-on-year to SEK12.5 million, while other external costs also increased 6% to SEK12.5 million.

As a result Entraction recorded a profit from continuing operations of SEK12.8 million for the quarter, up 19% versus the corresponding period last year. Including discontinued operations relating to the sale of Casablanca Gaming Group earlier this year, profit for the period fell 10% to SEK12.2 million.

For the nine month period, net revenues increased 34% to SEK326.7 million, despite third quarter revenues dropping for the third consecutive quarter, with a profit for the period of SEK66.9 million, up 129% year-on-year.

"The fact that we still show a good gross profit despite the highly negative effect of the hardware problems gives a sense of security," said Peter Åström, Entraction's CEO. "We are also continuing our cost control in order to ensure costs do not rise more quickly than our income.

"We have taken various initiatives to increase sales. We have also initiated an activation programme to help our partners increase the percentage of active customers in the database.

"The fourth quarter has started well with more gaming in the poker network and higher betting sales - a reflection of our improvements to the betting offering during the year. Our stable foundation and a good sales and earnings trend leave us well equipped to face the coming quarter," added Åström.

At the end of the quarter Entraction held cash and cash equivalents of SEK195.3 million compared to SEK143.4 million a year ago.

Shares in Entraction Holding AB (Co. Profile) (STO:ENT-B) have gained 1.67% to SEK61.00 per share in Stockholm this morning.