New acquisitions boost Betsson in Q1 as casino growth continues

Sweden’s Betsson has reported a 7 per cent increase in revenue to SEK686.0m (€75.5m) for the first quarter of 2014, which included the first contributions from the company’s recently acquired Oranje and Kroon online casinos.

Betsson said that its results were impacted by unfavourable currency movements. Excluding these, revenue would have risen by 13 per cent compared to last year.

The company benefited however from the first contributions from its newly acquired Dutch-facing online casino brands, Oranje and Kroon Casino, which delivered revenue of SEK23.4m in just four weeks of operation since being acquired on March 4th. If the casinos had been in operation for the full quarter, they would have contributed revenue of SEK80.7m to Betsson’s results.

Q1 2014 Gross Profit

Betsson’s customer-facing business accounted for 75 per cent of the company’s total gross profit, having grown by 16 per cent year-on-year, while its B2B business represents the remaining 25 per cent, down from a 31 per cent share a year ago.

Casino continues to be the company’s strongest product, with gross profit increasing 14 per cent to SEK372.0m. Sportsbook also performed well, with gross profit climbing 7 per cent to SEK175.9m, offsetting a decline in poker and other products, down 24 per cent and 63 per cent respectively to SEK23.4m and SEK7.4m.

Casino now accounts for 64 per cent of total gross profit, followed by sportsbook with 30 per cent. Poker and other products represent a combined 5 per cent of the total.

Betsson president and CEO Magnus Silfverberg said that the company was gaining market share following growth in casino and sportsbook, as well as mobile which generated revenue of SEK101.2m during the quarter.

“Mobile penetration has increased from 12 per cent to 15 per cent over the previous quarter,” he said. “This shows that the ongoing initiatives in personalized real-time communications, digital marketing, search engine optimization and mobile development is taking effect.

“At the same time, the acquisition of Oranje and Kroon had a positive effect on the result and both brands are showing a strong growth throughout the quarter. It is clear that the company, with its initiatives and its multi-brand strategy, is well positioned both for continued growth and for future potential acquisitions.”

Active customers fell by 10 per cent versus the previous quarter to 360,800, from a total registered customer base of 7,283,900, up 21 per cent year-on-year. Betsson said that the decline in actives was a result of its efforts to continue to focus on “value-adding players”, rather than on free spin promotions.

Nordic countries represented 79 per cent of Betsson’s total B2C gross profit, followed by EU (outside Nordic region) with 19 per cent.

Q1 2014 Results

Total operating expenses increased by 8 per cent to SEK407.6m, with marketing expenses falling 4 per cent to SEK190.7m. Personnel expenses rose 11 per cent to SEK102.6m, due to additional personnel costs associated with acquisitions and new recruits to create and meet future growth, while other external expenses climbed 29 per cent to SEK109.2m. This included one-off acquisition costs of SEK10.1m.

Operating profit increased 6 per cent to SEK171.2m, with profit for the period amounting to SEK157.7m, up 4 per cent year-on-year.

Betsson added that it will continue to further develop its cooperation with a Chinese state-owned company regarding an internet-based lottery and sports betting business.

“During the quarter, there has not been any concrete new information about a future licensing system for online games in China,” the company said. “Betsson has a continued positive outlook on the future market opportunities.”

As at March 31st the company held cash and cash equivalents of SEK123.9m compared to SEK106.5m a year ago.

Shares in Betsson AB (Co. Data) (OMX:BETS-B) have gained 1.27 per cent to SEK238.50 per share in Stockholm this morning following the announcement.