The Chinese lottery and Asian Handicap betting operator reported an operating loss of £3.4m on turnover of £133.3m.
At the beginning of January 2005 Betex launched its soccer betting platform, focused on providing Asian Handicap betting on European soccer matches. Turnover in the first 9 months amounted to £86.8 million, generating a gross loss of £643,837. In October the group was able to raise funds to strengthen its hedging deposits and adopted a policy of capping growth whilst focusing on improving margins. As a consequence, the turnover for the final quarter of 2005 was £46.3 million, making a total of £133.1 million for the full year, whilst the gross loss was £305,003 making a total of £948,840 for the full year.
Betex employs an agency structure mirroring the traditional established structure familiar in the Far East. Using this structure Betex is able to encourage agents to bring their existing customer base to the platform, and earn a small commission on each bet placed, whilst preserving attractive odds for the customer. The size of the customer base remains relatively small, although the agency structure employed makes it difficult to ascertain exactly how many individual customer bets are being placed.
On the 1 December 2005 Betex acquired the whole share capital of Capital Sports, a chain of 3 bookmaker’s shops based in Cambridge, Newmarket and Southborough. As well as offering a full range of betting services to the general public, the shops provide a UK base in which Betex can train its overseas staff in a “controlled” environment.
Between July and december 2005 Betex invested around £5 million to provide IT and marketing services to the Sports Lottery in the provinces of Guizhou and Hebei in China. Betex now receives 2% of the gross ticket revenues in the provinces, retaining 80% of the operating profits.
Chairman Johnny Hon said: “At the beginning of 2005 I started Betex with a view to creating an Asia focused gaming company with specific focus on China, the country of my ancestors.”
“During the first half of the year we set up the internet based Asian style handicap betting platform. As a new product to the western player, the appeal of the Asian style handicap betting had been questioned. However, a mixture of expatriate Chinese customers and adventurous newcomers has generated significant levels of business for the company.”
“As with any business start up, we have seen our fair share of teething issues, but in general these have come about through the demand we have experienced for our services. Whilst the business reported a loss for the full financial year, the improvement in our trading figures in the final quarter of the year is a testament to the refinements to the software, the trading policies, greater hedging facilities, and ultimately the hard work of our trading team.”
“The second half of the year has been marked by our ground breaking agreements in the Chinese Provinces of Guizhou and Hebei to provide investment, and IT and risk management consultancy to their Sports Lottery Management Centres. We believe that our co-operation and funding will allow the Sports lotteries to experience a step change in revenues that had already been growing at a compound rate of 36% per annum since 1998.”
“The introduction of new technology and new games has the capacity to revolutionise the way in which the Chinese play the lottery. Additionally, forthcoming trials on the sports lottery allowing players to predict the results for a single football match has the capacity to challenge the underground market thought to be worth $75 billion that has long proved to be a problem within China.”
“It is for this reason we believe China has the capacity to become the largest gaming market in the world. We are delighted to be working with the appropriate authorities within China to expand and modernise the lottery.”
Chief Executive Peter Greenhill added: “It has been a year of incredible change for the Company that has seen us progress from a private Company at the beginning of the year, to the Ofex market in May, and to the brink of an AIM listing, which was subsequently completed on the 3 March 2006.”
“Our strategy of bringing gaming, one of the biggest growth industries of the past few years, together with a focus on China, probably the largest gaming market and the fastest growing economy in the world, provides a unique growth opportunity for investors. In 2005 we secured two contracts to provide investment and consultancy to the Guizhou and Hebei Sports Lotteries, and hope to be able to conclude further partnerships in the coming year. We will continue to work with the Chinese to offer approved legal products in the regulated environment of the lottery to supply a new range of exciting and entertaining games.”
“Foremost in this strategy is the current trial of new lottery products based on the result of a single football match in 5 cities around China. We are thrilled to have secured an involvement in Guangzhou, the provincial capital of Guangdong province that has traditionally reported the highest sports lottery revenues of any province in China.”
“Whilst the products are currently being trialled, we have high hopes that eventually these will be made available across China, as we believe in the longer term this has the capacity to challenge the illegal market in football betting. This will give us the confidence to deliver and expand on our existing commitment to develop lottery shops authorised to sell the single match products.”
“Our dedication to Asian style football handicap betting is starting to reap dividends. We are now one of the leading sites for this style of betting outside Asia, drawing upon an increasingly diverse population of users. We believe that it is the experience we have gained in this market that has allowed us to develop close relationships with our Chinese State Lottery partners, who value the risk management experience operating in this market has given. It is this experience that has enabled us to gain involvement with the Guangzhou trial. We believe that single match betting has the capacity to create within China the single largest betting market in the world, and we further believe we are well placed to play a leading role in that development.”
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