The Austrian betting firm has reported a loss after tax of EUR 49.8m for the first nine months of 2006, compared with a EUR 1.4m profit for the same period last year, despite gross gaming revenues trebled to EUR 289m compared to the previous year. Bwin said the result was strongly impacted by non-cash depreciation of the customer base and software acquired as a result of the Ongame transaction as well as to increased marketing costs.
Third quarter results showed that Bwin generated gross gaming revenues (sum of gross gaming revenues from betting operations, poker, casino and games) of EUR 97.2m. This was equivalent to an increase of 172.5 per cent compared to 2005. Gross gaming revenue from sports betting rose by 91 per cent compared to Q3 2005 to EUR 44.4m, with a sports betting margin of 9.2 per cent (Q2 2006: 7.7 per cent). The gross gaming revenues generated from the casino, poker and games sectors amounted to EUR 19.7m (Q3 2005: EUR 8.4m), EUR 29.6m (Q3 2005: EUR 2.7 m) and EUR 3.5m (Q3 2005: EUR 1.2m) respectively. As anticipated, the gross gaming revenue per active real-money customer declined in Q3 2006 to around EUR 90 (Q3 2005: EUR 102), reflecting Bwin’s efforts to position its online offering more clearly than before as an entertainment product. During the period, Bwin generated 81 per cent of its gross gaming revenues with customers not resident in the USA.
Although the number of active customers rose by comparison to Q3 2005, by 730,000 from 349,000 to 1,079,000, this figure was down by around 3.3 per cent on Q2 2006, when the Soccer World Cup took place. At 234,000, the number of new active sports betting customers was below expectations in Q3 2006 (Q3 2005: 132,000, up 78 per cent). This was also reflected in significantly increased costs (including bonuses) per new customer in the amount of EUR 197 (Q2 2006: EUR 155). In Q3 2006 about 85 per cent of the total number of active customers were not resident in the USA.
Total marketing expenses of EUR 52.1m excluding bonuses to customers and promotions in the amount of EUR 11.3m were incurred as a result of increased sponsoring activities, such as jersey sponsoring for soccer clubs like AC Milan, Werder Bremen and 1860 München. Personnel expenses of EUR 13.7m rose significantly compared to the previous year (Q3 2005: EUR 4.2m). The company employed 870 people as at the reporting date of 30 September 2006 (30 September 2005: 296). The group\’s other expenses (including expenses for payment transactions, IT services, currency differences, consulting, rent and transport) rose to EUR 29.4m (Q3 2005: EUR 7.2m).
The consolidated loss after taxes and third-party interests was EUR 22.6m for Q3 2006 (Q3 2005: profit of EUR 1.3m). This included the depreciation of customer base and software attributable to acquisitions in the amount of EUR 9.1m and depreciation of rights to the German Soccer League in the amount of EUR 4.7m, which have been offset by revenues from marketing rights in the amount of EUR 3.6m to date.
In reaction to the legislative developments in the USA and in view of the uncertainties in several European countries, Bwin changed its aggressive growth strategy in favour of concentrating on generating profits and cash flow. Bwin estimates the restructuring costs associated with the cessation of its real money gaming products for US customers at around EUR 5.5m. Consequently, the company anticipates gross gaming revenues in the amount of around EUR 375m for the current financial year, with a balanced EBITDA before deduction of restructuring costs. Further to this, management expects to make a non-cash charge for the write-off of assets with a current net book value of EUR 534m acquired as a result of the Ongame transaction.
Bwin Co-Chief Executive Norbert Teufelberger commented: “From today’s point, one can say that the timing of the acquisition was bad.” Bwin added it would cut its marketing spend by half from the start of 2007 and with European legal developments still to be resolved, the company will not provide forecasts for next year.
Bwin also said that it will continue to exhaust all the legal possibilities to combat protectionist measures introduced by individual European governments with a view to protecting state monopolies. The company also said the European Betting Association will be relaunched with a significantly larger budget.
Calculators
