2010-02-25 08:30:02

END OF YEAR REPORT 2009

Progress in Live Betting

October - December
• Betting turnover: 2,203 SEK million (2,592)
• Net turnover after trading fees: 15.1 SEK million (27.4)
• Gross margin: 0.68% (1.06)
• Operating income: 8.6 SEK million (20.8)
• Operating margin: 57% (76)
• Net income: 5.2 SEK million (21.9)
• Profit per share: 0.54 SEK

January – December
• Betting turnover: 8,218 SEK million (10,543)
• Net turnover after trading fees: 43.9 SEK million (58.5)
• Gross margin: 0.53% (0.55)1
• Operating income: 18.9 SEK million (35.7)
• Operating margin: 43% (61)2
• Net income: 10.7 SEK million (35.0)
• Profit per share: 1.12 SEK

(For complete report and tables, see attached file)


Managing Director comments

"After a turbulent year it is satisfactory to end the year with a positive result. We see strong growth in the live betting market. It is therefore pleasing that we have been able to increase both margins and turnover in this product", says Johan Moazed, Managing Director of Betting Promotion.


Overview October – December 2009

Betting revenue for the fourth quarter was SEK 15.1 (27.4) million. The gross margin was 0.68% which is in line with expectations. On a rolling yearly basis the company achieved a net turnover after trading fees of SEK 43.9 million leading to a gross margin of 0.53%. In light of the poor third quarter results the fourth quarter results provided important verification that the business model is sound. Live betting turnover has increased by 21% compared to the corresponding period in 2008. This was mainly due to the increase in the number of matches covered. The market for live betting continues to grow at a healthy rate and it is important for the company to participate in this growth.

Betting Promotion has commercial agreements with a number of different betting exchanges. Most are based on commission-free trading but on exchanges with higher turnover a trading fee is paid by Betting Promotion. During Q4 Betting Promotion paid SEK 5.0 million (3.4) as fees to betting exchanges. These fees are reflected in the gross margin and are itemized in the income statement.


Overview January – December 2009

The net turnover after trading fees for the period amounted to SEK 43.9 (58.5) million, corresponding to a fall of 25%. The reduction in net turnover is mainly due to the negative results in the third quarter. Investigations carried out by the company discovered no technical problems and it has later been revealed that the poor results have been a general occurrence in the market. Part of the reason for these poor results has been the unusual amount of winning favorites. Betting turnover for the period amounted to SEK 8,218 (10,543) million. The fall in betting turnover arose when the company decided to reduce trading on certain events which carried increased risk but did not necessarily increase profits. The changes, which were implemented gradually during the second and third quarters of 2008, render comparisons to previous betting turnover of no further relevance. The conclusion is that turnover on pre-event betting has remained constant whereas live betting turnover continues to show steady growth.

During the last quarter Betting Promotion launched its service for bookmakers. The company will use its existing platform to deliver odds and risk management to bookmakers on a commercial basis. The initial response has been positive and during the period discussions have been held with various distribution channels in order to launch the service in an effective manner. The majority of turnover on sports betting is transacted through bookmakers. With this service Betting Promotion will reach the part of the market which today represents more than 90% of the sports betting turnover.


Segment Reporting

Betting Promotion does not split operating costs, other than trading fees, on different products or services. This means that the operating result for Betting Promotion is reviewed on one level, based on the Result for the total company. Therefore Betting Promotion only has one operating segment.


Products

An important part of Betting Promotion’s business concept is to deliver full market-making services even if some products offer better margins than others. Market making is the core of Betting Promotion’s business and is comparable to businesses that guarantee liquidity for different sorts of financial instruments. The company provides a breakdown of “Net Turnover after trading fees” and “Gross margin”, calculated as “Net Turnover after trading fees” as percent of “Betting Turnover” between various products.

Soccer

Soccer remains the core of Betting Promotion’s business and during the fourth quarter accounted for 58% of the total betting turnover, corresponding to SEK 1,275 million. The margin was 0.84%.

Live Betting

Live betting is presently offered in soccer and tennis. The margin for live betting was 0.56%. There are good opportunities to increase turnover within this product group by covering more football matches.

Other

"Other" includes a number of different sports, e.g. tennis, ice hockey, rugby, basketball and American football. The bookmaker service has lead to an increased offering in this product group.
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