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Betsson

Annual Report Feb 7, 2014

3010_10-k_2014-02-07_f9e5d01e-50ea-4f23-9160-9cfd20094977.pdf

Annual Report

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Year-End Report for the period 1 January – 31 December 2013

ALL FIGURES IN THIS REPORT ARE EXPRESSED IN SEK. FIGURES IN PARENTHESES REFER TO THE CORRESPONDING FIGURES FOR THE PREVIOUS YEAR, UNLESS STATED OTHERWISE. THIS INFORMATION APPLIES TO THE GROUP, UNLESS STATED OTHERWISE.

Casino increased by 8 percent

Fourth quarter

  • Revenues amounted to SEK 655.5 (651.9) million.
  • Underlying activity has never been higher, meanwhile revenues were negatively impacted by fourth quarter record low Sportsbook margin and by an amount of SEK 26.3 million due to unfavorable exchange rate fluctuations.
  • Operating income amounted to SEK 150.0 (173.4) million. Income before tax amounted to SEK 149.0 (173.4) million.
  • Net income amounted to SEK 140.9 (166.9) million, corresponding to SEK 3.24 (3.95) per share.
  • Gross turnover in Sportsbook, including all gaming solutions, amounted to SEK 4,094.6 (3,782.8) million,
  • which is an All Time High and represents an increase of 8 percent. Customer deposits in all of Betsson's gaming solutions amounted to SEK 2,262.3 (2,154.8) million, which is All Time High.
  • Betsson's Board of Directors proposes a distribution to the shareholders amounting to SEK 421.5 million, corresponding to SEK 9.71 per share. The distribution per share will be affected somewhat through planned new share issues.
  • After the end of the quarter, Betsson acquired Class One Holding Ltd which operates the brands Oranje and Kroon Casino. It had revenues of EUR 32.5 million in 2013, and the EBIT margin was 67,8 percent.

Full year 2013

  • Revenues increased by 12 percent to SEK 2,476.7 (2,203.7) million. The accumulated effect of unfavorable exchange rate fluctuations negatively impacted turnover for the year by SEK 78.3 million.
  • Operating income amounted to SEK 601.1 (577.1) million.
  • Income before tax amounted to SEK 596.2 (573.6) million.
  • Net income amounted to SEK 562.0 (547.8) million, corresponding to SEK 12.98 (13.04) per share.

Key Performance Indicators

Q4 Q4 Full year Full year
2013 2012 2013 2012
Totals
Revenues 655.5 651.9 2,476.7 2,203.7
Gross profit 548.6 548.8 2,073.9 1,853.7
Operating income 150.0 173.4 601.1 577.1
Liquid funds 562.5 467.2 562.5 467.2
Active customers (thousands) 401.4 520.4 401.5 520.4
Registered customers (thousands) 6,732.7 5,777.9 6,732.7 5,777.9
Customer deposits 1,613.6 1,586.5 6,064.5 5,092.4
Customer deposits, all gaming solutions 2,262.3 2,154.8 8,421.1 6,888.2
B2C Sportsbook 1)
Gross turnover Sportsbook 1,428.6 1,271.1 5,024.0 3,735.5
Gross margin Sportsbook 5.5% 7.5.% 5.7% 5.7%
Gross profit Sportsbook 79.1 95.0 288.0 214.5
B2B Sportsbook
Gross turnover Sportsbook 2,666.0 2,511.7 9,791.3 8,357.6
Gross margin Sportsbook 2.5% 2.8% 3.0% 2.6%
Gross profit Sportsbook from third parties 67.2 70.5 289.4 217.5

1) Refers to the margin after allocated expenses. The margin after free bets in all gaming solutions is 6.2 (7.4) percent.

Betsson undertakes a strategic acquisition in the Netherlands

"- With the acquisition of Oranje and Kroon Casino Betsson gains a strategic position in the Netherlands and will be one of the largest operators in the Dutch gaming market. This market is expected to be re-regulated in 2015 and, when this takes place, Betsson's total profits from locally-regulated markets is expected to comprise over 25 percent of the Group's overall profit. At the same time, the optimization of the operating entities continue through individual real-time customer communication, digital marketing and mobile offers. These initiatives have already had a positive impact and contributed to the strong underlying activity and growth in the key product segment Casino which despite unfavorable exchange fluctuations and strong comparable figures grew by 8 percent," states Magnus Silfverberg, Betsson's CEO and President.

Presentation of the Year-End Report

Today, Friday 7 February, at 09:00 CET, Betsson's CEO, Magnus Silfverberg, will present the Year-End Report at Betsson's office at Regeringsgatan 28, and through webcast at http://www.media-server.com/m/p/fdvzqah2, and by phone on +46 (0)8 505 564 74 (Sweden), +44 (0)203 364 53 74 (UK), +1 (0) 855 753 22 30 (USA). The presentation will be in English and will be followed by a question and answer session.

BETSSON AB'S CORE BUSINESS CONSISTS OF INVESTING AND ADMINISTERING SHAREHOLDINGS IN COMPANIES, WHICH THROUGH PARTNERS OR BY THEMSELVES, OFFER GAMES TO END USERS VIA THE INTERNET. BETSSON AB OWNS BETSSON MALTA WHICH OPERATES GAMING TO END USERS BOTH THROUGH ITS OWN WEBSITES AND THROUGH PARTNERSHIPS. BETSSON MALTA OFFERS POKER, CASINO, SPORTS BETTING, SCRATCH CARDS, BINGO AND GAMES. THE CUSTOMERS MAINLY ORIGINATE FROM THE SCANDINAVIAN COUNTRIES AND OTHER PARTS OF EUROPE. BETSSON AB IS LISTED ON NASDAQ QMX NORDIC MID CAP LIST, (BETS).

Fourth Quarter 2013

Group revenue amounted to SEK 655.5 (651.9) million. Gross profit was SEK 548.6 (548.8) million. Operating income amounted to SEK 150.0 (173.4) million and the operating margin was 22.9 (26.6) percent. The Group's income before tax was SEK 149.0 (173.4) million and net income was SEK 140.9 (166.9) million, equivalent to SEK 3.24 (3.95) per share.

Revenues were negatively impacted in an amount of SEK 26.3 million by unfavorable exchange rate fluctuations, compared with the exchange rates applicable during the previous year.

Marketing expenses amounted to SEK 195.2 (189.4) million, representing an increase of 3 percent. Management believes that there are opportunities for growth in the short and long term in both locally-regulated and selected internationallyregulated markets. In order to take advantage of these opportunities, continued marketing investments are required which, during the first quarter 2014, are expected to be in the same level in relation to revenues as during the previous quarter.

Personnel expenses amounted to SEK 101.8 (85.8) million, representing an increase of 19 percent. The increase compared with the previous year refers to the recruitment of new personnel to create and meet future growth opportunities and to replace contracted consultants. The item includes a restructuring charge of SEK 2.7 million.

Other external expenses amounted to SEK 96.9 (89.6) million, representing an increase of 8 percent. This increase is mainly attributable to an expanded Live Stream offering and is also due to the increased use of real-time betting scores in Sportsbook, something that increases the attractiveness of Betsson's offering. Also further investments in SEO contributed to the higher level of Other external expenses. At the same time, expenses for contracted consultants decreased according to plan.

Capitalized development costs amounted to SEK 24.7 (22.0) million. Betsson's operating subsidiaries continuously invest in improvements to their offerings to end users and partners, thus creating the conditions for growth. Furthermore, the company is investing in migrating additional gaming sites to the single technology platform which will contribute, in the long term, to more cost-effective operations.

Full year January - December 2013

Group revenue amounted to SEK 2,476.7 (2,203.7) million, equivalent to an increase of 12 percent. Gross profit amounted to SEK 2,073.9 (1,853.7) million, representing an increase of 12 percent. Operating income increased to SEK 601.1 (577.1) million and the operating margin was 24.3 (26.2) percent. Income before tax increased to SEK 596.2 (573.6) million and net income increased to SEK 562.0 (547.8) million, equivalent to SEK 12.98 (13.04) per share.

Acquisition of the Automaten brands

The acquisition of the Automaten brands has had an impact on the accounting since the first of April 2013. Since that date, and up until 31 December, the acquisition has contributed SEK 33.2 million to the Group's operating income through the net effect of the saving of profit shares previously payable to Cherry under the earlier partner agreement, and also due to the additional marketing commitments on behalf of Betsson.

Had the Automaten brands been owned for the full year, Betsson's operating income would have amounted to SEK 613.2 million, instead of SEK 601.1 million, excluding acquisition costs of SEK 0.5 million in the first quarter.

Had Betsson owned the Automaten brands for the entire year, the acquisition would have contributed SEK 45.3 million to operating income.

Operations

Through subsidiaries on Malta, Betsson offers Internet gaming to end customers via partner cooperations and its own gaming portals. Betsson also offers systems solutions to other operators.

Betsson believes that, from a risk perspective, there is sustainable value in both the locally-regulated markets and in the internationally-regulated markets. Selected internationally-regulated markets will comprise, for the foreseeable future, a basis for strong growth and profitability. At the same time, newly-regulated markets are taking on increased importance for Betsson. On the newly-regulated Italian market, Betsson's operations continue to experience strong growth, although the business remains relatively small.

A high demand for mobile solutions has followed in the wake of strong growth in the use of smartphones. Betsson has previously developed, and now provides, one of the market's broadest and most advanced gaming solutions for smartphones. Total mobile revenues during the fourth quarter amounted to SEK 80.9 million, which corresponds to an increase of 16 percent compared with the previous quarter. The particular strong growth in the Betsson.com brand, after the launch of the new mobile solution during the second quarter, has continued. Mobile revenues from this brand increased by 38 percent this quarter compared with the third quarter, which is an increase of 733 percent compared with the fourth quarter in 2012.

B2C – Fourth quarter

Gross revenue for B2C in the fourth quarter amounted to SEK 416.2 (401.4) million. The Automaten brands were moved from B2B to B2C on the first of April, and contributed SEK 36.7 million in gross profit during the fourth quarter.

The Nordic Countries represented 85 (82) percent of the segment during the fourth quarter, while EU outside Nordic Region represented 14 (17) percent. An important explanation as to the Nordic Countries' increased importance is the fact that the Automaten brands are now included in the segment.

B2B – Fourth quarter

Gross profit from B2B amounted to SEK 132.4 (147.4) million. Adjusted for the effect of the Automaten brands' transfer to B2C, the B2B segment grew by 15 percent compared with the previous year. The underlying activity, spread over a number of partnerships, developed strongly. Gross turnover in sports betting amounted to SEK 2,666.0 (2,511.7) million, corresponding to an increase of 6 percent.

Betsson continues to provide technological developments for Internet-based lotteries on behalf of a Chinese company involved in a joint venture with a state owned company. The objective is to create a technological solution that may be used if, and when, the Chinese market is re-regulated. Betsson has a positive view of the future possibilities in China.

Products

Gross profit in Casino during the fourth quarter amounted to SEK 364.1 (335.8) million, representing 66 (61) percent of the Group's total gross profit. This corresponds to a growth of 8 percent compared with the strong fourth quarter in the previous year when a large jackpot significantly increased casino activity.

Gross turnover in Sportsbook, as regards all of Betsson's gaming solutions, amounted to SEK 4,094.6 (3,782.8) million, representing growth of 8 percent. Gross turnover in Live betting in Sportsbook, including all of Betsson's gaming solutions, was SEK 2,770.8 (2,476.8) million, equivalent to an increase of 12 percent. The margin after free bets in all of Betsson's gaming solutions in Sportsbook amounted to 6.2 (7.4) percent. Gross profit in Sportsbook during the quarter totaled SEK 146.3 (165.5). The decrease is explained by the lowest margin ever in a fourth quarter and by unfavorable exchange rate fluctuations amounting to SEK 10.8 million. Given the same margin after free bets as the previous year and adjusted for currency effects, the gross profit in Sportsbook would have seen a growth of 15%. Gross profit in Sportsbook includes SEK 67.2 (70.5) million in licensing revenues, as well as gaming contributions from B2B. Sportsbook's share of the Group's total gross profit amounted to 27 (30) percent.

Gross profit in Poker during the quarter amounted to SEK 25.4 (31.6) million. The decline was due to continued decreased activity in poker networks and to the fact that Betsson terminated its cooperation with unprofitable Poker customers.

Gross profit in Other products in the fourth quarter was SEK 12.8 (15.9) million.

Customer deposits

During the fourth quarter a total of SEK 1,613.6 (1,586.5) million was deposited. Deposits in all of Betsson's gaming solutions amounted to SEK 2,262.3 (2,154.8) million during the quarter. Deposits have been adversely affected by unfavorable exchange rate fluctuations amounting to SEK 45.0 million.

Customers

At the end of the quarter, the number of registered customers was 6.7 (5.8) million players, which is an increase of 16 percent. The KPI of Active customers demonstrates activity in Betsson's solutions, although these customers have no deposit requirement. The KPI continue to decline as a result of the fact that Betsson continues to focus on valueadding players rather than on free spins promotions. The number of active customers during the quarter amounted to 401,399 (520,429). While the number of active customers (no deposit requirement) declined, the number of active customers who actually has deposit funds increased by 7 percent compared with the previous quarter.

An active customer is defined as a customer who has played for cash during the last three months. This definition also includes players who have played on the basis of free of charge offerings and who have never made a deposit.

Equity

Equity in the Group amounted to SEK 2,032.2 (1,577.8) million, equivalent to SEK 46.79 (36.33) per share.

Liquid funds and customer liabilities

At the end of the quarter, liquid funds totaled SEK 562.5 (467.2) million. Liabilities to credit institutions amounted to SEK 315.7 (344.5) million and unutilized credits totaled SEK 97.7 (133.6) million. During the year, liquid funds have been negatively impacted in an amount of SEK 39.6 million by the repayment of bank loans and in an amount of SEK 410.9 (395.6) million by a transfer to shareholders (redemption procedure).

Customer liabilities, including the provision for accrued jackpots, amounted to SEK 318.7 (280.9) million. This amount may impose restrictions on the utilization of the Group's liquid funds, due to stipulations in the Maltese gaming authority's regulations. The Group's current receivables with payment providers referring to unsettled client payments amounted to SEK 256.7 (245.1) million.

Personnel

At the end of the quarter, there was a total of 839 (748) employees. The average number of employees during the year was 789 (591) in the Group, of which 541 (432) were employed in Malta. In addition to these employees, the Group had, at the end of the quarter, 161 consultants contracted on a full-time basis.

Parent Company

The operations of the Parent Company, Betsson AB (publ), consist of the ownership and administration of shares in companies through which Betsson, itself or through partner co-operations, offers games to end users via the Internet. The company provides and sells internal services to certain Group companies regarding finance, accounting and administration.

Turnover for the year amounted to SEK 10.2 (15.9) million and income before tax amounted to SEK 685.5 (575.7) million.

Liquid funds amounted to SEK 165.7 (114.2) million.

Ownership structure

The company's Class B shares are listed on the NASDAQ OMX NORDIC MID CAP LIST, (BETS). At the end of the period, the company had 18,825 (17,225) shareholders. The largest shareholders (owners with more than 10 percent of votes) were Per Hamberg and company, with 5.8 percent of the capital and 19.3 percent of votes, the Knutsson family and company, with 5.3 percent of capital and 10.5 percent of votes and Rolf Lundström and company, with 3.6 percent of capital and 10.0 percent of votes.

Claims for damages

In December, the Supreme Court announced its ruling against Betsson's civil claims for damages, regarding Swedish Governments treatment of the prohibition of prize and wheel of fortune games. Other than the previously reported legal fees, this negative ruling implies no cost to Betsson.

Outstanding Shares

Total number of shares and votes in Betsson at the end of 2013 amounted to 43,433,003 and 92,213,003, divided into 5,420,000 Class A shares with ten votes each and 38,013,003 Class B shares with one vote each. This amount includes Betsson's holding of 638 own Class B shares which have been acquired at an average price of SEK 58.27 during previous years.

At an Extraordinary General Meeting held on 22 August, the Board of Directors, authorized to do so in November 2013, resolved to issue 521,700 Class C shares for use in incentive programs. These shares were issued in January 2014, and subsequently repurchased by the company. The shares are not included in the totals above.

In January 2013, a total of 100,000 shares were issued for the implementation of incentive programs resolved on in 2010, and, in February 2013, 1,063,895 shares were issued as part of the payment for the acquisition of the Automaten brands.

Events after the end of the year

The first quarter has started with revenues in line with the average level in previous quarters, despite continued negative exchange rate fluctuations.

On 7 February, the company announced the acquisition of Class One Holding Ltd for an expected purchase consideration amounting to EUR 130 million. The company, operates the brands, Oranje and Kroon Casino, targeting the Dutch market. The brands turnover in 2013 amounted to EUR 32.5 million and the EBIT margin was 67.8 per cent. Betsson estimates that acquisition and integration costs will not exceed SEK 30,0 million in the next comming 12 months. The acquisition is financed

with bank loan and new share issue. See the press release dated 2014-02-07 for further details.

There have been no other significant events after the end of the period.

Accounting principles

Betsson complies with the IFRS standards adopted by the EU, as well as with the interpretations of those standards (IFRIC). This Year-End Report has been prepared in accordance with IAS 34 Interim Financial Reporting, the Swedish Annual Accounts Act and the Swedish Financial Reporting Board's Recommendation RFR 2.

Betsson's B2C segment is defined as games by players acquired by the company, itself, and games from players originating from Betsson's network of affiliated websites (www.affiliatelounge.com). Betsson classes anything which cannot be included in these categories as B2B.

A gain or loss on an effective hedging instrument is reported under Other comprehensive income. The gain or loss which is attributable to the ineffective portion is reported in the income statement. In other respects, the accounting principles remain unchanged from the preparation of the Annual Report for 2012. Further information regarding the Group's accounting and valuation principles are found in the annual financial statements for 2012 (Note 2) which is available on www.bessonab.com, or copies can be obtained from the head office.

Risks and factors of uncertainty

The legal situation regarding online gaming is constantly changing in different geographical markets. There is continued pressure on countries in the EU to bring their legislation in line with applicable EU law, with unrestricted mobility for goods and services. A number of countries have reported that they are working on new legislation which will be compatible with EU requirements, and certain countries have presented proposals for concrete legislation and/or adopted new legislation. There is still uncertainty as to the point in time at which such legislation will be introduced into those of Betsson's main markets which are yet to be reregulated.

New legislation could result in market conditions regarding, for example, changes in taxes, product range and local licensing fees, changing and might have a negative impact on Betsson's profitability. Meanwhile, new legislation may lead to a significant growth for Betsson's gaming markets, as well as possibly providing Betsson with increased opportunities for marketing and an increased presence on the market.

At the start of June 2010, Norway introduced its ban on promoting games organized from abroad. This ban impacts banks, in that payment services for transactions to gaming companies made using debit and credit cards, have been classified as unlawful.

After the election in September 2013, a parliamentary majority has arisen in Norway in favor of the re-regulation of the Norwegian gaming market. However, based on what is known today,

Betsson's management does not believe that it is probable that new regulations will be introduced in Norway within the near future. Betsson remains positive in regards to the development, although it is still too early to assess how this will affect the company.

Today, there is a shared view amongst those representing various parliamentary political parties as regards the re-regulation of the Swedish gaming market. It is too early to draw any concrete conclusions regarding the situation, but many assessing these developments believe that the work of introducing new regulations can only first be initiated after the Parliamentary elections in 2014. This implies that any possible new regulations could be adopted, at the earliest, during 2016/2017.

After the divestment of the Turkish customer base, Betsson has license revenues for, among other things, system delivery to a gaming operator, for which parts of the revenues derive from players in Turkey. These license revenues are reported under B2B. Revenues arising from Turkey may be considered to have higher operational risk than revenues from other markets. A proposal for a new law was adopted in Turkey during 2013 implying changes in gaming legislation. This has, largely, been implemented.

A more detailed description of the risks above and other risks and uncertainties can be found in the Annual Report for 2012.

Transactions with related parties

No transactions significantly affecting Betsson's financial position and results for the quarter have been undertaken between Betsson and related parties.

Future prospects

Betsson is of the opinion that the online gaming market will continue to develop strongly. The number of Internet users across the globe is growing rapidly, which is a fundamental driver for the business. The confidence in Internet and e-commerce is increasing as more people use the Internet to perform their banking and stock market transactions, insurance business and other purchases. This changing behavior and increasing confidence in e-commerce is important for the online gaming industry.

Betsson believes that, from a risk perspective, there is sustainable value in both the locally-regulated markets and in the internationally-regulated markets. Selected internationally-regulated markets will comprise, for the foreseeable future, a basis for strong growth and profitability. Management believes that Betsson's main markets will grow by a total of 7-8 percent in 2014, based on analyses from, among others, H2 Gambling. Betsson intends, over time, to continue to grow faster than the market rate.

Management is of the opinion that revenues from mobile devices will increase significantly during the coming twelve-month period.

Annual General Meeting 2014

The annual general meeting of shareholders in Betsson AB will be held at 10.00 CET on Wednesday, 8 May 2014, at Betsson's office, Regeringsgatan 28, Stockholm.

Shareholders wishing to submit proposals for the Nomination Committee may do so via email to [email protected] or by post to the address; Betsson AB, Valberedning, Regeringsgatan 28, 111 53 Stockholm.

Financial calendar

Betsson intends to publish its financial reports as follows. The interim report for the first quarter will be made public on 25 April, for the second quarter on 18 July, for the third quarter on 24 October and the Year-End Report for 2014 (fourth quarter) on 6 February 2015.

Betsson has invited stakeholders to its first capital market day 7 Mars, 2014.

Presentation of the Interim Report

Today, Friday 7 February, at 09:00 CET, Betsson's CEO Magnus Silfverberg will present the Year-End Report at Betsson's office at Regeringsgatan 28, and through webcast at www.betssonab.com or http://www.media-server.com/m/p/fdvzqah2, and by phone on +46 (0)8 505 564 74 (Sweden), +44 (0)203 364 53 74 (UK), +1 (0) 855 753 22 30 (USA). The presentation will be in English and will be followed by a question and answer session.

A copy of the presentation is available at www.betssonab.com as of Friday 7 February.

Stockholm, 7 February 2014 Magnus Silfverberg

President and CEO

Betsson AB (publ), Regeringsgatan 28, 111 53 Stockholm Registered office: Stockholm Corporate Identity Number 556090-4251

For more information, please contact: Magnus Silfverberg, President and CEO Tel, +46 702 71 47 00, [email protected] or Fredrik Rüdén, CFO, Tel, +46 733 11 72 62, [email protected].

The information in this Interim Report is information which Betsson AB (Publ) shall publish in accordance with the Securities Market Act and /or the Financial Instruments Trading Act. The information was presented for publication on 7 February 2014, 07:30 CET.

This document is a translation of the Swedish original.

Business combination regarding the Automaten brands

On 19 February, Betsson AB entered into an agreement to acquire the brands Sverigeautomaten.com, Norgesautomaten.com and Danmarksautomaten.com from Cherry for a purchase price of SEK 286 million, of which SEK 60 million represents supplementary purchase consideration. In practice, this transaction implies that Betsson AB's subsidiary on Malta, which had already previously been responsible for the operation of the sites, has now, after the transaction, also taken over the brands and the responsibility for marketing. At the same time, Cherry acquired the brand Cherrycasino.com from Betsson's Maltese subsidiary for a purchase consideration of SEK 1 million.

The initial net purchase price of SEK 225 million was settled on the basis of the equivalent of 1,063,895 newly-issued Betsson Class B shares. The additional purchase consideration will be settled on the basis of liquid funds after 12 months.

No portion of reported goodwill is expected to be tax deductible upon taxation of income. The table below summarizes the purchase consideration paid and the fair value of the acquired assets and assumed liabilities.

Accounting effects

The acquisition of the Automaten brands has had an impact on the accounting since the first of April 2013. Since that date and up until 31 December, the acquisition has contributed SEK 33.2 million to the Group's operating income through the net effect of the saving of profit shares payable to Cherry under the previous partner agreement and the additional marketing commitments from Betsson's side.

Had the Automaten brands been owned for the full year, Betsson's operating income would have amounted to SEK 613.2 million, instead of SEK 601.1 million, excluding acquisition costs of SEK 0.5 million in the first quarter.

Had Betsson owned the Automaten brands for the entire year, the acquisition would have contributed SEK 45.3 million to operating income.

Acquisition analysis (SEK million)

Purchase consideration

Divestment of a brand 1.0
Equity instruments (1,063,895 Class B
shares)
Total purchase consideration paid
225.0
226.0
Supplementary purchase
consideration (unconditional)
Total purchase consideration
60.0
286.0
Reported values of identifiable
acquired assets and assumed
liabilities
Brands 38.1
Total identifiable net assets 38.1

Goodwill 247.9

Additional purchase consideration, NGG

In conjunction with the acquisition of NGG in 2012, a provision was recorded for a maximum supplementary purchase consideration of EUR 20 million. The final value of this liability will be impacted by the outcome of the current dispute with the sellers of NGG concerning fulfilment of the terms and conditions of the additional purchase consideration, and as regards the applied EUR/SEK exchange rate. The final settlement of the liability will take place on the basis of an agreement or, alternatively, legal assessment of the fulfilment of the terms and conditions, either via delivery of shares, or via payment in the form of liquid funds. An amount less than EUR 20 million can apply if only certain of the terms and conditions are seen to have been fulfilled. If the terms are seen as not fulfilled to any extent no further purchase consideration will be paid out.

Consolidated Income Statements (SEK million) Q4
2013
Q4
2012
Full year
2013
Full year
2012
Revenue 655.5 651.9 2,476.7 2,203.7
Cost of services sold -106.9 -103.1 -402.9 -350.0
Gross profit 548.6 548.8 2,073.9 1,853.7
Marketing expenses -195.2 -189.4 -734.5 -626.8
Personnel expenses -101.8 -85.8 -373.2 -290.9
Other external expenses -96.9 -89.6 -352.4 -329.3
Capitalized development costs 24.7 22.0 92.9 81.0
Depreciation/amortization -25.8 -31.7 -107.1 -105.0
Other operating income/expenses -3.5 -0.8 1.5 -5.6
Operating expenses -398.5 -375.4 -1,472.8 -1,276.6
Operating profit 150.0 173.4 601.1 577.1
Financial income/expenses -1.0 0.0 -4.9 -3.5
Profit before tax 149.0 173.4 596.2 573.6
Tax -8.1 -6.5 -34.2 -25.8
Net profit 140.9 166.9 562.0 547.8
Earnings per share before dilution (SEK) 3.24 3.95 12.98 13.04
Earnings per share after dilution (SEK) 3.24 3.94 12.98 12.98
Operating margin (as a percentage of revenue) 22.9 26.6 24.3 26.2
Operating margin (as a percentage of gross profit) 27.4 31.6 29.0 31.1
Profit margin (percent) 22.7 26.6 24.1 26.0
Average number of outstanding shares (millions) 43.4 42.2 43.3 42.0
Number of outstanding shares at end of period (millions) 43.4 42.3 43.4 42.3
Return on equity (percent) 31 38
Return on total capital (percent) 19 22
Return on capital employed (percent) 21 24
Consolidated Statement of Comprehensive
Income (SEK million) Q4 Q4 Full year Full year
2013 2012 2013 2012
Net profit 140.9 166.9 562.0 547.8
Other comprehensive income
Income/expenses reported directly in equity
Hedging of net investments in foreign currency incl. deferred tax
Exchange rate differences arising from translation of foreign
-11.5 -9.7 -13.3 10.7
operations 75.4 43.9 88.0 -57.0

Other comprehensive income for the period (after tax) 63.9 34.7 74.7 -46.3 Total comprehensive income for the period 204.8 201.6 636.7 501.5

Consolidated Balance Sheets (SEK million) 31 Dec
2013
31 Dec
2012
Intangible fixed assets 2,037.9 1,664.6
Tangible fixed assets 53.8 28.5
Financial fixed assets 26.6 25.2
Deferred tax assets 11.8 18.4
Other non-current receivables 0.0 0.0
Total fixed assets 2,130.0 1,736.8
Current receivables 823.4 752.7
Liquid funds 562.5 467.2
Total current assets 1,385.9 1,219.9
Total assets 3,515.9 2,956.7
Equity 2,032.2 1,577.8
Deferred tax liabilities 4.1 9.3
Liabilities to credit institutions 0.0 344.5
Total non-current liabilities 4.1 353.8
Liabilities to credit institutions 315.7
Other current liabilities 1,163.8 1,025.0
Total current liabilities 1,479.5 1,025.0
Total equity and liabilities 3,515.9 2,956.7
Consolidated Cash Flow Statements (SEK million) Full year Full year
2013 2012
Profit after financial items 596.2 573.6
Adjustments for non-cash items, etc. 111.8 110.4
Taxes paid -4,3 2.7
Cash flow from operating activities
before changes in working capital 703.7 686.6
Changes in working capital -20.2 -20.6
Cash flow from operating activities 683.5 666.1
Investments -138.5 -101.0
Acquisition of shares, subsidiaries -518.4
Acquisition of shares, associated companies -15.8 -15.0
Cash flow from investing activities -154.3 -634.4
Payments for redemption of warrants -9.2 -10.4
Share issue upon redemption of warrants 12.3 -
Borrowings - 431.8
Repayment of borrowings -39.6 -74.1
Share redemption program -410.9 -395.6
Cost of share redemption program -0.2 -
Dividends paid - -21.8
Cash flow from financing activities -447,5 -70.1
Changes in liquid funds 81.6 -38.4
Liquid funds at beginning of period 467.2 509.7
Exchange rate differences on liquid funds 13.6 -4.1
Liquid funds at end of period 562.5 467.2
Changes in Equity for the Group (SEK million) Full year Full year
2013 2012
Opening balance 1,577.8 1,334.3
Total comprehensive income for the period 636.7 501.5
Total change, excluding transactions
with company owners 636.7 501.5
Dividends 0.0 -21.8
Share redemption program -410.9 -395.6
Cost of share redemption program after tax effects -0.2
New share issue 225.0 159.6
Warrants – option premium paid 1.0
Capital contribution, associated company 0.0 10.1
Repurchase of warrants -9.2 -11.5
Share issue upon redemption of warrants 11.3 -
Share options – value of employee services 0.5 1.2
Equity at end of period 2,032.2 1,577.8
Attributable to:
Parent Company's shareholders 2,032.2 1,577.8
Minority interest - -
Total equity 2,032.2 1,577.8

Parent Company Income Statements (SEK million) Full year Full year

2013 2012
Revenue 10.2 15.9
Operating expenses -39.1 -59.7
Operating income -29.0 -43.8
Financial items 714.4 619.6
Profit before tax 685.5 575.7
Tax -4.0 2.1
Net profit 681.5 577.8
31 Dec 31 Dec
Parent Company Balance Sheets (SEK million) 2013 2012
Tangible fixed assets 2.5 4.0
Financial fixed assets 2,352.2 2,071.2
Total fixed assets 2,354.7 2,075.1
Current receivables 474.9 305.1
Liquid funds 165.7 114.2
Total current assets 640.6 419.3
Total assets 2,995.3 2,494.5
Restricted equity
Non-restricted equity
340.1
2,039.8
337.8
1,543.6
Total equity 2,379.9 1,881.4
Non-current liabilities to credit institutions - 353.8
Current liabilities to credit institutions 312.4
Other current liabilities 303.0 259.3
Total current liabilities 615.3 259.3
Total equity and liabilities 2,995.3 2,494.5

Group Overview

Income Statements (SEK million) 2013 2013 2013 2013 2012 2012 2012 2012 2011 2013
(continuing operations) Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Full Year
Revenue 655.5 603.4 579.2 638.7 651.9 529.5 486.2 536.0 515.2 2,476.7
Cost of services sold -106.9 -100.9 -96.5 -98.6 -103.1 -90.8 -79.0 -77.1 -81.9 -402.9
Gross profit 548.6 502.5 482.7 540.1 548.8 438.7 407.2 458.9 433.3 2,073.9
Marketing expenses -195.2 -167.5 -172.4 -199.4 -189.4 -152.4 -149.8 -135.2 -123.1 -734.5
Personnel expenses -101.8 -89.9 -89.3 -92.2 -85.8 -73.5 -71.3 -60.2 -56.3 -373.2
Other external expenses -96.9 -88.4 -82.5 -84.6 -89.6 -80.4 -79.2 -80.1 -73.5 -352.4
Capitalized development costs 24.7 19.2 25.4 23.6 22.0 17.9 25.7 15.3 13.4 92.9
Depreciation/amortization -25.8 -26.3 -27.6 -27.4 -31.7 -28.0 -23.2 -22.1 -22.3 -107.1
Other operating income/expenses -3.5 2.7 1.4 1.0 -0.8 -2.2 0.1 -2.6 0.8 1.6
Total operating expenses -398.5 -350.3 -344.9 -379.0 -375.4 -318.7 -297.7 -284.9 -261.0 -1,472.8
Operating income 150.0 152.2 137.8 161.1 173.4 120.0 109.5 174.0 172.3 601.2
Financial items, net -1.0 -2.5 -0.3 -1.0 0.0 -1.7 1.3 -3.0 0.6 -4.9
Profit before tax 149.0 149.7 137.5 160.1 173.4 118.3 110.9 171.0 172.9 596.2
Tax -8.1 -8.7 -9.2 -8.2 -6.5 -5.2 -5.5 -8.7 -7.1 -34.2
Profit after tax 140.9 140.9 128.3 151.9 166.9 113.1 105.4 162.3 165.8 562.0
Balance Sheets (SEK million) 2013 2013 2013 2013 2012 2012 2012 2012 2011 2013
Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Full Year
Non-current assets 2,130.0 2,034.2 2,050.3 1,960.0 1,736.8 1,692.6 1,754.0 1,020.7 1,033.8 2,130.0
Current assets 1,385.9 1,175.2 1,067.9 1,287.1 1,219.9 989.2 1,088.8 1,339.2 1,239.3 1,385.9
Total assets 3,515.9 3,209.4 3,118.2 3,247.2 2,956.7 2,681.8 2,842.7 2,359.9 2,273.1 3,515.9
Equity 2,032.2 1,827.8 1,704.1 1,908.9 1,577.8 1,382.4 1,347.7 1,604.4 1,334.3 2,032.2
Non-current liabilities 4.1 7.2 6.1 344.7 353.8 410.8 439.4 7.8 8.0 4.1
Current liabilities 1,479.5 1,374.4 1,408.0 993.6 1,025.0 888.6 1,055.6 747.7 930.8 1,479.5
Total equities and liabilities 3,515.9 3,209.4 3,118.2 3,247.2 2,956.7 2,681.8 2,842.7 2,359.9 2,273.1 3,515.9
Cash Flow Statements (SEK
million) 2013 2013 2013 2013 2012 2012 2012 2012 2011 2013
Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Full Year
Operating cash flow 192.0 175.4 150.7 165.4 326.3 -23.7 265.6 97.9 54.2 683.5
Cash flow from investing activities -57.9 -35.1 -34.8 -26.5 -48.1 -21.6 -547.4 -17.3 -24.4 -154.3
Cash flow from investing activities -0.6 -38.8 -410.9 2.8 -67.0 -39.2 36.2 0.0 2.7 -447.5
Total cash flow 133.5 101.5 -295.1 141.7 211.2 -84.5 -245.7 80.6 32.5 81.6
Key Performance Indicators 2013 2013 2013 2013 2012 2012 2012 2012 2011 2013
(Continuing operations) Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Full Year
Growth (revenue) per quarter (%)
Growth compared with the same
9 4 -9 -2 23 9 -9 4 11
period last year 1 14 19 19 27 14 44 28 6 12
Gross margin (percent of revenue) 83.7 83.3 83.3 84.6 84.2 82.9 83.7 85.6 84.1 83.7
EBITDA margin (percent of
revenue) 26.8 29.6 28.6 29.5 31.5 28.0 27.3 36.6 37.8 28.6
EBITDA margin (percent of Gross
profit) 32.1 35.5 34.3 34.9 37.4 33.7 32.6 42.7 44.9 34.2
Operating margin (percent of
revenue) 22.9 25.2 23.8 25.2 26.6 22.7 22.5 32.5 33.4 24.3
Operating margin (percent of Gross
profit) 27.4 30.3 28.5 29.8 31.6 27.4 26.9 37.9 39.8 29.0
Profit margin (percent of revenue) 22.7 24.8 23.7 25.1 26.6 22.3 22.8 31.9 33.6 24.1
Profit margin (percent of Gross
profit)
27.2 29.8 28.5 29.6 31.6 27.0 27.2 37.3 39.9 28.7
Marketing (percent of revenue) 29.8 27.8 29.8 31.2 29.1 28.8 30.8 25.2 23.9 29.7
Marketing (percent of Gross profit) 35.6 33.3 35.7 36.9 34.5 34.7 36.8 29.5 28.4 35.4
Earnings per share (SEK) 3.24 3.25 2.95 3.54 3.95 2.68 2.54 3.91 4.01 12.98
Operating cash flow per share
(SEK)
4.42 4.04 3.47 3.86 7.73 -0.56 6.29 2.36 1.31 15.79
Equity per share (SEK) 46.79 42.08 39.24 43.95 36.33 32.75 31.92 38.20 32.24 46.79
Executed dividend/redemption per
share (SEK) 9.46 9.42 - - 9.46
Average share price (SEK) 197.76 179.32 176.78 213.50 177.78 189.09 210.34 181.23 146.29 191.59
Last paid share price (SEK) 204.00 190.50 170.00 209.50 200.50 174.50 206.00 194.50 151.50 204.00
Highest share price (SEK) 213.50 196.50 210.00 224.50 200.50 207.00 234.00 199.50 159.50 224.50
Lowest share price (SEK) 182.50 167.50 159.50 200.00 158.50 164.00 195.00 152.00 125.25 159.50
Equity/assets ratio (percent) 58 57 55 59 53 52 48 68 59 58
Investments (SEK million) 57.9 19.3 34.8 26.5 33.1 21.6 29.1 17.3 13.5 138.5
Average number of employees
(accumulated)
Number of employees at the end of
789 756 721 739 591 527 464 439 340 789
the period 839 815 756 743 748 723 610 459 412 839
Number of registered shareholders
at the end of the period 18,825 19,909 19,447 17,388 17,225 16,195 15,246 14,568 12,507 18 825
Customers 2013 2013 2013 2013 2012 2012 2012 2012 2011 2013
Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Full Year
Registered customers (thousands) 6,732.7 6,623.2 6,354.9 6,044.2 5,777.9 5,633.7 5,418.0 3,906.3 3,662.4 6,732.7
Quarterly growth (%) 2 4 5 5 3 4 39 7 7
Growth compared with the same
period last year (%) 17 18 17 55 58 65 68 51 16 17
Active Customers (thousands) 401.4 423.6 428.7 479.2 520.4 463.6 508.7 405.0 403.6 401.4
Quarterly growth (%) -5 -1.0 -10.5 -7.9 12.3 -8.9 25.6 0 5
Growth compared with the same
period last year (%) -23 -9 -16 18 29 21 51 21 34 -23
Activity level, Active/registered
customers 6 6 7 8 9 8 9 10 11 6
Customer deposits 2013 2013 2013 2013 2012 2012 2012 2012 2011 2013
Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Full Year
Customer deposits (SEK million) 1 613.6 1 493.8 1 445.9 1 511.1 1 586.5 1 362.9 1 097.8 1 045.3 1 093.5 6 064.5
Quarterly growth (%) 8 3 -4 -5 16 24 5 -4 -3
Growth compared with the same
period last year (%) 2 10 32 45 45 21 45 9 -1 19
Customer deposits, all gaming
solutions (SEK million) 2,262.3 2,027.1 2,017.8 2,113.9 2,154.8 1,756.0 1,509.5 1,468.6 1,484.5 8,421.1
Quarterly growth (%)
Growth compared with the same
12 0 -5 -2 23 16 3 -1 0
period last year (%) 5 15 34 44 45 18 31 31 34 22
Sportsbook Gross margin 2013 2013 2013 2013 2012 2012 2012 2012 2011 2013
Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Full Year
Gross turnover, all gaming solutions 4,094.6 3,398.5 3,447.6 3,873.6 3,782.8 2,921.4 2,744.8 2,644.1 2,171.3 14,814.3
Quarterly growth (%) 20 -1.0 -11.0 2.4 29.5 6.4 3.8 22 20
Growth compared with the same
period last year (%) 8 16 26 47 74 61 52 48 15 23
Of which gross turnover from Live
Betting (SEK million) 2,770.8 2,365.2 2,393.2 2,667.3 2,476.8 1,910.9 1,904.8 1,740.1 1,336.1 10,196.4
Live betting portion (%) 67.7 69.6 69.4 68.9 65.5 65.4 69.4 65.8 61.5 68.8
Quarterly growth (%) 17.1 -1.2 -10.3 7.7 29.6 0.3 9.5 30 25
Growth compared with the same
period last year (%) 26 53 85 78 59 55 17 27
12 24
Margin after free bets (%) 6.2% 6.9% 6.5% 6.7% 7.4% 5.5% 4.6% 7.2% 8.1% 6.7%
Gross profit Sportsbook (SEK
million) 146.3 140.7 126.6 164.0 165.5 89.8 68.9 107.8 97.2 577.6
Gross margin Sportsbook (%) 1)
1) Margin after allocated expenses
3.6% 4.1% 3.7% 4.2% 4.4% 3.1% 2.5% 4.1% 4.5% 3.9%
Segment Reporting 2013 2013 2013 2013 2012 2012 2012 2012 2011 2013
Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Full Year
Gross profit, SEK million
B2B, Business to business 132.4 104.9 124.0 165.4 147.4 120.8 115.3 142.8 132.6 526.7
B2C, Business to consumers 416.2 397.6 358.7 374.7 401.4 317.9 291.9 316.2 300.7 1,547.2
Total Gross profit 548.6 502.5 482.7 540.1 548.8 438.7 407.2 459.0 433.3 2,073.9
Share of total Gross profit (%)
B2B 24.1 20.9 25.7 30.6 26.9 27.5 28.3 31.1 30.6 25.4
B2C 75.9 79.1 74.3 69.4 73.1 72.5 71.7 68.9 69.4 74.6
Share of total Gross profit (%)
B2B 26 -15 -25 12 22 5 -19 8 8
B2C 5 11 -4 -7 26 9 -8 5 13
Total 14 4 -11 -2 25 8 -11 6 11
Growth compared with the
same period last year (%)
B2B -10 -13 8 16 11 -2 -7 -24 -44 0
B2C
Total
4
0
25
15
23
19
19
18
33
27
19
13
92
48
122
39
96
11
17
12
Gross profit per product 2013
Q4
2013
Q3
2013
Q2
2013
Q1
2012
Q4
2012
Q3
2012
Q2
2012
Q1
2011
Q4
2013
Full Year
Gross profit, SEK million
Casino 364.1 329.9 316.0 325.4 335.8 301.7 303.1 308.3 290.4 1,335.4
Poker 25.4 21.2 22.0 30.6 31.6 32.2 25.4 27.5 24.8 99.2
Sportsbook
Other products
146.3
12.8
140.7
10.7
126.6
18.1
164.0
20.1
165.5
15.9
89.8
15.0
68.9
9.8
107.8
15.4
97.2
20.9
577.6
61.7
Total Gross profit 548.6 502.5 482.7 540.1 548.8 438.7 407.2 459.0 433.3 2,073.9
Share of gross profit (%)
Casino
66.4 65.7 65.5 60.2 61.2 68.8 74.4 67.2 67.0 64.4
Poker 4.6 4.2 4.6 5.7 5.8 7.3 6.2 6.0 5.7 4.8
Sportsbook 26.7 28.0 26.2 30.4 30.2 20.5 16.9 23.5 22.4 27.9
Other products 2.3 2.1 3.7 3.7 2.9 3.4 2.4 3.4 4.8 3.0
Quarterly growth (%)
Casino
Poker
10
20
4
-4
-3
-28
-3
-3
11
-2
0
27
-2
-8
6
11
6
15
Sportsbook 4 11 -23 -1 84 30 -36 11 16
Other products 20 -41 -10 26 6 53 -36 -26 149
Total all products
Growth compared with the
9 4 -11 -2 25 8 -11 6 11
same period last year (%)
Casino
Poker
8
-20
9
-34
4
-13
6
11
16
27
10
50
50
49
64
34
34
-7
7
-15
Sportsbook -12 57 84 52 70 7 67 3 -24 34
Other products -19 -29 84 31 -24 79 -35 -13 5 10
Total all products 0 15 19 18 27 13 48 39 11 12
B2C by geographical area 2013
Q4
2013
Q3
2013
Q2
2013
Q1
2012
Q4
2012
Q3
2012
Q2
2012
Q1
2011
Q4
2013
Full Year
Gross profit, SEK million
Nordic Countries 353.3 339.7 291.9 302.3 330.2 253.4 238.7 259.0 239.0 1,287.2
EU, outside Nordic Region 58.2 55.1 63.5 69.1 68.1 58.3 49.7 48.2 55.3 245.9
Rest of Europe 2.5 1.4 2.1 1.4 1.3 2.4 1.5 1.1 0.8 7.4
Rest of the world
Total gross profit
2.2
416.2
1.4
397.6
1.2
358.7
1.9
374.7
1.8
401.4
3.8
317.9
1.9
291.9
7.9
316.2
5.6
300.7
6.7
1,547.2
Share of total Gross Profit (%)
Nordic Countries
84.9 85.4 81.4 80.7 82.3 79.7 81.8 81.9 79.5 83.2
EU, outside Nordic Region 14.0 13.9 17.7 18.4 17.0 18.3 17.0 15.2 18.4 15.9
Rest of Europe 0.6 0.4 0.6 0.4 0.3 0.8 0.5 0.3 0.3 0.5
Rest of the world 0.5 0.4 0.3 0.5 0.4 1.2 0.7 2.5 1.9 0.4
Quarterly growth (%)
Nordic Countries
4 16 -3 -8 30 6 -8 8 20
EU, outside Nordic Region 6 -13 -8 1 17 17 3 -13 -4
Rest of Europe 79 -33 50 8 -46 57 39 38 -43
Rest of the world 57 17 -37 6 -53 96 -75 41 -24
Total all countries
Growth compared with the
5 11 -4 -7 26 9 -8 5 13
same period last year (%)
Nordic Countries 7 34 22 17 38 27 106 145 108 19
EU, outside Nordic Region -15 -5 28 43 23 1 42 38 34 10
Rest of Europe 92 -42 37 27 63 71 119 10 129 17
Rest of the world
Total all countries
22
4
-63
25
-38
23
-76
19
-68
33
-49
19
287
92
778
122
5 700
96
-57
17

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