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Betsson

Quarterly Report Oct 26, 2010

3010_10-q_2010-10-26_1d7c843b-4615-4f6a-9007-6ee97db4a885.pdf

Quarterly Report

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INTERIM REPORT, 1 JANUARY – 30 SEPTEMBER 2010

ALL FIGURES IN THIS REPORT ARE IN SEK. UNLESS OTHERWISE SPECIFIED. FIGURES IN BRACKETS ARE THE CORRESPONDING FIGURES FOR THE PREVIOUS YEAR. THIS INFORMATION APPLIES TO THE GROUP UNLESS OTHERWISE SPECIFIED.

The third quarter revenues increased by 22 percent

Second quarter

  • Revenues increased by 22 percent to SEK 385.1 (316.7) million, the largest ever reported quarterly revenue
  • Operating income increased to SEK 80.7 (79.4) million
  • Operating income was negatively impacted by a net cost of SEK 13.1 (2.3) million referring to the currency revaluation of balance sheet items
  • The net effect from capitalizations and amortizations of capitalized development costs amounted to a cost of SEK 2.8 (revenue 4.2) million
  • Excluding the above effects in currency revaluation and net of capitalization and amortization the operating income totalled SEK 96.6 (77.5) million, corresponding to an increase of 25 percent
  • Income before tax amounted to SEK 80.7 (79.6) million
  • Net income totalled SEK 76.3 (75.6) million, corresponding to SEK 1.94 (1.93) per share
  • Cash amounted to SEK 377.3 (396.0) million and the Group continues to have no interest-bearing liabilities
  • Gross Turnover in Sportsbook amounted to SEK 1 215.7 (634.9) million, corresponding to an increase of 91 percent
  • Gross Turnover in Live betting in Sportsbook amounted to SEK 733.7 (194.2) million an increase of 278 percent
  • Due to legal requirements, Betsson must shut down the Betsson shop at Götgatan in Stockholm

Interim period

  • Revenues increased by 22 percent to SEK 1 118.9 (916.8) million
  • Operating income increased to SEK 252.9 (223.4) million
  • Operating income has been charged with a cost of SEK 16.5 (revenue 0.3) million referring to the currency revaluation of balance sheet items
  • The net effect from capitalizations and amortizations of capitalized development costs amounted to a cost of SEK 2.8 (revenue 17.2) million
  • Excluding the above effects in currency revaluation and net of capitalization and amortization the operating income totalled SEK 272.2 (205.9) million, corresponding to an increase of 32 percent
  • Income before tax amounted to SEK 253.8 (224.6) million, an increase of 13 percent
  • Net income totalled SEK 240.5 (213.3) million, corresponding to SEK 6.13 (5.44) per share

Key Performance Indicators

Q3 Q3 Jan-Sep Jan-Sep Full year
2010 2009 2010 2009 2009
Totals
Revenues 385.1 316.7 1 118.9 916.8 1 299.7
Gross Profit 301.6 253.0 890.6 732.8 1 045.0
Operating Income 80.7 79.4 252.9 223.4 316.9
Cash 377.3 396.0 377.3 396.0 529.1
Active Customers (thousands) 255.7 220.9 255.7 220.9 288.7
Registered Customers (thousands) 2 833.9 1 916.7 2 833.9 1 916.7 2 117.8
Customer Deposits 913.6 823.6 2 789.6 2 342.3 3 258.0
Sportsbook
Gross Turnover Sportsbook 1 215.7 634.9 3 461.6 1 816.2 2 571.5
- of which Live Betting 60.0% 30.6% 52.5% 31.3% 31.2%
Margin after free bets, Sportsbook 8.6% 7.2% 7.9% 7.6% 8.9%
Gross Profit Sportsbook 89.5 41.4 239.5 124.6 206.6
Gross Profit margin in Sportsbook 7,4% 6,5% 6,9% 6,9% 8,0%

1) Margin after allocated costs

Fast growing Live betting in Sportsbook

"The activity level in the different gaming solutions has never been greater. Live betting in Sportsbook is particularly strong, with strong growth on all key markets which is joyous. Large short term operational receivables together with large currency fluctuations during the major part of the quarter increased currency exposure in the short term. This contributed to high cost for currency revaluations. This exposure is now significantly lower." states Pontus Lindwall, Betsson's President and CEO.

Presentation of interim report

Today, Tuesday 26 October, at 09.00 CET, Betsson's CEO Pontus Lindwall will present the Interim Report through webcast at http://www.betssonab.com or http://storm.zoomvisionmamato.com/player/betsson/objects/7tz0dw29 or through phone at +46 (0)8 505 598 53 (Sweden) or +44 (0)20 3043 2436 (UK). The presentation will be in English and will be followed by a question and answer session.

BETSSON AB´S CORE BUSINESS CONSISTS OF OWNING AND ADMINISTER SHARES IN COMPANIES WHICH OFFER GAMES TO THE END USERS THROUGH INTERNET. BETSSON AB OWNS BETSSON MALTA WHICH OFFERS THE CUSTOMER GAMES THROUGH PARTNERSHIPS AND THE OWN WEBSITES WWW.BETSSON.COM, WWW.CASINOEURO.COM AND WWW.CHERRYCASINO.COM. BETSSON MALTA OFFERS POKER, CASINO, BETTING EXCHANGE, SPORTS BETTING, LOTTERY, BINGO AND GAMES. THE CUSTOMERS MAINLY ORIGINATE FROM THE SCANDINAVIAN COUNTRIES AND OTHER PARTS OF EUROPE. BETSSON AB IS LISTED ON NASDAQ OMX NORDIC MID CAP LIST, (BETS).

Third quarter 2010

Group revenue amounted to SEK 385.1 (316.7) million, corresponding to an increase of 22 percent. The gross profit was SEK 301.6 (253.0) million which is an increase of 19 percent. Operating income increased by 2 percent to SEK 80.7 (79.4) million and the operating margin was 21.0 (25.1) percent. Income before tax increased to SEK 80.7 (79.6) million and net income was SEK 76.3 (75.6) million, which is equivalent to SEK 1.94 (1.93) per share.

Betsson continues to improve the offering to end users. In August LiveCasino was offered at Betsson.com. eGaming review ranked www.betsson.com as the fastest gaming site, which shows what a technically leading company Betsson has developed into.

Marketing costs during the quarter amount to SEK 124.0 (104.4) million, corresponding to an increase of 19 percent. Marketing consists of traditional marketing and partner co-operation agreements with variable remuneration. Marketing which derives from partners receiving variable remuneration is accompanied by a significantly lower risk than costs for traditional marketing.

Personnel expenses amounted to SEK 39.6 (34.9) million, corresponding to an increase of 13 percent. Betsson has developed into an attractive employer. Today, Betsson has one of the most competent and efficient organizations in its industry. Competent, motivated employees are crucial in order to create and meet future growth in Europe and elsewhere in the world.

Other external expenses amounted to SEK 39.0 (34.9) million. The lower level of growth in other external expenses compared with Betssons total growth is, to a large extent, explained by successful recruitment which has contributed to a decreased dependence on external sub-contractors and a generally restrictive approach to administrative costs.

Betsson actively seeks to reduce the foreign exchange exposure in the Group. The scope of future foreign exchange effects is determined by the timing of future cash flows, the currencies of the assets and liabilities and Betsson's success in actively limiting the exposure. During the major part of the quarter, short term operational receivables have been unusually large, generating an unusually large exchange exposure. The exposure in these receivables is lower at the beginning of October, due to a lower level of investments in the more attractive currencies with a higher degree of hedges. Operating income has been charged with costs of SEK 13.1 (2.3) million referring to the currency revaluation of balance sheet items.

Betsson continuously invests in integrated payment and product solutions. The net effect from capitalizations and amortizations of capitalized development costs amounted to a cost of SEK 2.8 (revenue 4.2) million

Interim period

Group revenue amounted to SEK 1 118.9 (916.8) million, corresponding to an increase of 22 percent. The gross profit was SEK 890.6 (732.8) million corresponding to an increase of 22 percent. Operating income increased to SEK 252.9 (223.4) million and the operating margin was 22.6 (24.4) percent. Income before tax increased to SEK 253.8 (224.6) million and net income was SEK 240.5 (213.3) million, which is equivalent to SEK 6.13 (5.44) per share, an increase of 13 percent.

Gaming operations

Through its subsidiary on Malta, Betsson offers Internet gaming to end customers via partners and the own gaming portals www.Betsson.com, www.CasinoEuro.com and www.CherryCasino.com.

Products

Casino is Betsson's largest products and represented 57.7 (68.5) percent of total gross profit in the quarter, followed by Sportsbook with 29.7 (16.4) percent, Poker with 8.1 (10.9) percent and Other Products, which together accounted for 4.5 (4.3) percent of gross profit.

Gross turnover in the third quarter in Sportsbook amounted to SEK 1 215.7 (634.9) million, of which Live betting increased with 278 percent and amounted to SEK 733.7 (194.2) million. Live betting accounted for 60 (31) percent of gross turnover. Gross margin in Sportsbook amounted to 7.4 (6.50) percent.

For further details about products see page 12.

Markets

Nordic is the largest market followed by rest of Europe and non-Nordic EU countries. Rest of the World is, to date, relatively minor in importance to the Group but management continuously evaluates a variety of opportunities to establish Betsson in new geographical areas.

Gross profit from Rest of Europe outside EU accounted for SEK126.3 (64.6) million, corresponding to an increase of 96 percent. The situation in this region is characterized by the strong growth in Live betting in Sportsbook. Gross profit in Nordic amounted to SEK 142.0 (153.2) million, corresponding to a decrease of 7 percent. This decrease is largely explained by continued 25 percent decline in Poker, Norway has been negatively hit by the outcome of new legislation and negative currency movements. Gross profit in the region EU outside Nordic amounted to SEK 31.3 (33.3) million, which corresponds to a decrease of 6 percent. In local currency, EU outside Nordic showed an increase of 4 percent. Rest of the World increased with 5 percent, but still accounts for a marginal portion of total revenues.

Due to legal requirements, Betsson has chosen to block players from France and this is assumed to have a marginal impact on Betsson´s future profits.

For further details see page 12.

Customer deposits

Customer deposits vary between quarters but represent, in the long run, a strong correlation with the activity in Betsson´s offerings. During the interim period deposits amounted to SEK 2 789.6 (2 342.3) million, which corresponds to an increase of 19 percent. During the third quarter, deposits amounted to SEK 913.6 (823.6) million, which corresponds to an increase of 11 percent.

Customers

The strong inflow of new customers is proof that the different Betsson gaming solutions are attractive. At the end of the quarter, the number of registered customers totalled 2.8 (1.9) million players, which represents an increase of 47 percent. Active customers totalled 255 700 (220 900), an increase of 16 percent.

An active customer is defined as a customer who has played for money in the last three months. Therefore, this definition includes all players who have played free spins/bets based on offerings from Betsson or Betsson´s partners.

Equity

The group's equity amounted to SEK 704.6 (728.1) million, which is equivalent to SEK 17.95 (18.54) per share.

Cash and customer funds

Cash and cash equivalents at the end of the year amounted to SEK 377.3 (396.0) million. Customer funds, including reserves for accumulated jackpots, totalled SEK 165.4 million. The total value of customer funds is comfortably covered by the Group's current receivables from payment providers for unsettled customer payments, which amount to SEK 242.5 million.

Personnel

There was a total of 276 (251) employees by the end of the second quarter. The number of employees has increased by 18 during the year. The average number of employees during the quarter was 266 (210), of which 190 (140) were based on Malta.

Parent Company

The operations of the Parent Company, Betsson AB (publ) consist of the holding company's activities and Group administration. The company provides and sells services to certain other Group companies in the areas of finance, accounting, administration and management.

Revenues in the interim period totalled SEK 12.0 (8.3) million and profit after financial items was SEK-30.8 (-4.2) million.

The Parent Company's investments during the quarter totalled SEK 5.2 (0.2) million. Liquid funds totalled SEK 291.7 (297.3) million.

Ownership structure

The company's B-share is listed on OMX NASDAQ NORDIC MID CAP LIST, (BETS). The company had 11 970 (8 316) shareholders at the end of the period. The largest owners (with more than 10 percent of the votes) were Per Hamberg with 8.9 percent of the capital and 21.4 percent of the votes, the Knutsson family with 6.5 of the capital and 11.1 percent of the votes, and Rolf Lundström with 3.9 percent of the capital and 10.5 percent of the votes.

Betting Shop in Stockholm

In May 2008, Betsson opened a betting shop in Stockholm. The Gaming Board for Sweden argued that these operations were in conflict with the Lotteries Act and, on threat of penalty, required the shop to cease the promotion of gambling operations. This decision was appealed by Betsson (Shopsson) to the County Administrative Court. The County Administrative Court rejected the appeal, in the company's opinion in violation of EC law. Betsson then appealed the decision to the Administrative Court of Appeal. This court gave Betsson leave to appeal in January 2009 and upheld the Betsson claim for interim relief, which meant that the County Administrative Court ruling no longer applied. In December 2009 the Administrative Court of Appeal issued its ruling that, once again, on threat of penalty payment, the shop must cease to promote gambling operations. Company management held fast to their view that the decision was in conflict with applicable EU law and appealed, once again, to the Supreme Administrative Court. In order to avoid penalties, management was forced to close the shop. Two days after the shop closed the Supreme Administrative Court upheld Betsson's claim for interim relief. Now the Supreme Administrative Court has informed Betsson that the decision from the Administrative Court stands. In order to avoid penalties, Betsson has closed the shop.

On September 22, the police made a house search with the purpose of investigating to determine if illegal gambling was taking place in the shop. Betsson is of the opinion that all terminals in the shop are open for all kinds of internet sites. Betsson also points out that all gaming activities in the Group are operated on Malta. The preliminary investigation continues and is expected to be completed within next six months. The prosecutor has, to date, not determined whether Pontus Lindwall will be prosecuted.

Claims for damages

On September 2, 2010, the County Administrative Court in Stockholm ruled against Betsson's claims for damages of SEK 102 million against the state. Betsson argue that the state, in breach of applicable law, applied a ban on wheel of fortune games which has negatively the financial position of Betsson. The County Administrative Court agreed that the state had acted in breach of applicable EU-law but that this was not sufficient for the state to be forced to pay claims for damages. Betsson has appealed this to the Administrative Court.

Outstanding number of shares

Betsson holds own shares amounting to 310 000 Class B-shares, acquired before 2010 at an average rate of SEK 58.27. The number of outstanding shares excluding repurchased shares amounted to 39 243 720, of which 5 420 000 were A-shares and 33 823 720 were Class Bshares. The average number of outstanding shares amounted to 39 243 720 in the interim period.

Events after the third quarter

October has started strong with all time high in revenues and deposits.

On the first of October 2010 the Finnish legislation regarding marketing of online games was strengthened. This is assumed to have a negative effect on Betsson´s possibilities to undertake local marketing in Finland. Betsson is now evaluating if this also impacts TV and internet commercials broadcasted outside the Finish territory.

There have been no key events after the end of the interim period.

Accounting principles

Betsson complies with the IFRS standards adopted by the EU, as well as with the interpretations of those standards (IFRIC). This interim 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 2.3, Accounting for Legal Entities.

Revenue reported by Betsson is the income arising from transactions with end users, i.e. the customers. Gross profit (gaming surplus) represents the income from transactions with third parties, e.g. gaming suppliers and payment providers. Gross profit from the Group's gaming operations is comprised of the net of received gaming wagers and paid winnings, minus gaming taxes, license fees to game suppliers, and the net value of income and expenses for bank and credit card payment services for the deposit of gaming wagers and payment of winnings. Bonuses to players and loyalty schemes do not affect the Group's gross margin.

From January 2010, Betsson applies the amended IFRS 3 Business Combinations and IAS 27 Consolidated and Separate Financial Statements, including amendments to associated standards.

In other respects, the accounting principles remain unchanged from the annual bookclosing 2009. Further information on the Group's accounting and valuation principles can be found in Note 2 of the Annual Report 2009, which is available at www.betssonab.com or at head office.

Risks and uncertainties

The legal situation regarding online gaming is constantly changing in different geographical areas. There is continued pressure on countries in the EU to bring their legislation in line with applicable EC law, with unrestricted mobility for goods and services. A

number of countries have reported that they are working on new legislation which is compatible with EU requirements. While there is still uncertainty as to the time at which such legislation will be introduced into Betsson's main markets, when this does take place it will provide Betsson with increased opportunities for marketing and with an increased presence on the market.

In 2007, Turkey introduced legislation against Internet gaming with the aim of protecting its state gaming company, IDDAA. Betsson's Internet-based gaming operations exhibit a clearly-defined, cross-border character which implies that international law is applicable. According to the principle of the sovereignty of states, each country is of equal value; consequently, one state's legal regulations cannot take precedence over those of another state. Betsson's marketplace is Malta and operations are undertaken in accordance with Maltese legislation and are subject to the Maltese legal system. As a part of Malta's market place, Betsson is able to claim immunity vis á vis any Turkish legislation which might attempt to prevent Betsson from carrying out its operations. This is, according to Betsson´s legal advisosr, a principle that Turkey accepted through its membership in WTO and through other international agreements. In addition to the above, Turkey has the intention of becoming a full member state of the EU and has accepted, in principle, the EU treaty concerning the free movement of goods and services between member states. Turkey has signed an Association Agreement which is to regulate the country's process in being a full member of the EU. According to Betsson´s legal advisor, this gaming legislation is in breach of EU law and is not strictly in line with the established Association Agreement. This Turkish legislation makes operations more difficult for Betsson on the Turkish market, even though Turkey can apply no sanctions against Betsson due to the principle of sovereignty. Consequently, Betsson's future revenues from Turkey continue to be more uncertain than those generated by its other markets.

Norway expanded the ban on promoting games organized from abroad. The ban impacts banks, in that payment services to gaming companies, regarding transactions made using debit and credit cards have been criminalised.

In Sweden, a public inquiry on gaming was presented in December 2008, preceding new gaming legislation. This proposed new legislation has met hard criticism. Betsson's view is that the law would be in conflict with EC law and that it will not be introduced in its proposed form. Betsson's view is that the law would be in conflict with EC law and will not be introduced in its proposed form.

The European Court of Justice has recently ruled on Internet games (Carmen Media, Marcus Stoss, WinnerWetten och Engelman) which further strengthen the obligations for national monopolies to comply with applicable EU-law. The major purpose today for having national monopolies is to generate cash inflows to the states,

this leads to the fact that the limitation of the free movement of services which they generate is not possible to defend in compliance with applicable EU law. The conclusion is that, based on these new rulings, it will be more difficult for domestic courts to assess, under their space of interpretation, in favor for the monopolies. Betsson conclude that these rulings will significantly weaken the existing ban in Germany. Betsson also assumes this to be an important guideline for other court cases in which local monopolies are in breach of applicable EU law.

A description of other risks and uncertainties can be found in the Annual Report 2009.

Transactions with related parties

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

Outlook for 2010

Betsson expects the market for Internet gaming to continue to grow very rapidly.

A considerable portion of the world´s citizens still have no or limited access to the Internet. The number of Internet users is growing rapidly, which is a fundamental driver for the business. The confidence in Internet and e-commerce increases as more people use Internet to perform their banking and stock market transactions, insurance business and regular purchasing of physical products. This changing behavior and increasing confidence in e-commerce is important for the online gaming industry.

At the beginning of the year, Global Betting and Gaming Consultants estimated that the online gaming market in Europe would grow 12.6 percent to USD 8.7 billion in 2010. Betsson aims to grow faster than the market.

High customer deposits and high activity in Betsson indicate continued healthy growth.

Election Committee and AGM 2011

In accordance with the decision taken at Betsson's annual general meeting on 3rd of June 2010, the members of the election committee have been appointed. The Election Committee will consist of the following persons:

  • Per Hamberg, representing own shares
  • Michael Knutsson, representing Bertil Knutsson,
  • Christoffer Lundström, representating the Lundström family
  • John Wattin, Chairman of Betsson AB

The task of Election Committee is to prepare a proposal to the General Annual Meeting 2011 for the number of board members that are to be elected by the meeting, remuneration of the board members, the composition of the board, the chairman of the board and the chairman of the Annual General Meeting. The Election Committee shall also submit a proposal

regarding a new instruction for the Election Committee, to be presented in the next Annual General Meeting.

The Annual General Meeting for Betsson AB will be held on Thursday the 12th of May 2010 in Stockholm, Sweden. The time and location will be published at a later date.

Shareholders wishing to put forward proposal to the Election Committee can do this through e-mail to [email protected] or by mail to Betsson AB, Election Committee, Regeringsgatan 28, SE-111 53 Stockholm, Sweden.

Financial calendar

Betsson plans to publish the Full year report for 2011 on 11 February 2011.

Extraordinary General Meeting 2010

The Extraordinary General Meeting in Betsson AB was held 23 August.

The EGM resolved to establish incentive programs, in which the granting of options and warrants will not exceed 900 000 options and warrants, which would result in a maximum dilution of equity of 2.2 percent and a 1.0 percent dilution of votes.

Further information concerning the EGM is published at the website www.betssonab.com.

Presentation of the Interim Report

Today, Tuesday 26 October at 09.00 CET, Betsson's CEO Pontus Lindwall will present the Interim Report through a webcast (by audio, image and power point), visit http://www.betssonab.com or http://storm.zoomvisionmamato.com/player/betsson/ objects/7tz0dw29 or through phone at +46 (0)8 505 598 53 (Sweden) or +44 (0)20 3043 2436 (UK). The presentation will be in English and will be followed by a question and answer session.

A copy of the presentation will be available onwww.betssonab.com on Tuesday 26 October.

Stockholm 26 October 2010

Pontus Lindwall President and CEO

Betsson AB (publ), Regeringsgatan 28, SE-111 53 Stockholm Registered office: Stockholm, Corporate ID no. 556090-4251

For more information, please contact: Pontus Lindwall, President and CEO Tel, +46 8 506 403 10, +46 708 27 51 55, [email protected] or Fredrik Rüdén, CFO, Tel, +46 733-11 72 62, +46 8-506 403 63, [email protected].

The information in this Interim Report is information which Betsson AB (Publ) shall publish in accordance with the law regarding securities and /or the law of trading with financial instruments. The information was delivered for publication 26th October 2010, 07:30 CET.

Audit report

We have reviewed this report for the period 1 January to 30 September 2010 for Betsson AB(publ). The board of directors and the CEO are responsible for the preparation and presentation of this interim report in accordance with IAS 34 and the Swedish Annual Accounts Act. Our responsibility is to express a conclusion on this interim report based on our review.

We conducted our review in accordance with the Swedish Standard on Review Engagements SÖG 2410, Review of Interim Report Performed by the Independent Auditor of the Entity. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Standards on Auditing in Sweden, RS, and other generally accepted auditing standards in Sweden. The procedures performed in a review do not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Based on our review, nothing has come to our attention that causes us to believe that the interim report is not prepared, in all material respects, in accordance with IAS 34 and the Swedish Annual Accounts Act, regarding the Group, and with the Swedish Annual Accounts Act, regarding the Parent Company.

Stockholm, 26th October 2010

PricewaterhouseCoopers Michael Bengtsson Authorised Public Accountant Responsible auditor

Translation

This document is a translation of the Swedish original

Consolidated Income Statement (MSEK) Q3 Q3 Jan-Sep Jan-Sep Full year
2010 2009 2010 2009 2009
Revenues 385.1 316.7 1 118.9 916.8 1 299.7
Operating expenses from gaming activities -83.5 -63.7 -228.3 -184.0 -254.7
Gross Profit 301.6 253.0 890.6 732.8 1045.0
Marketing expenses -124.0 -104.4 -364.5 -303.6 -440.0
Personnel expenses -39.6 -34.9 -132.4 -106.5 -150.4
Other external expenses -39.0 -34.6 -114.3 -112.0 -150.9
Capitalized development costs 7.3 12.2 26.4 38.4 53.3
Depreciation -12.5 -9.6 -35.6 -26.0 -36.6
Other operating income 4.4 8.7 11.0 24.6 21.4
Other operating expenses -17.5 -11.0 -28.3 -24.3 -24.9
Operating expenses -220.9 -173.6 -637.7 -509.4 -728.1
Operating income 80.7 79.4 252.9 223.4 316.9
Financial items, net 0.0 0.2 0.9 1.2 2.0
Income before tax 80.7 79.6 253.8 224.6 318.9
Tax -4.4 -4.0 -13.3 -11.3 -15.6
Net income 76.3 75.6 240.5 213.3 303.3
Earnings per share before dilution (SEK) 1.94 1.93 6.13 5.44 7.73
Earnings per share after dilution (SEK) 1.94 1.93 6.12 5.44 7.72
Operating margin (percent of Revenues) 21.0 25.1 22.6 24.4 24.4
Operating margin (percent of Gross Profit) 26.8 31.4 28.4 30.5 30.3
Profit margin (percent) 21.0 25.1 22.7 24.5 24.5
Average number of outstanding shares (millions) 39.2 39.2 39.2 39.2 39.2
Number of outstanding shares at end of period (millions) 39.2 39.2 39.2 39.2 39.2
Return on equity (percent) 32 29 39
Return on total capital (percent) 19 19 25
Return on capital employed (percent) 33 31 41
Consolidated Statement of Q3 Q3 Jan-Sep Jan-Sep Full year
Comprehensive Income (MSEK) 2010 2009 2010 2009 2009
Net income
Other comprehensive income
76.3 75.6 240.5 213.3 303.3
Exchange differencies on translating foreign operations -5.6 -5.3 -4.9 -5.1 -3.7
Other comprehensive income of the period (after tax) -5.6 -5.3 -4.9 -5.1 -3.7
Total comprehensive income for the period 70.7 70.3 235.6 208.2 299.6
Consolidated Balance Sheet (MSEK 2010-09-30 2009-09-30 2009-12-31
Intangible fixed assets 452.6 457.9 464.2
Tangible fixed assets 20.3 15.0 17.2
Deferred tax receivables 0.7 2.4 1.5
Total non-current assets 473.6 475.3 482.9
Current receivables 446.8 332.1 380.2
Cash and liquid assets 377.3 396.0 529.1
Total current assets 824.1 728.1 909.3
Total assets 1 297.7 1 203.4 1 392.2
Equity 704.6 728.1 820.4
Deferred tax liabilities 3.6 4.0 4.5
Total non-current liabilities 3.6 4.0 4.5
Other current liabilities (non interest bearing) 589.5 471.3 567.3
Total current liabilities 589.5 471.3 567.3
Total equity and liabilities 1 297.7 1 203.4 1 392.2
Consolidated Cash Flow Statement (MSEK) Jan-Sep Jan-Sep Full year
2010 2009 2009
Income after financial items 253.8 224.6 318.9
Adjustments for non-cash items 61.5 34.1 44.8
Taxes paid -17.6 -11.8 -7.8
Cash flows from operating activities 0.0 0.0 0.0
before changes in working capital 297.7 246.9 355.9
Changes in working capital -40.1 28.2 69.0
Cash flows from operating activities 257.6 275.1 424.9
Investments -28.5 -38.6 -58.5
Cash flows from investing activities -28.5 -38.6 -58.5
Redemption of shares
Cost of Share Redemption Program
Premiums received for warrants
-353.2
-0.2
1.4
-200.1
-0.2
-
-200.1
-0.2
-
Cash flows from financing activities -352.0 -200.3 -200.3
Changes to cash and liquid assets -122.9 36.2 166.1
Cash and liquid assets at beginning of period 529.1 373.2 373.2
Exchange rate differences -28.9 -13.4 -10.2
Cash and liquid assets at end of period 377.3 396.0 529.1
Change in Group Equity (MSEK) Jan-Sep Jan-Sep Full year
2010 2009 2009
Opening balance 820.4 720.2 720.2
Total comprehensive income for the period 235.6 208.2 299.6
Total change, excluding transactions 0.0 0.0 0.0
with company owners 235.6 208.2 299.6
Share Redemption -353.2 -200.1 -200.1
Cost of Share Redemption Program after tax -0.2 -0.2 -0.2
Premiums received for warrants 1.4 - -
Share options - value of employee services 0.6 - 0.9
Equity at end of period 704.6 728.1 820.4
Attributable to: 0.0 0.0 0.0
Parent company's shareholders 704.6 727.7 820.4
Minority Interest - 0.4 -
Total equity 704.6 728.1 820.4
Parent Company
Income Statement (MSEK)
Jan-Sep
2010
Jan-Sep
2009
Full year
2009
Revenues 12.0 8.3 10.8
Operating expenses -43.5 -13.7 -22.1
Operating Income -31.5 -5.4 -11.3
Financial items 0.7 1.2 299.6
Income before tax -30.8 -4.2 288.3
Tax 7.8 1.1 0.7
Net income -23.0 -3.1 289.0
Parent Company
Balance Sheet (MSEK)
2010-09-30 2009-09-30 2009-12-31
Tangible fixed assets 6.3 2.8 2.9
Financial assets 583.6 585.8 584.1
Total non-current assets 589.9 588.6 587.0
Current receivables 143.8 52.2 296.8
Cash and liquid assets 291.7 297.3 393.9
Total current assets 435.5 349.5 690.7
Total assets 1 025.4 938.1 1 277.7
Restricted equity 332.4 332.4 332.4
Unrestricted equity 387.3 463.4 762.4
Total equity 719.7 795.8 1 094.8
Untaxed reserves 0.4 0.4 0.4
Current liabilities 305.3 141.9 182.5
Total equity and liabilities 1 025.4 938.1 1 277.7

Group Review

Consolidated Income Statement (MSEK) 2010 2010 2010 2009 2009 2009 2009 2009 2008 2007
(Continuing operations) Q3 Q2 Q1 Q4 Q3 Q2 Q1 FY FY FY
Revenues 385.1 366.1 367.7 382.9 316.7 284.6 315.5 1 299.7 1 037.8 649.0
Operating expenses from gaming activities -83.5 -74.4 -70.4 -70.7 -63.7 -60.5 -59.8 -254.7 -209.7 -128.2
Gross Profit 301.6 291.7 297.3 312.2 253.0 224.1 255.7 1 045.0 828.1 520.8
Marketing expenses -124.0 -120.3 -120.2 -136.4 -104.4 -86.1 -113.1 -440.0 -347.8 -189.1
Personnel expenses -39.6 -47.4 -45.4 -43.9 -34.9 -39.3 -32.3 -150.4 -101.7 -62.4
Other external expenses -39.0 -39.0 -36.3 -38.9 -34.6 -37.7 -39.7 -150.9 -109.8 -91.2
Capitalized development costs 7.3 9.2 9.9 14.9 12.2 12.5 13.7 53.3 44.0 26.9
Depreciation -12.5 -12.0 -11.1 -10.6 -9.6 -8.9 -7.5 -36.6 -20.6 -12.3
Other operating income 4.4 1.9 4.7 -3.2 8.7 10.7 5.2 21.4 - -
Other operating expenses -17.5 3.9 -14.7 -0.6 -11.0 -13.7 0.4 -24.9 -15.6 -2.8
Operating expenses -220.9 -203.7 -213.1 -218.7 -173.6 -162.5 -173.3 -728.1 -551.5 -330.9
Operating income 80.7 88.0 84.2 93.5 79.4 61.6 82.4 316.9 276.6 189.9
Financial items, net 0.0 0.5 0.4 0.8 0.2 0.4 0.6 2.0 4.1 2.8
Income before tax 80.7 88.5 84.6 94.3 79.6 62.0 83.0 318.9 280.7 192.7
Tax -4.4 -4.5 -4.4 -4.3 -4.0 -3.1 -4.2 -15.6 -13.4 -13.3
Net income (continuing operations) 76.3 84.0 80.2 90.0 75.6 58.9 78.8 303.3 267.3 179.4
Consolidated Balance Sheet (MSEK) 2010 2010 2010 2009 2009 2009 2009 2009 2008 2007
Q3 Q2 Q1 Q4 Q3 Q2 Q1 FY FY FY
Non-current assets 473.6 482.4 477.3 482.9 475.3 478.7 474.6 482.9 462.6 415.7
Current assets 824.1 1 026.0 937.6 909.3 728.1 607.6 802.3 909.3 685.8 427.9
Total assets 1 297.7 1 508.4 1 414.9 1 392.2 1 203.4 1 086.3 1 276.9 1 392.2 1 148.4 843.6
Equity 704.6 632.5 903.3 820.4 728.1 657.8 798.9 820.4 720.2 623.5
Non-current liabilities 3.6 3.9 4.1 4.5 4.0 4.3 4.3 4.5 4.3 0.2
Current liabilities 589.5 872.0 507.5 567.3 471.3 424.2 473.7 567.3 423.9 219.9
Total equity and liabilities 1 297.7 1 508.4 1 414.9 1 392.2 1 203.4 1 086.3 1 276.9 1 392.2 1 148.4 843.6
Consolidated Cash Flow Statement (MSEK) 2010 2010 2010 2009 2009 2009 2009 2009 2008 2007
(Continuing operations) Q3 Q2 Q1 Q4 Q3 Q2 Q1 FY FY FY
Operating cashlow -126.0 18,5 11.9 149.9 129.6 65.0 80.4 424.9 384.3 239.3
Cashflow from investing activities -5.3 -17.0 -6.2 -19.9 -6.3 -12.8 -19.5 -58.5 -67.5 -36.8
Cashflow from financing activities 1.3 -0,1 0.0 0.0 0.0 -200.3 0.0 -200.3 -199.7 -37.9
Totals -130.0 1.4 5.7 130.0 123.3 -148.1 60.9 166.1 117.1 164.6

Group Review

Key Ratios
(Continuing operations)
2010
Q3
2010
Q2
2010
Q1
2009
Q4
2009
Q3
2009
Q2
2009
Q1
2009
FY
2008
FY
2007
FY
Quarterly top-line growth (%)
Growth compared to same period last year (%)
5
22
0
29
-4
17
21
19
11
26
-10
20
-2
38
25 60 121
Gross Margin (percent of Revenues) 78.3 79.7 80.9 81.5 79.9 78.7 81.0 80.4 79.8 80.2
EBITDA-margin (percent of Revenues)
EBITDA-margin (percent of Gross Profit)
24.2
30.9
27.3
34.3
25.9
32.1
27.2
33.3
28.1
35.2
24.8
31.5
28.5
35.2
27.2
33.8
28.6
35.9
31.2
38.8
EBIT-margin (percent of Revenues)
EBIT-margin (percent of Gross Profit)
21.0
26.8
24.0
30.2
22.9
28.3
24.4
29.9
25.1
31.4
21.6
27.5
26.1
32.2
24.4
30.3
26.7
33.4
29.3
36.5
Profit margin (percent of Revenues) 21.0 24.2 23.0 24.6 25.1 21.8 26.3 24.5 27.0 29.7
Profit margin (percent of Gross Profit) 26.8 30.3 28.5 30.2 31.5 27.7 32.5 30.5 33.9 37.0
Marketing expenses (percent of Revenues) 32.2 32.9 32.7 35.6 33.0 30.3 35.8 33.9 33.5 29.1
Marketing expenses (percent of Gross Profit) 41.1 41.2 40.4 43.7 41.3 38.4 44.2 42.1 42.0 36.3
Earnings per share (SEK) 1.94 2.14 2.04 2.29 1.93 1.50 2.01 7.73 6.81 4.55
Operating cashflow per share (SEK) 5,79 0.47 0.30 3.82 3.30 1.66 2.05 10.83 9.79 6.06
Equity per share (SEK) 17.95 16.12 23.02 20.91 18.54 16.75 20.35 20.91 18.34 15.85
Ongoing/executed dividend/redemption per share
(SEK)
- 9.00 - - - 5.10 - 5.10 5.00 0.50
Average share price (SEK) 94.73 109.65 122.36 111.59 91.35 91.79 87.92 95.09 66.88 57.00
Last paid share price (SEK) 96.25 89.25 124.00 109.75 109.25 87.25 91.50 109.75 68.50 83.25
Highest share price (SEK) 101.50 130.50 134.25 121.00 109.75 103.00 105.25 121.00 83.75 88.00
Lowest share price (SEK) 87.00 89.25 110.00 102.75 77.50 78.00 67.75 67.75 54.25 21.00
Equity/asset ratio (percent) 54 42 64 59 60 61 63 59 63 74
Investments, continuing operations (MSEK) 5.2 17.1 6.2 19.9 6.3 12.8 19.5 58.5 67.8 36.1
Average number of employees (accumulated) 266 266 261 225 210 197 182 225 154 106
Number of employees at end of period 276 275 276 258 251 225 196 258 185 136
Number of registered shareholders at end of period 11 970 11 782 10 677 9 905 8 316 7 826 6 413 9 905 5 790 5 952
Customers 2010 2010 2010 2009 2009 2009 2009 2009 2008 2007
Q3 Q2 Q1 Q4 Q3 Q2 Q1 FY FY FY
Registered Customers (thousands) 2 833.9 2 719.3 2 414.9 2 117.8 1 916.7 1 777.1 1 629.1 2 117.8 1 499.9 996.2
Quarterly growth (%)
Growth compared to same period last year (%)
4
48
13
53
14
48
10
41
8
42
9
44
9
42
41 51 83
Active Customers (thousands)
Quarterly growth (%)
255.7
-11
288.7
-9
318.6
10
288.7
31
220.9
19
185.3
6
174.6
4
288.7 167.4 107.0
Growth compared to same period last year (%) 16 56 82 72 74 33 14 72 56 16
Activity Rate, Active/Registered customers (%) 9 11 13 14 12 10 11 14 11 11
Customer Deposits 2010
Q3
2010
Q2
2010
Q1
2009
Q4
2009
Q3
2009
Q2
2009
Q1
2009
FY
2008
FY
2007
FY
Customer Deposits (MSEK) 913.6 911.1 964.9 915.7 823.6 783.1 735.6 3 258.0 2 279.7 1 346.6
Quarterly growth (%) 0 -6 5 11 5 6 5
Growth compared to same period last year (%) 11 16 31 30 41 52 54 43 69 80
Sportbook Margin 2010
Q3
2010
Q2
2010
Q1
2009
Q4
2009
Q3
2009
Q2
2009
Q1
2009
FY
2008
FY
Gross Turnover Sportbook (MSEK) 1 215.7 1 233.1 1 012.8 755.3 634.9 644.8 536.5 2 571.5 1 567.1
of which Live Betting
Quarterly growth (%)
60.4%
-1
56.7%
22
38.0%
34
30.7%
19
30.6%
-2
35.3%
20
27.5%
3
31.2% 19.8%
Growth compared to same period last year (%) 91 91 89 45 78 73 69
Margin after free bets (%) 8.6% 7.4% 7.6% 12.0% 7.2% 4.7% 11.7% 8.9% 11.1%
Gross Profit (MSEK) 89.5 78.0 72.0 82.0 41.4 25.8 57.4 206.6 159.0
Gross Margin Sportsbook (%) 1) 7.4% 6.3% 7.1% 10.9% 6.5% 4.0% 10.7% 8.0% 10.1%

1) Margin after allocated costs

Segment Reporting

Gross Profit by Geographical Area 2010 2010 2010 2009 2009 2009 2009 2009 2008 2007
Q3 Q2 Q1 Q4 Q3 Q2 Q1 FY FY FY
Gross Profit (MSEK)
Nordic Countries 142.0 140.9 151.3 168.7 153.2 140.1 143.0 605.0 478.2 351.4
EU, outside Nordic region 31.3 37.2 42.0 40.0 33.3 33.5 32.9 139.7 97.2 66.3
Others Europe 126.3 111.6 102.1 102.6 64.6 49.7 79.0 295.9 250.4 89.3
Rest of the world 2.0 2.0 1.9 0.9 1.9 0.8 0.8 4.4 2.3 1.5
Total gaming activities 301.6 291.7 297.3 312.2 253.0 224.1 255.7 1 045.0 828.1 508.5
Others, adjustments 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 12.3
Group totals 301.6 291.7 297.3 312.2 253.0 224.1 255.7 1 045.0 828.1 520.8
Share of total gaming activities (%)
Nordic Countries 47.1 48.3 50.9 54.0 60.6 62.5 55.9 57.9 57.7 69.1
EU, outside Nordic region 10.4 12.8 14.1 12.8 13.2 14.9 12.9 13.4 11.7 13.0
Others Europe 41.9 38.3 34.3 32.9 25.5 22.2 30.9 28.3 30.2 17.6
Rest of the world 0.7 0.7 0.6 0.3 0.8 0.4 0.3 0.4 0.3 0.3
Quarterly Growth (%)
Nordic Countries 1 -7 -10 10 9 -2 5
EU, outside Nordic region -16 -11 5 20 -1 2 6
Others Europe 13 9 0 59 30 -37 -13
Rest of the world 0 5 111 -53 138 0 -11
Total all countries 3 -2 -5 23 13 -12 -1
Growth compared to same period last year (%)
Nordic Countries -7 1 6 24 21 29 35 27 36 122
EU, outside Nordic region -6 11 28 29 54 51 46 44 47 130
Others Europe 96 125 29 14 17 -8 55 18 180 162
Rest of the world 5 150 138 0 171 100 167 91 53 -75
Total all countries 19 30 16 21 24 21 42 26 63 124
Gross Profit by Products 2010
Q3
2010
Q2
2010
Q1
2009
Q4
2009
Q3
2009
Q2
2009
Q1
2009
FY
2008
FY
2007
FY
Gross Profit (MSEK)
Casino 174.1 173.8 180.8 186.9 173.2 158.4 151.9 670.4 481.3 254.2
Poker 24.4 25.3 30.3 31.5 27.5 31.9 41.0 131.9 158.5 193.0
Sportsbook 89.5 78.0 72.0 82.0 41.4 25.8 57.4 206.6 159.0 56.8
Other products 13.6 14.6 14.2 11.8 10.9 8.0 5.4 36.1 29.3 4.5
Total gaming activities 301.6 291.7 297.3 312.2 253.0 224.1 255.7 1 045.0 828.1 508.5
Others, adjustments 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 12.3
Group totals 301.6 291.7 297.3 312.2 253.0 224.1 255.7 1 045.0 828.1 520.8
Share of total gaming activities (%)
Casino 57.7 59.6 60.8 59.9 68.5 70.7 59.4 64.2 58.1 50.0
Poker 8.1 8.7 10.2 10.1 10.9 14.2 16.0 12.6 19.1 38.0
Sportsbook 29.7 26.7 24.2 26.3 16.4 11.5 22.4 19.8 19.2 11.2
Other products 4.5 5.0 4.8 3.8 4.3 3.6 2.1 3.5 3.5 0.9
Quarterly Growth (%)
Casino 0 -4 -3 8 9 4 4
Poker -4 -17 -4 15 -14 -22 0
Sportsbook 15 8 -12 98 60 -55 -7
Other products -7 3 20 8 36 48 -41
Total all products 3 -2 -5 23 13 -12 -1
Growth compared to same period last year (%)
Casino 1 10 19 28 36 42 57 39 89 100
Poker -11 -21 -26 -24 -25 -10 -9 -17 -18 132
Sportsbook 116 202 25 33 27 -21 78 30 180 289
Other products
Total all products
25
19
83
30
163
16
28
21
36
24
29
21
-8
42
23
26
551
63
80
124

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