The online sports betting and gaming group has announced its results for the year ended July 31, reporting a 35% increase in total turnover up to £2.06bn and a gross margin of £303.3m, up 72%. Operating profit for the year was £103.0m (2005: £60.5m), representing a margin of 34% of gross profit, while pre-tax profits showed a 75% rise to £71.5m.
Considering that almost two-thirds of the group\’s gross margin was generated by US based customers and that only 19% of Paradise Poker rake was generated by non-US based customers, the sale of the US-facing sports and casino business and the closure of the US-facing poker operations will result in exceptional costs including £200m for asset impairment and £10m for restructuring and redundancies among some of the 350 remaining staff.
Commenting on the results, Nigel Payne, Executive Director and former Group Chief Executive, said that while Sportingbet, and the industry as a whole, continued to demonstrate significant growth, this past year has seen the emergence of a sustained political focus and debate on the industry across many parts of the globe.
This action culminated in September 2006 when the United States Congress passed the Unlawful Internet Gambling Enforcement Act 2006. As a result of clear advice received from its advisors, Sportingbet has exited from the US market.
Incoming Group Chief Executive Andrew McIver added: “Concentrating on the year just ended, Sportingbet reported another record performance across all product areas and all geographies. This growth was particularly pleasing having come off the back of a significant increase in the size and scale of the business the previous year.”
Analyzing the Sportingbet\’s results in each region we see that the number of customers on the US-facing sports betting websites rose by 65% to 312,022. The number of sports bets rose by 35% to 34.5m averaging 110 bets per active customer per annum (2005: 135 bets). The average sports bet size was relatively constant at $54 (2005: $58). Following strong performance in the second half of the year, the sports margin percentage was above historical levels at 6.7% (2005: 6.1%).
The number of customers who bet on the US\’ casino websites rose by 47% to 164,630. The number of gaming bets rose by 27% to 328.0m at an average bet size of $11, in line with the previous year. In addition, 45,299 sports customers, representing 18.3% of the region\’s active customer base, also played poker at Paradise Poker.
As a result of the post year end disposal, the US-facing sports and casino operations is now discontinued.
The European business continued to demonstrate the strong growth levels experienced in the previous year, with significant progress in all product areas: sports, casino and poker.
The number of active customers who bet on the European regional sports betting websites rose by 55% to 382,160. The number of sports bets placed rose by 74% to 35.3m averaging 92 bets per active customer per annum (2005: 83 bets). The average sports bet size increased marginally to £13.8 (2005: £13.3). The overall sports margin percentage, after betting tax, was 7.5% (2005: 7.9%), impacted in part, by lower margins in European soccer and low margins across the World Cup.
The number of customers who bet on the European regional casinos websites rose by 161% to 155,596 at an average bet size of £5.1 (2005: £5.0). The gaming margin percentage was constant at 3.8% (2005: 3.8%). In addition, the European business generated £14.7m of poker rake (2005: £5.2m).
New active customers increased by 131,004 (79%) to 295,532. The cost of acquiring new active customers continued to be cost effective at £158 (2005: £137), yielding a cash payback period of less than six months.
Sportingbet Australia has continued its transformation from being primarily a telephone based betting operation to one in which internet betting is increasingly important. During the year, the percentage of total bets taken over the internet has risen further to 66% (2005: 60.1%).
The number of customers who bet with Sportingbet Australia during the year rose by 181% to 17,732. The number of sports bets placed rose by 51% to 4.6m (2005: 3.0m) averaging 259 bets per active customer per annum (2005: 482 bets). The average sports bet size was lower at A$181 (2005: A$301), while sports gross margin increased to 3.8% (2005: 2.3%). These results reflect a more leisure-orientated internet platform characterized by a broader customer base and higher margins. In accordance with Australian licensing regulations, no casino or poker products are offered within Australia.
New active customers increased by 4,862 (122%) to 8,843. The cost of acquiring a new active customer fell to A$521 (2005: A$917), yielding a cash payback of under three months.
Paradise Poker performed strongly during the year, exceeding the Board\’s expectations in all of its key performance indicators. In particular, the number of active customers rose by 63% to 345,575. The average daily revenue increased by 81% to $513,995 representing a yield per active player of $543 (2005: $489). During the year, 58,190 (19.4%) active real money poker customers also bet on the group\’s US-facing sports or casino websites.
During the first 10 weeks of the current financial year, trading across the group was strong. In Europe sports bets are 62% ahead of the same period last year and gross margin is more than 50% ahead of the previous year. In addition, poker rake from the European Boss Media platform is 75% ahead of last year.
The Australian business is generating more stable margins, with internet customers now representing 81% of the bets made compared to 67% in the prior year. Volume to date is also very strong, with sports bets up 80% compared to the same period last year and a promising sports margin performance.
“Outside of the US market Sportingbet is performing well and this will now be our focus going forward. The Group\’s continuing operations of European sports, casino and poker, Australian sports and the non US-facing business of Paradise Poker are well placed to grow,” commented Nigel Payne.
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