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Gambling Industry Quarterly Wrap





Ladbrokes updated the market for the four months ended 30 April 2008. The company said that profits* (excluding profits* from High Rollers) had increased by 13%, with gross win increasing by 16% (34% including High Rollers). Profit from High Rollers was £40 million but Ladbrokes said that their activity had recently fallen to de minimis levels. UK Retail gross win increased by 11%, with Over the Counter (OTC) gross win increasing by 4%, with strong growth noted in football turnover. It said that there was a small decline in horse gross win against tough comparatives. Machine (including fixed odds betting terminals) gross win increased by 26%, with average weekly gross win per Gaming Machine coming in at £673 compared with £538 for the same period in 2007. The UK Retail estate reported a cost increase of 12%. Ladbrokes is now the market leader in Ireland with a combined 281 shops. Gross win in Ireland during the period under review grew by 43. eGaming recorded revenue growth of 24% during the period with customer sign ups growing 27% and unique active customers increasing 18%. Poker net revenue fell by 2% in what the company once again described as a highly competitive market. Excluding High Rollers, Telephone betting net revenue fell by 5%.

Ladbrokes subsequently issued a correction notice for its Interim Results for the half year ended 30 June 2008. The Group noted that its "Other European Retail - Ireland" section of the Business Review contained two errors regarding its like for like gross win and cost figures. The text stated that like for like constant currency gross win increased by 1.7% whereas it should have read declined by 4.4%. The text also stated that like for like costs, excluding Turf TV, were up by 2.9% whereas it should have read 5.7%. No other changes were required to be made to the Group's disclosure in the Interim Results for the half year ended 30 June 2008. Ladbrokes is now the largest operator in both Northern Ireland and the Republic of Ireland. The acquisition of the 54 shop Eastwood chain in February and six McCartans shops in April increased our scale in Northern Ireland to 76 shops as at 30 June 2008. The acquisition of a further seven shops in the Republic of Ireland brings our total there at 30 June 2008 to 206 shops. These acquired shops are all rebranded and are trading in line with our expectations. Overall gross win in Ireland increased by 45.1% to £47.6 million reflecting the benefit of the acquisitions and favourable exchange rates. Like for like constant currency gross win declined by 4.4%. During the period under review operating costs in Ireland rose by 59.2% to £28.5 million (H1 2007: £17.9 million) principally due to the increase in shop numbers, with like for like costs, excluding Turf TV, up by 5.7%.

Blue Square, Rank Group's interactive gambling business said that increasing competition in its core UK sportsbook and bingo markets had held back first half revenue and profit. The company said that whilst revenue grew by 3.1% to £27.0m, the company had experienced a marked deterioration in performance in the second quarter as average stakes declined on both sports betting and games .

Operating profit of £5.3m was 3.6% below the level achieved in the first half of 2007, with a £1.1m saving on gaming duty being offset by start-up costs relating to the business's non-UK operations. The company said that first-half revenue from its sportsbook had declined by 14.4% to £7.7m on lower average staking levels and a marginally weaker win margin. A clear sign, if one were neeeded, of the credit crunch starting to impact upon the online betting world.

Sportech PLC has announced interim Results for the six months ended 30 June 2008. The company said that for the six months to 30 June 2008 gross win revenues had increased by £8.1m (28%) to £36.6m (2007: £28.5m). Adjusted profit before tax increased by £2.6m (50%) to £7.8m (2007: £5.2m). Net debt was reduced by £3.2m to £83.3m (31 December 2007: £86.5m). Total shareholders' equity and the Group's net assets increased to £101.3m at 30 June 2008 (30 June 2007: £49.5m before the Vernons acquisition and associated fundraising in December 2007). Adjusted earnings per share were 5.5p (2007: 6.1p, adjusted following share consolidation). The company has introduced an innovative website at www.footballpools.com, which combines an enhanced range of football prediction games with comprehensive content aimed at both the football fan and the wider general public. Sportech has secured distribution deals for The New Football Pools with the Daily Mirror, FourFourTwo and FootyMad, all of whom will make the games available to their online readers and customers. Moreover, on 24 June 2008 it signed a strategic distribution and marketing agreement with 888, which will allow the promotion of The New Football Pools across 888's entire gaming database of 4.9m registered customers.

Bet365, the Stoke-on-Trent based bookmaking company, has increased turnover by 84% to £1.81 billion, in the year to April 2008. This headline grabbing turnover figure returned profits of £36 million.

PartyGaming recently announced that since 28 April 2008 its gross revenues had fallen slightly due to "seasonality and competition for players' leisure time from the Euro 2008 football tournament(!)". The company said that its Casino division had continued to perform strongly but that this had been offset by a weaker than expected performance in poker and sports betting with overall revenues slightly lower than expected. Moreover, PartyGaming said that in sports betting, Euro 2008 had seen a marked increase in betting volume, but that a poor run of results at the start of the tournament had impacted the gross win margin.

William Hill announced that its retail channel's gross win had grown by 5% to £421.3m in the first half of 2008, but it said that its pre-exceptional profit had fallen by £1.3m to £123.5m, with the channel bearing incremental costs of £5m relating to the Turf TV contract . Gross win from over the counter (OTC) increased by 2%, while machines gross win was up 10%. The impact of sporting results on OTC gross win year-on-year was broadly neutral as the effects of a relatively poor Royal Ascot meeting and below expectation Euro 2008 football tournament were largely offset by favourable football results in the earlier part of the year. Overall, UK horseracing continued its relative decline as a share of the Retail mix of gross win falling from 50% to 47%, while conversely football increased its share from 10% to 15%. The average number of gaming machines in the estate increased to 8,520 (FY 2007: 8,382) in the period. The average net contribution per machine per week was £513 (FY 2007: £466).

Sky Bet said that revenue had decreased by 6% on the prior year to £44 million (2007: £47 million). The company said that a fall in underlying revenue offset the benefit of the first full year of consolidation of 365 Media Group plc (acquired in January 2007) and reflected the continued shift from interactive TV betting towards the internet.

When announcing interim results for the six months ended 30 June 2008, Paddy power said that a downturn in the economic outlook had caused it to moderate its operating profit outlook for the full year from approximately €82m to €75m. The company said; "Much has happened since our last trading update three and a half months ago. The performance of the Irish and UK economies has deteriorated, and the growth rates in our businesses have slowed accordingly. Paddy Power has always focussed on providing better value than the competition, and as our customers face tighter times we have stepped this up in the last three months. In addition, we said last year that the old adage of 'what goes around comes around' applies to sporting results and they certainly have come back around for punters since June with a string of unfavourable results for bookmakers, and Irish bookmakers particularly. These factors have led us to moderate our operating profit outlook for the full year from approximately €82m to €75m, representing growth of €3m over the 2007 level of €72m". Regarding the online segment of the market Power said; "Competition for customers is intense, and pricing aggression has intensified". Telephone customer numbers were up 18% in the first half of 2008 compared to the equivalent period last year, while bet volumes were up 4% to 1.6m. The average stake per bet was €89.97, a decrease of 9%, or 4% in constant currency. Overall, this resulted in the amount staked falling 6%, or 1% in constant currency. Outside of currency depreciation, the reduction in the amount staked per customer was partially driven by increased net migration of customer spending from our telephone to our online channel, as well as increased competition from non retail competitors and, in Ireland, retail competitors also. Non Retail and Retail sportsbook amounts staked have increased by 12% and 2% respectively since the start of July versus last year, compared to growth of 17% and 7% respectively in the first half.

PartyGaming - Curret Trading. In the 4 weeks ended 28 July 2008, average gross daily revenue was $1,679,700. In poker, new player sign-ups averaged 1,050 per day and there were on average 51,100 active players per day, generating average gross daily revenue of $855,300. In casino, average gross daily revenue was $739,100 while in bingo it was $28,800. In sports betting, gross win per day averaged $56,500. In the following 4 weeks, ended 25 August 2008, average gross daily revenue was $1,523,600, reflecting the peak holiday period in a number of key markets and temporary technical difficulties experienced during the month. In poker, new player sign-ups averaged 936 per day and there were on average 50,600 active players per day, generating average gross daily revenue of $815,400. In casino, average gross daily revenue was $649,000 while in bingo it was $26,500. In sports betting, average gross win per day was $32,700. It is estimated that in the week ended 24 August 2008 PartyPoker.com had approximately 8% of the global online poker market (versus approximately 12% in August 2007).

Marketing Expenses for bwin Interactive Entertainment rose from EUR 25.6 million in Q2 2007 (33.9% of gross gaming revenues) to EUR 37.6 million (36.6% of gross gaming revenues). For the year as a whole, the Company anticipates marketing expenses equivalent to around 30% of gross gaming revenues. Bonuses were significantly up in Q2 2008 compared to the previous year, accounting for 11.3% of gross gaming revenues (Q2 2007: EUR 7.1 million, or 9.4% of gross gaming revenues). Personnel expenses rose by 40.0% compared to Q2 2007 to EUR 24.5 million, or EUR 20.9 million excluding share-based remuneration (IFRS 2). The number of staff as of the reporting date 30 June 2008 was 1,367 employees (including 63 freelance staff). This represented an increase of 32.3% compared to the previous year (1,033 employees including 67 freelance staff). Other expenses were up 42.7% compared with the same period the previous year to EUR 36.3 million (Q2 2007: EUR 25.4 million). This amount included EUR 0.7 million in non-cash expenses in connection with share-based remuneration (IFRS 2). Expenses for services rendered (third-party services (such as external software maintenance and programming, consulting), Internet charges, information services), and expenses for legal services, auditing and consulting rose from EUR 11.0 million in Q2 2007 to EUR 15.3 million in Q2 2008. The cost of providing TV signals to licensees of German Soccer League rights and commissions in connection with the sublicensing of these rights rose to EUR 2.4 million in Q2 2008 compared with the same period the previous year (Q2 2007: EUR 0.9 million). Office, rental and leasing expenses totalled EUR 4.8 million (Q2 2007: EUR 3.8 million). Banking expenses rose to EUR 7.7 million in Q2 2008 (Q2 2007: EUR 6.6 million).

Leisure&Gaming has announced results for the 6 months ended 30th June 2008. In total, the amounts wagered on all of the company's products for the six months to 30th June 2008 were €41.3m (2007: €65.4m), earning net win of €11.5m (2007: €13.9m) generating a net win margin of 27.8% (2007: 21.3%). Amounts wagered on sports betting were €37.4m (2007: €56.9m) generating a net win of €10.0m (2007: €10.9m) at a net win percentage of 26.7% (2007: 19.2%). Amounts wagered on horses was €1.9m (2007: €5.1m) generating a net win of €0.6m (2007: €1.3m) at a net win percentage of 31.5% (2007: 25.5%). Amounts played on casino products were €18.7m in plays (2007: €34.3m) generating net win of €0.6m (2007: €1.1m). Amounts played on lotto and skill games were €1.4m (2007: €2.3m) generating net win of €0.3m (2007: €0.6m). The company said that in the 6 months to 30th June 2008 the number of sports bets placed by customers was 3.9m (2007: 5.2m) at an average bets size of €9.58 (2007: €10.93).

32Red Plc has announced interim results for the half year ended 30 June 2008. The company reported total gaming revenues of £6.6m, an increase of 26% on H1 2007 and 32% on H2 2007. EBITDA before share option costs totalled £1.0m for the first 6 months, up 17% on H1 2007 and up 13% on H2 2007. Casino revenues of £6.0m, an increase of 31% on H1 2007 and 38% on H2 2007. Active casino players in the first 6 months : 12,283, up 14% on H1 2007 and up 9% on H2 2007 Casino yield per active player in the first 6 months : £491, up 15% on H1 2007 and up 26% on H2 2007. New casino players in the first 6 months: 8,189, up 12% on H1 2007 and up 12% on H2 2007. Casino cost per acquisition in the first 6 months of £137, down 12% on H1 2007 and down 3% on H2 2007.





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