November 28, 2008

Sportingbet looks to live streaming to increase revenue

Sportingbet is set to grow its sportsbook revenue through a focus on live streaming of sporting events for its key markets, the company said today in its first quarter trading update.

The company launched its live streaming on 29 October and said raw data showed there had been an increase of between 5% and 10% in total gaming revenues.

Jim Wilkinson, Sportingbet’s finance director, said the company suffered an initial drop in margins on in-running betting after launching the feature, but those margins had “recovered to the previous levels as we increased the number of markets we offered in-running”.

Sportingbet announced a 45% rise in operating profits for the three months to 31 October, and said it was “cautiously optimistic” it would meet the Group’s full year forecast, despite fears of a recession.

Andrew McIver, Sportingbet’s chief executive, said these results showed the group had made a solid start to the new financial year.

“Whilst sports betting has historically shown itself to be ‘recession hardy’, no industry is ‘recession proof’,” he said. “That said, customer metrics remained very robust both during the quarter and in the four weeks since it ended.”

Wilkinson added that the industry would be affected by the recession but Sportingbet had an advantage in that it operated in markets where levels of broadband penetration were low compared to Western Europe.

The operator reported a 28% rise in net gaming revenue to £38.9m, up from £30.4m for the same period last year.

Sportingbet also reported a 25.4% rise in gross win to 364.9m, up from 290.9m in 2007. Operating profit was up 45.2%, to £6.1m, and EBITDA rose 42.9% to £8m. The group reported a pre-tax profit of £4.9m, compared with a loss of £1.4m for the three months to October 2007. As at 31 October, the group reported £41.8m of cash and other liquid resources on its balance sheet.

In Europe, net gaming revenue from sports betting was up 19% on the previous year, while the Australian business saw a 97% growth, almost doubling to £7.1m for the quarter due in part to the relaxation of advertising restrictions in new South Wales and Victoria.

The group also reported strong figures for casino and games, with net gaming revenue up 34%, which the group said was helped by a strong flow of customers recruited via its sport sites. Poker revenues, however continued to fall, with NGR down 4% on the previous year, which Sportingbet attributed to difficulties competing with US-facing poker sites. Talks with the US Department of Justice were progressing, according to Wilkinson.

The operator reported positive growth from its Spanish, Greek and Eastern European markets, but said it continued to struggle in the UK and Italy due to overservicing of the markets and expensive media environments. Sportingbet's overall margins in its European markets are around 10.7% and those experienced during the live streaming of sports events were 9.4%, Wilkinson said.

Sportingbet also reported a 42% fall in gaming revenues in the Turkish market as a result of downsizing its activities in the region. Going forward, the group plans to launch a sports betting operation in the South African market, as well as expand further into the European football markets.

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