13th Mar 2014 11:04
LONDON (Alliance News) - Bwin.party Digital Entertainment PLC's decision to focus on only the most lucrative online betting and gaming markets is showing signs of paying off, as it Thursday said it swung to a profit it 2013 thanks partly to much bigger cost reductions than it had targeted.
Like rivals, the company has been exiting some markets and focusing its attention on so-called regulated and to-be-regulated markets, where returns are higher and the companies have more certainty over regulatory conditions.
The company reported a pretax profit of GBP44.9 million for the year, compared with a GBP23.5 million loss in 2012, mainly thanks to a EUR83.8 million gain related to the settlement of certain legal and regulatory disputes that came about at the time the company was created through the merger of PartyGaming PLC and bwin Interactive Entertainment AG.
However, profits were also lifted by cost cutting. The company said it cut costs by EUR97 million in 2013, well above its target for savings of EUR70 million.
The result marks a turnaround for a company that has reported a pretax loss for the past two years and declining profits for three years before that.
Its 2013 profit after tax from continuing operations was EUR41.1 million, compared with a loss of EUR24.9 million in 2012, and much better than the EUR9.5 million loss that analysts had predicted.
Shares in Bwin.party were trading 3.4% higher Thursday morning at 126.26 pence per share, the second-biggest rise on the FTSE 250.
"2013 was a challenging year for our business, but it also marked a turning point as we increased our focus on regulated and to-be-regulated markets, began to roll-out new and refreshed versions of our mobile and desktop products, and commenced the transformation of our technology infrastructure through the adoption of the agile development methodology. Having streamlined the shape and size of our business we now have the foundations to return our business to sustainable growth," said Chief Executive Officer Norbert Teufelberger in a statement.
The company's earnings before interest, tax, depreciation and amortisation from continuing operations were EUR108.0 million, down from EUR164.9 million in 2012, due to lower revenues, increased gaming taxes in Germany and costs for its start-up in New Jersey.
The Gibraltar-based group said total revenues fell to EUR652.4 million, from EUR801.6 million in 2012, due to a lower number active players as it exited markets, and as it was hit by its websites being blocked in Greece.
"As a result of our shift from 'volume to value', we stopped player acquisition in 18 markets where the returns from marketing spend were insufficient or where there was significant regulatory uncertainty. By focusing our marketing efforts on fewer, nationally regulated and taxed markets, there was a significant reduction in customer acquisition-related spend," it said.
The company was also more positive about 2014.
"Despite the headwinds of lost revenue from Greece and continued pressures in European poker, we are confident that we can deliver year-on-year revenue and clean EBITDA growth in 2014," the company said in a statement.
Trading in the first 10 weeks of 2014 has been in-line with expectations, with average daily net revenue down 10% year-on-year due to its shift to the most-lucrative markets, but up 6% on the previous quarter. It said nationally regulated and/or taxed markets are currently representing 56% of net revenue.
Bwin.party increased its total dividend for 2013 to 3.60 pence per share, up 5% from 3.44 pence in 2012.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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