21st May 2015 10:23
LONDON (Alliance News) - Bwin.Party Digital Entertainment PLC on Thursday said its revenue in the first quarter to the end of March was down, echoing other bookmakers in bemoaning punter-friendly football results which ate into gross win margins, as the online gaming operator also said it expects takeover talks with its various suitors to complete in the next few weeks.
FTSE 250-listed Bwin.Party said its total revenue in the first quarter was EUR155.3 million, down 6% year-on-year against EUR165.7 million but up 6% on the fourth quarter of 2014. The group said its cost savings plans are on track and said its non-core asset disposal programme is on course to generate EUR30 million to EUR50 million in proceeds this year, in line with its previous guidance.
Bwin.Party added its trading in the year to date is robust, with revenue up 6% year-on-year on the back of a 25% rise in sports betting volume, and said it is on track to meet its full year targets.
Bwin.Party said it expects talks with potential buyers to complete in coming weeks. Earlier this week, 888 Holdings PLC entered the race to acquire Bwin.Party, going into competition with AIM-listed GVC Holdings PLC, the bid from which is being backed by Canadian gaming and gambling company Amaya Inc.
No financial details have yet been revealed on the offers, but 888 has submitted a cash and shares proposal to Bwin.Party, saying it sees "significant industrial logic" in a combination of the businesses. GVC's bid would be partly financed by Amaya, given GVC's market capitalisation is significantly lower than Bwin.Party's.
Bwin.Party shares were up 3.8% to 107.30 pence on Thursday, one of the best performers in the FTSE 250. Shares in the company are up 29% so far this week on the back of the takeover offers tabled for the company.
Average daily net revenue was down by 13% in the quarter owing to lower-than-expected gross win margins in sports betting, continued declines in its poker business and the introduction of VAT on certain gaming activities in the European Union, which came into effect on January 1. That was offset by a better performance in non-core activities.
In sports betting, the amounts wagered in the quarter rose by 9%, but, as has been flagged by other bookmakers, unfavourable football results in the period meant the company's gross win margin fell to 8.7%, compared to 10.3% a year earlier, meaning net revenue in sports betting fell to EUR58 million from EUR64.7 million.
Those issues offset a good performance in the group's mobile betting business, which now represents 41% of total sports gross gaming revenue, up from 26% in the first quarter of 2014. The gross win margin hit meant that the 44% revenue rise from mobile was therefore wiped out.
The sports betting issues echo those already flagged by William Hill PLC and Ladbrokes PLC in their first-quarter results. William Hill's operating profit in the first quarter was dragged lower by it having its worst-ever loss-making week in January due to punter-friendly football results. Ladbrokes reported similar woes in its Sportsbook business, where adverse football results, a weaker Cheltenham race and a significant loss to a small number of high-stakes customers knocked its gross win margin down to 4% from 6.5%.
Bwin.Party's casino and other games business saw amounts wagered rise by 1% in the quarter, with an increase in sports betting customers offset by lower VIP activity and reduced cross-selling from its poker business. The resultant change in the revenue mix, couple with the application of VAT in certain markets, meant its gross win margin dropped to 3.4% from 3.8% in the quarter, driving down net revenue by 11% year-on-year.
In this division too, however, Bwin.Party said the contribution from its mobile operations increased, up to 21% from 9%. Bwin.Party said its blackjack and roulette mobile games have been popular and it intends to roll our further branded games later in 2015.
Poker net revenue was down by 31% year-on-year in the quarter and by 7% against the fourth quarter of 2014, confirming the challenging conditions the European poker market, the company said. In its Foxy Bingo business, trading was strong in the quarter, with new player sign-ups rising 24% year-on-year, against driven by mobile.
By Sam Unsted; [email protected]; @SamUAtAlliance
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