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Betsson AB
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Hello. Welcome to the presentation of Betsson first quarter 2019. I'm going to start off with some highlights for the quarter. We have a revenue growth of 10% with revenues of SEK 1.3 billion, and we see growth across all the regions where we operate. We have the EBIT growth of 21%, EBIT of SEK 255 million, and the efficiencies that we have implemented during the last year continued to show effect on our profits.Our OpEx has decreased organically by 5% compared to the same period last year, and our EBIT margin was 19.2%. This was the first quarter with new regulation in Sweden, and we now have revenue share from regulated markets increased to 31.7% of our total revenues. So looking into the financial summary. We have a total revenue growth of 10%, casino growth of 10%, Sportsbook revenue growth of 13%, and this is despite the Sportsbook showing a margin which is a little bit lower than our rolling average margin, which is 7%. So Sportsbook margin was 6.3% during the quarter.Our EBIT was SEK 255 million, which is an increase by 21% compared to the last year, EBIT margin at 19.2% and earnings per share of SEK 1.66, a growth of 22%.We have some impact from the IFRS 16 in the P&L. It's not massive due to the fact that -- yes, how our P&L looks. But there are costs that has been moved in the P&L, but it has minimal impact on the EBIT and no impact on net cash.We see it as a solid quarter with increased customer activity. The margin, as I said, was up despite challenging first quarter from the Swedish regulation. Our EBIT increased by 21%. Betting duties increased by 49%, and -- but our operational costs decreased organically by 5%. Number of active clients in the first quarter was 686,000, which is an increase by 13%. And it's actually a little bit higher than the fourth quarter last year which is a seasonally very strong quarter, too. So my favorite topic, product and technology. We have made major improvements in product offering. To mention a few: site speed improvements, daily jackpot widget in the casino, OBG live stream calendar, match results in bet history, live score in open bets, to mention a few.We have Betsson branded cards by MasterCard launched with exclusivity for the Swedish customers, and Swish is launched as a payment solution in Sweden.Betsson operate in several regions, and I'm really happy and proud to see that we show growth in all the operational regions in this quarter. If we start off with the Nordics. It's a relatively smaller growth than we had the last quarter and -- but that is due to the Swedish regulation, but still there's growth in the Nordics.Western Europe growth, CEECA growth and Rest of World growth, and that adds up to the 10% growth that we see.On casino. Betsson offer 2,700 casino games, of which 2,000 on the mobile. The growth was 10% in the quarter. Organically, the growth was 7%, and casino was accounting for 76% of total revenues.We saw growth on the casino in Western Europe, CEECA and Rest of World. We saw some negative impact, of course, from the Swedish regulation. Mobile casino revenues increased 25%, and we see an increase from proprietary games that we have. And as a product segment, the Live Casino continue to grow in the quarter.On the Sportsbook. Betsson operates its own Sportsbook. It's a proprietary product that we own ourselves. And it has a really competitive offering, more than 230 pre-match markets, 100-plus live markets and 46,000 live betting events in the first quarter. Sportsbook turnover grew 10% with 18% organic growth. Sportsbook revenue grew 13% with 14% organic growth. And the Sportsbook accounted for 22% of our total revenues, and we saw growth in all the regions from the Sportsbook. Mobile Sportsbook grew 31% and now accounts for 80% of total Sportsbook revenue. And this was all achieved with a Sportsbook margin, as I mentioned, on 6.3%, which is a little bit lower than the average Sportsbook margin that we see.So Sweden is now a regulated market since 1st of January 2019. This means we pay 18% betting duties. We have a 5-year license for 4 brands on the market. And of course, it's a new situation. We see some impact from the regulation with the betting duties, of course, in the P&L. The welcome bonus that we did initially in the first quarter had an impact on the revenues. We have seen self-exclusion by a number of players through spelpaus. And there are, as we all know, ongoing discussions in media and elsewhere about the marketing situation in Sweden, which I personally think will change during the latter part of this year.So Betsson, we see Sweden as a long-term important market, and we aim to grow here sustainably. We have a good position in the market. We have a good and broad product offering, which is very attractive. So we are in a good position for the Swedish market.On the regulatory side. We have licenses in 12 jurisdictions. And the changes that has happened in the first quarter or is about to happen, our betting duties increased in Italy from 1st of January on casino games and in the U.K. from 1st of April, so in the beginning of the second quarter.There's also a new gaming law adopted in the Netherlands. It happened in February, and it's estimated to come into force in this third quarter of 2020, and market is expected to open in the first quarter 2021.Betsson has made several adjustments to its offering in The Netherlands, such as rebranding and payment solutions and other things to be in the best possible position for license at the earliest possible date. And this ensures a sustainable outlook for the Dutch business. And as you can see in the trading update, it has a short-term negative impact on the revenues from The Netherlands, but it's focused on the long-term business that we see in The Netherlands. And we have high ambitions for a solid long-term business there, so this small negative impact on the revenues is to be seen as an investment for the future. So to summarize all this, we see revenue growth across all regions, and we see really solid profitability, where we have this big and great company in full control on the cost side. We see some impact from the Swedish regulation and the upcoming Dutch legislation, but with the size that we have and the broad geographical spread, we don't suffer too much from that.We're going to work with continued improvements of the products and technology to offer our customers fun and secure entertainment. We're going to work -- continue to work on efficiencies to be able to absorb betting duties and still be profitable. And we're going to continue to work on and develop our geographical spread, which is a very strong backbone of Betsson, as you can see in this report. Our long experience and our considerable size gives us a solid foundation for continued profitable growth. Thank you.And now we have questions. We're going to start with questions from the room here. So I see Martin Arnell there waiting for a microphone.
Martin with DNB. Could you share some more color on this start to Q2? I know it's only a month, but you went from 80% organic growth to 6% decline. And can you just share some more color on if it's Sportsbook margin impact, Sweden? I know you mentioned The Netherlands, but any more color on that would be helpful.
Yes. Sweden is at a lower run rate as in the first quarter, that's obvious to everybody, and the business decisions that we have made and implemented regarding The Netherlands also has an impact. Then again, we are doing well on a lot of markets. And we have to remember, in this comparison, we look at the short period of the second quarter, but we compare it to the full second quarter last year because that's how we normally do it. And that second quarter last year contained also the world championship, which was a high active thing. So it's a little bit comparing apples with pears in this relation. But this is how we usually present it, and that's -- and we stick to that.
Sure. And given that you comment on these adjustments in The Netherlands, do you expect that the effect from that will gradually be higher in the remaining quarters this year?
It's hard to tell. We don't know that. We know that we have made adjustments to be compliant with the stated wishes from the Dutch authorities. And we have put ourselves in a position where we are well positioned to get a license as soon as it's possible. And that's important to us, so that is the reason. And then the fact that we have a little bit lower revenues from that, we see that as a long-term investment. And I'm sure it's a good investment.
Okay. And on your cost outlook, you've been on this back on track plan now for a year. Is there more to do going forward? How should we view the cost outlook going forward?
Actually, the back on track program was finalized by the end of the first quarter, but that doesn't mean that we stop thinking about costs. We're going to continue to work on the cost side. And it's a really central part of our companies to be in cost control in order to be effective on all the markets where we operate.
Okay. And my final question is on this discussion about marketing in Sweden. Could you just elaborate a little bit why you expect that discussion to change in -- later on this year?
Yes. When we went into regulated situation in Sweden, I said that it's like a black box. Nobody knows what Sweden will look like in the first quarter when it opens up, and that turned out to be true. And most companies went very hard on marketing. And the people in general kind of suffered from all this marketing, and it became a media discussion and some political involvement in future marketing in Sweden. I think when the market settles a bit, I think the dynamics on the marketing side will change. And I expect that marketing intensity will go down, and I think we will see that already by the end of this year. But we have to remember that we are only now 4 months into the regulation. So it's really, really fresh, but I definitely expect to see changes for the latter part of this year.
And what about you? Are you lowering your intensity?
I can't comment on the short-term strategic decisions that we make, but we -- no, I can't comment more on that.
Christian Hellman from Nordea Markets. Just a question on The Netherlands. You expect it to be a short-term impact you say in the report and the presentation from these measures that you're -- you have taken to be compliant. But the market is expected to open up in Q1 2020. Could you elaborate a bit on what you mean by short term?
Yes. A short-term impact, I mean, that we will see a little bit lower revenues going forward until we are in the license situation. And then what happens, we don't know. It's another new regulated market, and we don't know the behavior of that market. But we have made this decision to be fully compliant and to be ready to get the license as soon as possible, and that's an important decision taken. And it's like we are present on so many regulated markets. And we have been in place on these markets from early stage, and we intend to be the same in The Netherlands.
And a question on Sweden. The number of -- or sorry, the percentage of locally -- the share of taxed markets has increased by 9 percentage points quarter-on-quarter. Is that roughly the size of Sweden now? Or has that been severely impacted by high bonus and costs in Q1? Could you just give us some sort of hint on the size of Sweden for your business?
I can't do that. We don't go into the size of the market in detail. But of course, the first quarter was impacted by the bonusing that we did early in the quarter.
It's Lars-Ola from Pareto Securities. If I can follow up on Christian's on Sweden. I think you probably have read what Kindred wrote in their report about the bonus dynamics. Can you say -- how do you see in similar kind of bonus dynamics in Sweden? Because it was really excessive levels that we saw from Kindred. Have Betsson seen a similar pattern? And has the bonus level normalized in March? And is it lower in Q2 compared to 2018? So 3 questions in 1.
Yes. The first one, was the bonus thing excessive, I think I can answer yes to that one because most of the operators on the Swedish market decided to give that one option welcome bonus to the clients. And that was done on a broad scale at one point of time. So that was kind of different from normal business. Of course, that was consumed early in the quarter, and it turned to more normal levels by the end of the quarter.
Okay. Also, to follow up on The Netherlands, I think you said now, when you answered Christian, that you will see lower revenues from The Netherlands. Would it be fair to assume that total revenue from The Netherlands in 2019 will be on the same level as in 2018? Or will you be able to grow on an annual basis?
That remains to be seen. I don't know, and I can't comment on it.
And is it mostly due to the absence of ID solution that you have seen so much slower growth in The Netherlands? Or is it that you have stopped with affiliation as well?
We have made several adjustments and, altogether, they have a small negative impact on our revenues. And I can't comment more on that. We will see how it plays out for the rest of the year, but the important thing is that we are in a good position for the licensing procedure in the future.
And one final for me right now. One real good thing here is that Sportsbook turnover growth of 10%, 18% organically. Can you say which regions is above and below the 10% growth?
I can't say that. But what I can say is that I'm happy to see this growth in the Sportsbook, and that the product has made several great steps as a product. And we have so much more to come for that product, so I'm really looking forward to see how it will perform in the future.
Oscar Erixon with Carnegie. A few questions on The Netherlands for me as well.First of all, when were the changes made? Was it the start of April?
There's several changes made, and they have been done as soon as possible. I don't know the dates exactly, but they didn't happen on one single date. But the important thing is that changes has been made as soon as possible for us. So -- yes.
Okay. And what do you think is the biggest thing that you have changed? Is it the change of the brand for the website? I think I noticed that you changed brand name twice for Oranje, for example.
I don't know what the biggest change and which change had the biggest impact. We see it as a number of changes that we decided to do at a very early stage, and we've made those changes as soon as we could. And altogether, they have an impact. And that impact we will live with for a while, and -- but it will take us to a good position in the licensing procedure.
Okay. And I suppose that these changes, they're down in close discussions with the regulator. So this is what they actually want you to change ahead [ of a cutoff period ].
I don't want to go into details on how the communication has been done. But obviously, as a company, we have done everything that we deemed necessary, and that we understand that we are expected to do.
Okay. And a final question on The Netherlands for me. This cooling-off period, you discussed it a bit in the report, what you think it entails. Could you just elaborate on that a little bit? What is permitted? How long could it be?
I think there will be more regulations coming up and discussions even with the regulator in the future, so I think we will get to a more deep understanding on that in the future. And I see no reason to -- I don't know enough to comment on it at this point of time.
Okay. And one final question on Sweden. I mean, operating conditions can change quite a lot, which we've seen in other markets. What, in terms of marketing limitations, do you think would severely impact the generalization in Sweden?
I think big changes to the possibility to communicate to the market would definitely hurt the generalization. So -- yes.
Lars-Ola again. I'll ask a follow-up on The Netherlands. Has the cooling down period started? Are we in the cooling down period?
It depends who you ask. And I think we passed on that one, and we'll let the future tell the answer to that question when it's more -- the answer is more solid.
And on the Western Europe, as The Netherlands has seen a slowdown, is Spain and Italy, Germany performing -- continue to perform strong?
I don't want to go into the different markets one by one. But as a region, Western Europe is performing strongly. I think I mentioned -- I usually mention Italy as a good example of where we see a very strong momentum, very strong growth there.
Yes. And I was speaking about Italy. How do you view your growth opportunities after 1st of July when the marketing ban takes -- goes effective?
We think we have solid plans to -- on how to operate there even after the marketing -- change of marketing opportunities. We have a team with a very good understanding of the market and very good knowledge. And we are lined up to work under these new conditions, so I'm sure we're going to continue to grow there.
Martin Arnell with DNB. Just a follow-up from me as well. On these Western Europe markets, are you focused on Germany? Can you tell us anything about other markets than The Netherlands?
No, not really. Western Europe is quite a large region containing many countries, and we don't have any specific focus on anything. Of course, we -- the markets, which are already regulated, such as Italy, are prioritized in terms of where we invest.
Okay. And a similar question on the Nordics. It looks like you were stable in the Nordics overall despite assuming a decline in Sweden. That must be the case that you were growing quite well in the other Nordic markets, excluding Sweden. Any comments on that? What was driving that?
I think the product offering that we have is really compelling. And we have been pretty strong in the Nordics for a very, very long time. So we have a solid brand position and a solid market position, and I think that helps us to grow.
Okay. And a question on CEECA as well. Well, you were at 30% growth, I think, from Realm. Anything new there that you've done or...
It's -- as you can see in the report, the Sportsbook is performing really well, and that region is mainly driven by Sportsbook. So of course when the Sportsbook offering is so strong and competitive, then it has a bigger effect in that market, where the Sportsbook is a really important product.
And a final question for me on where are you in the consolidation phase here in the industry on both ends? What do you look for? And what do you expect going forward?
We always look for opportunities. You know that up until the first quarter, we were in this project, back on track, where we said we do know we kind of put everything on pause in terms of M&A. Now we have started to evaluate different options again. And we can see that there's an increased activity in the industry, probably triggered by different new market conditions and companies are up for sale, companies that has Swedish exposure. And the international companies are also looking at Swedish companies, of course, with Swedish exposure and other regulated markets. So I think we will see some consolidation going on in the future.
Yes. Just another question on the trading update. It's Oscar from Carnegie again. So maybe a straight question about the start of Q2 last year didn't contain the World Cup, of course. I mean, how are the comparisons from April last year compared to the full quarter, if you understand what I mean?
Without giving you the figures, it's, of course, a situation where the second quarter last year started in the same way. But the second half of the second quarter was a lot stronger due to the world championship, and this is the full quarter that we compare with. So if we would have compared this quarter up till now with the same period as the last year, then we would have another different figure from what's in the report.
So perhaps more similar to your run rates in Q1? So organic growth at least?
I can't go into that. We would see another figure, and then you have to elaborate on that yourself.
I can rephrase that question. So has there been -- the game margin in April, has that been normal or weak or strong?
The Sportsbook margin?
In total, casino and Sportsbook, sir.
It's no deviations which is worth commenting on, I would say.
And speaking about the sports margin, I noticed there was a downtick in the CEECA region from Realm compared to Q4. Is that mainly because there was a weak sports bar margin in Turkey?
That's -- that contributed. I can't say that it's only because of that, but the more important thing in my view is to look at how the region performs in general. And we see this really strong uptake in the first quarter, so we're definitely on a good track in that region.
And one final, final question for me. What -- how do you see -- on Germany in Casino, is there a risk that Casino will be banned in a few years time? What's Betsson's view?
That is a very unclear situation, and I'm not in a position to comment on it at this point of time.Okay, it seems we have no further questions from the room right now at least. So let's see if we have any questions -- should we start with telephone or -- yes, on the telephone. Do we have any questions from the phone?
[Operator Instructions] Our first question comes from the line of Erik Moberg from ABG.
A couple of questions, if I may. In regards with receivables, they have trended upwards lately. Could you perhaps give some more insight into what's been driving this?
Yes, it's -- that figure is depending on which markets perform strongly and which markets perform less strongly, but it's also been changes in conditions by some third parties. So that's the reason for that.
Is it fair to assume that Norway has been growing quite strongly?
In line with what Martin asked before, assuming that Sweden has gone down, so other countries in Nordics has gone up. And yes, that could be one assumption. We have always been strong in the Nordics, and they are growing stronger. So yes, that's true.
Okay, got you. And in terms of the Dutch market, my understanding is that you stopped with all the affiliate marketing towards the later stages of February. So this should, in extension, have more of a negative headwind for the Q2 -- for Q2 performance. Affiliate, on a stand-alone basis, what could -- what sort of negative impact do you expect from this?
It's the same answer as I gave before. We now see the impact what it looks like today. It's very hard to predict what it would look like for the rest of the year. It's a small downturn. It's not severe for us as a company, of course. So -- but it's a great investment for us that ensures a Dutch license once it's time to get that.
Okay, got you. And in terms of Oranje and Kroon Casino, as you mentioned you rebranded both of those sites. I'm just trying to understand it better. So this has nothing to do with the risk of not obtaining a license once the market regulates? To me, it seems just kind of odd to just throw away a brand value like this if there were no other aspects involved. And if I recall correctly, you explicitly stated during the Q4 report that there were no risks whatsoever that you would not be able to obtain a license. And now you just simply decided to change the brand. For me, it seems a little bit contradicting.
No, I don't think so. We have made adjustments that we find proper, which we have understood from the Dutch authorities that they would appreciate. And I think that puts us in a great position for getting a license, and that there is no reason to speculate what would happen if we wouldn't have done the changes of brands. We have done the changes of brands many times before. We know how to do it without losing a lot of traction for the business.
Okay, got you. And in terms of the cooling-off period, and you didn't want to comment on it before, but is it -- but from what I understand, some people claims that their cooling-off period is from -- is basically from [ once you're like ] compliant with the regulator and towards onwards. And in that -- in this case, it should then mean that you would be able to acquire for a license then in May 2021. You would essentially be almost 6 months behind the rest of the -- behind the rest of your competitors when it comes to starting to marketing your brands, et cetera. What's sort of your thoughts on this?
I can't comment on the details. It's too early to say how that process will be run by the authorities. I just know that we are licensed in a big number of jurisdictions, and we've got licenses early-stage in all those jurisdictions. I know that the intention with the Dutch regulation is mainly consumer protection. And I think in order to achieve that, it's good to get as many of the operators on that market as soon as possible. So I think that is a great starting position for that procedure.
[Operator Instructions] Our next question comes from the line of Peter Testa from One Investments.
I have a couple of financial questions. The first one was just on the marketing, which was relatively flat in an intensive quarter for Sweden. I was wondering if you could give a sense as to what impact the Italian advertising ban had and maybe the switch between above-the-line bonusing and below-the-line marketing in Sweden might have had on this number?
I can't elaborate on those details. Unfortunately, I can't.
Is it fair to say that there was a negative impact to the marketing spend line or a lower -- it was lower than normal because of the Italian ban, just to be clear?
On the Italian ban?
Yes, they have Italian ban.
Oh, it's not implemented yet.
Okay. So that's to come. And then on the OpEx post the end of the cost plan. When we look at the personnel costs and other OpEx, excluding the IFRS change, is that roughly a base number from which you think it will grow now? Or is this a base level you're going to try and hold?
I think the personnel cost has been quite stable since the middle of last year or second quarter last year. And we are not planning any extensive additions to make that increase, but we will continue to be a growth company. And we will grow, and, eventually, we will have to add on more staff to cater for that growth. But I think it's fair to say that you shouldn't expect any strong increases in the near future.
Okay. And the last thing is just on Sweden, if you could give some understanding of how active customers behavior may have changed post the consumption of all the bonusing earlier on, so we could just kind of get some sort of understanding of how the market really looks once this bonus bonanza has settled down.
Yes. This bonus offering that was done by all operators, I guess, created a little bit of a hassle, where customers was moving between different sites, and it kind of raised the active clients figures for most operators, I guess. Now that has settled, and I think we will go into a more normal state for the rest of the year. Probably the number of active clients will be a little bit lower in the near future than it was in the first quarter because the first quarter was a very odd thing with heavy bonusing on all the sites which had an impact, of course.
Yes. If you looked at what you regarded your active customers now at the end of the quarter versus, say, Q4 prior to the whole changeover, can you give any sense as to how -- jumping over the distorting impact of the bonusing bonanza, can you give any sense as to how that looks, please?
I can't, really. But I think we will be back to a more stable situation, and we will be able to -- possibly be able to comment on that after the second quarter.
And as there seemed to be no further questions from the phone lines, I hand the word back to the speakers.
Okay. There is no further...
We have a couple of questions from the webcast. And I think we already touched based on one, which refers to the growth of receivables. I think you answered that one a bit earlier.
Yes, I answered that one.
One question about the gaming tax base in Sweden. What is it based on? NGR, GGR or what else?
It's based on NGR.
And we have a couple of other questions. First of all, do you have an outlook for the -- for revenue and margin for the remaining part of the year compared to full year 2018?
No, we don't give such outlooks, and we have never done that. So it's very hard to give such outlooks. And we work in a very dynamic industry. It's dynamic from the regulators' angles, but also from competitors' angles. So it's very hard to tell.
Okay. Then we have another question from Frederick about Holland. Could you elaborate a little bit of the potential negative impact on profitability in Q2 considering that margins in Holland probably are higher than average?
I can't elaborate on that. As I said, it's early stage in the quarter, and it's hard to tell how the remaining part of the quarter and, for that sake, the remaining part of this year will turn out. We will have to wait and see. Important takeaway is that we are active on a broad number of markets, and we have a solid, strong operation in all those markets. So being quite a big company with a lot of pretty large markets helps us, of course, to consume any issues on certain markets.
And we have no further questions from the webcast either.
Okay. So then finally, is there any more -- are there any more question from this room? If not, then I say to all of you, participants in this meeting, on the phone, on the web, in this room and all others watching the broadcast, thanks to you. And thanks to all Betssonites out there who made this possible. It was a great quarter. Now we go to work with the second quarter. Thank you.