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Betsson AB
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Welcome to the presentation of Betsson AB fourth quarter 2017. I will start with some highlights from the fourth quarter. We had quite a strong sportsbook development, up 36%. Business to consumer sportsbook had a gross turnover up. Margin was quite strong at 8.2%. The new mobile web sportsbook was launched on, on our core brands. And we're quite happy that the sportsbook performed well. That's a good foundation for this year when we will have the World Championship Soccer. Casino growth was 5%. The growth mainly came from Western Europe, but we saw a small decline in the Nordics. We have implemented a restructuring program in the first quarter of 2018 with ambition to make the company more efficient. We have also introduced KPIs related to responsible gaming in our reporting.So the financial summary for the fourth quarter. Revenue increased by 12% and organically it was a 10% growth. EBIT declined 18% mainly based on increased spending in marketing, SEK 44 million; negative currency impact of SEK 34 million; and negative impact from acquisitions of SEK 16 million; organically, EBIT increased by 1%. So the EBIT margin came in at 17.4%. The Board of Directors proposed a dividend to the AGM of SEK 393 million, which is SEK 2.84 per share, to be distributed to the shareholders. So on the organic growth. We reported SEK 1,256 million. And as you can see on this slide here, we have an impact from acquisitions and also quite a big currency impact. And if we look into these figures then we see that the organic revenue was SEK 1,231,000,000 which is a growth of 10%. For the EBIT, we reported SEK 218 million. If we look at the impact from acquisitions of minus SEK 15 million and currency of minus SEK 32 million -- SEK 34 million, that corresponds to an EBIT of SEK 268 million which is a growth of 1% and which is a margin of 22%. So going into the regions. Nordic is still our strongest region, 48% of the revenues. Nordics, we're very happy about the sportsbook growth with 62%, very encouraging before the world championship in soccer. In region Western Europe, we had a growth of 14% which is quite strong, and we saw some all-time highs from some markets which is also encouraging. The CEECA region still struggles with currency headwind. And the rest of world continues to grow strongly even though it's a small part of our revenues.So if we look at the growth per region and see how it builds up from last year. In Nordics, we have a growth of 9%. In Western Europe, 42%. In CEECA, we have a negative growth of 14%. And rest of world, unfortunately a small region, but a growth of 75%. And this makes up the growth of totally 12% on the revenues. So this was a strong quarter for the sportsbook, up 36% year-on-year. Margin came in at 8.2% which is a little bit higher than our rolling average of 6 point -- which tend to be around 6.5%, last quarter -- same quarter last year was 6.6%. We have done a rollout of the new mobile web sportsbook on our core brands. And we have -- we do continuous improvements of the offering. We will roll out the OBG front-end framework on the desktop and apps during this year.Casino was not that strong in the fourth quarter, saw a growth of 5%, organically 3%. The growth was mainly driven by live casino and mobile web casino. The roll out of OBG front-end framework on desktop and apps during 2018 will have a positive effect of the casino going forward. We expect so at least. Underlying activity was quite strong. Active customers up to 615,000 customers. Deposits also strong even though impacted negatively by the currency effect in CEECA region. On the regulatory side, we look forward to the Swedish re-regulation that is bound to happen in the beginning of 2019. There is also a re-regulation going on in the Netherlands. The process is a little bit unclear, but the government has expressed its ambition to re-regulate during 2019.So we have announced a program -- a restructuring program for increased efficiency. This is not the cost saving program, but a program to improve the performance of the company. We want to make the responsibilities within the organization more clear. We want to have less layers, and we want to scale back our activity in the U.K. a little bit. And these changes resulted in a headcount reduction by 160 people. So the cost for this program is to be taken in the first quarter which is this year around SEK 15 million. And as a result of this program, we will save costs going forward of SEK 50 million to SEK 60 million per year. But it's important to keep in mind that this program is not a cost saving program, it's an efficiency program to make the company more efficient going forward.So what's the focus of Betsson going forward. We want to continue to strengthen the product. We want to further roll out the new casino and the sportsbook. We will continue to invest in marketing before the world championship 2018, and we want to focus on efficiencies. That's why we did this reorganization, and we're going back to basics on our operations in the U.K. And we have a big program with a lot of activities to address efficiency within the company and within the company's operation. And I really believe that, that will have an impact in the future. But it's not a quick fix and it's not something -- it's not the silver bullet that we're working on. It's a broad program with a lot of activities. And we have an organization which is very committed to this, so we look forward to the future and this -- the rest of this year. Thank you. And this was efficient as well, 9 minutes. We open up for questions.
Martin with DNB Markets. My first question is on the growth in the sportsbook in the quarter. How much of the year-over-year growth is sort of relating to the sportsbook margin? And how much is really due to your improvement on the product side would you say?
I can't answer that in firm figures. But of course, revenues are helped by the higher margin. But that wouldn't happen if the product wasn't good enough. So it's course also depending on the product. So that gives us a good foundation for the product before the world championship.
And did -- the sportsbook margin trends, did they continue in Q1 when looking at your trading statement?
This is nothing that we have communicated so I can't go into that.
So -- okay. Then you comment on this roll out of OBG on desktop and apps during the year. Would it be possible for you to be a bit more specific when? Because you sort of expect this to have a positive impact so it would be good for us to know.
It's a continuous roll out, but I can't go into the details today here. But it's something that would happen across the year.
It would make sense to have it up before the World Cup or…
It would be -- I would be happy if we would do that, but I can't go into the details.
Okay. And on your reorganization with this impact of SEK 50 million to SEK 60 million, is that something you expect already for this year or is it for the coming years?
It -- that's like the annual cost reduction and it starts from -- actually from the day when we announced the program. So it will impact this year partly because it happened bit into the year.
Okay, great. And then just overall on your changes to the product side, sort of could you elaborate a little bit more on these changes and where you are today compared to where you want to be so we can get a better feel for how long it will take until you sort of have the possibility to outperform again? I guess that's your ambition.
Yes. It's -- we are not -- today, we are not where I want us to be fully with the product. But then again, we have a lot of products, lot of sites and a lot of different channels. So we have quite a massive volume to work with and it's a constant work. And it will actually never finish. It has never happened that I'm fully satisfied with a product. But at this point of time, we have certain areas that I really want to address. And I think that by the end of this year, we will be in a better position than today, not that the position today is bad in any way, but there is room for improvements.
And on that note, you say that during the end of the year you will see improvements and you have an ambition to grow revenues and earnings, but then we have the Swedish regulation in 2019 and possibly the Dutch regulation. But is your ambition to grow earnings in that kind of year 2019?
That I can't comment on today. Nothing that we have communicated.
Okay. And on the U.K. market, you're mentioning that you're scaling back marketing volumes. How should we see that? Is that sort of a lost longer-term opportunity here or because it's -- I mean competition is increasing quite a lot in your core markets as well? Can you elaborate on U.K.?
I mean competition is really high in the U.K. We have gained some market share there and we are going to continue to be on the U.K. market. We're just not going to be as aggressive as we have been so far. We're going to do it a little bit more step by step.
Could we expect more acquisitions in the U.K. or organic from here?
For this year, I'm looking at organic. We work with the efficiency program within the whole company and this is what we're going to focus on this year. That program is very detailed and there's a lot of work to do. So that is what we're going to work with till the end of this year.
And when it comes to acquisition possibilities elsewhere, Sweden for example ahead of the regulation, is that sort of things you're still looking into? Or are you fully obtained with the reorganization and the changes in the company right now?
We are fully occupied by the changes and with the products that we work with. Still, we're an opportunistic company. Should we find something that suits us very well, we could definitely be open to that. But it's not the top priority, acquisitions is not something that we work on actively today.
Mathias, SEB. Well, I wanted to continue a bit on the product and geographies. You mentioned casino in the Nordics, was that slightly slower growth dependent on a few brands? Or was it a broader phenomena?
We didn't succeed as good as we should in the Nordics on casino across the line this quarter. So yes, it was not any specific brand that stood out, but there's room for improvement in all the brands in the Nordics on the casino side.
Okay. And have you done any changes to your brand portfolio this quarter? Or is it the same brands running?
Mainly the same brands running.
Okay. And I’m a bit curious about Spain, have you announced when you are to launch that brand?
I don't know what we have announced really in the case of -- yes, we have announced that we actually have launched sportsbook in Spain.
You have launched it under a new brand or an old brand?
Under Betsson. That's under the -- sorry, local brand.
And I noticed that affiliate spending did quite a jump between Q3 and Q4, is this a trend we should expect continued through 2018 that you will try to leverage affiliates more than perhaps during previous year?
It's not a trend that we will really grow on affiliate side. But affiliates will still be an important part of our customer acquisition, so we will have -- that’s a part of our marketing mix going forward as well.
Great. And then also another product question, there was a press release I think it was last quarter about daily fantasy sports. Have you launched that product? [ Do you ] remember?
I can't answer that.
Then I will have a look I guess.
Do we have any more questions? Okay, questions from the phone then.
[Operator Instructions] Our first question comes from the line of Rasmus Engberg from Handelsbanken.
I had a question on if you could give some sort of indication on marketing spend in the first half of the year, how will it develop compared to the last year or compared to the fourth quarter of ratio, sales or something? If you could sort of indicate a little bit more on what you mean with investing ahead of the World Cup?
Yes, as you can see from the figures in the fourth quarter, we invested quite heavily and we will keep on investing in the first quarter. I can't go into details on the figures. But of course, it's important to stay on top on -- in the marketing before the world championship.
Yes, okay. And then the second question, where -- scaling back marketing in the U.K. where does that leave the Netplay acquisition? Can that sort of turnaround any way due to lower costs or what is the strategy there with that acquisition?
The strategy with that acquisition was expressed already when we did the acquisition that it's a long-term acquisition and there are some agreements that is running. So we will see a different story from 2019 for that acquisition. Still, we want to enhance it as much as we can of course on the way there. But the changes for marketing in U.K. is not only related to NetPlay, it's for other brands as well.
Can you remind us what the changes are in '19 with regards to that acquisition?
It's agreements that are related to those brands that run out and that would put us in a different position.
[Operator Instructions] And as there are no more questions registered, I hand back to you speakers in the room.
So follow-up question from me, Martin, with DNB Markets. On Turkey and the B2B agreement with Realm, can you comment a bit on how that progressed in Q4? And what you're doing there in order to help them improve in the market?
Realm is doing their own operations. But we have seen stability in the fourth quarter in their operations and I have -- I'm optimistic for their operations for the upcoming world championship. So I think we have seen an uptake in their business and how they operate. They have launched a new brand in the second half of the last year. So we’re optimistic.
And can you comment on Georgia as well because I noticed that the CEECA region was flat organic growth? So how are you doing in Georgia with the Europe-Bet operations?
I can't comment on the operations in detail for that. But of course being quite geared towards sports betting, we are optimistic also before the world championship for that region.
A question from the web. How -- it’s actually 2 questions from Marius Therkelsen from Strawberry Capital. How much of the 3% organic growth in casino is due to your expanded live casino offering with Evolution Gaming?
That's a very detailed question which I can't answer. But I can say that there has been a shift over time where live casino has increased and live casino is performing really strong. So obviously, some part of that growth come from the live casino offering.
Do you believe that you now take your fair share of the live casino growth in your most important markets?
Yes. I don't know really what the -- our fair share should be but it has increased. And I think we're doing quite well on the live casino.
And also, is it possible to elaborate a bit on the OBG performance in mobile web sportsbook so far?
Yes. We launched the OBG framework on the mobile sportsbook during the second half of last year on the main brands and it's doing well. It's a product which is quite new. It needs some adjustments and it has got some adjustments. And I think we will continue to improve the product. But it's doing well and it’s a part of the -- it has definitely contributed to the fact that the sportsbook has been doing well in the fourth quarter. Any more questions? Okay. Thank you.