Sportingbet flashed out of the traps at the start of the new financial year, with a healthy increase in bets wagered, though earnings declined as new taxes in Spain and Greece took their toll.
Amounts wagered in the three months to the end of October totalled £693.7m, up from £513.9m in the corresponding quarter of last year. Total revenue grew from £51.1m last year to £59.9m this time.
Earnings before interest, tax, depreciation and amortisation (EBITDA), and excluding the effects of exceptional items, eased to £10.2m from £11.3m the year before.
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The firm made an operating loss of £0.1m after exceptional costs of £5.3m (2010: £nil), a share option charge of £0.2m (2010: £0.3m) and amortisation of other intangible assets of £0.4m (2010: £0.4m); in the same period a year ago, the company made an operating profit of £7.5m.
The exceptional charge of £5.3m was for corporate transactions and restructuring costs related primarily to the acquisition of Centrebet and the disposal of the Turkish language website.
Loss before tax was £1.2m, versus a profit the year before of £8.5m.
Australia remains the group's jewel in the crown. Total amounts wagered down under were up 95% from last year, while total net gaming revenue (NGR) was up 165% year-on-year, though this was somewhat flattered by acquisitions; on a like-for-like basis, the improvement was still an eye-catching 58%.
"With the acquisition of Centrebet in Australia and the disposal of our Turkish Language website, we are making good progress towards our goal of deriving the majority of our revenues from regulated territories. The early signs from our enlarged Australian business are very encouraging and we look forward to making further progress there during the coming year," said Andrew McIver, group chief executive.
Performance in Europe was lacklustre in comparison, but there were extenuating circumstance. Amounts wagered were down 4.8%, with Greece (down 11%) and Spain (up 1%), predictably turnoing out to be areas where growth was hard to come by. Sportingbet also had to be Spanish and Greek betting taxes of £4.3m in the quarter. With new taxes stripped outm NGR in Europe was down 3.4%.
"While trading in the eurozone territories remains subdued, we welcome regulation in this key market and the greater certainty it brings to our revenues," McIver said.
The group has made a solid start to its second quarter with trading in line with our expectations.
Altium Securities, a buyer of the stock, said the results were largely as expected.
"In:play [betting on an event after it has started] delivered an industry leading margin of 10.1% (2010: 9.7%) and mobile actives increased by 108% YoY [year-on-year]," the broker noted.
In explaining its revised target price of 50p, the broker said: "Acquisitions in Australia and Denmark alongside the disposal of the Turkish business have materially changed the 'shape' of Sportingbet as well as significantly increasing exposure to regulated (or soon to be regulated) markets. The dilution from the Turkish disposal combined with the payment of gaming taxes in both Spain and Greece is a price worth paying for the medium term. In time the group's cash flows will attract a higher rating," the broker avers.
A sum of the parts valuation would put a price of 62p a share on Sportingbet, according to Altium.
Peel Hunt, which has its target price under review, said that overall, investors should be heartened by Sportingbet's first quarter performance.
"At the current price the valuation is underpinned by Australia, with everything else thrown in for nothing," Peel Hunt's Nick Batram suggested.
"Australia has performed well and more than underpins the current share price. Europe is more difficult and short-term visibility is poor, and this may temper a re-rating at the current time," Batram believes.
The shares were up half a penny in afternoon trading at 31.5p.
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