Exceptional items tip Sportingbet into the red

Bid stock Sportingbet fell into the red last year after tax charges and mergers & acquisitions costs bit hard.

The year ended July 31st 2012 was described as one of "significant change" by company Chairman, Peter Dicks, as the online bookie offloaded its Turkish operations and assimilated its Centrebet acquisition.

Amounts wagered in the year rose to £2,349.2m from £2,053.9m the year before. Core net gaming revenue (NGR), however, eased to £188.9m from £206.3m. The market had been expecting core total revenue of around £199m. NGR was down 2% on a like-for-like basis, as business was hit by Greece and Spain making changes to gambling duties.

The disposal of the Turkish business, the acquisition of Australian operator Centrebet and the passing of online gaming laws in two of its largest markets, Greece and Spain, saw the bookmaker's revenue mix shift decisively towards licensed and taxed jurisdictions. The group's revenue derived from regulated and/or taxed countries has risen to a current run rate of over 80%, Sportingbet revealed.

Earnings before interest, tax, depreciation and amortisation improved to £56.8m from £51.4m a year earlier, but a £71.6m exceptional charge tipped the company into the red, with a core pre-tax loss of £56.2m, versus a profit of £20.7m the year before.

The market consensus forecast for pre-tax profit was £28.94m. Even adding back the exceptional charge and throwing in a £10.7m contribution from non-core businesses, the pre-tax profit only rises to £26.1m.

Looking at the exceptional items, £18.1m were costs associated with the disposal of the Turkish language website and £16.8m related to the acquisition and integration of Centrebet. An impairment charge of £18.7m was taken relating to these transactions for computer hardware and software. A further £14.7m was incurred settling a Spanish tax charge.

The exceptional charge has resulted in a cash outflow of £48.8m this year and a further £4.6m will be cash outflows in future periods.

Adjusted diluted earnings per share (EPS) slipped to 5.3p from 6.3p the year before, but those exceptional costs mean the unadjusted figures were very different, with a loss per share of 6.8p, versus a positive figure of 3.9p the year before.

"With over 80% of our revenue coming from regulated countries we are confident that the increased advertising opportunities, improved payment processing and stable business platform provided by our regulated market presence will drive profitable growth in the medium-term," said Andrew McIver, Group Chief Executive.

"Whilst the economic outlook remains challenging, our robust position gives us confidence for the current financial year," McIver added.

The full year dividend has been maintained at 1.7p.

Shares in Sportingbet fell to 50p from 53p overnight in the first hour of trading after the results before recovering somewhat.

JH