Australian growth plugs Sportingbet's European decline
Centrebet integration going well, although uncertainty remains over regulatory progress in Greece and Spain.
A strong performance in Australia has helped Sportingbet record a small increase in H1 net gaming revenue, the London-listed operator has revealed in its results for the six months ended 31 January.
Overall NGR was up 2.4% for the period to £109.4m despite a 33% year-on-year decline in European sports NGR amid regulatory uncertainty in Spain and Greece.
Greece remains Sportingbet’s largest European market, contributing 15% of net gaming revenue for the group compared to 13.4% from Spain, although amounts wagered in the two markets fell 22% and 11% respectively compared to H1 2010-11. The operator paid £7.9m in taxes during the quarter in preparation for the opening of the two markets this year, with Spain potentially going live as soon as 31 March following an initial delay.
Chief executive Andy McIver told eGaming Review that the decline “Was very much down to economic factors, but having said that the margin in the quarter was about 1% lower than what we normally are.
“With Greece we did opt in and we did pay taxes because we are number one in the market and it’s not a market we can turn our back on easily. However the status in Greece and to some degree Spain is that we as potential licensees are a little bit in the dark,” he added.
In contrast, the NGR contribution from Australia rose to 39.9% for the quarter, and McIver anticipates that figure to cross the 50% threshold by the end of the financial year. The group hopes the integration of Centrebet, the Australian bookmaker acquired last year for £130m, will be completed by the end of July, with the CEO explaining that “The integration is definitely going ahead of what we’ve anticipated but there are still some substantial hurdles to jump.”
Sportingbet executives have also been involved in initial discussions over the revision of Australia’s Interactive Gaming Act (IGA), with McIver hopeful that in-play betting is regulated this year.
“If we are really lucky we could also see progress on casino, but I don’t think we will be really lucky,” explained McIver, adding that “Current thinking is mid-autumn or mid spring for them for changes, around November, but political issues [i.e. the fragile majority held by the ruling government] could be a determinant there and could end up slowing things down.”
Regulated markets now constitute 45% of group revenues for Sportingbet, with a further 18% from those territories where the company is paying tax ahead of regulation.
These figures follow the disposal of the operator’s Turkish business Superbahis, with McIver confirming that “The business is performing at least as well as it did when it was under our ownership,” meaning GVC subsidiary East Pioneer Corporation, which bought Superbahis last October, is on track to meet the 3-4 year timescale given upon the acquisition.
Ivor Jones, analyst with Numis Securities, retained his firm’s ‘Buy’ recommendation, saying: “Australia is clearly outperforming our expectations although this is in part due to very strong 1H margin performance which may reverse later in the year.
“The weakness is Europe is probably greater than we would have forecast but then so is the planned cost-cutting,” he added.
There was also a ‘Buy’ recommendation from Simon French, analyst with Panmure Gordon, who noted that “[T]he legacy legal risk from the Turkish business is diminishing by the day”. This legacy risk was seen as one of the factors in the breakdown of merger talks between Sportingbet and Ladbrokes last year.
However Peel Hunt’s Nick Batram was less positive, bringing a ‘Hold’ recommendation and noting that “Europe is clearly a challenge and the elongated exit from Turkey may hold back potential acquirers of the group”.