Sky-high marketing costs hit Bwin profits
Bwin posts 27% drop in quarterly operating profit with marketing spend up 30% and a costly entry into France to blame.
Austrian egaming company Bwin, that will merge with PartyGaming at the beginning of 2011 to form a US$3.3 billion business, posted a 27% drop in quarterly operating profit in the second quarter of this year, hit by marketing costs for the football World Cup and “intensive preparations and start-up costs” during its launch in France.
Marketing costs were up a massive 30% in the second quarter with EBITDA falling from 15.1 million in Q2 2009 to 11m this year. The company did not specify how much it had spent.
“The market launch in France was successful with two French sports betting platforms launched and preparations made for three different poker labels there,” a spokesman said this morning. “This intensive activity associated with start-up costs, however depressed our results on a temporary basis and we will incur these costs with a view to further regulation in Europe.”
However, Bwin saw a record turnover for sports betting due to the World Cup that helped boost gross gaming revenues by almost 35% from 95.1m to 127.2m, or 113.8 million excluding Gioco Digitale. Bwin acquired the Italian poker operator for around 90m in September last year. Its sports betting margin rose from 5.9% in 2009 to 7.2% in Q2 this year. It also bucked the seasonal decline in poker to record a 19% rise in the vertical, a Bwin investor relations spokesman said.
“Measured in terms of sports betting gross gaming revenues, Bwin reported almost the same results for the 2010 World Cup as for the last two major soccer events combined, the 2006 World Cup and Euro 2008,” the company added.
In the first quarter of this year Bwin announced it was feeling the pressure of US-facing poker companies such as Full Tilt and PokerStars operating in Europe, with poker revenue falling 17% year-on-year (YoY) if the contribution of Italian poker giant Gioco Digitale is deducted.
Bwin said its planned merger with PartyGaming, that will make it the world’s largest egaming business and save the two companies around 55m a year in “synergies”, was “on schedule” to close early next year. It added that the consolidated company would be the “market leader” in poker, sports betting, casino, games, and “particularly bingo”.
Bwin’s share price was up by 0.75% on the Austrian stock exchange to 37.40 at 8.50am (GMT).