Positive year but poor Q1 for L&G

It was mixed signals from the online betting group Leisure and Gaming plc this week as the company reported a fall in first quarter gross profits but an impressive 67 percent year-on-year growth in full-year 2009 operating profit.
Publishing its Q1 results to end March 2010, L&G said its gross profits fell to Euro1.2 million – down from Euro 2.8 million in the first quarter last year. This was despite an increase in the amounts wagered to Euro 37 million (2009 Q1: Euro 31.9 million) and overhead static at Euro 1 million.
The net win margin declined to 15.7 percent compared with 27.3 percent a year ago, and net profit before tax for the quarter dropped from Euro 1.8 million in Q1 2009 to Euro 200 000.
Chief executive Richard Creed said: “This year’s first quarter saw disappointing margins on sports betting as the dominant teams in the Premiership and European football leagues recorded consistent success throughout the quarter, contrasting with margins seen in Q1 2009, when these teams regularly failed to win.
“This further emphasises the need to continue with our strategy of product and geographic diversification, thereby improving revenue stability.”
L&G had better news for investors in its full year 2009 results, where gross profits rose to Euro 6.8 million – up Euro 600 000 from FY 2008.
Operating profit before interest, foreign exchange, tax and depreciation and amortisation was Euro 2.5 million (2008: Euro 1.5 million), thanks mainly to solid growth in the Betshop Italia part of the L&G business.
Total amounts staked grew 5.5 percent to Euro 81.1 million, with tournament poker providing a boost to L&G’s bottom line due to Italian players spending Euro 47 million on joining poker tournaments during the year, compared to Euro 2.7 million in 2008, and online poker contributing 27 percent of total net win, compared to just 2 percent in 2008.
The story with sports betting volumes in Italy was not as good, with revenues falling to Euro 43.4 million last year, from Euro 53.9 million in 2008. The picture was better looking at sports betting volumes internationally, which remained broadly stable at Euro 70.2 million, marginally down on 2008’s Euro 71.3 million, with better growth from Cyprus to Euro 17.5 million (Euro 14.6 million in 2008), and Greece to Euro 8.9 million (Euro 2.5 million in  2008).
Cash held at banks, excluding borrowings, was Euro 1.6 million, slightly up on last year’s number. Cash held as security for guarantees for Italian licenses was Euro 1.6 million (2008: Euro 2.2 million).
Creed said: “Figures published by the Italian regulator show that the Italian gaming market is growing by 20 percent per annum. In addition, the imminent regulation of casino and cash poker games, (announced by the Italian regulator to occur in July 2010) is expected to provide significant growth opportunities.
“The group continues to diversify its product offerings in order to reduce its dependence on sports betting.
“The development of our B2B offering, using proprietary betting software, is generating many leads and the fees earned through the use of existing assets will serve to reduce the risks associated with sports betting.”
The company’s report revealed that L&G is in discussion with suppliers to launch online bingo in Italy, and that it had recently obtained a gaming licence in Malta to cover all other online activities in regulated territories in Europe.
It appears that the group is also busy cleaning its US slate against a possible legalisation of internet gambling, reporting that it had devoted “a considerable amount of time and energy” in providing information to the US authorities
A statement added that it expended “a considerable amount of time and energy” in the latter part of 2009 providing information to the US Justice authorities concerning the US-facing subsidiaries L&G sold prior to the passage of the UIGEA in October 2006.
“We remain hopeful that we can reach an agreement with the US Department of Justice which will provide us clarity on this matter,” the statement said.

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