bwin.party in trading update

The European online gambling group Bwin.Party Digital Entertainment has issued a pre-close trading update highlighting its ambitions to:

* Continue cost-cutting in order to achieve Euro 70 million in savings by thethe end of 2013

* Pursuing New Jersey online gambling licensing with a November launch in mind

* The continuation of its focus shift from volume to value

* Reports that revenue during Q2-2013 has followed a similar path to that seen in Q1 reflecting the introduction of the turnover tax on sports betting in Germany in July 2012 and a lower than expected gross win margin in sports

* Next generation online poker product is being tested with full launch scheduled for August; new payments services also to launch in August

* New social sports betting application currently in test on Facebook

Norbert Teufelberger, CEO, said Wednesday:

“Trading in the year-to-date reflects our shift from volume to value, the introduction of a turnover tax in Germany in July 2012, as well as some issues we faced following the migration of bwin.com customers in December 2012, all against a challenging competitive and market backdrop.

“However, the process to optimise the shape and size of our business, with a greater focus on regulated and to-be-regulated markets, is on-track and we remain focused on returning our business to growth.

“While the revenue performance was down on last year, we remain on course to deliver the targeted €70m of cost savings in 2013 with more to follow in 2014.  During the second half we expect to roll out our new real money and social gaming products as well as, regulations permitting, the launch of our poker and casino games in New Jersey.”

Teufelberger reported that the Group’s revenue performance since the beginning of April 2013 was softer than expected due to a lower than expected gross win margin in sports betting during April and June as well as competitive pressures in bingo.

“Ahead of the launch of our new poker product, the trends seen in Q1 in casino and poker continued during the second quarter,” he said.

“Whilst we retain a leadership position in our two largest markets, competitive pressures in both the UK and Italy have continued to hold back our bingo business.

“Our cost reduction initiatives remain on-track and we are set to deliver Euro 70 million of savings in 2013, with more to come in 2014.”

Teufelberger said that the company is currently testing the new version of its poker product, a process that will run for the next few weeks before a full launch during August 2013, “….when we also expect to launch a new social sports betting application that is currently being tested in a closed environment on Facebook.”

He said that Kalixa, Bwin’s payments business, will launch a new service on both iOS and Android in August, enabling consumers to make contactless mobile payments.

“Additionally, Kalixa Pro, our service for small and medium-sized businesses, will launch its mobile point-of-sale product in September, enabling the making and acceptance of card payments anywhere and at any time,” Teufelberger said.

The group is making good progress on its bid to acquire licensing and launch online gambling activities in New Jersey later this year, one the intrastate market becomes regulated. Licensing applications will be lodged by the end of July, and the company expects these will be finalised by the New Jersey Division of Gaming Enforcement following the summer, with a market opening sometime in November 2013.

The update also notes that at the end of June 2013 the Group successfully concluded an outstanding legal claim made by the State of Kentucky for $15 million, resolving the only remaining litigation involving the company that stemmed from its pre-UIGEA US activities .

The Group’s results for the six months ended 30 June 2013 will be announced on Friday, 30 August 2013.

In related news, French media reports suggest that the Bwin chief exec will be taken to court and prosecuted in Nanterre, France in respect of a case seven years ago in which he was arrested by French police on allegations of sponsoring football team AS Monaco (see previous reports on the incident).

Incredibly, French prosecutors are only now ready to proceed against Teufelberger, with a court date set for September 19 2013.

Bwin.Party said in a statement this week that Teufelberger and fellow exec Manfred Bodner “…remain of the view, that we did not do anything wrong and we were compliant with EU law.”

However, industry observers have pointed out that the timing of the criminal prosecution is not the best, given Bwin’s current attempts to penetrate the finicky US market.

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