Record results for Net Entertainment

The Swedish online gambling software provider Net Entertainment posted a sparkling interim report for the period January to June 2012 Friday, noting that its revenues reached an all-time high during the period.

High points of the company’s second quarter 2012 included:

* Revenues for the second quarter increased by 32.2  percent to SEK 132.0 (99.9) million compared with Q2-2011
* Operating profit amounted to SEK 39.6 (27.2) million
* Operating margin was 30.0 (27.2) percent
* Profit after tax amounted to SEK 36.7 (25.1) million
* Earnings per share amounted to SEK 0.93 (0.64) before and after dilution
* Five new license agreements were signed and four new customers’ casinos were launched

For the first six months of 2012, Net Entertainment reported:

* Revenues for the first six months increased by 33.0  percent to SEK 259,5 (195.1) million
* Operating profit amounted to SEK 79.7 (53.5) million
* Operating margin was 30.7 (27.4) percent
* Profit after tax amounted to SEK 71.4 (48.0) million
* Earnings per share amounted to SEK 1.80 (1.21) before and after dilution
*Ten new license agreements were signed and eight new customers’ casinos were launched

The company attributed its impressive growth in to increased volumes primarily driven by existing customers’ growth and new customer agreements signed. The amount of set-up fees for the quarter also contributed positively to the revenue increase.

The report notes that the Italian market continued to contribute positively to the company’s revenues during the second quarter. The Italian gaming authority AAMS has announced that slot games online will be allowed in Italy from December 2012, which will further enhance returns.

NetEnt handled 2.9 billion game transactions in the second quarter – a decrease of approximately 3 percent compared to the previous quarter. The decrease is the result of seasonal variations as the summer months traditionally have a lower activity level, in combination with exceptionally high activity from two games in the first quarter that have now normalised.

However, the average bet level during the quarter increased which affected revenues positively.

Looked at year-on-year, game transactions increased by approximately 53 percent compared to the same period in 2011.

During the second quarter, development on the mobile platform at NetEnt continued in order to introduce a product compatible with Android units. This work has progressed well and two customers were initially launched on NetEnt Touch via Android.

During the second quarter Bwin.it was launched, ready for casino operations in Italy.

Per Eriksson, president and CEO of Net Entertainment, said the company’s progress was good, with operating profit up by 46 percent compared to the same period last year.

He revealed that in order to improve speed and efficiency, the company had undergone some reorganisation during Q2-2012.

“The purpose of the changes was primarily to make the decision making process more effective through a flatter organisational hierarchy and meant that certain management positions were eliminated, such as the CTO,” Eriksson said. “The reorganisation resulted in non-recurring costs of SEK 2.5 million in the second quarter.”

Eroksson also revealed that several strategic projects are currently ongoing in Net Entertainment, including Live Casino, the entry into the UK market and establishing a presence in regulated markets.

“These projects have not yet started to generate any new revenues to the company, or have not yet reached the full potential, such as in Italy, but are expected to generate significant value for Net Entertainment in the future,” he said. “As these projects are completed the investments will in certain cases decrease while other projects will require further development to maintain competitiveness. In addition, Net Entertainment will continue to invest as new opportunities arise.”

Eriksson cautioned that the impact of diverse regulatory requirements and the need to handle growth made it necessary to maintain and further develop Net Entertainment’s processes, systems and organisation, requiring that staff levels and recruitment policies remain unchanged.  Additional studio staff had been recruited for the Live Casino project during the third and fourth quarter, he noted.

Turning to the mobile sector, Eriksson said that the launch of mobile games has been successful and there was strong growth in this area, albeit from low levels as the launch took place in December 2011.

“There is a high interest in the market and the company has signed a total of 17 contracts since launch, of which eleven are live,” he revealed. “During the quarter, development of mobile games for Android units continued and we have now launched two customers.”

The Italian market continued to perform positively for Net Entertainment clients, and the company was preparing for the advent of online casino action in the market at the end of 2012, planning initially to launch a selection of slot games when the market opens.

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