Welcome to the Presentation of the Fourth Quarter from Betsson, and to all of you on the web, welcome as well. I'm going to start with going through some highlights for the fourth quarter. We see an all-time high in revenues of SEK 1.4 billion, with growth across all our operational regions. There is also an all-time high EBIT of SEK 342 million, this is, of course, from successful operations and the efficiencies that we have implemented in the company that continue to show effect. We have also received gaming licenses in Sweden during the fourth quarter, which are now up and running on our operational sites in Sweden. We have received eCOGRA Safe & Fair Seal certificate during the quarter. We're going to dig into the figures a bit. Our total revenue grew at 14%, where 12% was organic. Casino revenue grew 24%.
Sportsbook revenues were down 5% compared to the same quarter last year. We have to remember that in that quarter a year ago, we had a really high sportsbook margin, whereas in this fourth quarter 2018, it was more of a normalized margin at 7.3%. The sportsbook average margin for the past eight quarters is 6.9%. With all this, we can conclude the EBIT at SEK 342 million and a quite strong and impressive margin, in my view, at 23.8%, which is an increase by 56% compared to the same period last year. The board of directors propose a dividend to the AGM of SEK 539 million, which corresponds to SEK 3.89 per share, to be distributed by automatic redemption process. This is in line with the dividend policy of distributing 50% of the net income.
To elaborate a little bit of what is behind this, in my view, strong report, we initiated a program in the beginning of 2018 called Back on Track, that plan spans across and right through the whole company, including technology, marketing, organization, and everything. In central of this plan was the culture and organization. The organization is the most important asset that we have in this company, and we have made quite strong changes to that organization. Around that, we have put four pillars in this plan: namely, to get back to growth in core markets, to work with efficiencies all across the company and right through the company, to enhance and develop our technology and our product, and to put M&A on hold in order to be able to focus on the other part of the plan.
I think the results for this quarter and the past quarters as well show that we have set the group Back on Track, now we're going to stay on track and keep on enhancing the company even more. On the product and technology side, we have made quite a few improvements on the product offering and also the speed of the services. We have added a lot of functionality to the sportsbook. We have modified the product to be compliant with the Swedish gaming authorities and the regulations in Sweden. We have started to roll out OBG on the desktop, which is still ongoing. There are some other things we have done as well, like automated chat box for customer service and some improved functionality on the responsible gaming tools that we have. I'm really happy to see that we grow in all regions.
This was another part of the plan, to get back to growth in all our main regions. As you can see on this slide, we grow in the Nordics, we grow in Western Europe, we grow in CEECA, and we grow in rest of the world. That is what builds up to this increased revenue. The third important pillar is the efficiency, and we have been working a lot with that. As you can see, it has resulted in a lot higher profits and we are starting to get the EBIT margin back to a very healthy level, despite the fact that we pay more and more taxes. For the products on the casino development, We now offer 2,700 casino games, whereas 2,000 on the mobile. The casino grew by 24%, 20% organically, and casino was 75% of the total revenue in the quarter.
Mobile casino increased 35% and now accounts for 64% of the casino revenue. We see an increased revenue from our proprietary games, which are unique to Betsson. On the sportsbook side, we have an extensive offering on the sportsbook, and we served close to 47,000 live betting events in the fourth quarter, which is an increase by 24% compared to the last year. The turnover grew with 6%, but the revenue was down 5%. As I mentioned before, it's compared to the quite unusually high margin of the fourth quarter 2017. Sweden is newly regulated since 1st of January. We now pay 18% betting duties in Sweden, and we have received a five-year license for four brands that we applied with. We see a bit of an impact on the EBIT in the beginning of the quarter.
We had welcome bonus for many customers under the new regulation. We have done increased marketing, and we pay the betting duties. Another effect from the Swedish re-regulation is that close to 20,000 customers have self-excluded so far via the functionality at scale house. We now see new marketing channels opening up, and we have introduced Swish as a payment method on our sites. Over to the regulatory updates. We have licenses in 12 jurisdictions, including Sweden from 1st of January 2019. The revenue share from regulated markets is estimated to increase from 24% 2018 up to somewhere between 30% and 40% for the year of 2019. There's a re-regulation of the gambling market in the Netherlands ongoing, and we will see when that will turn into effect for us. Betting duties increase in Italy from 1st of January 2019 and in the U.K. from 1st of April 2019.
To summarize all of this, I'm really happy that we have an all-time high, both revenue and EBIT. I think we can definitely conclude that 2018 brought the company Back on Track. We are now very focused to stay on track with continued improvements of products and technology. We're going to keep on working on efficiencies so that we are able to absorb betting duties. We will continue to grow in our core markets, and we will continue to work on our geographical spread, which is quite wide, in order to spread our risk. I think our long experience and considerable size gives us a solid foundation going forward. Thank you, and we open up for questions. We start here in the room. I have a microphone.
Thank you. Martin Arnell with DNB Markets in Stockholm. My first question was on the numbers in the quarter on EBIT. I think you mentioned that there was some one-off items affecting the EBIT. Can you elaborate and explain what that was?
We have mainly two provisions that we have done. One is a provision made for recalculation of taxes in a licensed market, and the other one is for a provision for claims from a payment provider. That is estimate close to SEK 20 million that is to be considered as one-offs.
Thank you. On your Back on Track plan, is the effect from that also going to be visible in Q1, and it ends from there, or?
We're going to close the plan by the end of the first quarter. We have come to a situation with the company where we are now a lot more effective than a year ago. Of course, after the plan or the program is closed, we're going to continue to work with other parts of the company to increase the effectiveness even more.
Okay. Thank you. On Sweden, what's your view on the start of the re-regulated market and how Betsson has performed so far?
First of all, we're really happy about that it finally became a regulated market. We see strong activity figures, a lot stronger than the last year in terms of activity. Of course, as you could notice on the market, all operators offered a lot of bonuses to keep the clients in the start of the year, and that, of course, has an impact on the revenues for the beginning of this year.
Is it fair to assume that the revenue, the growth, the year-over-year development would be back-end loaded in Q1? Or should we see this 10% for the group as a guidance for the quarter?
No. The statement for the first part of the quarter shouldn't be seen as a prediction for the rest of the year at all. When it comes to the Swedish market, it's really hard for us to estimate how it will develop during the year. We are now 40 or 45 days into the regulated market, and it's too early to say how it will develop. We are happy about the activity, and it remains to be seen how it will behave for the rest of the year.
What's your view on channelization so far in Sweden? Are you live with all the brands that you had before the regulation?
We are live with all the brands that you applied for a license with, and all the other brands are shut down for Swedish players. We did not expect channelization to be 100%, because that has never happened in any regulated market so far. I think the channelization looks quite healthy, but it remains to be seen, and we need to look deeper into that.
Okay, thanks. I must ask you on the discussions in the Netherlands, the ongoing discussions ahead of potential reregulation. What's your comments about what has come out so far from the debate in the Netherlands and potential impacts for Betsson?
Yeah, we're really happy that the process is moving forward. This is something that we have been waiting for a long time. Our latest view is that regulation will come into force, possibly by the end of 2020, otherwise, in 2021. We look forward to a regulated market and to take part in that market.
Can you give any comments on the potential risk for a cool-off period for operators that are being discussed and the potential negative impacts for Betsson?
There are a lot of details being discussed right now. A cool-off period would, in my view, hit the whole international industry, and that would not be in line with the ambitions presented by the regulator to channelize the players to licensed operators. I think we should look at the history, and there have been discussions on cool-off periods in many different countries, but it has never made it into regulation, and I don't think that we will see that in this case either.
Okay. Are you taking part in any discussions with the authorities in the Netherlands now? I think I remember in the last earnings call, I asked you if you had initiated discussions with the Kansspelautoriteit, for example. Has anything progressed there?
We just follow the development on the market from our end.
Okay. Then on Italy, there's a change of tax. How will that impact Betsson? How big is Italy for you?
Italy is a part of Western Europe, which is a strong region for us, and Italy is showing strong growth. It's one of the markets where we have put strong efforts to become successful, and we are successful there. Now we will face a little bit more tax than we did before, but we have reached the size in the Italian market where we can handle that tax, and that goes for the whole company. With the way we have managed to put efficiencies into the company, I think we are better suited than most parties in this market to handle local taxes.
Okay. Thank you. I'll come back later.
Niklas Ekman , Carnegie. Hi. A few more questions on Sweden. Can you say something about, maybe not from your own perspective, but from the total market, how the bonus offerings are in the market in total? What are the operators offering the customers in general?
Nowadays, I guess more or less nothing. There was this ability to give a welcome bonus to clients, I think most operators offered a bonus to all their customer bases, which of course, has an impact on the figures in the first part of the quarter. Apart from that, there are not, as far as I know, many bonuses being offered in the market.
Okay. How long would it take to consume these bonuses? Is it pretty fast, given the churn and the activity level?
It should be pretty fast. It should mainly be in the first quarter.
Okay. In the report, you talk about increased competition from larger players. Can you talk about the competitive landscape in Sweden so far? What you're experiencing?
Yeah. I think if we would count the number of sites, then you could come to the conclusion that the competition has decreased. We have a few new players in the market, namely the Swedish incumbents. They are, of course, in a strong market position, and they offer healthy competition to us and other players. Sweden was a competitive market before the regulation, and Sweden will be a competitive market even after the regulation.
Okay. You are growing by 8% organically so far in Q1. Can you say something about the sportsbook margin? Is that on the historical average now in Q1, or is it higher or lower?
I can't comment on the margin other than saying that it's nothing exceptional. If it was exceptional, then we possibly could have stated it in the report, but it's nothing exceptional.
Okay. Just a final one regarding the Netherlands. This cooling down period of two years, and the focusing on operators actively targeting that market. Can you talk about that? What does it mean? When does this period start?
I don't think that there is no decision about the cooling off period yet, and I have a hard time to see that it should happen because it wouldn't be very good for the market. If it would happen, it would probably hit all international operators in the same way, and that would be probably not very good for the development of the Netherlands market.
Okay, got it.
Okay. Do we have any more questions in the room? Yeah, we have one more before we hand over to telephone.
Can you explain why Realm improved so much in the quarter?
Realm improved operationally. We made a lot of changes to the product, and that had an immediate impact on the revenues. It's mainly driven by the enhancements that we did in the product and site speeds and offering in the sportsbook and things like that.
Okay, thank you. Then on your acquisition strategy, you have had a pause during your Back on Track plan. Do you still expect to start looking for more acquisitions already this year, or?
We are still on the plan as to the end of the first quarter. After that, we may start to investigate. We have a strong, healthy organic growth, and we're going to keep on working on that to make sure that it is sustainable. After all, that's the best way to grow our business in the long run. We are always open for opportunities. If we find something that fits our geographical map, we are open for it.
Okay, thanks. My final question is on the percent from regulated markets this year when Sweden has now regulated, what do you expect that will be this year?
We expect to end up somewhere between 30% and 40% of revenues from regulated markets for the year of 2019.
Okay. If, just theoretically, if Sweden had regulated a year sooner, what would it have been in 2018?
I haven't done that calculation, but I can't answer that.
Okay. Thank you.
Okay. That was questions in the room. We hand over to the operator for further questions.
Thank you. Ladies and gentlemen, if you do have a telephone question, please press zero one on your telephone keypad now, and there will be a brief pause whilst questions are being registered. Our first question comes from the line of Hjalmar Ahlberg from Kepler Cheuvreux. Please go ahead. Your line is open.
Thank you. Just a question on Sweden. You have seen increased activity and then the customer is using bonuses. Could you say anything about, is it existing clients using the bonus to increase activity, or do you see a lot of inflow from new customers or old customers coming back? Any comment on that?
Yes. The answer is that it's our existing clients, but it's also new clients. Internally, we refer to this time period as the jump around period because we find that most naturally, when there is a one-time bonus, some customers tend to jump around between operators to pick that bonus. It's a little bit hard to draw any conclusions from what we have seen so far in the quarter. To answer your questions, it's both our existing clients and it's new clients. That's why we see quite a high activity on the Swedish markets.
Okay, got it. As you said, you're coming to the end of your plan in Q1. Have you started thinking about the U.S. accordingly, or will you have to wait until the plan is finished before you start looking at it?
We are monitoring the development in the U.S. closely, and it's not really related to the plan, even though it's true that we have been putting more focus internally for the past year. We have no immediate plan to run to the U.S. to do anything, but we will keep on monitoring the market and see if any possibilities open up there for us.
Okay. Just maybe one more on Netherlands. As you say, if they would do some cool-off period, it would hit a lot of players. Do you think that the international operators would still then provide casino or sports betting to Netherlands, although they maybe cannot advertise them? What do you think would happen if they do the cool-off period?
These are all speculations, and I can't speculate on that. I think it would be a drawback for the Netherlands market if all the international operators would have to shut down, because that would open the door for Dutch consumers to move to unregulated markets and operators who are not licensed anywhere. That would be in conflict with the interest of the regulator, which actually is to protect the Dutch consumers.
Okay. That's all from me. Thank you.
Thank you.
Thank you. Our next question comes from the line of Lars-Ola Hellström from Pareto Securities. Please go ahead. Your line is open.
Hi, Pontus. Congrats on a good report.
Thank you.
Starting with the Q4 and what happened in the Nordics. I learned from the Kindred report yesterday that they had been invested quite a lot in Sweden through high bonuses. Was that an effect for you as well, affecting growth in the Nordics in Q4?
No, we didn't have any dramatic bonus changes for the Nordic market in the fourth quarter. It didn't happen any unusual bonuses during that period.
Okay. The sequential downtick was mostly related to that Q3 was really strong?
I don't follow you really. Of course. Okay, you talk sequential to Q3. Yes. Q3 had the world championship effect in it, and that has an impact, of course.
Okay. In the Western Europe growth, is it still the same markets, Italy, Germany, the Netherlands, that continue to show good growth?
Yeah, these are the markets that you mentioned that show strong growth, and also I can mention Spain, even though it's a very small country for us still. The growth figures are doing all right there. It's across the board, I would say, apart from the U.K., where we have decreased our investments in marketing and our ambitions in the market.
In Q3, you were not super happy with the product in Spain. Is that in place now, and are you pushing it even more now?
It's not in place yet, and we are not pushing it hard. Still we see some growth. We have higher ambition for that market in the future. We have not been able to push it as hard as maybe we planned initially, because we have been putting a lot of focus on where it was mostly needed, which was inside the company, and that has given the outcome that we wanted. I hope we will be able to push even harder in Spain in the future.
The improvements we saw in the CEECA region, is it mostly Turkey or is it Georgia as well?
It's both Turkey and Georgia.
Perfect. Going to the Swedish regulation, I guess there has been a bonus effect in January, and that effect is diminishing. Have you also seen an effect of lower player values?
I haven't checked that in detail, but I could by guessing assume that if we would calculate player value in the beginning of January, we would see a lower value. That's very natural because there is a lot of shopping around, as I mentioned, what we call the jump around period, where people come and pick up bonuses and then leave. That kind of has an impact on the player value, of course, for a short period of time.
Do you think that the player values will remain on the same levels by the end of 2019 as they were in 2018 in Sweden?
I can't speculate in that. I hope we will know in a year.
This bonus effect, do you think it will almost will be gone by end of Q1, that we will see a smaller difference between GGR and NGR compared to what it was in 2018?
Yes, I definitely hope and believe that we will see, in the later parts of this year, a different structure on that compared to the first part of the first quarter this year, where we had this quite big bonus cost.
Okay. On marketing spend, should we assume that you will keep marketing in line with the Q4 and now in Q1, or will you ramp up a little bit to protect your position?
I don't want to go into any outlook on that, but I think if you look back, we have been pretty consistent in how we market. Of course, it differs a little bit between quarters, it will in the future also differ between quarters, but you should not expect any big deviations.
On the OpEx, is this on a level from where to grow now, or is there more to do?
We will keep on working on efficiencies. As said, most of the job has been done there, but of course, I hope that we can find some more areas of improvement.
Okay. On the Netherlands, and concerning the cool-off period that has been discussed here during the call, if we will have a regulation in place next Tuesday, if they vote in favor of it, when do you expect that we can have some kind of news flow explaining how they will treat operators that have been fined? Do you think it will be out in coming months, or it can be one year away?
That one is impossible for me to predict. I can ensure that we will communicate as soon as we know anything more about the regulatory process in the Netherlands.
Okay. Thank you.
Okay. Any more questions from the telephone?
Thank you. Ladies and gentlemen, if you do have a further question, it's zero one.
Maybe I should speak in with a few questions from the webcast.
Yes, we have a few questions from the webcast, please.
The first one is from Robert Gustafsson, who asks: regarding all the actions that you have been doing to be more efficient, do you believe that the effect of this is bigger than the impact of the Swedish taxes?
I haven't put those next to each other. We have made all these efforts, first of all, to get the company fit, and we have really managed to do that. By doing that, we have prepared the company to be able to consume future taxes, because that is something that all of us know is going to affect this industry in the future, and the fittest companies will survive. We definitely are one of the fittest, if not the most fit.
Okay. We have more questions from Robert Gustafsson. He also asks about Spain. Of course, you mentioned Spain before. He says that in the last report, you said you were waiting to implement some platform updates. How is that process ongoing?
Yeah, we don't have our Spanish operations on our own platform yet. I can't communicate any detailed time plan for doing that. Still, we will work on changes to the existing platform to make it better during the year. We believe a lot in the Spanish market. It's a big market. It has great potential. We have to start working our way upwards there as we did in Italy, by small steps. At some point of time, we will become big in Spain as well.
Okay. I will continue with a question from Jamie Taylor. How should we think about the contribution margin from Holland versus group average margin?
Obviously, we don't do marketing in the Netherlands, and that is, of course, different from what we do in other markets, like in Sweden. Of course, that has an impact on the EBIT margin. That's probably how you should think. Now, that goes for all the operators active in the Netherlands, as no international companies does any marketing there.
Another follow-up question about Holland from Robert Gustafsson again. Do you see it as a possibility to apply for licenses with a number of your operators, with other operators in Holland?
These are details that I haven't looked into. We look forward to the regulation, and we will apply for license as we have done in all other jurisdictions, and hopefully we will be operational there in 2021 under license.
Okay. Let's see if we can take a last question from Robert Gustafsson. We touched upon the question before. There is a big focus on Swedish regulation when it comes to your estimates about 30%-40%. Do you mean that around 35% would be a probable guess?
Well, let's see now. 35% is between 30% and 40%, that's a guess as good as anything in that bracket. It's very hard for us to see how the market will play out. We think, when we summarize 2019, that we will be between 30% and 40%. As I said before, we are 40, 45 days into Swedish regulation. The market is hard to predict from this short time span, but we are in a good position with a strong product, we should definitely look forward to the nice ride in Sweden for the rest of the year. Do we have any more questions here in the room?
I have one more question from the web browser that just came in.
Okay.
How do you think about share buyback programs?
This is not something that we comment on in this report. Okay, any more questions? Okay, if not, thanks a lot, and before I quit here, I want to say it's been a fantastic year, 2018. We have gone from one situation. I was actually this morning reading through the presentation for the fourth quarter 2017, and what I said in that report and how I felt, and it's a big change that we have been going through during this year. We have this strong organization in Betsson with all these people fighting hard every day, and I'm really happy about that. Thanks to all of you. We have done this together, and see you next quarter. Bye.