Q & A: Eric Semel, ukbetting plc

ukbetting plc this week released its first batch of financial results since it floated on the AIM in August. The United Kingdom-based company is posting total turnover of £7.15 million and gross profits of £88,000. IGN spoke with Eric Semel, ukbetting's chief executive, about the group's progress.

IGN: What's your impression of the maiden results? Do you feel the company is where it should be at this point?

Eric Semel: Definitely. I think the results can be a bit difficult to dissect at this point. What we have is the combined businesses that we acquired since Aug. 7--we brought them all forward to year-ending Dec. 31. So you had a few different financial years and we basically decided to pile everything into last year and bring all the businesses associated into yearend Dec. 31. You have different calendar years for each of these businesses. Essentially we've bedded down all the costs, all the exceptional charges for listing and professional fees and acquisitions and redundancies and all those expenses into last year's numbers. So going forward, we're very comfortable about the position, in terms of on a gaming side, in terms of gaming turnover, customer growth, the reach of our sites. And on the content side, we're very happy in terms of the increase in users of the site, the traffic. Especially notable is the increase in advertising revenue that we're generating.

IGN: Did the acquisitions all happen after you went public?

ES: Yeah. We acquired and listed, essentially floated, ukbetting on the same day. The other businesses--I can walk you through individual ones if you'd like.

IGN: If you could give a brief summary that would be great.

ES: In August 2001, the directors raised about £6 million, of which we contributed--the directors did--about £1 million. That was used for an IPO of ukbetting, which we purchased from Enic plc, for £1.5 million in cash and £1.5 million in shares. Then we acquired the Totalbet and SportingLife business; that was for £2 cash and £1 million for Totalbet. Following that acquisition--there was no debt inside that business--we thereafter acquired SportsCard, which is a credit card business, for £4.3 million in stock. We benefited from £3.4 million in cash we received inside that company, in addition to approximately £700,000 to £1 million in liquid tickets to sports events like Wimbledon and rugby here. Thereafter we acquired Sportal, the brand, for £1, and bought about £190,000 in servers to run the site.

IGN: How did you acquire Sportal for just £1?

ES: How did we? Well, it's amazing that a company that had spent almost $1 million on their brand seemingly went for £1. I guess it was partially through luck and partially through timing. The markets around September and October last year were as bad as they could possibly get. The appetite for online businesses that had failed to show any sort of a profit had reached its peak.

IGN: But the brand was still of use to you?

ES: The brand was still of use to us. Their strategy was as a pan-European content provider--network--what they did do well was, among other things, sell advertising. At the time we bought it, they were doing about £350,000 a month in online advertising, so what we did was take the people responsible for those sales and brought them into our group at SportingLife. But to answer your question, how did we acquire it for a buck, I guess it's just partially luck and partially timing that we could acquire not only that business but the SportingLife business, which just last summer had a price tag of between £25 million and £40 million. We've acquired those two businesses for £3.

IGN: Do you have more to add to your summary of acquisitions?

ES: Well, I can tell you where we are today as opposed to August 2001. In August 2001, ukbetting had under 8,000 registered gaming customers, and today we have over 68,000 registered gaming customers, partially through acquisition and partially through organic growth. Just the growth alone in ukbetting went from under 8,000 in August to approximately 13,000 today, so we've almost doubled since August. We have 1.25 million unique users for our content sites per month, doing 50 million page impressions a month and growing.

Just to give you some stats on that growth if you're interested--what we did is we relaunched Sportal. That went up last month. And we just launched what's called the bettingzone.co.uk, and basically we did 52 million pages combined in January, which is double what we did in January 2001. So the growth in the content is quite large. Just last week during the Cheltenham race festival, we were doing 3.5 million pages a day. We've just expanded to a 30-megabit pipe. We could probably power the whole one-mile square radius of our office with that.

The average time (spent) on the site is 45 minutes, which is quite large. We did an intake in February for advertising of almost £200,000. To put that in context, SportingLife did approximately £100,000 in advertising revenue for the whole of last year. We syndicate content from our content sites to other portals and platforms. In the U.K., we syndicate our bettingzone content to MSN, to Yahoo!, our sports content to BT, British Telecom. Shortly we'll be making other announcements in terms of syndication of content and betting with wireless partners. We also supply content on digital television, on Telewest and NTL. So really the content business is growing exponentially, every month, every year, and the advertising revenues, as stated in the press release, are going quite nicely.

IGN: Since the content business is growing so fast, do you see that eclipsing betting revenue?

ES: No. Gaming revenues account for over 90 percent of the revenues for the group, so we are a gaming company, and the majority of our revenue will always be in gambling. I don't anticipate that that would ever change, but ideally, but the key metric here is, as far as online gaming is concerned, in my opinion, is, brand or no brand, big brand or little brand or small brand, how much does it cost for somebody to acquire a gambling customer online. Numbers thrown out here by Merrill Lynch in this market would show that it costs between £150 and £500 per customer, to acquire each customer. So if you put that in context of our growth, in terms growing at 2,000-3,000 customers a month, you see that, if we didn't have our content sites we would be spending in excess of £400,000 a month on advertising online and off to get that growth. So we're sort of in a unique position in that respect, compared to our competitors--or most of our competitors anyway.