Webis cuts losses despite lower customer spending

26 February 2020

Webis Holdings, parent company of WatchandWager, saw turnover - defined as total wagers minus winnings - increase to $8.1m (£6.2m/€7.1m) for the six months to 31 December 2019, and losses decline as it hopes to bounce back from the loss of a major customer in late 2018.

Denham Eke, non-executive chairman of WatchAndWager said that, despite making a loss, the six months were a success, particularly in the B2C sector.

“I am pleased to report that performance has been a little above expectation across our key sectors from December to the time of writing,” Eke said. “We have seen particularly good performance from our business-to-consumer unit and the racetrack in California.”

The amount wagered in the six months came to $37.7m, down 38.3% year-on-year. Eke said that this decline was largely due to the loss of a major B2B syndicate, which was one of its largest customers.

Eke added that the amount wagered from its business-to-consumer arm increased 10%.

However, despite the lower stakes, turnover increased 49.8% to $8.1m. Webis said that a large reason for the improved margin was an effort to promote “high-margin racetracks and customers.”

However, Eke described its B2B turnover as “largely flat,” even after accounting for the loss of the syndicate.

“Whilst we continue to service a wide range of customers on a wide range of international tracks, this sector [B2B] is becoming increasingly competitive in nature,” Eke said. “In particular, we compete with a wide range of operators who seem intent on maximising the volume of amounts wagered at the expense of margin.

“This is, of course, something of a race to the bottom and not commercially attractive, doing little to increase the value of the company for shareholders. As a result, we continue with our strategy of growing our team of players for as long as a reasonable margin can be maintained, and activity is permitted within our regulatory obligations.”

Most of Webis's turnover came from racetrack operations in North America, which brought in $7.6m. Advanced deposit wagering in the British Isles brought in $404,000 and in the Asia Pacific region $12,000.

Webis added that its racetrack operation at Cal Expo in Sacramento, California “performed well” during the off-season racing events as international wagers at the racetrack increased.

After a $6.2m expense because of costs of sales, up 73.9%, and a further $42,000 in betting duty, gross profit came to $1.8m, up 5.2%.

Webis’s operating costs came to $2.0m, down 7.6% from 2018. After $60,000 in other income and $10,000 in other losses, the business’s operating loss came to $166,000, down 70.1% from 2019’s loss.

After financial costs of $41,000, Webis made a loss of $207,000, down 65.7% year-on-year.

Eke said he is optimistic for the future of Webis, with the loss of the syndicate allowing it to run “a more balanced business, with less reliance on one group of customers.” The business can become profitable again through a continued focus on higher margins and the United States, he added.

“The board is confident that existing operations have now stabilised and can indeed return to profitability,” Eke said. “The operation is run leanly and whilst the external welfare issues impacting horse racing and greyhound racing are a concern, there remain significant opportunities, both domestic and international, for new player content.

“Our strategy is to grow our platform through additional content and players, but continually focussing on higher-margin business. However, the Board recognise that the ultimate goal is to capitalise on the huge opportunities available within the USA’s expanded gaming landscape.”