contact us Address
24hpoker Holding AB, po Box 3108, Gårdsvägen 18, Se-169 03 Solna Phone
+46 8 564 884 60 Fax
+46 8 564 884 61 Email
investor.relations@24hpoker.se www.24hpoker.se
Corporate Registration Number 556367-2913
annuaL GEnERaL MEEtInG the Annual General Meeting of sharehold- ers will be held on May 10, 2007, at 4 p.m. in the Company’s premises at Gårdsvägen 18 in Solna, Sweden.
Shareholders wishing to participate in the Meeting must be registered in the compa- ny’s share register maintained by VpC AB on Friday May 4, 2007, and must also notify the Company of their intention to participate not later than 12 noon on Monday, May 7, 2007.
Shareholders may be accompanied by up to two advisors if the number of assistants is no- tified within the stated time.
Application to participate in the Annual Gen- eral Meeting as well as for any assistants shall be made in writing to the address 24hpoker Holding AB, Box 3108, 169 03 Solna, or via e-mail to pia.rosin@24hpoker.se. Application must include the shareholder’s name, per- sonal identity number or Corporate Registra- tion number, address and telephone number.
If participation is based on power of attorney, the power of attorney should be included with the application for participation at the Annual General Meeting.
Shareholders whose shares are registered with a nominee must request a temporary re- registration of the voting rights attached to the shares to be eligible to participate at the Meet- ing. the nominee should be informed in this respect well in advance of May 4, 2007.
FInancIaL REPoRtInG DatEs May 10, 2007
Interim report for the period January–March May 10, 2007
Annual General Meeting August 22, 2007
Interim report for the period April–June November 15, 2007
Interim report for the period July–September February 21, 2008
Year-end report 2007
24HpoKeR At A GlAnCe 1
2006 In BRIeF 2
Ceo'S CoMMentS 3
VISIon, BuSIneSS ConCept AnD StRAteGY 6
opeRAtIon 8
MARKet 13
WoRKFoRCe 15
tHe SHARe 16
CoRpoRAte GoVeRnAnCe RepoRt 19
BoARD oF DIReCtoRS 22
eXeCutIVe MAnAGeMent 24
BoARD oF DIReCtoRS’ RepoRt 26
FInAnCIAl StAteMentS 31
noteS 41
AuDItoRS’ RepoRt 56
DeFInItIonS 57
contents
24hPoker at a glance
24HPoKER HoLDInG aB Is a sWEDIsH GaMInG GRouP tHat, via subsidiaries, develops proprietary software systems for online gaming and operates one of the world’s largest poker networks.
24HPoKER LauncHED onLInE PoKER In 2001 and conducts gaming operations via subsidiaries in Malta. All gaming is conducted in euR and 24hnetwork is licensed to market and pursue proprietary gaming operations as well as for supplying gaming services to part- ners in the poker network.
24H nEtWoRK oFFERs PaRtnERs everything from access to the poker network, with accompanying software systems and periph- eral services, to turnkey solutions in which 24hnetwork also offers other products, such as sports betting and casino, as well as website design, gaming licenses, operation, payments solutions, promotional tools and around-the-clock support to end customers
24HPoKER.coM Is onE oF tHE LEaDInG PoKER websites in the nordic region and offers a wide range of gaming services and stakes.
24hpoker.com is part of 24hnetwork.
tHE coMPanY PREsEnts the very latest developments in the poker world on its proprietary news website 24hpokernews.com.
the support organization and sports betting administration are oper- ated via subsidiaries in estonia.
24hpoker Holding AB is listed on the Stockholm Stock exchange and has some 10,000 shareholders.
24HPoKER's HIstoRY
2000 24hBet AB is established in January by per Hildebrand and others.
2001 August sees the launch of sports betting via phone, and in December, the service is offered online.
2002 May marks the launch of online poker with real money winnings.
2003 An online casino is launched in September.
2004 June sees an agreement covering a joint venture with the unibet Group plc. B2B poker (Sweden) AB is established and poker software is transferred from 24hBet AB to B2B poker. September marks the launch of the B2B poker network.
2005 the company changes its name from 24hBet AB to 24hpoker AB, its pro- prietary gaming units are combined to form a website, 24hpoker.com.
2006 In February, 24hpoker expands its shareholding in B2B poker through the acquisition of unibet’s share- holding.
In March, Daydream Software AB (publ) makes a public offer to shareholders in 24hpoker AB for all outstanding shares. Following the acquisition, all operations relating to the former Daydream are discon- tinued. In June 2006, the name of the merged company is changed to 24hpoker Holding AB.
24HpoKeR At A GlAnCe
Sharon and Simon work with accounting in Malta.
2006 In BRIeF
KEY Data
the data below pertain to operations excl. Daydream 2006 2005
net sales, SeK 000s 208,512 136,041
Sales growth, % 53.3 499.4
operating earnings, SeK 000s 1,630 27,117
operating margin, % 0.8 19.9
Return on shareholders’ equity, % 22.4 79.7
earnings per share, remaining operations, SeK 0.02 0.04
Shareholders’ equity per share, SeK 0.08 0.08
equity/assets ratio, % 29.2 28
Market capitalization at end of period, SeK 000s 347,123 e/t
number of employees at year-end 110 65
Gia administrates tournaments in 24hNetwork.
2006 in brief
♣ the number of players in the network increased sharply during the year, amounting at year-end to almost 556,000 registered players and more than 68,000 active players.
♣ In 2006, some 60 new partners were affiliated to 24hnetwork.
Bet 24 and unibet withdrew from the network during the year.
♣ 24poker acquired the outstanding shares in B2B poker (Sweden) AB and since spring has been the sole owner of the company. Fol- lowing the acquisition, 24hpoker and B2B poker coordinated op- erations and boosted the efficiency of the organization to stream- line it for growth.
♣ In May, 24hpoker AB and Daydream Software AB merged under the name 24hpoker Holding AB. per Hildebrand was appointed Ceo of the company. the remaining operations in Daydream were discontinued.
♣ In July, 24hpoker closed out uS players from its network, since the legal situation in the uS was deemed to be uncertain. In october, a law was passed that essentially prohibits online gaming.
♣ In november, 24hpoker commenced cooperation with Interna-
tional poker network, which is operated by Boss Media, and as of
March 2007, 24hnetwork offers its customers the opportunity to
also play via this poker network using the same e-wallet.
Despite setbacks in 2006, 24hPoker is marked by consi- derable optimism as regards its future operations. Gaming activity has been maintained and player numbers have increased.
2006 – a turbulent year for 24hpoker
Ceo'S CoMMentS
Ë During spring and early summer, the company conducted a reversed acquisi- tion of Daydream Software AB, listed on the o-list of the Stockholm Stock exchange, giving shareholders the opportunity to trade in the 24hpoker share via the stock exchange. the acquisition did not shape up as the company expected, since it transpired that Daydream’s financial status and operations were in considerably worse condition than what the company had been led to believe. Meanwhile, the company lost its two major partners, weakening the poker network and reducing the revenue base. other adverse events during the year were that Svenska Spel – the Swedish state gaming monopoly – launched a competing poker service, and that the uS market was curtailed, leading a number of competitors to focus their marketing efforts on europe.
Despite setbacks in 2006, 24hpoker is marked by considerable optimism as regards its future operations. the focus among the workforce is now to reverse the negative results from the second half of 2006 and again be a profitable company. thus, in early 2007, employees in 24hpoker in Sweden were offered to participate in an options program. the offer sparked considerable interest, prompting 90 percent of employees to subscribe for options.
acQuIsItIon oF DaYDREaM
During 2005, a process commenced to float 24hpoker, and to this end, HQ Bank AB in Stockholm was commissioned as a financial advisor. In early 2006, the companies made contact and certain potential advantages for a merger were identified, which prompted HQ Bank to recommend that 24hpoker AB undertake a reversed acquisition of Day- dream. the major shareholders in 24hpoker AB pledged to support the proposal and the company’s Board at the time recommended the deal on the basis of the facts that were then known. the deal was completed and in conjunction with acquisition, it was discov- ered that Daydream’s financial position was considerably worse than what the company had been led to believe and that ongoing operations showed a larger loss than we expected. Since there was no basis for continuing operations, the company’s new Board decided to terminate all operations in the former Daydream. termination was completed via Gamefederation’s takeover of the last business components in January 2007.
In hindsight, we can conclude that the acquisition was extremely negative for 24hpoker. the company was itself ready for a stock market listing and it was unfortu- nate that this deal was conducted, since it resulted in expenses and considerable extra work for company management, without any visible upside.
the year 2006 was an eventful one for 24hpoker. the company merged with Daydream and was listed
on the Stockholm Stock exchange. the poker network expanded rapidly, although two major partners
withdrew from the network. the company is marked by optimism and the focus is now on regaining profit-
ability.
Since the company believed the deal was recommended and con- ducted on the basis of incomplete and inaccurate information, the company is now in dispute with HQ Bank, which has sued the company in the Stockholm District Court to gain payment for an invoice pertaining to a “success” fee in conjunction with the deal.
the company, in turn, has made a cross action and claims that all fees paid to HQ Bank must be repaid. At a later stage, the com- pany may demand damages, but in this event, such action will move via arbitration proceedings.
actIVItY In tHE PoKER nEtWoRK
When unibet withdrew from the network in September, there were fears that the remainder of the network would also be adversely af- fected. In this situation, the highest priority was to attempt to retain a high level of activity in the network. For players, it is important that there are always active tables with a wide range of games and stake levels. Among other factors, playing was stimulated by higher sponsoring of tournaments and adjustments to the loyalty program to make it more attractive. 24hpoker.com and other partners also conducted major marketing campaigns in connection with this. Al- though the measures resulted in higher costs, they must be viewed as having been successful, as player liquidity was maintained and the number of active players increased. Maintaining activity in the network provides a sound basis for drawing in new, solid players, which in turn makes the network more attractive.
GaMInG oPERatIons tRansFERRED to MaLta
During the year, the company was granted gaming licenses in Malta and all gaming operations were transferred to this location.
It is important to conduct operations from a jurisdiction in the eu, since this means that players from other eu countries are not taxed for any winnings in their home countries. At the same time, gaming services – according to decisions in the european Court – may be marketed in eu countries where gaming services are already marketed by, for example, gaming monopolies.
the move to Malta resulted in higher costs in the form of gam- ing tax and more costly It system operations, but the competitive advantages of being in the eu are important vis-à-vis partners and players. the company’s poker network was the first to be estab- lished in the eu and several competitors are currently active in poker networks lacking eu status.
GRoWtH EMERGInG In nEW MaRKEts
Historically, Sweden has been the highly dominant market for the company’s poker network. In 2006, an increasingly larger portion of customers derived from other countries. During the year, we saw the fastest growth in Finland, where the development of online poker lags a few years after that of Sweden and where we have a number of successful partners. the poker boom is continuing in other markets and we expect rapidly rising interest for online poker in a number of major european countries, such as Germany, Spain and Italy. Considering the large populations, there is every reason to look positively at market growth in europe in the foreseeable future. Competition for market shares in europe is intense and in- terest has increased from a number of major players following the ban in the uS, but thanks to 24hnetwork’s turnkey solutions, the company can rapidly reach out to new markets by identifying favo- rable partners.
the Swedish market remains strong but competition for cus- tomers is stiff, as witnessed during 2006 by the successful launch of online poker by the Swedish state gaming monopoly Svenska Spel, which rapidly became the largest player in the Swedish mar- ket.
BusInEss PaRtnERs
24hpoker actively seeks cooperation with established players in the gaming industry. We are a relatively small player in the context, but thanks to our advanced software system and network concept, we are nevertheless an attractive partner for many large compa- nies. toward the close of 2006 and in early 2007, cooperation was initiated with major players such as Boss Media, WagerWorks and Victor Chandler. these cooperation programs offer the company a range of new opportunities, though in certain cases, they may take time to develop.
efforts are continually in progress to affiliate new partners to the poker network. Interest in 24hnetwork remains high, leading to the recent strengthening of the sales department. each month, some two to four new partners are launched and many offer con- siderable potential, although these generally involve start-ups.
unfortunately, 24hnetwork currently lacks a major partner, which
is the main reason as to why we cannot really compete with the
larger poker networks. It is extremely difficult to get major po-
tential partners to change poker network, since this involves the
Ceo'S CoMMentS
Ceo'S CoMMentS
risk of losing players. However, we believe that there may be a trend towards major players in the gaming industry electing to offer their customers gaming in several dif- ferent poker networks. It seems reasonable to permit the customer to select among a number of products and, thus, 24hpoker has considerable potential to attract major partners.
stRatEGIc REFocusInG anD nEW sERVIcEs
For the future, the company plans to market its own brand less intensively and instead focus on supporting partners by means of joint campaigns and closer dialog. Since 24hpoker.com represents only a small potion of the network, this strategy can be ex- pected to provide higher gearing and higher activity in the network.
During 2007, the company plans to add several new gaming services, all of which will be offered to turnkey partners. In March, an additional poker service was added in coop- eration with Boss Media, permitting customers of 24hpoker.com and affiliated turnkey partners to play in two poker networks using the same e-wallet. this offers players access to twice as many active tables, which should raise revenue and customer loyalty.
During the year ahead, the company expects to launch another casino in cooperation with WagerWorks, along with bingo.
suMMaRY anD outLooK
the company has made far-reaching efforts over the past two years in its bid to gain a public listing. It has changed its financial year and conducted a number of adjustments to comply with IFRS, which have entailed considerable work in changing accounting methods and restating historical comparative data. Changes have been made in the company’s structure and organization in an effort to ensure that operations are con- ducted in accordance with prevailing gaming legislation. the company has completed several licensing processes in Malta, leading to the transfer of gaming operations to this location. operations in Daydream had to be dealt with and their termination is now complete.
In the case of a small, growth company active in a new, rapidly changing market, it is extremely frustrating to have to allocate so much management time to matters irrelevant to core business. In addition, these processes have involved a considerable increase in corporate costs. Following our relisting, I hope we can leave this difficult period behind us and return to investing all our resources in operations.
underlying factors such as the strength of poker as a product, the absence of price pressure for online poker, low marginal costs for additional players and partners, and high liquidity in the poker network – combined with considerable growth potential in the european market, fewer market competitors, the trend towards the same opera- tor offering a number of poker services, plus competitive software systems, a superior service for all partners and 24hnetwork’s unique concept in the form of many differ- ent gaming services – indicate that 24hpoker is well positioned for future growth.
Per Hildebrand Ceo, 24hpoker the company can rapidly
reach out to new markets
via 24hnetwork’s turnkey
solutions.
Linda works as a project manager in Solna.
Vision
24HnEtWoRK WILL BE onE oF tHE tEn LaRGEst online poker networks/websites worldwide (based on the average number of simultaneous cash players) within the next three-year period.
24HnEtWoRK WILL oFFER tHE sEctoR’s Most attRactIVE turnkey solutions. the offering to partners will encompass a large number of gaming services, payment systems, multi-language information, expert 24/7 support, and tools for the promotion and administration of part- ners' websites and customer databases.
Business concept
24HPoKER’s BusInEss concEPt Is:
as a soFtWaRE DEVELoPER – via the subsidiary B2B poker (Sweden) AB – to provide one of the market’s best network platforms for online poker and offer market players access to 24hnetwork with accompanying services.
as a suPPLIER oF tuRnKEY soLutIons, to offer market players a complete solution in which a partner markets services under its own brand and 24hnetwork is responsible for the entire gaming operation, including software, operation, gaming licenses, payment systems and support.
as a GaMInG oPERatoR, to work towards offering all 24hnetwork’s services on 24hpoker.com, via subsidiaries in Malta.
VISIon AnD BuSIneSS ConCept
24hnetwork will be the
leading, most stimulating
and attractive poker network
in Europe.
strategy
24HPoKER FocusEs on PoKER, but also offers casino and sports betting to customers in 24hnetwork. the of- fering will subsequently be supplemented with other poker and casino services, as well as with other attractive games that are deemed to increase competitiveness and gain the attention of new partners and players.
the company’s poker network, 24hnetwork, is run by the subsidi- ary B2B poker network ltd. It has a distinct european profile, with gaming activities conducted in euR, as well as being licensed in the eu, and the network offers several local poker forms not avail- able at other websites. the regions on which 24hpoker plans to focus are the nordic area, Central europe and eastern europe.
the strategy is based on 24hnetwork being the leading, most stimulating and attractive poker network in europe by ensuring that the network:
✓ is fully scaleable
✓ always has sufficient player liquidity
✓ is stable and functionally secure
✓ has superior protection against potential hackers and denial- of-service (Dos) attacks
✓ has excellent systems for counteracting cheating and other forms of fraud
✓ consistently develops new attractive functions
✓ has a user-friendly interface for players
✓ offers both installable and browser based gaming software
✓ offers attractive poker tournaments
using a turnkey solution with a fast and simple start-up process and with no demands from partners for technical integration, 24hnetwork focuses on companies worldwide. thanks to the business concept, in which 24hnetwork is responsible for gaming operations while the partner is responsible for moving traffic to the website, the network is very well positioned to grow in mar- kets in which local market strategies are decisive.
24hpoker.com will be an attractive one-stop-shop for online games. players will perceive 24hpoker.com as one of the market’s most user-friendly, customer-oriented and skilled gaming opera- tors with unique poker know-how. A good reputation among players is attained via, for example, a well-known brand, excel- lent service and support, gaming expertise, high player liquidity, broad product range, attractive odds, secure payment solutions, reliability and technical stability. 24hpoker.com’s most important markets are Sweden and the other nordic countries.
Marcia works with payment transactions in 24hNetwork.
StRAteGY
Ë 24hpoker runs one of the world’s largest poker networks, 24hnetwork. the network consists of players from various partners. each player enters “his/her” gaming operator’s website, but actually enters a joint network and plays at the same table as players who have entered via other websites. this permits players to select among many types of poker games, stakes and tables, thus ensuring they always feel they have many fellow players.
In a poker network, players play against each other and not against the operator, which means that the poker operator as- sumes relatively limited risk. the gaming operator makes money on operations by taking a share of the pot, referred to as the rake.
our operations
24hpoker is primarily a business-to-business gaming supplier. Via the 24hnetwork, the company offers solutions for poker, sports betting and casino to partners. In addition, the company runs its own gaming website, 24hpoker.com, aimed directly at end customers.
opeRAtIonS
the revenue model for 24hnetwork consists of a fixed fee plus a profit-sharing model in which the partner receives a rising share of the gaming revenue in pace with revenue growth.
the network offers well-functioning, stable and secure soft- ware that has been developed in close cooperation with profes- sional poker players. the software platform has been designed to accommodate expansion via new games and functions.
24hnetwork has two offerings – namely, an integrated solu-
tion and a turnkey solution – to suit different partners. the solu-
tions are aimed at different target groups. However, a common
feature of both is that the partner is in charge of all marketing and
customer recruitment.
opeRAtIonS
24hnetwork’s integrated solutions are aimed primarily at partners that already have a functioning infrastruc- ture in the form of payment solutions, support and an existing customer base. this may involve a company that already offers poker in some other poker network, or companies that offer other types of gaming activi- ties, as well as companies involved in other fields, but who frequently already have a large customer base.
A partner that selects the integrated solution buys access to the poker network plus accompanying ad- ministration tools, and licenses the poker software.
the partner has its own systems for customer support, payment solutions and other back-office functions, which are integrated into 24hnetwork’s systems. Such integration can be an extensive process, depending on the degree to which a partner’s systems require cus- tomization. In addition, the partner must itself have a gaming license in the jurisdiction in which it is active, which is frequently a complex legal process. For these reasons, launching a partner using the integrated so- lution is a more lengthy process than in the case of a
turnkey partner.
Via 24hnetwork’s turnkey solution, the partner essen- tially needs only to contribute limited graphic mate- rial – such as logotypes and graphic profiles – and can then be on the market in less than four weeks. techni- cal integration and the start-up process for a partner choosing the turnkey solution are minimal, since all systems and tools are centralized and are used similarly by each partner.
partners selecting 24hnetwork’s turnkey solution may also add other gaming products, such as sports betting and casino. In addition, numerous peripheral services such as website design, back-office, payment solutions, promotional tools and customer support are offered.
Administrative tools Administrative tools Poker software
Poker software Poker software
Sports betting software Casino software CMS CRM Poker software Sports betting software Casino software CMS CRM
Support Payment solutions Administrative tools Web hosting Support Payment solutions Administrative tools Web hosting
IntEGRatED soLutIon tuRnKEY soLutIon
Services in 24hnetwork’s turnkey solution
opeRAtIonS
♣ GaMInG sERVIcEs
partners can offer their players poker, sports betting and casino. 24hnetwork is continually adding new gaming services.
♣ casHIER FunctIon
the cashier function is the player’s tool for the administration of his/her gaming account and this manages all payments transactions. there is the potential for direct deposits, such as credit card payments and transfers via netteller, Money- bookers, Webmoney (or e-wallets), as well as transfers via bank accounts in local currencies.
♣ WEB HostInG
Web hosting services cover the management of hardware and software platforms.
♣ aFFILIatE ManaGEMEnt
24hnetwork offers automatic affiliate management. With just a few clicks, reg- istered players can upgrade their user accounts and start earning commission on new customers that they lead to the website.
♣ contEnt ManaGEMEnt sYstEM (cMs)
using 24hnetwork’s CMS, partners can readily edit their website content.
♣ MaRKEtInG tooLs (custoMER RELatIonsHIP MaRKEtInG – cRM) Via 24hnetwork’s CRM tools, partners can categorize and communicate with their players. Information can be processed for mailings tailored for target groups, analyses and compiled reporting.
♣ custoMER suPPoRt
24hnetwork offers customers round-the-clock e-mail support in english, Swedish, Finnish, Russian and estonian.
24HPoKER’s
coMPEtItIVE aDVantaGEs
✓ Proprietary software for poker, sports betting and customer management systems
✓ user-friendly interface
✓ scaleable software for online poker
✓ Gaming licenses in Malta (within the Eu)
✓ several languages
✓ 24/7 support
✓ unique turnkey solutions
24HnEtWoRK oFFERs tHE FoLLoWInG PoKER GaMEs
✓ texas Hold'em
✓ omaha och omaha High/Low
✓ 7-card stud och 7-card stud High/Low
✓ 5-card Draw
✓ sökö (scandinavian stud)
✓ telesina
✓ americana
✓ 2-7 triple Draw
nuMBER oF REGIstERED PLaYERs In 24HnEtWoRK
600,000
500,000
400,000
300,000
200,000
100,000
0
2006 2005 2004 2003
suPPoRt
the company’s estonian subsidiary, 24hSupport oÜ, handles sup- port for players affiliated to partners that have selected the turnkey solution and second-line support for other partners. Support is open round-the-clock and is conducted via e-mail in english, Swedish, Finnish, Russian and estonian. Support for partners is also offered via telephone and MSn Messenger. In pace with rapid growth, the support team has been strengthened steadily. looking ahead, sup- port will be provided in additional languages, and round-the-clock in languages in which there are sufficient customers.
opeRAtIonS
Leonid is the Support Manager in Tallinn.
sEcuRE PaYMEnt soLutIons
each day, considerable sums of money are transferred via 24hnet- work’s system when players deposit and withdraw money. Con- sequently, it is extremely important that the company offers fast, simple and secure payment solutions. players can make direct pay- ments via credit card, deposit money in the bank account in lo- cal currency or elect to transfer money via, for example, neteller, Moneybookers or WebMoney.
All transfers to the system are encrypted and the security sys- tem is approved by the suppliers of payment services with whom 24hpoker works. In addition, the company fulfills the requirements set by VISA and MasterCard in terms of secure card processing.
antI-FRauD PRoGRaMs
the company is proactive in its efforts to prevent fraud and money laundering in the network and has dedicated personnel who deal solely with these matters. they work, for example, with checking that nobody tries to use stolen credit cards or defraud in some other manner. In addition, various automatic systems are used to identify and counteract attempted fraud, such as systems that verify the player’s identity and trigger the alarm in the event of suspicious behavior. Any suspicion of fraud or money laundering is monitored carefully.
24HPoKER.coM
the company’s own gaming website, 24hpoker.com, offers
online poker, sports betting and casino to end customers in
eleven languages. the website is one of the leading poker
websites in the nordic area and is an asset for the com-
pany by moving traffic to the network as well as providing
the company with key information on trends in the gaming
market and the opportunity to test new services and tools.
opeRAtIonS
PoKER 24hpoker first launched poker games in 2001 using make-believe money. playing for real money commenced in May 2002 and 24hpoker was then one of the first players to focus on the nordic market.
24hnetwork offers a range of poker games round-the-clock with varying stakes. the actual playing involves no risk for the company, since players play against each other and not against the operator.
there are two types of online-poker products – cash games and tournaments. Cash games involve playing for cash at indi- vidual tables, for which the operator takes a percentage – or rake – of the pot. Fees are also charged in tournaments, either in the form of a fixed fee or as a percentage of the prize money. tourna- ments are a key feature for operators, since they are easy to mar- ket and they help to increase traffic to the poker network, thereby also raising the number of participants in cash games, which are generally the most profitable activity for the operator.
24hnetwork has a strong european hallmark and generates a higher rake than other poker networks, since gaming is conducted in euR instead of uSD, making it an attractive alternative for gam- ing operators wishing to connect to an additional poker network.
caRDRooM2 24hpoker offers players in 24hnetwork to play also in the International poker network run by Boss Media. this means that players gain access to two alternative poker networks without having to open additional ac- counts. this is an attractive service, since poker players play on an average of three poker websites. the service was launched on 24hpoker.com in March 2007 and an increasing number of players in the network are seeking the service.
the company sees considerable potential in the concept, as it makes 24hnetwork a more attractive alternative for partners. the network provides access to additional gaming services and creates the potential to raise revenue per active player. Meanwhile, the partner gains a more attractive offering, making it easier to attract new customers.
Gaming services
sPoRts BEttInG 24hpoker has specially de- signed proprietary software for sports betting, which it launched in 2001. In sports betting, cus- tomers are offered to bet on the results in vari- ous sports events at fixed odds. Sports betting is aimed at the european market, with the most popular sports being football and ice hockey. the software offers effective and partly automated risk management. Since there are many skilled players who live on their winnings from betting companies, effec- tive risk management is important for sports betting.
24hpoker’s sport betting remains relatively small compared with competitors, but nevertheless, it is an excellent marketing tool. offering sports betting with a high return percentage, and thus attractive odds, permits the recruitment of customers who are primarily interested in good odds but who subsequently begin to use other gaming services. the transition from sports betting to poker is quite common and many customers recruited to sports betting gradually begin to play poker and casino – a move that is considerably more profitable for 24hpoker.
casIno the casino is a licensed gaming module provided by netentertainment. 24hpoker is enti- tled to add the casino to all websites in 24hnet- work and a number of major partners currently have both poker and casino. the casino is browser based and currently includes some 50 casino games. Since most of the players are accustomed to casino games, this gaming service requires little support. In addition, revenues are generated from the casino without incurring major extra costs.
nEW GaMInG sERVIcEs
the company’s strategy for the future is to offer additional gam-
ing services via 24hnetwork. these may include various types of
games such as bingo, lotteries or other games, as well as addi-
tional poker or casino products – in other words, games that gen-
erate most revenues. the company does not plan to develop more
proprietary products, but will instead – whenever appropriate – li-
cense games from other suppliers. the rapidly rising number of
network partners entails a simultaneous increase in demand for
new products.
Ë In the space of just a few years, the international market for online gaming has grown from an insignificant and relatively unknown market to total rev- enues of more than uSD 13 billion in 2005. Despite this growth, the online gaming market accounts for only 5 percent of the overall gaming market. Since its inception in the late 1990s, poker has become one of the most rapidly growing segments in the online gaming market. In 2005, online poker generated some 20 percent of revenues in the overall online gaming market.
europe accounts for almost half of total revenues in the online gaming market, while the uS and South/Central America account for about 25 percent each. the rest of the world accounts for an insignificant share, but growth in Asia and the Middle east is expected to outpace other markets in relative terms. the uS, Sweden and the uK are mature markets for the sector and thus future growth is expected to be limited.
24hpoker sees its greatest potential in markets in Central and eastern europe, where there is considerable gaming interest, with demand for online gaming expected to rise in pace with growing access to fast Internet connections and secure payments solutions.
In october 2006, a law was passed in the uS prohibiting financial transactions to Internet gaming websites, which has affected the global gaming market. 24hpoker is a distinctly european website, and already during the year, the company banned uS players from its network and thus the gaming ban in the uS has not affected the com- pany to any major degree. needless to say, poker websites with considerable exposure to the uS market have been hit harder, speeding up the consolidation process that frequently occurs in new sectors. So far, relatively few mergers have occurred, but it is becoming increasingly evident that independent websites are finding it difficult to compete on their own, encouraging them to merge with other poker networks. this trend offers 24hpoker and its competitors the potential to expand by attracting new and established poker websites into their networks.
noRDIc PoKER MaRKEt
24hpoker was the first poker website to focus on Sweden and has offered online poker since 2001, and subsequently, permitting players to play for real money in 2002.
24hpoker’s most important market remains the nordic region, accounting for some 70 percent of revenues. During the next five years, the company expects growth in Sweden to be relatively limited. the major growth will instead derive from Finland, fol- lowed by Denmark and norway. However, Sweden will continue to be a key market, thanks to the substantial number of players.
In the space of just a few years, the international market for online gaming has grown from an insignificant and relatively unknown market to total revenues of more than uSD 13 billion in 2005. Despite this growth, the online gaming market accounts for only 5 percent of the overall gaming market.
24hPoker sees its greatest potential in markets in central and Eastern Europe, where there is considera- ble gaming interest, with demand for online gaming expected to rise in pace with growing access to fast Internet connections and secure payments solutions.
Great player interest and demand for online gaming
MARKet
Kalle works as Key Account Manager for 24hNetwork
MARKet
DRIVInG FoRcEs In onLInE PoKER
✓ Internet penetration – wider access to fast Internet connections increases the po- tential for and interest in online gaming.
✓ Payment solutions – access to fast and secure payment solutions in various cur- rencies is important to enable customers to deposit money in a gaming account and feel secure playing on the website.
✓ TV exposure – tV-programs showing poker help teach the game and raise general interest in poker.
✓ Celebrities – a growing number of celeb- rities play poker and act as ambassadors for the game.
✓ Prize money – ever-increasing prize money in poker tournaments – both online and offline – creates interest from players and boosts media coverage.
WoRLD MaRKEt FoR onLInE PoKER uSD billion
All the nordic countries have regulated gaming markets that ban certain types of mar- keting of gaming services, such as bonus offers, direct links from local websites, etc.
Svenska Spel AB – the Swedish state-owned gaming company – was granted a license by the Swedish government to be the first state-owned poker operator worldwide, with operations commencing in April 2006. Information from Svenska Spel indicates that it has a market share of about 25 percent of the total number of active players in the Swedish market.
coMPEtItIon
Although there are more than 500 poker websites, the market for online poker is dominated by a small number of major gaming operators. GBGC (Global Betting and Gaming Consultants) estimates that the ten largest gaming operators, including net- works, had a joint market share of some 87 percent during the fourth quarter of 2005. Most operators believe it is better to capitalize on the player liquidity offered by a poker network such as 24hnetwork instead of attempting to build a proprietary solution.
24hpoker’s competitors may be divided into gaming suppliers and gaming opera- tors. Gaming suppliers use a business model similar to 24hnetwork, while gaming operators are brands that compete for end customers, such as 24hpoker.com.
Most gaming suppliers provide similar services and offer existing operators the op- portunity to affiliate to their poker network. Some companies offer a full-service solu- tion, including payment solutions and customer support, similar to the turnkey solu- tion offered by 24hnetwork. However, as opposed to most competitors, 24hnetwork offers poker as well as casino and sports betting to its partners. the main competitors offering a poker network are as follows (not ranked):
✓ Boss Media ✓ BWin (formerly ongame)
✓ cryptologic ✓ Microgaming
✓ Playtech (iPoker network)
Since 24hpoker’s main operation and its primary market is currently in the nordic re- gion, competitors are mainly other gaming operators focusing on nordic players. the gaming operators listed below have substantial market shares in the nordic region, some of them because they are international market leaders and others because they are major gambling operators who have succeeded in getting many of their sports betting customers to start to play poker online, as well as attracting new poker play- ers. the primary competitors among gaming operators are as follows (not ranked):
✓ Expekt ✓ Ladbrokes
✓ PartyPoker ✓ Pokerstars
✓ svenska spel ✓ unibet the above estimate was made before
the ban in the uS.
CAGR = Compared Annual Growth Rate.
Source: Global Betting and Gaming Consultants (GBGC) 6
5
4
3
2
1
0
2010 2003 2004 2005 2002
CAGR 18,2%
Ë All development of the software systems – which make up the foundation of the company’s operations – are con- ducted in Solna, Sweden. In addition, personnel engaged in sales and marketing for 24hnetwork, as well as the Group’s accounting staff unit and Group management are located in Solna.
tallinn is the location primarily for support personnel, who as- sist players and partners with inquiries regarding gaming activi- ties, but also work with identifying and counteracting fraud in the network. the administration of sports betting is also conducted in tallinn.
the 24hpoker.com website is run from Malta, where employ- ees work in different ways with marketing and accounting, since all payment flows to players and partners in 24hnetwork is han- dled from Malta.
attRactIVE WoRK EnVIRonMEnt
24hpoker seeks to create a working environment in which em- ployees are comfortable and feel they are developing. It is meant to encourage innovative thinking and assist the company in be- ing attentive to employee requirements and wishes. In addition to offering a positive work environment and an attractive bonus program, 24hpoker has established a stock options program to encourage employees to remain in the company and take an ac- tive part in its development. the company encourages employ- ees to assume considerable responsibility and their initiatives and ideas are highly valued.
EQuaLItY
As in the case of many other companies involved in It, most em- ployees are men. 24hpoker recruits employees primarily on the basis of skills, but the company is convinced that diversity in terms of experience, personal characteristics and expertise make for a creative and nurturing work environment, raising the potential to attain optimal results.
For employees in 24hpoker, working conditions and develop- ment opportunities must not depend on gender, origin or other background. 24hpoker upholds its democratic values and offers scope for free thinking and discussion. the company is an equality enterprise characterized by openness.
EtHIcs anD REsPonsIBLE GaMInG
24hpoker is active in a sector in which ethical issues are particu- larly significant. the company views online gaming, whether it is poker, sports betting or casino, as a positive form of entertain- ment for adults. Most players share this approach, but there is a small proportion of players that allow gaming to be an excessive part of their life. 24hpoker attempts in various ways to assist these players in playing in a more responsible fashion, such as – in line with players’ wishes – adjusting how much money the player can deposit via credit card, imposing limits on the maximum that may be lost during a month or by closing the player’s account during a requested period. 24hpoker’s gaming website also directs players to non-profit organizations that they can contact if they feel the need to discuss their gambling behavior with someone.
24hpoker has 110 employees, located at offices in Solna, in Sweden, tallinn in estonia and Sliema in Malta.
the workforce increased by 45 during the year as part of efforts to handle the sharp expansion.
Working at 24hpoker
WoRKFoRCe
Pablo works with .Net development in Solna, Sweden.
Ë 24hpoker Holding AB’s share is listed on the Stockholm Stock exchange, under small cap, and is included in Informa- tion technology. A trading lot is 5,000 shares. the ticker is 24H and the ISIn code is Se0000355729.
tRaDInG anD sHaRE PRIcE tREnD
During 2006, a total of 1,370 million shares were traded with a total value of SeK 1.671 M. the highest paid price during the year was SeK 7.95 (March 7, 2006) and the lowest price was SeK 0.54 (August 25, 2006). At year-end, the share price was SeK 0.67, and 24hpoker’s market capitalization was SeK 347 M (59).
sHaRE caPItaL
At December 31, 2006, the share capital in 24hpoker totaled SeK 730,512,706. the par value was SeK 1.41 per share. An extraordinary meeting of shareholders on January 15, 2007 approved a reduction of the share capital to cover losses. Subsequently, the par value was SeK 0.39. the number of shares totaled 518,094,118, distributed among 18,213,800 Series A shares, each with 10 voting rights, and 499,880,318 Series B shares, each with one voting right. At the An- nual General Meeting, shareholders may vote for the full number of shares owned and represented by them with no limit to voting rights. All shares carry equal rights to participation in profits and in the company’s assets in the event of liquidation. Series A shares are not listed.
At an extraordinary meeting of shareholders on January 15, 2007, a resolution was passed to issue 9,100,000 warrants that extend to February 28, 2009. the warrants are aimed at all employees in 24hpoker in Sweden. each warrant entitles the holder to subscribe for one new Series B share at an exercise price of SeK 0.92 per share during the period February 1, 2009 through February 28, 2009.
oWnERsHIP sItuatIon
At March 30, 2007, the number of shareholders totaled 10,106. the Board of Directors and executive management jointly hold approxi- mately 28 percent of the number of voting rights.
DIVIDEnD PoLIcY
the objective is to pay an annual dividend equivalent to 30 percent of net profit, provided that distributable unrestricted capital is available and that the company’s equity/assets ratio is not less than 30 percent.
tHe SHARe
the dividend will take the form of a normal dividend, share redemp- tion, share buyback or via a combination of these dividend forms.
However, no dividend can be paid prior to 2011 (for the 2010 financial year) due to the fact that the company reduced its share capital as of January 1, 2007. However, share redemptions and buy- backs may be conducted.
sHaREHoLDER contacts
24hpoker welcomes questions concerning the company and its progress. Contact persons are:
peR HIlDeBRAnD, Ceo phone: +46 (0) 8 564 884 60 e-mail: per.hildebrand@24hpoker.se
BRItt-MARIe BoIJe, CFo phone: +46 (0) 8 564 884 60 e-mail: britt-marie.boije@24hpoker.se
pIA RoSIn, InFoRMAtIon MAnAGeR phone: +46 (0) 8 564 884 73 e-mail: pia.rosin@24hpoker.se
Shares and shareholders
10,000 20,000 30,000 40,000 50,000
1 2 3 4 5
JAN 2006
FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC JAN
2007
FEB MAR
Series B share SIX General index
Number of shares traded 1000s (inc. off-floor)
0.5
