500.com sees revenue plummet amid Swedish struggles
Regulatory challenges in Sweden led to 500.com’s revenue falling by two thirds during 2019, with the group’s woes continuing into 2020.
New York-listed 500.com, the China-headquartered online sports lottery service provider and owner of lottery betting brand Multilotto.com, said full year revenue for the year to 31 December 2019 was down 68.5% year-on-year to RMB39.7m (£4.4m/€5.2m/$5.7m).
The year-over-year decrease was mainly attributable to Multilotto operator The Multi Group’s (TMG) website migration in connection with the conversion of its Swedish licence at the beginning of 2019 which required users to re-register their accounts and resulted in a decrease of players. Another negative was the cessation of sports information services in China in March 2019.
TMG accounted for approximately 89.7% of the company's total net revenues during the fiscal year, of which approximately 61.3% was generated from Sweden.
The decrease in revenue came after a 73.7% year-on-year rise in 2018, when 500.com benefitted from its first year of income from TMG, which it acquired for approximately $56m in 2017.
Operating expenses fell starkly by 24.7% to RMB365.8m, with marketing costs more than halving to RMB42.5m.
Operating loss for full year 2019 was RMB634.4m ($91.1m), including the impairment of acquired intangible assets of RMB181.8m and the impairment of goodwill of RMB129.8m. The impairments of goodwill and acquired intangible assets were related to the company's acquisition of TMG. These impairments represented an 84.2% year-on-year increase to RMB289.9m.
Net loss attributable to 500.com for 2019 was RMB636.4m, up 37.% year-on-year.
500.com said: “The company does not expect to issue any earnings forecast until it receives clear instructions as to the resumption date of online sports lottery sales from the [Chinese] Ministry of Finance.”
Online sports lottery sales were suspended in China by the Ministry of Finance in 2015 over concerns about regulation.
Meanwhile, 500.com’s revenues during the first quarter of 2020 have been materially impacted by the temporary suspension of TMG's operations in Sweden. This occurred in January because TMG did not renew its igaming licence before it expired.
“TMG has submitted all the application materials and is in close communication with Sweden's gambling regulatory authority to complete the renewal process as quickly as possible,” 500.com said.
The full-year results did not contain any update on 500.com's leadership, following the resignation of its chairman and temporary depature of its CEO. In December 2019, the business announced the formation of a special committee to internally investigate alleged illegal money transfers and the role played by consultants in relation to accusations of bribery in Japan. The chairman resigned from the company and chief executive temporarily left his position until the committee reports back.