The long awaited Party Gaming annual results out this week show the
adverse impact of the Unlawful Internet Gambling Enforcement Act in
the United States, but an encouraging resilience and diversification
into other markets by the group.
"Trading patterns since the year end have seen continued
recovery in poker and casino revenue, in line with the board's expectations,"
the company statement said, noting gross revenue per day in the four
weeks to February 25 has averaged $1.3 million.
Annual profit dropped 56 percent at the London listed company on costs
for withdrawing from the U.S. after a crackdown on online gambling
financial transactions in that country forced the company to stop
taking bets from Americans.
Net income fell to $128.4 million from $293.2 million in 2005, the
Gibraltar-based company revealed in a public statement. One-time expenses
for exiting the U.S. were $243.2 million. However, sales climbed 13
percent to $1.1 billion as Party Gaming signed up more customers from
non-US sources.
The company lost around 75 percent of its revenue last October, when
the UIGEA was enacted after a questionable passage through Congress
attached to an unrelated but critical bill.
The good news was that sales more than doubled to $325 million last
year in business outside the USA, helped by February's introduction
of new casino gaming facilities and the acquisition in August of an
online sports-betting company.
Poker remained the largest business segment of the company’s
continuing operations, representing 82 percent of revenues. However,
the casino business enjoyed strong revenue growth over the year, up
278 percent to US$51 million from US$13.5 million, helped by the launch
of Party’s blackjack product in October 2005 and the launch
of Party Casino in the first quarter of 2006. Sports betting made
a debut contribution of US$5.6 million since Party acquired Gamebookers
last year. Emerging games contributed US$2 million.
In terms of new player sign-ups by region, Party saw a 192 percent
increase to 382 000 in Europe, the Middle East and Africa (EMEA).
The Americas, excluding the US, rose 43 percent to 102 000 and Asia
rose 84 percent to 42 400. Unique active players in EMEA rose 224
percent to 530 000, the Americas non-US rose 70 percent to 162 300
and Asia rose 119 percent to 56 400.
"While the decision to stop accepting customers from the
U.S. was a bitter blow for our business, our continuing operations
have grown strongly,'' Chief Executive Officer Mitch Garber
said in the statement.
EBITDA from continuing operations came to $50.9 million. Shares prices
on the company's stock have declined 68 percent since month end last
September, the last session before the U.S. Senate unexpectedly approved
the law, and the company currently has a market value of GBP1.35 billion
($2.6 billion).
Revenue totaled $1.10 billion, up 13 percent from $977.7 million but
pretax profit fell to $138.9 million from $324.9 million.
U.S. gamblers are believed to have accounted for 71 percent of Party
Gaming's sales in 2006. The company now gets about two-thirds of revenue
from Europe, the Far and Middle East and Africa.
France "is not an attractive market'' because of
regulations, Garber told reporters. "We may decide to make
it next to impossible for French customers to sign up to Party Gaming,''
he said. "It's already difficult.'' The statement
seemed to confirm news emerging earlier in the week that Party was
closing the door on French based operations.
Party Gaming has not lost its appetite for acquisitions, it appears
- Garber said the company would continue to consider big or small
acquisitions, despite being "very content with where we
are at right now.''
"It's a very good opportunity for us to step back and breathe
for a minute,'' Garber said. "We need to see whether
we are better off alone in a strong leadership position or whether
we need to take on another business.''
Garber said the passing of the UIGEA last October in the US had “accelerated”
the company’s move to transform itself towards a multi-geography
and multi-product company. He hinted at good news for affiliate marketers,
saying that the focus for 2007 in terms of marketing would be online
as opposed to offline. “A large and effective affiliate
program will be the way forward,” he said.
The portion of Party Gaming's non-U.S. sales coming from poker dropped
to 82 percent last year from 91 percent in 2005. Casino sales almost
quadrupled to $51 million.
The company signed up an average of more than 2 400 new customers
a day and had 66 000 active daily players in the four weeks to February
25. That compares with about 2 300 new players a day and 58 000 active
players during January.
Bad news for investors is that Party Gaming will not be paying a second-half
dividend. The company in October scrapped its 3 cents-a-share payout
for the first half following the U.S. ban.