eGaming Review

PARTYGAMING CHIEF EXECUTIVE MITCH GARBER said the passing of the UIGEA in the US last October had accelerated” the company’s move to transform itself into a multi-country and multi-product company.

Garber was speaking as the company’s full-year results showed the gaming giant moving strongly ahead following its forced exit from the US. Revenue from continuing operations more than doubled from US$153m 2005 to US$325m (£167m), while clean EBITDA on continuing operations rose from US$20m to US$51m.

Despite reorganisation costs of US$250m and share-based payments of US$113m, the company still managed to post a pre-tax profit of US$139m for the year.

Garber said the forced exit from the US was a “bitter blow”, but he praised the efforts of staff in turning the company around since October. Poker remained the largest segment of the company’s continuing operations, accounting for 82% of revenue.

However, its casino business enjoyed strong revenue growth over the year, up 278% to US$51m. This growth was fuelled by the launch of PartyGaming’s blackjack product in October 2005 and PartyCasino in the first quarter 2006. Sports betting made a debut contribution US$5.6m, following the company’s acquisition of Gamebookers last year.

The number of new player sign-ups by PartyGaming in Europe, the Middle East and Africa (Emea) 192% on 2005 to 382,000. In the Americas, excluding the US, the fi gure increased 43% to 102,000, Asia it was up 84% to 42,400. The number of active players in Emea rose 224% to 530,000, in the Americas excluding US to 162,300, and 119% to 56,400. 

In addition to Gamebookers, PartyGaming also acquired the assets of Empire Online and Intercontinental Online over the period. Despite saying the company remained interested in any deals that come its way, Garber said the possible acquisitions had “diminished greatly” since October. “I think there are fewer and companies that we could merge with,” he said. “We would have zero interest, for instance, in any companies which didn’t switch off the US in October.”

Garber didn’t comment on whether PartyGaming received a summons from the French authorities, he did say that France remained a minor market company. Garber suggested the company’s marketing focus year would be online. “A large and effective affiliate programme will be the way forward,” he added.

WILLIAM HILL HAS reiterated its belief that its interactive betting and gaming channels will correct the disappointing performance they produced in 2006. The prediction came as the UK bookmaking giant unveiled its full-year results, which showed gross win from the interactive ventures increasing 6% to £130.5m (US$255m), with operating profits showing a small increase to £61.5m. 

William Hill said its poker and casino products had performed disappointingly following a promising start to 2006, and that the shutdown of the US market had impacted liquidity and increased competition for European players.  The growth in the company‘s online sports-betting markets had been modest compared with expectations at the start of the year.

William Hill explained that it had fully exploited its existing technical infrastructure and client management system, since its launch in 1999, and that the performance of its interactive sportsbook had been adversely affected by the “relative inflexibility of our current technology configuration”.

William Hill said it would rectify these issues by implementing its NextGen technology programme this year “to deliver systems clearly superior to anything currently available to our major competitors”. The company said the launch of skill-gaming and bingo channels in January had also produced encouraging signs.

At group level, gross win rose 15% on 2005 to £931.3m, while profit on ordinary activities before finance charges and exceptional items increased 19% to £292.2m.  A strong performance during the World Cup and from fixed-odds betting terminals (FOBTs) boosted year-on-year growth, the company said.

Gross win for William Hill‘s retail unit grew 18% to £736m.  Stanley Retail contributed 12% of the gross win total, as well as 13% of the 24% rise in pre-exceptional profit to £225.9m. Gross win from FOBTs and amusement with prizes (AWP) was 18% up on 2005.

Average net profit per machine per week on the William Hill estate was £494, compared with £402 in 2005. In Stanley shops, the equivalent fi gure was £346, up from £287 in 2005.

Telephone betting gross win grew 8% to £57.5m and operating profits rose by 28% to £16.7m.  Figures were boosted by the World Cup and favourable horseracing results.

The bookmaker said its international activities were also looking promising, as it planned for sports-betting and gambling joint ventures in Italy, Spain and Latin America with Spanish gaming group Codere.

Eckoh has been reappointed to provide William Hill‘s automated horseracing commentary and results service until 2010. The company has been operating the service since its launch in 2002.

LADBROKES CHIEF EXECUTIVE Christopher Bell highlighted the achievements the company had made in the past year as it released full-year results.

“Both at home and internationally, we are pleased to post a record profit performance,” he said. Bell said the group had started 2006 by delivering one of the biggest returns to shareholders on record, after the sale of its hotel division to the Hilton Group. He also highlighted the consultancy services it would be providing to the betting and gambling authorities in China.

Ladbrokes ended the year by winning licences and acquiring shops in Italy, and began 2007 by signing a joint venture to launch a betting business in Spain.

“Early trading in 2007 has been satisfactory with good football results, but more cancellations of horseracing fixtures than last year,” he added. “2007 has its own challenges, but we remain confident in the prospects for Ladbrokes.”

Bell said the company would enter into a joint venture to bid for the licence to operate the supercasino in Manchester. Ladbrokes will also bid for the licences for several of the smaller casinos. “We are well advanced in our preparations for our casino bids,” added Bell. 

Profits across Ladbrokes’ egaming operations grew by 13.5%, but the company admitted poker gross win was 2.7% down on 2005. This was blamed on increased competition, particularly from Swedish national monopoly operator Svenska Spel, which launched a poker operation last April, and a dip in business during the FIFA World Cup.

However, the company said signups in the fourth quarter of the year were 39% higher than in the previous quarter, while average monthly player days rose 16%.

Gross win across the company rose above £1bn (US$1.95bn) for the first time, compared with £918m in 2005. Operating profits rose 7.6% to £268m, while pre-tax profits, which benefited from the sale of Ladbrokes’ hotels arm, were up from £394m in 2005 to £669m.

In terms of online operations alone, sportsbook gross win rose 41% to £46.4m, including a £4.6m contribution from the FIFA World Cup. Ladbrokes said growth in the second half of the year had remained strong, buoyed by an increase of in-play betting. Casino revenues rose 14% to £44.7m, while gross games win rose to £13m, following the launch of bingo and a Deal or No Deal game, while egaming operating costs increased 16% to £80m.

SPORTINGBET CHIEF EXECUTIVE ANDY MCIVER said the company would focus on European growth after it announced the purchase of its Turkish marketing partner Maslin Properties. The initial consideration is £3.5m (US$6.8m), with a deferred consideration of up to 35.3m Sportingbet shares, dependent on the performance of the Turkish business.

In Italy, Sportingbet acquired a further 40% of Sportingbet Italia, taking its stake to 90%. The company’s interim results showed how hard it had been hit by its exit from the US. Pre-tax losses in the six months to the end of January were £243m, including a one-off charge of £252m caused by the write-down of its US-related assets. Turnover in the second quarter fell to £282m, compared with £648m last year. Gross profits fell from £83m to £35m. However, excluding the US contribution last year, gross profit from continuing operations rose 40% to £35m and group operating profit was up 54% to £2m.

The company said it had £36m worth of cash on the balance sheet. Sports-betting turnover in Europe for the second quarter stood at £157m, earning a gross profit of £16.9m, compared with £7.3m for the same period last year. Casino and gaming, and European poker, contributed £8m and £3.9m respectively.

In Australia, gross profit slipped from £2.8m to £2.6m, while turnover fell from £110m to £89m in 2006. Costs in the second-quarter costs rose from £23m last year to £33m.

PADDY POWER highlighted the contribution made by its online betting and gaming division as it published its full-year results. The Irish bookmaker said the continued enhancement of its online activities had made it the third largest online sportsbook in the UK, as measured by the number of visitors. It said the reasons for its online success were due to a strong focus on its internet offering.

A results statement said: “Some hold the view that products and services sold online can only be differentiated on the basis of price. We disagree with this. We differentiate ourselves versus our competition just as strongly in the online world as in our retail markets.”

Paddy Power said the broader and original range of betting products it offers, such as money-back specials and double-result payouts, are valued by customers.

It added that the strength of its online and land-based brands and the irreverent side to some of its marketing campaigns had also made a significant contribution, while its quality in-house customer service and efficient use of technology had improved the user experience and increased cross-selling opportunities. 

Revenues from its online gaming channel operation, which includes poker, casino, games and bingo, increased 65% on 2005 to €28.3m (£19.3m). Paddy Power said its sponsorship of the Irish Poker Open had been one of the highlights of its egaming activities over the past 12 months.  The company will guarantee this year’s tournament for €2m.

The company said the first six months of 2007 would present “an important operational challenge”, as it migrates customers from the Tribeca software platform to Playtech’s.

Group turnover increased 31% to almost €1.8bn, across all channels. Gross win rose 36% to €219m, boosted by a 64% increase in win from online gaming and fixed-odds betting terminals. Operating profit was up 51% to €45.5m, while pre-tax profits rose 52% to €47.6m. Online gross win increased by 57% to €67.4m and online operating profits 38% to €23.4m.

Chief executive Patrick Kennedy described the bookmaker as a “growth company”, pointing out that it had expanded organically, “without recourse to acquisition”, and that it had a strong portfolio of businesses, all of which are well positioned to drive further turnover and profit growth.

With the Irish minister for justice, equality and law reform announcing in August 2006 the possible regulation of land-based casinos in Ireland, Kennedy added: “Given our knowledge and experience of the Irish market and the strength of our brand, we would consider participation in land-based casino developments in Ireland. “We would hope to see clarification and implementation of the government’s position in the next few months.”

PLAYTECH, THE POKER and casino software developer, posted 89% growth in total revenue to US$90m (£46.2m) last year. Casino revenues increased 81% on 2005 to US$77.2m, while poker revenues rose 309% to US$10.9m. Excluding US contributions, annual revenues increased 143% to US$55.6m. Playtech’s ex-US casino income rose 131% to US$47.3m, while that generated by poker was up 386% to US$7.4m.

Highlights included the acquisition of Tribeca Tables’s European player base, the  expansion of its technical centre in Estonia and the establishment of a development centre in Bulgaria. Playtech also signed licensing agreements with a leading casino operator in Mexico, Entretenimiento de Mexico, and China’s largest corporate retail gaming network, Sino Strategic International.

Chief executive Avigur Zmora said: “The US Unlawful Internet Gambling Enforcement Act 2006 (UIGEA) forced many gaming operators to radically change their business model to survive in the new international environment.  But it highlighted Playtech’s great strength as a software provider to the wider gaming industry, and clearly vindicated the board’s strategic decision more than three years ago to concentrate on geographical diversification.

Posted: 2007-04-12