eGaming Morning Snapshot - 22 March 22/03/2007

Scott Longley

NEWS: Rank was the company the quickest off the blocks following yesterday’s budget. Noting the rises in gaming duty, including a top rate of 50% for the biggest casinos, the company said it was dismayed. It added: “The changes, which have been imposed without prior indication or consultation with the industry, will have a negative effect on the profit performance of Rank's casinos. It is estimated that the increase in casino gaming duty for Rank will be of the order of £8m on an annual basis.” The Remote Gaming Association (RGA) was quick to add that the new remote gaming tax rate of 15% effectively closed the door to any online gaming companies returning to the UK. Chairman John Coates said: “Quite simply, under this regime, with an additional VAT and corporation tax for most companies, it would be almost impossible for a UK-based operation to compete with offshore businesses, especially those located in other EU jurisdictions.” Martin Dane, tax principal at BDO Stoy Hayward, said the 15% rate was a “real bolt from the blue”. He added: “Together with no indication that the corporation tax regime will recognise the potentially huge tax cost of becoming regulated, this sounds the death knell for the UK government’s aspiration to be the world leader in regulated remote gaming.” Mark Summerfield, head of gaming at KPMG, said there was some good news for offshore operators: “More positively, VAT will not be charged on remote participation fees on bingo, poker and betting exchanges.  This means they will retain their advantage over UK based bricks and mortar bookmakers and casino operators.”

Leisure & Gaming released full year results this morning. Its main subsidiary Betshop reported a 247% growth in turnover to US$116.7m and 187% growth in net win to US$27.4m, compared with the same period last year. The number of active customers rose to 44,750, a 200% growth on 2005. The company retained losses of US$104.5m following the sale of its US-facing operations in October 2006 and cut operational costs by 75% thanks to a group restructuring. Chief executive Henry Birch said: “Disposing of our US-facing assets dramatically impacted our business, but having successfully restructured our operations we are now well-positioned to capitalise on growth opportunities throughout Europe.”

The European Commission yesterday said it had “taken action to put an end to obstacles to the free movement of sports betting services in Denmark, Finland and Hungary”. The EC’s findings follow the infringement procedures it initiated against those countries in April 2006 in relation to Article 49 of the EC treaty guaranteeing free movement of services. “The Commission considers that the restrictions in questions are not compatible with existing EU law and that the measures taken by the Member States to restrict the free movement of sports betting services have not been shown to be necessary, proportionate and non-discriminatory,” its statement said. National operators could not be regarded as non-profit organizations it added and if there was no satisfactory reply from the states in question within two months, the Commission may refer the mater to the European Court of Justice.   

Sportsbook and gaming operator Intertops has launched a new mobile gambling service in partnership with wireless casino systems provider Spin3. The service will allow Intertops to expand its mobile services from WAP to internet and provide casino classics such as blackjack, roulette and video slots, to mobile users connected to the Microgaming network of online casinos through Spin3.   

Canada’s Alexander First Nation (AFN) has refused to comply with a cease and desist order issued by the Alberta Government’s Gaming and Liquor Commission, in relation to its IT business venture Alexander Internet Technologies (AIT), citing its inalienable right to build and operate a data centre. AIT operates as a web hosting and data centre for a range of companies, including online gaming firms and is licensed by the Alexander Gaming Commission as an internet service provider. Ray Arcand, chief and council of AFN, said: "We have cooperated fully and have sought to meet with the Alberta Gaming and Liquor Commission and the Government of Alberta, but our requests have been refused or ignored. The Government of Alberta desires to ignore our sovereignty and our right to regulate online gaming transacted within our territory, along with all of the positives of our developing economic independence, and has chosen to launch this attack.”

CyberArts has announced two appointments. Mark Simpson has been given the job of European sales director and Rudi Diezmann is the new vice president of engineering.

NEWSPAPERS AND WIRES: The Times reports on its front page that gamblers were one of the big losers from chancellor Gordon Brown’s last budget yesterday. In a report, the paper says that in comparison with Prime Minister Tony Blair, Brown has shown his “distaste for gambling” by announcing a rise in gaming duty to 50% for the new supercasino and the 15% rate for the new remote gaming duty. The paper adds: “The move is a stark indication of Mr Brown’s much cooler attitude to gambling than Tony Blair, and has left the British industry reeling.” It adds that the Treasury defended the tax rates saying they were needed “to ensure that this vibrant and expanding sector continues to make a fair contribution to tax receipts”. However, the paper goes on to quote Karen Potts, a partner at the accountant Deloitte Leisure, as believing the rates could well “discourage operators from bidding to run the new casinos. Some have probably been working on an effective tax rate of 20% to 25% of duty, and I would think this change could well put that up as much as 25%.” The Guardian reports on that the online gaming industry had previously told the Treasury that it was unlikely it would come onshore if the remote gaming tax was anything more than 2%. Meanwhile, City AM reports a spokesperson for PartyGaming as saying that, allied with corporation tax at 28%, the new tax rate would mean any company coming to the UK would effectively be paying tax of 43%. “Coming to the UK we would be giving away a big competitive advantage,” the spokesperson added.

The Times reports on yesterday’s news from Sportingbet. It says Sportingbet paid US$400,000 to the state of Louisiana to draw a line under the arrest of former chairman Peter Dicks last summer. The paper reports that the St Landry parish district attorney, Eric Taylor, decided to seek a financial settlement after it became clear that it was unlikely his office would be able to prosecute the case. The paper added, though that the dismissal of the charges is unlikely to persuade Sportingbet to relax its ban on directors visiting America, as it is believed that there is still a threat of arrest.

The Sun reports that spread-betting firm IG Group is to expand into Spain. The company expects trading of contracts-for-differences — a popular type of investment — to take off there following a change in regulations. It may even open a local dealing desk.

CITY: Rank is off nearly 6% or 13.25p in early trade after the news on the budget. PartyGaming is us a tad at 46.25p. Leisure and Gaming is up 12% or 1.25p to 11.5p on the back of its results.

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Posted: 22/03/2007