Party Gaming Predicts Better Profits

Published: Wednesday, January 30, 2008 Online-Casinos.com

PARTY GAMING PREDICTS BETTER PROFITS

Trading update confident 2007 numbers will beat analyst's forecasts

Mitch Garber, CEO of the multi-faceted UK online gambling group Party Gaming, was in bullish mood this week in a trading update covering underlying profit for 2007, saying that the numbers would be slightly ahead of analysts' forecasts and that January trading was in line with expectations.

Revenue rose 52 percent to $120 million in the fourth quarter to December, giving full-year revenue of $448.2 million - well up on the $324.7 million achieved the year before. Earnings before interest, tax, depreciation and amortisation (EBITDA) would be slightly ahead of current expectations, buoyed by lower than anticipated costs and customer bad debts, the executive revealed.

Analysts are expecting 2007 EBITDA of $104.5 million, according to the average forecast of a Reuters Estimates poll of six banks.

"We continue to build on the four pillars of our strategy: growing the player base, localising the customer offer and broadening the product base whilst acting responsibly," Garber said in the statement. "These results show that we have built a solid platform for growth... and we remain confident about the Group's future prospects."

PartyGaming said average gross daily revenue rose by 1 percent in the four weeks ended January 28 from the fourth quarter.

The firm is looking for new ways to boost revenue as it faces stiffer competition for poker players and continues to try to compensate for the loss of U.S. gamblers following the UIGEA in late 2006 which banned financial transactions with online gambling companies and caused Party to withdraw from the US market.

Together with competing online gambling companies like 888.com and Sportingbet, PartyGaming is talking to the U.S. Department of Justice in a bid to avoid prosecution for accepting U.S. Internet wagers prior to the UIGEA. Such a deal would not only remove legal obstacles but could pave the way for a re-entry to the lucrative American market should bans on Internet gambling transactions be lifted.

Analysts say it would also trigger major consolidation in the fragmented sector.

Garber confirmed that discussions with U.S. authorities continued, and undertook to report any significant developments.

Earlier, the group said that its new poker customer loyalty scheme had adversely impacted sales; the group's gross poker revenue rose 7 percent from the third quarter, but net revenue dropped 3 percent, as the restructuring of the player loyalty programme led to a rise in bonuses as a percentage of gross revenue. This would be offset, however, with lower-than-expected costs and customer bad debts.