A Shot in the Arm from Sportingbet

13 October 2005

On the heels of a positive annual report from Sportingbet, share prices for I-gaming companies have rebounded somewhat from a slide that took place early in the week.

Chief among Sportingbet's financial highlights for the year ended July 31, 2005 is an almost fivefold increase in pre-tax profit to £40.8 million, compared to £8.3 million for the previous year.

Gross win has risen to £175.8 million from £93.9 million, and turnover has risen to £1.53 billion from £1.18 billion. Sports betting accounted for the bulk of turnover--£1.42 billion worth--while casino and gaming accounted for £45.2 million, poker accounted for £49.5 million, and fee income accounted for £9.5 million.

With the release of its annual financial results, the company also proposed its first ever dividend of 1p per share.

"We now have over 2.7 million registered customers who placed 400 million sports and gaming bets in the year, up 51 percent, and generated an 89 percent increase in daily poker rake," Sportingbet CEO Nigel Payne commented in the report. "We are particularly pleased with the group's customer dynamics, which have remained in line with previous years despite the increase in scale of the business. Important indicators such as customer acquisition cost, bet size, bet frequency and attrition, have either remained in lie with last year or in some cases improved. The stability of these indicators demonstrates the power of Sportingbet's multi-product, global offering and our ability to drive organic growth cost efficiently, without compromising the quality of customer attained."

Payne also said that Sportingbet's poker business has seen its fastest growth period ever during the last 10 weeks, the results of which are not contained in the annual report because they represent the first 10 weeks of the next financial year. This comes despite recent numbers from rivals PartyGaming and Empire Online indicating declining growth in revenue and new player sign-ups.

Payne also downplayed the recent decline of investor confidence in I-gaming stocks.

"The whole thing has been overblown," he said. "From where I am standing, volumes up 50 percent this year after being in business for seven years is something any company in any industry in any part of the world would want."

He added, "Our poker rake is up 71 percent year-on-year and 22 percent quarter-on-quarter. That is not a slowdown."

Sportingbet's shares rose by 9.4 percent (25p) on the day to close at 314p.

Share prices for other industry operators were up as well following Sportingbet's positive news. PartyGaming shares rose by 9.7 percent (7p) to 78.5 p, Empire Online shares rose 4 percent (4p) to 111p and 888 Holdings shares rose 4 percent (5.75p) to 152p.

As Mark Brumby at Oriel Securities told the Financial Times, "In-line numbers and an upbeat statement may go some way to stabilizing the sub-sector."

Click here to view a copy of Sportingbet's preliminary results for the 12 months ended July 31, 2005.

Bradley Vallerius

Articles by Bradley P. Vallerius, JD manages For the Bettor Good, a comprehensive resource for information related to Internet gaming policy in the U.S. federal and state governments. For the Bettor Good provides official government documents, jurisdiction updates, policy analysis, and many other helpful research materials. Bradley has been researching and writing about the business and law of internet gaming since 2003. His work has covered all aspects of the industry, including technology, finance, advertising, taxation, poker, betting exchanges, and laws and regulations around the world.

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