After Profitable Year, Party Shares Swell ahead of DOJ Resolution

11 March 2009
Although adverse currency fluctuations significantly dampened PartyGaming's financial year, optimism on imminent plans for an Italian poker launch, growth in the casino vertical and -- of course -- an expected resolution with the Justice Department pushed the company nearer to its 52-week stock-exchange high Wednesday.

On an earnings call, James A. Ryan, the company's chief executive, described conditions in the Italian skill games market as "early days," and following on from the initial success of competitors like Playtech Ltd., said plans are in the works to leverage the company's business-to-business services model there.

With net revenue from poker down 12 percent to $274 million over last year, casino proved resilient with net revenue up 20 percent to $176 million.

Amid the wider economic downturn, casino has remained a buoyant offering across the sector -- largely because operators and developers can regularly supply new games, particularly slots, according to Lorien Pilling, who is head of research for Global Betting & Gaming Consultants.

The 2008 calendar year saw a marked uptick in branded slots content, and for its part, Party launched a raft of new games themed after films like "The Godfather," "The Terminator" and "Gone with the Wind." The company also added a live-dealer casino via its agreement with Evolution Gaming.

"Maturity in the online casino sector is still some way off and GBGC sees steady growth over the next few years," Mr. Pilling told IGamingNews. "First there is the development of live-dealer casinos for the European market and also a new group of players being introduced to casino-style slot games through the side-games offered in online bingo rooms."

Between the five weeks ended Feb. 4, 2009, and the four weeks ended March 4, daily gross revenue from casino grew 10.9 percent to $662,500.

The European poker market, meanwhile, remains a troublesome one for Party. Mr. Ryan hinted at a "transformational" acquisition that could help boost liquidity, but looking within the company's stable, a new stream of poker players is expected from its b-to-b partner Cirsa Gaming Corporation and, separately, from Italy.

Mr. Ryan said that despite the 12 percent fall in net poker revenue and an increase in bonus-related costs, the company was able to maintain its share of the global online poker market -- about 8 percent -- between August 2008 and yearend.

Between the five weeks ended Feb. 4, and the four weeks ended March 4, however, average daily gross revenue from poker fell 2.4 percent to $738,500, as competition from United States-facing sites like Pokerstars and negative currency movements continued to put downward pressure on the top line.

PartyBets, the company's sportsbook, grew turnover by 54 percent to $538.8 million but only achieved gross revenue of $25.1 million on a margin of 4.7 percent. Net revenue came in at $18 million. In current trading, average daily gross win was up 62 percent to $123,000.

Net revenue from bingo, meanwhile, grew 96 percent to $4.9 million, though its contribution to earnings before interest, taxes, depreciation and amortization was nil.

Mr. Ryan said the terms of the company's deal with ITV -- a minimum revenue-sharing agreement -- will not be renewed, and that Bingo Night Live, which ended last November, will probably not be relaunched.

To grow bingo revenues -- which stagnated between January and February of this year -- he said the company is looking toward launching its new white-label partner, DM, by the end of the first half.

The company's negotiations with the United States Justice Department are "progressing well," Mr. Ryan said, adding that the company is hopeful of a resolution in "the not-too-distant future."

From total net revenue of $472.9 million, Party reported profits after tax of $77.8 million.

Buyers of PartyGaming added 16.75 pence, or 7.24 percent, to the share price Wednesday, which closed at 248 pence. Across the last month, the company's share value has ballooned 42.5 percent and continues to approach its one-year high, 312 pence.

Chris Krafcik is the editor of IGamingNews. He lives in St. Louis, Mo.