Party Teases B-to-B on Forex, Poker Woes

19 November 2008

Although PartyGaming reported flat revenue growth in the third quarter, year over year, the Gibraltar operator hinted that its nascent business-to-business arm is nearing deals with a number of prospects.

"We're very pleased with where we are," James A. Ryan, chief executive of PartyGaming, said on today's earnings call about current b-to-b activity. "The fact of the matter is we are a long way down the path with a number of prospects -- so instead of putting undue pressure on the organization, this is going to be a circumstance where we're going to overdeliver and surprise, we hope, in the future."

Like 888 Holdings earlier this week, PartyGaming, which reports in United States dollars, absorbed a foreign exchange loss that Chief Financial Officer Martin Wiegold said trimmed around $5 million off the top line.

Total revenue came in at $117.7 million against $118 million last year as quarterly income from poker, the company's core business, dropped 14 percent to $65 million. Quarter on quarter, moreover, poker fell 12 percent.

Poker performance, it said, was affected by adverse reaction to a new loyalty program, unplanned downtime in August and planned downtime in September when the platform was relaunched.

In a research note today, Ivor Jones, an analyst with Evolution Securities, reiterated comments made in mid-October that PartyGaming needs to merge its poker liquidity with that of a European competitor.

"Biggest hurdle is working out who will be in charge," Mr. Jones said last month. "Party has the most to lose from status quo and, therefore, the most to gain from change."

The casino business, which Jon Salmon, the new marketing chief, was brought on to grow, generated $45.9 million, up 25 percent against last year but down 3 percent, sequentially.

Mr. Ryan said the company is working to reduce cross-selling between poker and casino -- for which Party is well known -- and begin direct-marketing initiatives for casino with the hope of attracting new, higher-spending patrons.

Bingo grew 143 percent to $1.7 million over last year on a strong performance in ITV Bingo in the United Kingdom. Sports betting revenue, meanwhile, was up 19 percent to $5.1 million over 2007 and up 21 percent, sequentially -- helped by an uptick in live-betting activity.

As ever the subject of speculation, Mr. Ryan declined on today's call to give guidance on long-running negotiations with the Justice Department.

On further forex gains by the dollar against depositing currencies like the British pound and Euro, average daily revenue for the first six weeks of the fourth quarter was off 6.6 percent against the same period last quarter.

"However," said a note from Numis Securities, "the US$ is on average 13% higher than Q2, therefore implying underlying revenue growth of 6%."




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