US Penalty Inflicts PartyGaming H1 Loss

PartyGaming, the online gaming company most famous for owning PartyPoker, has posted its six monthly figures which despite showing a loss of $66.9 million after tax have been described as in line with company expectations.
Chief executive Jim Ryan said of the results:”The group continues to make good progress in 2009 despite a challenging business environment. Given our robust trading performance and outlook, we remain confident about the group’s prospects and look forward to the rest of the year with confidence.”
The news was largely well received by the market which has pushed its shares up by a third this year already. Today PartyGaming shares were up 0.3% at 267p placing a value on the company of $1.78 billion.
PartyGaming showed a first half Pre-tax profits of $60.7 million compared to $64.9 million  in 2008, despite net revenue falling to $201.3m from the 2008 figure of $254.8m. The fall in revenue has mostly been explained by the strengthening of the US dollar compared to the Euro and Pound, which accounted for around $27 million of the fall, although market competition and consumer slowdown have also been factors.
Numis analyst, Wyn Ellis said: “We calculate that had it not been for adverse currency movements EBITDA would have been around 10 percent ahead of the $64.9 million reported in 2008.”
Casino revenue was mostly unchanged at $89.3 million with increased spending by consumers counteracted by currency changes.
Sports betting revenue fell by 13% to $7.7 million over last years H1 result despite record signing of new players once more due to currency movements.
Bingo revenue fell 32% from $2.5 million to $1.7 million due to the ending of an ITV contract as well as currency factors.
Poker revenue dropped 33% to $102.6 million despite 1300 new players per day signing up, and a $642,900 generated in gross daily revenue.
Overall trading had been good in the three weeks up to August 18th, which is the peak holiday season in the market with he gross daily revenue at $1.9 million a day.
A major factor affecting the profits of Partygaming has been the deal they struck with the US government in April this year whereby in return for not being prosecuted following the introduction of UIGEA in October 2006, they agreed to pay $105 million over 42 months. The result has been a net loss of $66.9 million for PartyGaming in 2009 H1 as opposed to a $22.7 million for the same period in 2008.
Jim Ryan was positive about the potential for the company following the deal and said: “The agreement has put a line under the issue and removed questions about what is going to happen. It has also opened up the capital markets for us and allows us to pursue acquisitions we would otherwise have been unable to go after,”

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