US gambling ban pushes PartyGaming to £23m loss

Online gambling group PartyGaming yesterday recorded a $47m (£23m) half-year loss as it continued to rebuild in the wake of US legislation last October which forced it to close operations across the Atlantic, wiping out 75% of revenues.

Chief executive Mitch Garber said the first six months of this year had seen an 83% increase in customer sign-ups outside the US, taking the total to 403,700.

Nevertheless, even excluding the US, losses for the half year were $32m. Pre-tax profit 12 months ago had been $320m.

Focus on growing customer numbers came at an increased cost in terms of the amount paid to marketing affiliates and other punter recruitment and retention spending. Such spending grew to about 40% of revenues and depressed margins.
"We made a strong investment in players in the first quarter," said Mr Garber. "We have shown that it was worthwhile."

The company yesterday said it was planning a "very meaningful and very competitive" launch of a bingo game in the coming months. It is also on the brink of signing a major partnership deal with a "blue chip household name in the UK" not associated with gambling.

The tie-up, which would link PartyGaming's technology to a larger brand, comes as all gambling groups active in Britain prepare to launch advertising campaigns when regulatory restrictions, which have been in place for almost 40 years, are relaxed this weekend. New advertising freedoms for betting firms - including off-shore companies such as PartyGaming who do not hold licences from the UK Gambling Commission - come into force with the final tranche of the controversial 2005 Gambling Act.

PartyGaming shares jumped 5.25p, or 23%, to 28p on the back of yesterday's figures. The group had crashed out of the FTSE 100 index after the US ban wiped out three-quarters of its business. It floated at 116p a share in June 2005 and peaked at 170.75p that summer.

Trading figures met City expectations, with revenues averaging $1.4m a day in July and August. The firm signed up an average of 1,192 new poker players a day. PartyGaming is keen to expand through acquisitions and joint ventures in China and Russia, and hinted that it was close to clinching several deals.

"We expect to announce a number of important alliances with leading companies around the world that will help us to promote and grow our business," Mr Garber said.

Simon Bowers and Julia Kollewe

News Added: 30 August, 2007

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