October 26, 2007

Garber upbeat as Party goes for full on offering

Mitch Garber, PartyGaming chief executive, praised the operational changes the company had driven since the company’s US exit and the fact that the group had addressed its structural weaknesses, as it revealed rising revenues in its third-quarter key performance indicators yesterday.

“In the space of a year, we have gone from being an English-only operator to providing our products in 12 different languages and three currencies,” Garber said. “Our casino has performed particularly strongly and the product has improved dramatically through our acquisitions of Empire Online and Intercontinental Online.”

One of the landmark dates for Party will be 1 January 2008, when Germany publishes its State Lottery Treaty outlining the regulation of gambling services. Germany is Party’s second biggest market after the UK representing around 19% of revenues. Garber said: “The momentum is clearly going the way EU law says it should be going. It is hard to imagine Germany discriminating against EU-licensed operators and the European Commission has shown it is willing to take action against governments that do. Therefore we are looking at Germany in that European context and it would be very surprising if they took an aggressive position. If that happened you would see us oppose it more aggressively than you have seen us oppose any similar positions from governments, where frankly there has been less of a financial incentive to take the lead in opposition.”

Garber said Party had no current plans for further acquisitions and could not foresee further partnerships such as the one Party has with UK broadcaster ITV. The group did not have “that many weaknesses left” in it, as it has acquired or developed the main product lines it needed to be a fully diversified online gaming operator. “We have a lot of work and growth ahead of us now that we are established as a multi-lingual, multi-currency operator with our own casino and bingo software and our own sportsbook. Growth in the non-poker areas of the business is now a key focus for everyone at PartyGaming.”

A new UK advertising campaign for Party’s sportsbook will be launched in the near future. However, Garber said there were many other markets Party was targeting and the UK was already the most competitive betting market in the world. Party would not be spending “a disproportionate amount of its marketing budget on the UK”, he added.With regards to its dealings with the US Department of Justice, Garber said Party was aware it would probably have to pay a fine but they were talking “months and not years” in terms of coming to an agreement with the US authorities.

The poker liquidity issues Party suffered after the US exit had been addressed throughout the first and second quarters of the year during which time marketing and affiliate-related distribution costs had risen significantly. They had now been brought into line to between 43% and 45% of the company’s revenues and the company was now focusing on attracting back the high rollers it lost after the US internet gaming ban.

Party revealed a 24% annual increase in group revenue to US$116m (£56m), compared with US$93.3m in 2006, and a 5% rise on the previous quarter. Poker revenue fell 3% to US$74.8m, compared with US$76.9m in 2006, but was up 3% on the second quarter. Casino revenues were up 158% to US$36.7m, compared with US$14.2m in 2006. Sports-betting income rose 91% to US$4.2m, compared with US$2.2m last year and 100% up on the previous quarter.