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PartyGaming, the internet gambling firm that's merging with rival bwin, has traded in line with expectations during the fourth quarter, with a stronger casino business offsetting weakness in poker and bingo.
The company said trading since the end of September has been "solid" overall, thanks mainly to casino’s double-digit growth in average daily gross revenue versus the third quarter.
There was also growth at the poker business quarter on quarter, but the usual seasonal pickup has been "less pronounced" due to the euro’s strength against the dollar. Both bingo and sports are down on Q3.
But clean earnings before interest, tax, depreciation and amortisation (EBITDA) margins for 2010 remain in-line with previous guidance of 27-28%.
And the company is excited about the possibility of online gaming being regulated in the US both at the Federal and State level. If it goes through, the group is "well advanced" in talks with licensed companies in the US that could create "substantial" value.
"The proposed merger with bwin remains on-track to complete at the end of the first quarter and should place the combined group in a strong position to take advantage of the changing regulatory landscape in Europe given its leadership positions across all key product verticals," boss Jim Ryan said.
Press Release
PartyGaming Plc ("PartyGaming" and, together with its subsidiaries, the "Group") Pre-Close Trading Update
Revenue overall has been in-line with expectations with a strong performance in casino mitigated by a softer seasonal performance in poker and bingo
Clean EBITDA margins for 2010 expected to be in-line with previous guidance
Prospective regulation in new markets offers exciting medium to long-term revenue potential that may require additional investment
Merger with bwin remains on track
Trading since the end of September 2010 has been solid overall with a particularly strong performance in casino that has enjoyed double-digit growth in average daily gross revenue versus the third quarter, driven by growth in both turnover and hold. Poker has also seen growth in average daily gross revenue over the third quarter, although the usual seasonal pickup has been less pronounced than in previous years due to the strengthening of the euro against the US dollar. In bingo, average gross daily revenue has grown versus the current trading data reported at the time of our Q3 KPIs, but remains lower than the third quarter. This is due to the strengthening of the euro against sterling and seasonality, as UK-based bingo players typically reduce their spend in the run-up to Christmas. While sports betting has continued to deliver a solid performance in the period, the benefit of the World Cup during the third quarter as well as a favourable series of results for punters has meant that average daily gross revenue in sports is down versus the third quarter.
In respect of margins, we expect that full year Clean EBITDA margins for 2010 will remain in-line with our previous guidance of between 27% and 28%.
An increasing number of territories are now actively exploring the merits of a regulatory framework for online gaming. In Europe, the Group is continuing to monitor closely Germany, Greece, Holland, Denmark and Spain as well as other countries. Whilst the shape and scope of any such regulations is not yet known, should some of these markets move to regulate, additional gaming taxes and investment may be required to ensure that the Group’s long-term revenue potential is maximised.
There continues to be much movement in the US towards regulating online gaming both at the Federal and State level. Should the requisite legislation be enacted, the Group is well advanced in discussions with licensed companies in the US that could create substantial value for the Group’s shareholders.
Proposed Merger with bwin
It is expected that the shareholder documents associated with the proposed merger will be issued shortly with an extraordinary general meeting of shareholders expected to be convened for late January 2011. The proposed merger remains on course to complete during March 2011.
Commenting on today’s announcement, Jim Ryan, Chief Executive Officer, said:
"Revenues in the fourth quarter have enjoyed their usual seasonal upturn. Casino has performed particularly strongly with double-digit revenue growth over the third quarter, although currency movements meant that the uplift in poker has been less pronounced than usual. Clean EBITDA margins are expected to be in line with our previous guidance for 2010.
"The proposed merger with bwin remains on-track to complete at the end of the first quarter and should place the combined group in a strong position to take advantage of the changing regulatory landscape in Europe given its leadership positions across all key product verticals."
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