Online gaming company PartyGaming Plc (PRTY.L) Friday reported a net loss for the first half of fiscal 2009, compared with profit a year ago. On a pre-tax basis, profit increased from last year, as benefits of expense reduction efforts and currency movements nearly offset a 21% decline in revenues. PartyGaming also said that it remains confident about its full year outlook.
Profit before tax for the first-half reached $38.0 million, higher than $30.3 million in the same period last year.
The company also reported a first-half loss attributable to the equity holders of $66.9 million or 16.5 cents per share, compared with a profit attributable to the equity holders of $22.7 million or 5.3 cents per share last year.
Profit after tax from continuing operations rose to $35.2 million or 8.2 cents per share from $26.7 million or 6.2 cents per share in the prior-year period.
Loss after tax from discontinued operations was $102.1 million, wider than a loss of $4 million a year ago. According to the company, discontinued operations include operations located physically outside of the US, but which relate to customers in the US that were no longer accepted following the enactment of the UIGEA on October 13, 2006.
PartyGaming also reported six-month period net revenues of $201.3 million, down 21% from $254.8 million in the year ago period. The revenue decline reflected the significant appreciation in the US dollar, which was responsible for approximately half of the year-on-year decrease, as well as competitive pressures in poker and the consumer downturn, the company noted.
Commenting on the results, Jim Ryan, PartyGaming Chief Executive Officer, said, "As expected this has been a challenging first half given year-on-year currency movements, competitive pressures and the impact of the macroeconomic downturn."
Total active player days and the average number of daily players were down 16% and 15% respectively. Despite a 17% increase in new player sign-ups, unique active players declined 7% to 821,300 due to the increased awareness of competitor sites as well as a reduction in consumer spending.
Yield per unique active player dropped 15% to $245.1, reflecting weak macroeconomic factors as well as the increased cost of player bonuses, particularly in poker, due to the increasingly competitive nature of the online poker market.
Poker revenue decreased 33% from 2008 to $102.6 million. Despite the decline, poker remained the largest business segment in terms of net revenue with 51% of the total revenue.
Casino revenue of $89.3 million was flat year-on-year with adverse currency movements and lower cross-sell from poker. These were offset by higher levels of spend from the company's casino players, largely due to the improved quality and quantity of games offered on the company's flagship casino product, PartyCasino.
Sports betting revenue declined 13% to $7.7 million from $8.9 million a year ago, due to adverse currency movements. Bingo revenue totaled $1.7 million, 32% lower than last year's $2.5 million, due to the termination of the white label agreement with ITV as well as adverse currency movements.
During the six-month period, the company's distribution costs declined 24% to 80.8 million as customer acquisition and retention costs slid 37% and webhosting and technical services costs fell 23%. As a proportion of net revenue, total distribution costs decreased to 40.1% from 41.8% in 2008.
Administrative expenses also declined 33% in the period to $81.6 million. Before share-based payments, administrative expenses were down 27% to $77.3 million. Staff costs represented the largest saving,a decline of 32% year-on-year, the company noted.
Further, PartyGaming said that its trading since June 30 has been in line with the management's expectations. Trading was strong in the three weeks ended on August 18, which represents the peak holiday season in most of the group's core markets. Including Cashcade, average gross daily revenue grew 32% to $1.92 million from the previous quarter. In poker, new player sign-ups averaged 1,300 per day and there were on average 51,000 active players per day, generating average gross daily revenue of $642,900. In casino, average gross daily revenue reached $713,200. In bingo, average gross daily revenue was $510,800 while in sports betting, average gross win per day was $56,800.
Additionally, PartyGaming said that its Board is not recommending payment of an interim dividend in light of the attractive consolidation opportunities that continue to be available to the group following the settlement with the USAO.
Moving ahead, the company said that it continues to make good progress in 2009 despite a challenging business environment. The company's three-year strategy is on track. While the macroeconomic outlook remains uncertain, the company remains confident about the full year outlook and of making good progress in the remainder of 2009.
PRTY.L is trading at 266.70 pence on the LSE, up 0.70 pence, on a volume of 75,623 shares.
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