PartyGaming Annual Profit Down 56 Percent

PartyGaming PLC reported a 56 percent plunge in annual net profits on Thursday following the U.S. government’s decision to ban Internet gambling, but also revealed its attempts to find revenue elsewhere are beginning to bear fruit.PartyGaming, which pulled out of the lucrative U.S. market in October after the government shut down the industry there, unveiled a 2006 net profit of US$128.4 million (euro97.2 million), down from US$293.2 million in 2005. Revenue rose 12 percent to US$1.1 billion (euro830 million) from US$977.7 million. “Whilst the decision to stop accepting customers from the U.S. was a bitter blow for our business, our continuing operations have grown strongly from the lows reached in November 2006, benefiting from the rapid reorganization of our business and the acceleration of our efforts in international territories,” said PartyGaming Chief Executive Mitch Garber. Stripping out the company’s defunct U.S. operations, underlying profit from continuing operations jumped more than twofold to US$50.9 million (euro38.53 million) in the 12 months ended Dec. 31 from $19.7 million a year earlier, bolstered by its European operations. PartyGaming, which runs what was once the world’s biggest poker site, PartyPoker, has scrambled to tap other markets since the United States effectively banned online gambling last autumn when the Congress added a provision to a bill aimed at improving port security to make it illegal for banks and credit card companies to settle payments to online gambling sites. U.S. President George W. Bush signed the bill into law Oct. 14. That eliminated nearly 80 percent of PartyGaming’s revenue, sending its stock plunging not even six months after it became the largest new listing on the London Stock Exchange when its shares hit the boards in June. The stock dropped 6.2 percent to 34.25 pence (63.03 U.S. cents; 50.89 euro cents) on Thursday. PartyGaming axed 945 jobs, or 41 percent of its work force, in the immediate wake of the decision but has since bought some businesses and assets from smaller rivals Empire Online Ltd. and Intercontinental Online Gaming Ltd. It has also added multi-lingual and multi-currency versions of its games. The company announced its results a day after rival Sportingbet PLC also revealed it had some success in restructuring its operations after the U.S. gambling ban. Sportingbet said Wednesday that it had swung to a net loss in the second quarter, but also unveiled a 40 percent rise in gross profit from continuing operations, also driven by its European operations.