2ND UPDATE: PartyGaming Loses Third Of Its Value On Warning
09-06-05 07:52 AM EST
LONDON (Dow Jones) -- PartyGaming, the controversial poker web site operator that earns most of its revenue where its services are considered illegal, on Tuesday lost a third of its market value when the company warned that more casual players joining its site weren't spending as much as its initial core of users.
PartyGaming said revenue growth is slowing as the market matures.
It's comfortable with 2005 EBITDA excluding share option and IPO expenses forecasts, but retention rates and player yields have declined at faster-than- expected rates, due to more casual players joining the player pool.
New sign-ups are in line with expectations, with more from outside the U.S.
"You're talking about an industry that's had almost unprecedented growth rates, remarkably high growth rates. Very clearly, they are moderating over time. Very clearly, they will continue to moderate. But let's be clear, they're moderating from very high levels," said CEO Richard Segal.
The company added it won't bring on any new "skins," or third-party websites which use their platforms.
Shares tumbled 32.4% to 106 pence a share in mid-day trade, below where it priced its late June public offering.
PartyGaming said first-half after-tax profit climbed 23.8% to $171 million, with EBITDA excluding share option and IPO expenses up 70% to $257.7 million.
Revenue climbed 81% to $437 million on strong growth in poker. The number of daily active players rose to 123,447 from 60,738, though the yield per active player day slid to $17.80 from $19.20.
Most of its users come from the U.S., where the Department of Justice considers online gaming illegal, though it hasn't brought prosecutions.
PartyGaming said about 15% of its active players are outside the U.S., from 9% in 2004.
"We made it very clear throughout the IPO process that we would stick to the knitting and concentrate on our core product, i.e. poker, in our core market, the United States and that is something that absolutely we are doing," Segal said.
He said they're still monitoring developments on the legal side, including the introduction of a bill by Senator Jon Kyl (R-Ariz.), but said it was a "fair assessment" that he wasn't particularly concerned.
Segal added that the company will monitor Sportingbet's interest in buying Empire Online "closely," but didn't commit to a counter-bid.
(END) Dow Jones Newswires
09-06-050752ET
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