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PartyGaming is blaming gains in the U.S. Dollar and competition from those online poker rooms still taking customers in the States for its flat third-quarter sales. Shares were down as much as 10 percent in London trading on Wednesday following the news.
The Gibraltar-based company said today in a statement, little changed from $118 million a year earlier and below Deutsche Bank AG's $119 million estimate. The company is ``confident'' of meeting the consensus of analysts for increasing annual profit, the statement shows. Deutsche Bank analysts, who cut their forecasts earlier this week, trimmed their full-year EBITDA (earnings before interest, tax, depreciation and amortisation) estimate by a further $1 million to $141 million and also nudged down their forecast for the next financial year by 3 percent to $151 million.
Gains by the U.S. dollar, which is PartyGaming's reporting currency, reportedly eroded the value of sales it generates in other monies. The dollar climbed during the third quarter following market turmoil across the globe. While the U.S. economy was hit hard, European economies in many respects were hit even harder.
``We are seeing a trend across the online industry of poker being weak, but sports betting, bingo and casino strengthening,'' Mark Brumby, an analyst at Blue Oar Securities in London, said in a research note.
Revenue from poker, the main sales generator, fell 15 percent overall in the quarter and dropped 6.6 percent in the six weeks after the period ended on a gross daily basis, the statement shows. The number of new poker customers slid 12 percent in the quarter from the prior three months, partly because of deferred marketing spending.
PartyGaming fell 3.25 pence, or 3.3 percent, to 94.75 pence at 10:28 a.m. local time. The shares cost 116 pence each when the company went public in June 2005 and would trade below 10 pence now if not for a 1-for-10 reverse split in May of this year.
Bloomberg News reports that web-gaming companies are indeed being affected by the economic downturn much the same way that Las Vegas and the Asian gaming playground of Macau have been in recent months.
Web-gaming companies also face a spending slowdown as higher food and energy bills sap incomes and plunging stock prices erase wealth and hurt confidence. World economic conditions contributed to a slowdown in sales growth unveiled this week by 888 Holdings Plc, whose Pacific Poker competes with PartyPoker.
``The macroeconomic challenge we face is certainly more marked than everyone predicted in the summer,'' Jim Ryan, PartyGaming's chief executive officer, told journalists on a conference call. ``Online gaming is likely to be resilient, but not immune to the economic downturn.
"This is a tough trading environment," he added. "The online gaming industry is having to navigate the way through its first ever economic slowdown. What the full effects will be for the industry as a whole remain to be seen."
Christopher Costigan, Gambling911.com Publisher
