PARTYGAMING

PartyGaming shares rise on revenue growth

By Damian Reece, City Editor - The Independant

Published: 22 October 2005

Richard Segal, the chief executive of PartyGaming, the online poker business, hit a winning streak yesterday with third-quarter revenue growth up 32 per cent year-on-year, repairing some of the damage to the company's share price, down 50 per cent since its July high of 176p.

Mr Segal said the company was proving it was capable of executing a cogent business plan after delivering revenues for the three months to 30 September in line with expectations at $220m (£125m). "We know exactly what we want to do and we are demonstrating that we are executing well. In short, we've upped the ante," Mr Segal said.

PartyGaming's volatile share price reacted positively to the results, rising 8p to 86p, helped by an upbeat presentation to analysts and a promise that the company will hand back cash to shareholders if it fails to identify suitable takeover targets. About 150 analysts attended the company's results conference call, reflecting the intense interest in the stock in the UK and the US.

PartyGaming recently changed its approach to acquiring new customers by reducing its reliance on marketing websites such as Empire Online, the quoted website that issued a profits warning this week. PartyGaming is moving to a single technology platform of its own where players can play poker and other casino games, such as blackjack, using one online account.

Although during the quarter, yield per active player fell 2 per cent year-on-year to $16.60, at the bottom of market expectations, the company said this reflected the growth of new players discovering the site who play less often and for lower stakes than the site's earlier, more serious users. However, Mr Segal said he expected the yield figures to improve as newcomers started to play more and stake more.

At its recent interim results, the company warned that rates of revenue growth in July and August had not been as high as expected. That extended into September, although October had been much better, Mr Segal said yesterday. The return to higher revenue growth rates had been driven in part by the company's lower reliance on introductory sites such as Empire Online, known as "skins" in the online gaming market. "We have gone up and they have gone down," Mr Segal said.

Having grown 38 per cent year on year, poker revenues grew by 4 per cent between the second and third quarter, reflecting a maturing of the market for online gaming. But Mr Segal said there was still huge opportunity for organic growth as online gaming was only 4-5 per cent of the total gaming market. He expects to see the 3 billionth hand of online poker to be played in the near future and has started online poker schools, also available on mobile phones, to expand the market and recruit players.

Richard Segal, the chief executive of PartyGaming, the online poker business, hit a winning streak yesterday with third-quarter revenue growth up 32 per cent year-on-year, repairing some of the damage to the company's share price, down 50 per cent since its July high of 176p.

Mr Segal said the company was proving it was capable of executing a cogent business plan after delivering revenues for the three months to 30 September in line with expectations at $220m (£125m). "We know exactly what we want to do and we are demonstrating that we are executing well. In short, we've upped the ante," Mr Segal said.

PartyGaming's volatile share price reacted positively to the results, rising 8p to 86p, helped by an upbeat presentation to analysts and a promise that the company will hand back cash to shareholders if it fails to identify suitable takeover targets. About 150 analysts attended the company's results conference call, reflecting the intense interest in the stock in the UK and the US.

PartyGaming recently changed its approach to acquiring new customers by reducing its reliance on marketing websites such as Empire Online, the quoted website that issued a profits warning this week. PartyGaming is moving to a single technology platform of its own where players can play poker and other casino games, such as blackjack, using one online account.

Although during the quarter, yield per active player fell 2 per cent year-on-year to $16.60, at the bottom of market expectations, the company said this reflected the growth of new players discovering the site who play less often and for lower stakes than the site's earlier, more serious users. However, Mr Segal said he expected the yield figures to improve as newcomers started to play more and stake more.
At its recent interim results, the company warned that rates of revenue growth in July and August had not been as high as expected. That extended into September, although October had been much better, Mr Segal said yesterday. The return to higher revenue growth rates had been driven in part by the company's lower reliance on introductory sites such as Empire Online, known as "skins" in the online gaming market. "We have gone up and they have gone down," Mr Segal said.

Having grown 38 per cent year on year, poker revenues grew by 4 per cent between the second and third quarter, reflecting a maturing of the market for online gaming. But Mr Segal said there was still huge opportunity for organic growth as online gaming was only 4-5 per cent of the total gaming market. He expects to see the 3 billionth hand of online poker to be played in the near future and has started online poker schools, also available on mobile phones, to expand the market and recruit players.