Paradise Poker Continues to Deal the Nuts for Sportingbet
Sportingbet plc, the London Stock Exchange quoted company that owns Paradise Poker, has announced its third quarter and nine months financial results for the period to 30th April 2006, and has once again impressed the market with its numbers.
Nigel Payne, Chief Executive of Sportingbet plc, said:
“I am very pleased to report a record performance for all parts of the Sportingbet Group this quarter, with each of our operating regions achieving its best ever performance. In the last three months we have grown our customer database by some 500,000 registered customers, up 86% over last year. Of this increase, 171,000 customers funded their accounts, an increase of 58% over last year, which has yielded a 58% increase in gross margin.
“We continue to be delighted with the growth that the Group's strategy is delivering. In particular, we are pleased with the spend patterns of our customers, which have remained in line with previous years despite a significant increase in the scale of the business.
“The further development of our product offering, with the introduction of a new casino suite and in-running betting for our US facing brands, should further enhance our customer focused product offering. In addition, we look forward to the FIFA World Cup, which will boost volumes in the usually quiet season for our European business.”
While the directors are clearly pleased with the general performances, it should be noted that, as has been common across the financial spectrum of betting and gaming companies in the last year, the impressive group-wide results have been helped substantially by spectacular growth in poker operations.
Sportingbet say the following about their Paradise Poker business:
“The Group's poker business continues to perform well. In the third quarter, the number of active customers who have contributed to rake at Paradise Poker rose by 71% to 187,522 (2005: 109,511). The number of games of poker played per day rose by 84% to 2.2m (2005: 1.2m), generating an average daily rake of $575,339, an increase of 90% (2005: $302,555). The cost of acquiring new active customers to Paradise Poker in the quarter was $204 (12 months 2005: $139), yielding a payback period of less than two months.
“Since the introduction of the Group's shared purse technology, the Board has been pleased with the contribution from allowing poker customers to bet on sports. During this seasonally quieter US sports quarter, 22,685 (13.8%) active real money poker customers also bet on the Group's US-facing sports or casino websites, generating $2.6m of incremental margin.”
The industry and players of poker and online gaming generally are of course still wary of how future governments will approach matters as the size and impact of the industry grows in the economy. Sportingbet has this to say about the current environment:
“Whilst there has been a good deal of activity with regard to the regulation of the industry in the quarter, little has fundamentally changed.
“The EU has initiated proceedings against certain EU Member States for possible infringement of EU Law with regard to internet gambling. The EU has also received the important study by the Swiss Institute into European cross-border internet gambling. Notwithstanding these developments however, the potential for internal market distortion remains high and the Board does not expect any significant progress to be made in improving the overall EU regulatory environment in the near term. The taxation driven fiscal protectionist policies adopted by several Member States presents a large political obstacle and is serving to reduce the political will within the EU to tackle the issue with any alacrity.
“In the UK, the Board's view remains that given the existing high levels of non-gaming related taxation (by international standards), the level of gaming tax proposed by the UK government (when announced) is not per se relevant to encouraging companies to come onshore. Sportingbet is encouraging the adoption of alternative structures whereby operators pay a licensing fee to be licensed and regulated but are not obliged to be onshore. The complex nature of this debate was illustrated in the March budget, where the Treasury again delayed announcing its taxation proposals for the industry.
“In the US there has been a good deal of activity so far this year. The Board continues to work hard to educate interested parties as to the merits of regulation and believes that progress is being made. Importantly, during the quarter, the influential American Gaming Association, recognising that technology to allow proper management of the potential social concerns of excess gambling has improved materially in recent years, modified its stance on internet gaming and is now encouraging Congress to study the industry fully prior to considering any legislation.
“Notwithstanding this progress however, certain US politicians have introduced legislation designed to prohibit or restrict certain forms of internet gambling. The Board is increasingly of the view that such Bills have a large part of their foundation in protectionism and not the stated moral arguments. This is evidenced through exemptions in the Bills for the burgeoning domestic internet gambling industry on fantasy sports and horse racing. The Board remains of the view, however, that there are a substantial number of obstacles that remain in the path of these Bills becoming law.”
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