Agreement with Intralot comes to fruition

Online gambling group Party Gaming’s agreement with Intralot SA three months ago to provide an Italian online poker operation (see previous InfoPowa report) came to fruition this week when the gambling group announced the launch of the new Intralot.it poker site. Following the receipt of certification from the Italian regulator, AAMS, the Intralot poker service is now being rolled out and will join Party’s Italian poker network.

While the group’s Italian poker network has only been operating a few weeks, with the expected introduction of poker cash games before the end of the year, the Board is hopeful that Italy will prove to be a profitable and exciting regulated online gaming market in the medium to long-term, the company said in a statement.

Party Gaming took the opportunity to additionally deliver a pre-close trading update, revealing that since 6 April 2009, revenues have remained robust and in line with that achieved in the first quarter of 2009.

Online casino revenue has shown a significant increase from the first quarter despite a fall in casino active player days due to seasonality and lower levels of cross-sell from poker. This revenue growth has been driven by the group’s main casino site, PartyCasino.com, which accounts for over 70 percent of the Party group’s casino revenue.This operation continues to perform strongly on the back of a substantial increase in the number of games offered as well as the launch of a dedicated affiliate programme and major international marketing campaign, both of which commenced last (June) month.

There has been a marginal reduction in active player days in the poker operations compared with Q1, but this due to the summer months in Europe, where online activities are quieter. Rivals who continue to offer poker to US clients continue to provide very strong competition. The company reports that its enhanced player loyalty programme, improved player promotions and a new offline marketing campaign saw each of these metrics improve last month. As a result of these initiatives, poker yields have been softer than in the first quarter due to increased bonus and player loyalty costs, resulting in a reduction in poker revenue versus the first quarter.

Sports betting revenue was down on the previous quarter, reflecting a reduction in betting volume due to the end of the season for European football, which remains the single most popular sport for betting customers.

Whilst bingo is currently small in the context of the Party group, management says that it believes it represents a significant opportunity with the global online bingo market estimated at $1.5 billion per annum. The B2B deals signed over the past few months with CIRSA, DM plc and Channel 5 (see previous InfoPowa reports) are expected to benefit bingo revenues during the fourth quarter of 2009.

Party appears to see the recent New York US Attorney’s seizure of online poker funds with US e-processors as an opportunity to take players away from the US-facing poker rooms, and it has increased its marketing spend in certain territories.

Whilst this has already had a positive impact on player numbers, it is also expected to lead to distribution costs being slightly higher than the firm’s previous full year guidance of 38-40 percent of net revenue. However, continued cost savings and favourable currency movements have meant that lower staff and overhead costs have mitigated the increase in marketing costs and consequently, clean EBITDA margins for both the half year and the full year results are still expected to be in line with that achieved for the full year in 2008.

The group’s interim results will be announced on 28 August 2009.

Jim Ryan, Party Gaming’s CEO said: “The Group’s strategy remains on-track and I am pleased that many of the seeds we have sown over the past year are now beginning to bear fruit.

“The improvements to our poker product and loyalty programme, the addition of Intralot to our Italian poker network and the launch this week of bingo and casino facilities for DM plc are clear examples of this. We look forward to the rest of the year with confidence.”