Paradise Poker sales set to fall 90% on US gaming ban

[clevfan]

Paradise sales set to fall 90% on US gaming ban
· Owner's shares still sliding despite 80% leap in profits
· Sportingbet says goodwill write-down put at £200m

Simon Bowers
Friday October 20, 2006

Guardian UK

Paradise Poker, the US-focused online business acquired two years ago by Sportingbet for £169m, is expected to see a 90% drop in sales and profits this year following the introduction of anti-gambling legislation in the US a week ago.
The move comes eight months after the three unnamed Canadian technology experts who founded Paradise cashed in 17m shares in Sportingbet, sharing a windfall of £65m. They sold the shares at 385p - more than eight times last night's price.

Andy McIver, chief executive, warned yesterday that even Paradise players outside the US, who last year produced 19% of revenues, "may be difficult to retain given the threat from black market sites".

The disappearance of US players on Paradise is expected to draw some remaining players - particularly in Canada where they share time zones - away to alternative sites, such as PokerStars and Full Tilt, which are continuing to trade in the US. A quarter of Paradise's non-US revenues last year came from Canada.

PartyGaming, which has also withdrawn from the US, is believed to be suffering similar player defections and is expected to update the market in a quarterly trading update today.

Beyond the US, Mr McIver said Paradise and Sportingbet's casino and sports betting also faced regulatory challenges in Europe, though he was encouraged by a European commission inquiry into restrictive practices by some member states.

Sportingbet shares closed down 3.75p at 46.5p last night, despite the company posting a 80% jump in pre-tax profit and a 32% rise in active customers. Management admitted strong results for the year to July 31 had been rendered irrelevant by the new US legislation. It said the closure of Paradise to US customers would lead to a writing down of two-thirds of the £186m goodwill value of Paradise in the accounts.

A further £78m write-down would be made in relation to sports betting operations in the US, which was sold for $1 a week ago - just hours before the Unlawful Internet Gambling Enforcement Act was signed into law by George Bush.

Sportingbet, which has pursued a string of US-focused acquisitions since it floated in 1999, said its "best estimate" of the total goodwill write-down likely in July next year was £200m. This would controversially leave a £30m carrying value on Sportingbet's accounts relating to its US sports betting and casino operations - all of which have been shut down or sold off.

Last night, Mr McIver conceded the £200m write-down figure "will continue to be the subject of much debate", adding that it may widen substantially by July.

Less than a month ago, Mr McIver said the US was the only gambling market worth investment. "It's the US - or what's the point?" he told the Financial Times, despite some of the directors facing Louisiana arrest warrants over Sportingbet's alleged violation of "morality laws".

Yesterday Mr McIver said: "The US is, and remains, a very attractive market, but we still have a very viable business in the rest of the world." Sportingbet's business is now dominated by European online poker, casino games and sports betting as well as sports betting in Australia.

Daniel Stewart, the group's house broker, downgraded the stock from a "buy" recommendation to "hold". James Hollins, an analyst, said Sportingbet's exit from the US had prompted him to slash profit forecasts for the poker and sports divisions by 92% and 52% respectively.

[Juice]

See you, bye, bye and we wont miss you, you goddamn idiots.