• Gambling giant sees £1bn wiped off value

September 7, 2005 - THE dramatic stock market rise of poker giant PartyGaming came to an end yesterday when it warned growth in online gaming was slowing. The owner of PartyPoker saw more than £1bn wiped off its value after it said the amount of profit earned from each player fell by more than expected in its first half. PartyGaming also said it was finding it harder to hold on to customers as more casual punters logged on to its sites. Investors have piled into PartyGaming since its stock market debut, making it bigger than blue-chips such as retailer Marks & Spencer, with a market value of more than £6bn. However, this fell back to below £5bn yesterday - closer to the level seen at the time of the flotation. It is also due to be promoted to the FTSE 100 Index in a reshuffle based on last night's closing prices. The Gibraltar-based group said in its maiden interim results, "Against a background of moderating market growth, group revenues are expected to continue to show good year-on-year growth, although at rates lower than the substantial rates previously experienced." This was despite the firm reporting a 70% hike in first-half earnings to £140m and an 81% rise in revenues for the six months to June 30. Experts have expressed concern about the potential for the boom in online gaming to be a fad. Analyst Hilary Cook, at stockbroker Barclays, said the shares could now be settling down to a more realistic level after theirrapid growth. She said, "The shares had enjoyed an extraordinary debut, much better than we expected, but they are very vulnerable to any disappointment "The City never likes nasty surprises and this is a difficult business model to predict." It comes just days after the world's largest online casino unveiled plans to float on the stock market. 888 Holdings is seeking to build on the recent flurry of investor interest in internet gaming, although potential investors will be closely watching developments at PartyGaming. PartyGaming gave no details of potential acquisitions and did not comment on rival Sportingbet's interest in fellow gaming firm Empire Online. It was reported at the weekend that bosses at PartyGaming were evaluating their options after Empire said it had received an approach. Yesterday's results showed the average daily profit from each active player fell by 7% to £9.70. In the face of slower growth, PartyGaming said it would increase its focus on retaining players and boosting the amount spent by customers. The figures included an 89% rise in poker revenues - the core part of the business. PartyPoker. com is the world's largest online poker site and had 415,633 active customers in June. The group, which also has gaming brands including Starluck Casino and PartyBingo, said the percentage of revenues generated outside the United States was 14% compared with 12% last year. Many experts have expressed concern at the boom in online gaming stocks amid concerns over the legality of online poker in the United States.

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