Gibraltar-based online casino, sportsbook and poker operator, 32Red, has announced disappointing interim results to the end of June and declared that the mixed trading the company has been experiencing may result in the inability to meet market expectations for the full year. Distractions caused by the FIFA World Cup led to a slower than anticipated recovery in casino performance and, even though there was a 60% increase in the number of active players, the average value of each player declined to GBP 523. Both factors combined may have contributed to the poor results that were reported. 32Red assured investors, however, that they were continuing to closely monitor the key performance figure of yield per player.
While poker room operations continued to show significant growth from a low base in 2005 (with the number of active players tripling and revenues more than doubling in the first half of 2006), the company is still anticipating a “softer” performance than originally expected, with the 2005 growth rate not being maintained.
In addition to the June’s decline in material levels caused by the FIFA World Cup 2006, 32Red may have also suffered a setback because of the launch of Swedish national gambling operator Svenska Spel’s online poker room. Yet another cause of 32Red’s troubles, were the aggressive rakeback tactics of competitors. Both factors have continued to have a negative impact on the company’s revenues since mid March.
Following the June acquisition of Bet Direct, Sportsbook operations have been unable to meet market expectations. Until the end of June, the FIFA World Cup and Royal Ascot horse racing festival were traded by 32Red. Gross win was GBP 100,000 off target with Ascot producing a small negative margin. Trading during the FIFA World Cup produced a 9.8 percent gross win margin.
32Red’s Chief Executive Officer, Ed Ware, said: “The 32Red business has shown revenue growth in the period. However, trading in the second half to date has not recovered as quickly as anticipated from the industry-wide FIFA World Cup slowdown. We believe the acquisition of Bet Direct in June will significantly enhance the scale and diversity of the business although a tough Goodwood and the one-off costs and expenses incurred have impacted our profitability.”
The company still managed to make a profit, however, in spite of the lower than anticipated performance. Group revenues were up 48 percent to GBP 6.2 million, with the casino side making up GBP 5 million of the totals. The number of total active customers rose to 44,539 and profits before tax for casino and poker operations amounted to GBP 1.1 million.
Posted on: September 12, 2006