PARTY GAMING PROFITS DOWN 68 PERCENT

7 March 2008

CEO Mitch Garber is on the way out....


Party Gaming has released it's 2007 full year results, admitting a huge 68 percent drop in annual profit due mainly to the group's enforced exit from the US market late in 2006, and revealing that CEO Mitch Garber will be leaving his post mid 2009. Apparently Garber plans to return to Canada and will not be renewing his contract after May 2009.

Net income slid to $41.6 million in 2007 from the 2006 full year's number of $128.4 million, in 2006, the Gibraltar-based company said today in a statement, pointing out that 2007 was the first full year in which it had not enjoyed US revenues. It added that current trading had seen lower-than-expected growth in revenues although underlying earnings were in line with its expectations.

Party has concentrated on acquiring bigger market share in Europe and Asia to compensate for the loss of its American revenues, adding websites in different languages to attract a wider range of gamblers. Revenue from continuing operations rose 41 percent.

The stock has dropped 5.2 percent this year, adding to an 8.7 percent decline in 2007.

The shares plunged by more than 75 percent in 2006 as the Unlawful Internet Gambling Enforcement Act made it a crime for banks or other institutions to process financial transactions, such as electronic fund transfers, that are used to place bets online.

The performance under these circumstances has been remarkable. Excluding the U.S, earnings before taxes, depreciation and amortisation from the company's poker operations, which generate almost two-thirds of revenue, rose 60 percent to $62.4 million.

PartyPoker bought out competitor Empire Online Ltd. last year to help rebuild revenue, and added new poker tournaments. In November, the company signed an agreement with German television broadcaster RTL to introduce a website providing poker tips.

EBITDA from PartyCasino games was similarly positive and almost tripled to $43.6 million, with PartyBets adding sportsbetting numbers that rose to $3.4 million, compared with a year-earlier loss of $1.6 million. In December, PartyGaming agreed to develop online slot-machine games based on director Francis Ford Coppola's ``The Godfather'' and three other Paramount Pictures movies.

Excluding discontinued operations, net revenue rose to $476 million in 2007 from $325 million in 2006 and PartyGaming made a profit of $13.9 million compared with a loss of $83.4 million.

The company remains in talks with US authorities regarding its pre-UIGEA online gambling activities, and hopes for a conclusion in the forseeable future. If the group can remove the legal threat from the US Department of Justice, it could ease the worries of banks who are refusing to lend to companies like PartyGaming as they are worried about US official perceptions of such business.

CEO Garber (43) took up his responsibilities in April 2006 and will have picked up an estimated GBP 14 million through a controversial pay scheme. His predecessor Richard Segal who left rather than relocate to Gibraltar, is reported to have scored twice that when he left.

Shortly after joining, Garber had to deal with the imposition of the Unlawful Internet Gambling Enforcement Act, which decimated the group's American revenues, hacked the share price and caused a withdrawal from the American market.

"There is never a good time to announce that you intend to leave a company, but I personally take great pride in the fact that the company is delivering on its business strategy and is in great shape to exploit its full potential in the future," said Garber this week, describing the challenges of the last 18 months as "extraordinary".

Garber is a qualified attorney, having graduated from McGill University in Montreal and of the University of Ottawa. His departure plans were announced alongside PartyGaming's financial results for 2007. It recorded a pre-tax profit from continuing operations of $111.7m (£56.5m) on an Ebitda basis, up from $50.9m a year ago.

Chairman Michael Jackson said the company had increased its range of products during 2007. Although its PartyPoker site is still the biggest single revenue generator, it has increased its income from both casino and sports betting operations by almost 200 percent.

Jackson added that the company has enjoyed a "solid start" to 2008.

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