Flat revenues for bwin.party in first full year post-merger
Double-digit poker revenue decline overshadows small growth in other verticals.
Bwin.party saw flat pro forma revenues in its first full year since the merger of bwin and PartyGaming, the London-listed operator announced in its financial results for the year ended 31 December.
Group revenues of 801.6m were down 1.8% year-on- year, due largely to revenues from the operator’s poker business declining 17% compared to FY 2011, coming in at 173.8m, while losses after tax from continuing operations narrowed significantly to 24.9m.
The operator completed the migration of bwin’s poker players to the PartyPoker platform in December last year, and CEO Norbert Teufelberger cited “migration problems [which] have now stabilised” as a contributing factor towards gross average daily revenues in the early part of 2013 being down 7% year-on-year.
The full-year results statement is the first since Teufelberger (pictured) assumed sole control following the retirement of former co-CEO Jim Ryan in January, and the chief executive acknowledged “Most of last year was focused on integration [and] with most of our single technology platform in place, we are now optimising the shape and size of our business in order to maximise our operational and financial performance.”
Teufelberger pointed towards bwin.party’s general trend towards regulated markets, following the receipt of a Belgian licence earlier this month to accompany accreditations in markets such as France, Spain and Denmark, while also noting “2013 will be about completing [the integration] effort and transforming our business through innovation as we revitalise our offer with a string of product updates and extend our reach through mobile and social media channels.”
However continued regulatory uncertainty in Germany is one of a number of factors continuing to affect bwin.party’s share price, which has fallen by more than 7.5% today at the time of writing, sitting at 140p. This represents a decline of more than 30% on the price at which the combined entity began trading in March 2011.
The operator made inroads into social gaming in 2012 with the acquisition of Orneon and the establishment of development studio Win Interactive in May, and this segment of the business announced its first social sports betting deal – with Nordeus – in September. The division has since launched its first two Facebook games to be developed in-house, with Slots Craze going live in late February and Cheeky Bingo released in March this year.
It said in a statement: “We are determined to capture a meaningful share of [the social gaming] market and believe that by producing the very best game content, supported by creative marketing and our own real-time analytics platform, we have the tools necessary to succeed.
“During 2013 we will also launch more slots, a bingo product for social platforms, a social casino product and a pioneering approach to social sports betting that we are developing with our partner, Nordeus,” the statement continued.
Software services incorporated via social acquisitions were highlighted as a main contributor to the group’s ‘other’ revenues rising 62% year-on-year on a pro-forma basis to 32.7m. This segment also includes the World Poker Tour, with the operator buying out an ongoing royalty participation Blackridge Oil & Gas in September.
Analyst Ivor Jones of Numis securities reiterated his firm’s ‘Buy’ recommendation, saying “If management get their new strategy right they will dispense with low-value customers (and the costs associated with acquiring and servicing them) and retain a more profitable business, better focussed on growth.”
Jones cited the likelihood of “Investment in new sources of revenue including Kalixa the largely in-house payments business, social gaming and sports content.”
One such source of revenue is likely to come in the form of Zynga’s real-money offering, which will be launched in the first half of this year following last October’s agreement with bwin.party.
The operator is also under consideration for licensure in Nevada, where it has joint ventures with MGM and Boyd, and it has also pursued partnerships in other US states.
Analyst Simon French of Panmure Gordon issued a ‘Buy’ recommendation, noting “[T]he group is well positioned to capitalise on the shifting US regulatory landscape given its B2B and JV agreements with MGM and Boyd.”