German tax harms bwin.party revenues
Third-quarter pro-forma revenues down 5% year-on-year - operator "encouraged" by last month's EC online gambling action plan.
Bwin.party blamed poor poker revenues and a 5% turnover tax on sports betting in Germany for a 5% year-on-year decline in third-quarter pro forma revenues.
In its interim management statement for the three months ended 30 September, the operator explained that the 20 July decision to remove short-odds single bets in Germany was in part responsible for sports betting revenues falling by 2% year-on-year and amounts wagered falling by 8% compared to the corresponding period in 2011.
Short-odds bets [with odds of less than 1.1] were deemed by bwin.party to be “No longer viable following the introduction of the new turnover tax.”
However sports betting revenues for the nine months to 30 September are flat, coming in at 186.8m, while 2.98bn in amounts wagered over the nine-month period represents a year-on-year increase of 7%.
Despite the uncertainty in Germany, the operator expressed its general support for last month’s European Commission action plan on online gambling, which pledged to refer all egaming legislation deemed noncompliant with EU law to the Court of Justice of the European Union, noting in a statement that: “This is a clear sign that the Commission intends to address outstanding infringements and complaints against a number of Member States.”
It also noted the regulatory proposals intimated by the Dutch coalition government this week, but elsewhere suggested France will remain a “challenging” market by virtue of its “Punitive tax regime.”
Meanwhile casino net revenue of 65.2m was down 5% year-on-year and poker net revenues fell 29% to 37.0m, however the operator will hope last month’s agreement with Zynga for real-money poker and casino will see the two verticals rebound in 2013.
Co-CEOs Jim Ryan and Norbert Teufelberger described the Zynga deal as “A testament to the strength of our vision for the future of poker and casino, our ability to deliver turnkey solutions for strategic partners and our industry-leading position.”
The operator also completed the sale of the Ongame poker network to Amaya Gaming yesterday for an initial 15m and is on track to migrate poker players on the bwin brand away from Ongame and onto its main PartyPoker platform.
A statement from bwin.party read: “We believe that the integration of our dotcom poker networks later this quarter will be the first major catalyst to return our poker business to growth. This will soon be followed by the launch of PartyPoker on mobile and then a complete repositioning and relaunch of PartyPoker in the first half of 2013.”
While acknowledging that “We also remain uncertain about the prospects for German sports-betting,” analyst Ivor Jones of Numis issued a ‘Buy’ recommendation this morning despite what he referred to as a “soggy” Q3.
“We remain very positive on the basis that we are close to the end of the period of rebuilding the group and that FY13E will see the launch of upgraded products and a renewed focus on marketing-led growth,” Jones explained.
However analyst James Hollins of Investec retained his firm’s ‘Hold’ stance, saying: “We… see an equalweight balance between stronger prospects into FY13E (poker platform integration, ongoing merger synergies capture, Italian slots from 3 December 2012, Zynga launch) offset by continued weakness in Southern European macro conditions and regulatory issues in its core German market (gaming legislation remains a key risk).”