February 22, 2005
(Bloomberg) -- Sportingbet Plc, a U.K. Internet betting company whose shares have tripled in five months, said second-quarter profit jumped 84 percent as earnings benefited for the first time from November's purchase of Paradise Poker. Net income rose to 15.6 million pounds ($30 million), or 3.6 pence a share, in the three months through January from 8.5 million pounds, or 2.8 pence, a year earlier, the London-based company said today in a statement. Paradise Poker contributed 8 million pounds of operating profit, Sportingbet said.
"Paradise Poker is running considerably ahead of expectations," said Paul Leyland, an analyst at Seymour Pierce in London with a "hold" rating on Sportingbet stock. "Calendar 2005 should see a doubling of the poker market, which Sportingbet should outperform due to cross-selling its customer bases."The $298 million acquisition of Paradise Poker, the world's third-biggest online poker operator, doubled Sportingbet's size and reduced the company's dependence on sports events such as the Wimbledon tennis tournament. Sportingbet is seeking to make more acquisitions, Chief Executive Nigel Payne said in an interview.
"This industry will continue to consolidate very quickly," Payne said. "We have always said that once we digested Paradise we would be back in the market for the right deal at the right price. We would be interested in growing the business further."Acquisition Funding
Shares of Sportingbet rose 15.5 pence, or 5.3 percent, to a record 309 pence at 11:10 a.m. in London, the day's highest price. That gave the company a market value of about 932 million pounds.DBS Advisors Ltd., from whom the company acquired SportsBook in 2001, today sold 18.8 million Sportingbet shares, cutting its stake from 8.4 percent to less than 3 percent, according to a separate statement. The stock was sold to institutional clients of Dresdner Kleinwort Wasserstein, spokesman George Hudson said.
Payne said the company's next acquisition is likely to involve online casinos or sports betting, rather than poker. A transaction may not need to be funded with new equity, he said."It would be entirely possible to fund a medium-term deal through cash flow," he said. "It's not necessarily the case that we would need to dilute the equity base any further."
Business at Sportingbet in the first three weeks of the fiscal third quarter has been "strong," Payne said. Sports- betting volumes have risen "at an encouraging rate," while casinos, gaming and poker "performed well," he said.Profit Outlook
Payne said analysts are increasing their estimates of the company's full-year earnings before interest and amortization to as much as 54 million pounds from 47 million pounds. First-half profit on that basis climbed 86 percent to 26 million pounds.Seymour Pierce's Leyland raised his estimate of full-year operating profit to 53.3 million pounds. Numis Securities didn't change its forecast of 47.2 million pounds, according to a note.
Almost 4 percent of British adults who have access to the Internet have gambled online in the past two years, according to the Gaming Board for Great Britain, which regulates U.K. casinos. A sixth of them used the Internet to play casino-style games.Sportingbet's first-half sales rose 30 percent to 825 million pounds, including 12.5 million pounds from Paradise Poker.
The company plans to pay its first dividend later this year.To contact the reporter on this story:
Paul Jarvis in London at pjarvis@bloomberg.net.
To contact the editor responsible for this story:
Kimberly Kirner at kkirner@bloomberg.net.