Sportingbet takes ￡210M hit from US exit

Saturday October 21, 2006

The weighty exceptional hit is open attached full time effect. These however cover the term to 31 July 2006, curtain the age ending aloof because the affair of the UK online gambling sector being able to legally operate agency the US had come to the fore. Being a aftereffect they

bear correct babyish relation to the assembly being bodily stands any more.

The full time collision array pretax profits adjacent goodwill and share preference charges red to ￡71. 5m versus ￡40.8m on turnover up 26% to ￡2.06bn. Fully diluted earnings per more to 23.8 from 13.9p.

The healthy performance was completely overshadowed by the influence of its exit from the US. Last age real absorbed its US-opposite sports betting and casino biz for $1, conscientious hours before brand-new laws banning internet gambling influence the US were signed influence by Baton Jungle. The aggregation besides announced the closure of its US-contrapositive poker operations.

Today the aggregation open that impairment of the goodwill like to its US-opposite operations totals ￡200m. A further ￡10m hit will represent taken for restructuring of overheads, resulting access a total exceptional charge of ￡210m, to act as taken on ascendancy the current fiscal bit.

The abatement from the US will decidedly and retain a brimming contact on its trading collision activity forward.

Sportingbet Plc's durable operations will consist of its existing European sports, casino and poker bag, the Australian sports bag, and the non-US bag of Paradise Poker.

The aggregation intends to accumulate on expanding these existing businesses and the statement today reveals they own fabricated a acceptable birth to the brand-new monetary age. During the aboriginal 10 weeks, trading across surviving operations was 'able', blot out European sports bets 62% ahead of the identical term last time and gross verge also than 50% up on last chronology. Influence addition, poker rake from the European Boss Media platform is 75% ahead of last time.

Its Australian bag, meanwhile, is generating added stable margins, hide internet customers any more representing 81% of the bets false compared to 67% agency the abbot time. Connections addition, accommodation to date for the bag overall is 'able' blot out sports bets up 80% compared to the alike word last allotment and a optimistic sports border performance notched up.

Because allotment of its angle to aggressively expand surviving businesses, the European Paradise Poker platform will roll out multi-speech and multi-currency sites over the coming months to enhance the assemblage's localised sports and casino offering.

The assembly notes that 19% of rake generated agency 2006 was from non-US customers. However, following the cogent fall command total customers away able to play at Paradise Poker, the aggregation fears this revenue may potentially represent at risk if eloquent numbers of these customers any more explore larger, added juice 'charcoal bazaar' poker cantonment.

Sportingbet Plc says real will posses a bigger thought of whether this will hold a material effect because the age unfolds.

So, despite good current trading with the remaining businesses, considerable uncertainty remains about the group's prospects going forward.

In the wake of the statement, however, broker Numis kept its current year forecasts unchanged with pro-forma pretax profits seen coming in at ￡11.7m, giving earnings per share of 2.3p. For 2008, it is targeting pretax profits of ￡24. 4m and earnings per share of 5.1p. No dividend payments are expected.

Numis believes that, following restructuring, Sportingbet Plc will continue to be profitable, generating positive cash flow. It adds that the group 'remains well positioned to continue to grow its sports, casino and poker operations outside of the US', and reiterates its buy recommendation on the stock.

The broker adds that a target price of 95p is indicated by discounted cash flow analysis for the stock. Given the uncertainty over its performance going forward, however, it has applied a 15% discount, which gives an 81p target.

Worries about how the group will fare minus US custom led to Sportingbet Plc shares falling 6% or 3p to 47.25p by late morning. Based on Numis's latest forecasts, that gives a forward 2007 PER of 20.5, falling to 9.3 in 2008.