News Column Starts Wider Revamp As Loss Widens, Revenue Falls

August 29, 2014

Steve McGrath

LONDON (Alliance News) - Digital Entertainment PLC Friday said it would simplify its structure to cut even more costs out of the business and drive revenue growth, after it reported a wider pretax loss and lower revenue for the first half of the year as solid sports betting was offset by declining poker and casino revenue and it suffered from the loss of its Greek market.

"We are on-track with our current cost saving measures, however it is clear that a more fundamental approach is needed to turnaround our commercial and operational performance. This requires a major change: we are simplifying our structure to accelerate the execution of our plans to drive revenue growth, increase our focus on customers in nationally regulated and/or taxed markets, and further reduce infrastructure costs," the company said in its earning statement.

It said the new approach would also allow it to consider alternative financing and corporate structures, which would create additional value.

It added that the moves will underpin its financial performance and said it remains confident about the full-year outlook.

The online gaming company reported a pretax loss of EUR100.5 million for the six months to end-June, significantly wider than the EUR9.1 million loss it posted a year earlier, as revenue fell to EUR317.1 million, from EUR342.5 million, and it booked a EUR94.7 million impairment, mainly against its poker assets.

Excluding impairments and other items like reorganisation costs, earnings before interest, tax, depreciation and amortisation fell to EUR46.4 million, from EUR60.7 million, due to the loss of its Greek market, operating losses in its recently-started New Jersey operation, and reduced domain sales.

It said the revenue decline reflected its shift from "volume to value", a weak international poker market and the loss of EUR11.9 million of revenue from Greece following the closure of that market. Those factors were partially offset by a strong performance during the recent football World Cup.

It said revenue from nationally regulated or taxed markets grew to 56% of the total, up from 52% a year earlier, while mobile gaming revenue increased 125% to EUR67.4 million. said it remained on track to deliver EUR30 million of cost savings this year, and achieved EUR13.8 million of savings in the first half. It expects its new cost savings drive to deliver at least EUR15 million of savings in 2015.

The company said trading has been in line with its expectations in the first two months of the current financial year, with average daily net revenue down 4% compared with last year.

"While the tail end of the FIFA World Cup delivered a helpful boost to betting volumes during the first two weeks of July, a later start to the Bundesliga in Germany (22nd August) and La Liga in Spain (23rd August) made for a more challenging year-on-year comparison during the current trading period," it said.

Still, regulated and taxed markets were up 2% over the same period, driven by sports betting that was up 11% and casino that was up 7%.

Despite the new cost savings drive, said it will raise its interim dividend to 1.89 pence, from 1.80 pence. Digital Entertainment shares were up 3.1% at 82.60 pence early Friday, the biggest rise on the FTSE 250.

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Source: Alliance News

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