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Sportingbet In Profit At Operating Level After 3 Years

by Jason Gorringe,, London

04 November 2002

UK-listed Sportingbet, which claims to be the world's biggest on-line gaming and betting company, reported half-year results slightly ahead of expectations on Friday, turning in an operating profit of UKP2.2m on turnover of UKP495m; after goodwill write-downs and interest costs, the pre-tax loss was UKP3.8m.

The company's shares fell after the company said that credit card companies in the US were charging it 30% more than before. To some extent this presumably reflects the perceived risk for the credit card companies of being involved with an activity which is banned in many US states, and has been the target of Congressional 'prohibition'-style legislation.

In the US, moral objections to gambling, plus a fear that such cash-based business are a soft touch for money-launderers, have led Pay-Pal, a highly significant on-line payment agency to withdraw altogether from the offshore gaming market, admittedly after pressure from its new parent E-Bay.

But Sportingbet says it has already identified an alternative method of collecting payment, which it expects to implement early next year.

Nigel Payne, chief executive, said the underlying growth was in line or ahead of expectations and that issues such as the credit card charges could be expected. "You are bound to get growing pains in such a young company," he said.

He is probably right to be sanguine: payment mechanisms on the Internet are diversifying and maturing very quickly, and the US government will probably find it impossible to repress its citizens' desire to gamble even if Congress legislates to clear up the current confusion about what is allowed and what is not. One bill was lost when Congress recessed for mid-term elections, and there is no clear mandate for change.

Sportingbet, which was making its first annual pre-tax profit this year after only three years in business, said customer numbers in the six months to September 30 rose 194,119 to 752,706, placing 49,000 bets a day.

Sportingbet is licensed in Alderney, Costa Rica and Antigua, and was reported in July to be considering a Gibraltar base, where the regulatory regime for betting and gaming has recently been overhauled.

The company announced last July that it would provide back office services for, a portal which is moving away from its historical emphasis on content towards a concentration on betting facilities. Nigel Payne said that currently had 3m audited users per month, and he expected that the deal would be very profitable for Sportingbet.

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