|Sportingbet, the online gaming group whose shares have been under attack from short sellers, has warned that higher costs in the US and adverse foreign currency movements will hit its full-year results. |
Yesterday's profits warning, which came as the group reported increased first-half losses, knocked 24 per cent off its shares. They fell 14.5p to 45p.
Nigel Payne, the chief executive, said the higher costs related to its US operations. 'It's a commercial issue and was unexpected. Because our volume [of revenue] is so huge a couple of banks spotted the opportunity to leverage their margins by increasing their prices,' he said.
While Sportingbet is tied to using a limited number of banks that are willing to handle its business in the US, where online gambling is illegal, Mr. Payne said the company had come up with a solution to get around the hike in bank handling charges. 'It's innovative, it works and it's completely above board,' he said, adding that the new system would be in place by January.
The company's house broker, Dresdner Kleinwort Wasserstein, slashed its full-year pre-tax profits forecast by 20 per cent to £19.4m from £24.1m. The bulk of Sportingbet's profits are usually made in the second half of its year.
Sportingbet also said its losses before tax for the six months to 30 September widened to £3.8m from £1.6m the year before. But it said its European operations would be profitable before the end of the year. Turnover for the six months rose by 41 per cent to £494.5m while customer numbers rose by 35 per cent to nearly 800,000, boosted by the acquisition of Sporting Odds in July.
Sportingbet also warned that the regulatory environment in the US remained unclear. 'For the 19th consecutive legislative session an internet banning bill has failed,' Mr. Payne said, adding that the trend 'continued to move in our favour'.
One analyst said: 'The numbers weren't that bad. A bit sluggish. But it's impossible to value an illegal revenue stream.' The company's shares, which traded at 167.5p earlier this year, have been driven down by short sellers, led by Simon 'Evel Knievel' Cawkwell, who have been borrowing Sportingbet shares to sell, in the expectation that they will be able to buy them back at a lower price.