Empire puts brakes on after slump
The future of one of the more controversial pioneers of the internet betting boom was in question today after Empire Online reported a collapse in earnings and called a halt to its expansion plans.
In an online sector that has been hobbled by the high-profile arrest of executives in the US and fears of a slowdown in the number of new players coming to play - and more probably lose - on the net, Empire said it has embarked not so much on a strategic U-turn but an emergency stop.
Announcing a 37% slide in underlying pre-tax profits in the first half of the year to $15.7m (£8.3m), the company issued a downbeat trading outlook and a shock strategic update.
In a statement, it said the sign-up of players had slowed more than expected during the summer: 'If there is no improvement in this rate of sign-ups, earnings growth for 2007 will be challenging.'
It added: 'The regulatory uncertainty that the online gaming industry has always faced has increased as a consequence of recent events. In light of this, the board will review carefully all uses for the company's surplus capital in order to maximise shareholder value.'
Empire's hotshot Israeli chief executive, Noam Lanir, is understood to have told analysts that he has called an immediate halt to Empire's planned mergers and acquisitions campaign as it and other acquisitive internet gaming companies have little idea how the US crackdown on the sector will play out.
Empire has a $260m cash pile burning a hole in its balance sheet but previous plans to return some of that to shareholders via a share buyback programme hit the rocks when investors blocked such a move at the company's annual meeting.
Some stock market traders now believe the company is open to a takeover from any buyer keen to get its hands on Empire's cash.
The cash pile equates to about 46p a share.
Shares in Empire, which have been one of the worst performers in the sector having fallen by more than 60% since the spring, were on the rise today, 4¼p dearer at 64¾p.
Empire built up its cash pile after its controversial and at times nasty dispute last year with PartyGaming, which ended up with the much larger FTSE 100 company paying Empire $237m in compensation.
Empire had previously acted as a so-called 'skin' for PartyGaming whereby poker players signing up for Empire's sites were migrated to Party's gaming platforms.
The end of the arrangement is responsible for the crash in Empire profits. Empire's poker revenues have slumped 80%, offsetting a tripling in the company's casino revenues.
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