PartyGaming scraps promised dividend

PartyGaming, the internet poker giant, has told its shareholders it will not now pay the dividend it promised last month, saying it needed the money instead to fund expansion of its operations in Europe and Asia.

Its U-turn came in the wake of the US Congress vote to prevent Americans gambling online, a decision that was still causing upheaval across the industry yesterday.

PartyGaming and its rivals were struggling to understand the impact of the new laws and to convince shareholders that they could find viable alternative business to replace bets from the US, which accounted for almost half the $12bn (£6.4bn) online gambling industry last year.

PartyGaming said it would now keep the $115m it had been due to pay out to shareholders as a 3 cents-per-share dividend at the end of this month.

"The board believes that cancellation of the interim dividend will allow the company to take advantage of the many attractive opportunities in the sector that will emerge over the coming months," it said in an announcement to the Stock Exchange. Its shares fell 9 per cent to 40.75p.

At the end of June, PartyGaming had a net $93m cash in the bank, but it has said it will need to make staff redundant when it begins to block US customers.

PartyGaming says it is looking to boost marketing in Asia and Europe, and to add new games to its websites on those continents. It also wants to make acquisitions and believes that consolidation in the industry will accelerate as big players sweep up smaller companies whose operations may not be viable without bets from the US.

World Gaming yesterday became the first UK-listed online gambling group to warn that it was in breach of its banking covenants as a result of the US bombshell. "The company continues to operate at the current time and is in discussion with its lenders," it said, sending its shares down another 18 per cent to 12.5p, following a 76 per cent slide on Monday. 888.com, the online casinos group, said it would rebrand itself as an "online entertainment" group in the US.

Gigi Levy, 888's chief executive-designate, said: "Our core capability is not gambling per se - it is bringing people to the website, selling them the products and giving them the best customer service. We'll take those capabilities to other products."

Sportingbet, the other of the big three London-listed online gambling companies, is yet to say how it will react to the clampdown.

Nigel Payne, its chief executive, expressed his anger in an interview with the BBC, saying the UK government had been "disappointingly silent" on an issue where the US was potentially in violation of international trade rules. "What in fact is happening is overt protectionism," he said.

Because state lotteries and domestic horseracing bets are exempt from the US clampdown, the World Trade Organisation has already ruled that the country is breaking trade rules by shutting out offshore operators.