SOURCE: guardian.co.uk

(London, UK) — PartyGaming, the online gaming group, reported a 57 percent drop in annual profits today as a result of a U.S. ban on internet gambling last October.

The shares dropped more than 2 percent to 35.70p this morning. They floated at 116p in June 2005 but plummeted after the U.S. crackdown which lost the group its place in the FTSE 100 index.

The owner of the PartyPoker and PartyCasino websites said profits before tax plunged to $138.9m (£70.77m) last year from $324.9m.

Three-quarters of the group's business were wiped out overnight when the U.S. government unexpectedly tightened anti-gambling laws.

The departure from the U.S. cost PartyGaming $250.4m in reorganisation costs. Excluding those costs, underlying earnings before interest, tax, deprecation and amortisation (Ebitda) fell 6 percent to $550.7m. Group revenues climbed 13 percent to $1.1bn.

However, revenues from ongoing businesses were just $325m.

PartyGaming has since seen a recovery in the number of poker players on its sites. Gross revenues averaged $1.3m a day in the four weeks to February 25.

Chief executive Mitch Garber said: "Whilst the decision to stop accepting customers from the U.S. was a bitter blow for our business, our continuing operations have grown strongly from the lows reached in November 2006, benefiting from the rapid reorganisation of our business and the acceleration of our efforts in international territories."

The group switched its focus to Europe, the Middle East and Africa but there are now signs that French authorities are starting to clamp down on offshore operators.

PartyGaming quietly closed its website to French customers last Friday as it emerged that authorities in Paris have requested interviews with executives from an estimated 20 online gaming firms.

Mr. Garber said: "While regulatory uncertainty continues in some territories, our continuing operations are in excellent shape and we have made a solid start to 2007."

Dresdner Kleinwort analyst Andrew Lee noted that PartyGaming has enjoyed strong revenue growth of late and said there was a chance that he might upgrade his forecasts.

"The online gambling market continues to grow strongly and PartyGaming should benefit from the completion of the multi-lingual and multi-currency launch in the first half, followed by a more aggressive marketing launch for, in particular, casino and sports betting," he said.