Entraction reports sales decline

Online gaming software developer Entraction Holding AB has released its interim financial results for the first half of 2010 showing a 22.2 percent year-on-year decline in net sales to $23.971 million.

The Swedish firm revealed that this decline was six percent excluding the performance of its Cardroom2 network and currency exchange differences in the Euro while stating that net sales dropped 26.6 percent year-on-year over the second quarter of 2010 to $10.605 million.

Entraction’s earnings before interest, tax, depreciation and amortisation for the six-month period were $2.745 million, a decline of 40.1 percent over the same six-month period in 2009, while its operating profit amounted to $1.853 million, a drop of some 49.8 percent year-on-year.

The firm revealed that its profits after tax for the first half of 2010 came in at $1.947 million, which was a drop from last year’s $6.533 million, while cashflow from operations before changes in working capital amounted to $2.529 million, down from 2009’s $4.221 million.

“The gaming sector finds itself in a challenging period and it is important that we maintain good profitability if we are to develop successfully,” said Peter Astrom, Chief Executive Officer for Entraction.

“With this in mind, we are initiating a cost programme and prioritising areas with fast revenue streams and effects on our poker liquidity. The turbulence and consolidation we are seeing in the gaming sector place us, as an independent supplier and owner of one of the world's largest poker networks, in a unique position as poker operators now look round for alternatives.

“The second quarter is traditionally a weak season and this year our income has also been negatively affected by the 2010 FIFA World Cup. Our royalty income from poker is increasing steadily and we see continuing positive development for our business model as a supplier of technology for poker. We are maintaining good liquidity in our poker network and see many opportunities to achieve growth in the number of players.

“Our second quarter sales and profits were lower than in the same quarter for the previous year. In response, we are taking immediate action to break the trend and return to good profitability. As part of an action programme, we may be moving certain functions to our subsidiary in Estonia and also reviewing staffing in general. The cost savings are expected to have an impact of $2.029 million on earnings on an annual basis and a positive effect of $3.382 million on cashflow. The associated cost will be approximately $676,351 and it is our intention to implement the measures during the third quarter in order to obtain the full effects in the fourth quarter.

“Over the last two years, Entraction has invested a great deal in improving the gaming platform in terms of stability, security and capacity. We have created a scalable platform from which we can grow, a platform that is perfectly capable of receiving large operators. In parallel with our cost savings, we are also strengthening the sales team.

“Several markets in Europe have stated that they will be regulating their gaming markets and, so far, this has actually come into force in Italy and France. Last year, we announced our intention to establish Entraction in Italy when the Italian authorities begin to allow poker cash games and casino. This was scheduled for the beginning of this year but, sadly, has been postponed on several occasions by the Italian authorities.

“I am convinced that, with our prompt action, good products and competent and committed staff, we shall once again be achieving growth, reporting sound profitability and signing new agreements.”