32Red Online Casino Issues a Profit Warning Due to Bet Direct
by Colby Lewis, News Staff Writer
December 13, 2006

It has come as surprising news that famed and renowned UK online casino, 32Red, issued a profit warning this morning. Citing poor performance of 32Red's telephone betting system, Bet Direct, a drop in online casino gambling (due to the U.S. ban), and an uncharacteristically high winning ratio of favorite horse picks at UK racetracks, 32Red breached its loan conditions with the Royal Bank of Scotland, whom the online casino and gaming operator holds £6 Million in outstanding loans with.

The past three months have been especially trying for 32Red. The poor trading levels at Bet Direct have been a significant factor in lower operating results than previously forecasted. As deemed by an EBITDA covenant with Royal Bank of Scotland, 32Red's overall performance was below anticipated loan conditions, for which 32Red will still be held responsible to meet.

Although the profit warning was justified, it is highly likely that the breach of 32Red's EBITDA agreement is more of a technicality than anything else. Gross assets for 32Red exceed £5.3 Million, which is enough to cover the company's currently owed debt. The main concern, however, is the continued performance of Bet Direct, considering telephone betting is becoming an antiquated, if not much less lucrative of a business. Sports betting at online casinos and sportsbooks, albeit not in the U.S., is still a thriving industry with resounding demand.

When 32Red purchased Bet Direct in June of this year, many gambling analysts were shocked to say the least. With a purchase price of £12.5 Million, 32Red evidently thought Bet Direct still had significant money-making potential. However, only £1.57 Million in gambling revenues came from the Bet Direct division in the third quarter of 2006 - And it looks as if the fourth quarter is not faring much better, if not worse.

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