AsianLogic Profits Hit on Wholesale-Retail Transition

AsianLogic Ltd., the land-based and online gambling operator, said profitability in 2008 was negatively impacted by increased operational expenses, margin pressure on its wholesale business and bad debt provision.

Although revenue for the year rose 82 percent to $98.7 million, losses before tax came in at $11.9 million against profits of $7.9 million last year.

Operating expenses rose 146 percent to $6.9 million, while net finance income fell from $6.7 million in 2007 to a loss of $12.2 million.

In November 2008 the company issued a profits warning and said that it would be scaling back its lower margin credit-betting business -- which accounted then for approximately 90 percent of sales -- and transitioning toward a higher margin, deposit-based retail business.

"The Board considers this move entirely prudent and in the long term interests of the business considering the decline in wholesale betting," Jong-Dae Lee, the company's non-executive chairman, reiterated in Thursday's results statement.

The company indicated moreover that it is looking to put its wholesale business on the block, though did not provide further detail.

AsianLogic has already begun building out and marketing its deposit-based retail business; in doing so, however, it warned in February that capital expenditure was likely to rise "significantly higher than in previous years."

"When you actually grow your deposit business, you have to spend significant amounts on marketing -- we do that, and that's going to impact our bottom line," Thomas A. Hall, the company's chief executive, told IGamingNews in a recent interview. "We're going to be profitable, but not as much as last year as we reinvest in the business."

For the year, revenue from casino gaming was $87.6 million; video streaming revenue was $3.42 million; and revenue from player-to-player games was $7.33 million.