PartyGaming: playing their cards right

Next week’s flotation of the proprietor of the world’s largest online poker
room, PartyGaming, suggests the company is more than willing to take a few
gambles.

With a valuation of up to £5.08bn, the stakes are high, though the company’s
soon-to-be-fabulously-wealthy founders are not gambling recklessly. With a trio
of high-profile accountants now pulling the financial strings, the company is
clearly looking to hedge its bets.

Leading the executive side is CFO Martin Weigold, who joined in January. His
background is entertainment, albeit of a more family-friendly kind. He was CFO
of of Jetix Europe, formerly Fox Kids Europe, for five years from 1999. Before
that, he was vice-president of finance of Walt Disney Television International
for four years.

In Michael Jackson, PartyGaming has a chartered accountant (he qualified with
Coopers & Lybrand) well-known to UK accountants. Non-exec chairman of
PartyGaming since May, Jackson also chairs accountancy software giant Sage. His
is a more controversial appointment.

Chairing two FTSE100 companies runs counter to the Higgs code on corporate
governance, but a PartyGaming spokesman was unapologetic. ‘Our position is we
are not making any compromises on the quality of our non-executives. We want the
best people and we have to pay sensible fees to them.’

Equally controversial is the appointment of Brian Larcombe, deputy chairman
and senior non-executive director since May. Larcombe recently retired from 3i
who he served as CEO and, prior to that, finance director.

Larcombe will get a windfall of £1m from the flotation. The remaining three
non-execs ­ Lars Berg, Rod Perry and Nigel Kenny ­ will get £100,000 and are
expected, along with Larcombe, to reinvest up to 60% of these payments in
shares.

The four have only been on PartyGaming’s board since the spring and their
payments and ownership of shares appears to contravene the Higgs code.

These rules state that non-executives must remain independent and should not
receive additional remuneration, other than a director’s fee, or take part in
the company’s share option scheme ­ except for exceptional circumstances.

All this and it is bringing the mid-tier back as auditors to the FTSE100. BDO
Stoy Hayward is the company’s reporting accountant and will become auditor after
trading begins on 30 June. PartyGaming is already the most eye-catching IPO in a
long time. If it continues in a similarly single-minded vein, it will be one of
the most watchable stocks on the main board.

COMPANY REPORTS

Airport giant sees operating profit rise, while newspaper publisher
recognizes defered tax liability

FTSE100
BAA plc announced an increase in operating profit after it
restated its preliminary accounts under international financial reporting
standards. The airport giant disclosed that operating profit for the years ended
March 2005 had increased from £691m under UK GAAP to £987m. Profit before tax
has increased to £867m from £733m. ‘The move to report under IFRS does not
change the fundamental strengths of our business,’ said Margaret Ewing, chief
financial officer at BAA. ‘The transition, which is now complete, has been a
major undertaking.’

Lloyds TSB has said earningsper share will be reduced by
around 6% under international accounting standards, while pre-tax profits will
be 8% down. The bank, however, said the reductions were purely a result of
changes to the timing of income and expense recognition. Lloyds added that it
would ‘endeavour’ to provide information on the company’s underlying
performance, which would exclude the impacts of accounting changes caused by
IFRS.

Sainsbury’s has provided a full restatement of accounts
under IFRS. The supermarket group’s numbers were in line with its initial
forecasts on the impact of the standards. Its net assets in its 2004/05 accounts
will reduce by £347m, compared to the £350m previously estimated. Underlying
profit before tax is reduced by £1m.

FTSE250
Slough Estates has reduced its group interest costs by over £10m per
annum after completing two exchange offers that were launched in May. The first
exchange offer was to holders of Slough Estates’ three shorter dated existing
notes to exchange all of their shorter dated notes into new unsecured Sterling
denominated fixed rate notes due in 2018. The second offer was to holders of its
longer dated existing notes. Over 75% of the holders of the two classes of debt
issue voted in favour of the transaction.

Trinity Mirror has recognised a deferred tax liability of
£474m on its balance sheet after updating its original guidance on the IFRS
transition. The media company said that after further interpretation of IAS12,
the standard for income tax, it had decided to include the liability in its
accounts. The tax liability was not included in the preliminary consolidated
balance sheet published as part of its 2004 annual report.

AIM
Ramco Energy has appointedErnst & Young to help it sell its 86.5%
stake in the Seven Heads gas field near Ireland. The Big Four firm was appointed
after Ramco concluded extended waiver agreements with its bankers and a major
creditor. Ramco needs to repay a £12m tranche of its borrowings on Seven Heads
and has negotiated to defer the payment of £1.55m of debt to a major creditor
until asset sales have been concluded.