BUSINESS

888 delivers “impressive” H1 result despite $20m in new taxes

TAGs: 888 Holdings, bwin.party

888-tax-hitUK-listed online gambling operator 888 Holdings says it achieved an “impressive result” in H1 despite nearly $20m in new taxes.

Revenue in the six months ending June 30 slipped 2% to $220m, although revenue would have risen 9% absent the triple whammy of currency exchange rates, $5.1m in new value added tax on the European continent and $14.4m in point-of-consumption tax in the UK. Earnings fell 17% to $49m and profit before tax was down 41% to $20m.

888’s B2C operations reported revenue up 2% to $196m while B2B revenue was off 10% to $29m. 888’s flagship casino vertical improved 1% to $108.7m, despite a rise in the number of jackpots at its proprietary Millionaire Genie game from two to seven during the period.

888’s usually reliable poker product suffered a rare setback, falling 4% to $46.2m despite active player ranks increasing 4% and 2% in Q1 and Q2 respectively. Regardless, 888 exec chairman Brian Mattingley said the poker vertical had “outperformed” in a “highly competitive and challenging market.”

Bingo revenue was also down, falling 6% to $22.6m, although the company blamed most of the slide on the rise in the value of the US dollar versus the UK pound, as most bingo revenue in generated in the UK. On a like-for-like basis, B2C bingo revenue was up 3% year-on-year thanks to a strong mobile performance and a 42% rise in first-time depositors.

The B2B Dragonfish operation suffered similar currency exchange woes from its UK bingo partners but the Dragonfish Bingo network added six new UK skins during the period. Operational changes in 888’s US-facing online gambling business also took a bite out of revenue, but 888 says it continues to “develop our understanding” of the US market and is “refining our marketing approach” at its AAPN joint venture to better exploit customer opportunities.

On the plus side, 888’s ‘emerging offering’ surged 41% to $18.5m. The division includes 888’s Kambi Sports Solutions-powered sportsbook, which reported revenue up 81% (albeit from a low base) thanks in part to the launch in Spain in H2 2014.

On the European continent, 888 says its Spanish-facing business increased its market share thanks to improved cross-sell opportunities provided by its new sportsbook. 888.es launched slots games at the end of H1 and these games are “gaining traction” in Q3. In Italy, 888’s casino revenue rose 4% thanks to the H2 2014 launch of a mobile offering.

Elsewhere, 888 has received a new online sports betting license in Ireland and new casino, poker and sports licenses in Denmark. 888 has also applied for new Romanian licenses but is content for the moment to “closely follow’ regulatory developments in Portugal, the Netherlands and the Czech Republic.

888 generated 57% of its H1 revenue from regulated markets. The UK accounted for 46% of total revenue, followed by Europe (38%), the Americas (11%) and the rest of the world (5%).

BWIN.PARTY ACQUISITION OFFER UPDATE
On Friday, 888 said shareholders would get a chance on Sept. 29 to vote on the company’s proposed acquisition of online rival Bwin.party digital entertainment. A similar vote will be held the same day by shareholders of Bwin.party, whose board has unanimously recommended accepting 888’s bid.

That said, Bwin.party confirmed on Friday that it is still talking with online operator GVC Holdings, which has submitted its own acquisition bid. GVC’s bid has a higher monetary value than 888’s but is considered more of a regulatory risk, given GVC’s greater exposure to grey- and black-markets. GVC has also proposed around twice the amount of cost-cutting (€135m) than that planned by 888.

Mattingley said he understood that Bwin.party’s board “must look at all offers” but believed 888’s bid was sufficiently “compelling’ to win the day. Mattingley also criticized GVC’s proposed cost-cutting, saying you can’t cut that much “without destroying value” in the process. Mattingley declined to speculate on whether 888’s existing bid would be its final offer.

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