888 Holdings’ shares tank on weakness in core UK market


888-holdings-shares-tank-uk-gamblingOnline gambling operator 888 Holdings saw its shares hit their lowest point in over two years after reporting ongoing struggles in its core UK market.

Figures released Thursday show the UK-listed 888’s revenue hitting US$273.2m in the six months ending June 30, a 1% year-on-year improvement. However, in constant currency terms, group revenue suffered a 5% decline.

Adjusted earnings were up 10% to $42.5m – only 1% at constant currency – while actual earnings came in at $70m versus a $7.3m loss in H1 2017. Similarly, adjusted profit improved 13% to $42.5m while actual profit swung to $60.1m from a $17.3m loss in the previous year.

888 was dealing with some significant items in H1 2017, including a $45.3m charge for unpaid VAT in its German operations. 888 also walked away from several newly inhospitable markets, including Australia and Poland, that didn’t help the H1 2018 numbers.

888 CEO Itai Frieberger expressed pleasure with the results but UK investors ran for the exits, pushing the company’s share price down 15.4% to close Thursday’s trading at 190.2p, their lowest price this year. In fact, it’s the lowest the shares have traded in over two years.

Casino revenue was up 10% to $161m, primarily due to non-UK market growth and improved cross-sell from sports and poker. The company is putting great stock into its new Flash-free Orbit casino platform for dot-com markets and plans to debut Orbit in regulated markets in H2, starting with Denmark, Italy and Spain.

Sports betting revenue gained 11% to $37.5m, again, largely driven by 34% growth outside the UK. The company says it had a “strong” showing during the first half of the 2018 FIFA World Cup, which helped offset some “exceptional” horseracing wins.

Poker revenue tumbled 28% to $30.6m, in part due to those aforementioned market skedaddles, but also because poker players were allegedly too engrossed in monitoring World Cup yellow cards to bother with playing cards. The company hopes to right the ship through the launch of its new Poker 8 ‘cross-territory’ platform before the year is through.

Bingo revenue was also negative, falling 11% to $17.6m, despite improving individual player spending by 12%, which suggests a plunge in 888’s overall bingo audience (the company claims to have purged a lot of ‘bonus hunters’).

The bingo decline played its part in the 4% fall in 888’s B2B revenue, which suffered from bingo partner Cashcade reducing its marketing investment as it migrates its brands to its own proprietary platform. 888 believes this will have a “small negative impact” on its FY19 earnings.

888’s H1 report helpfully introduced a new category of ‘disrupted’ markets to account for its struggle to sustain positive momentum across the planet. Now, let us never speak of it again.

888’s UK-facing business reported revenue down 18% year-on-year to $86.5m, pushing the UK market’s share of group revenue down seven points to 32%. In addition to higher taxes, 888 is also spending more on regulatory compliance to ensure no repeats of the £7.8m fine it incurred in August 2017 for failing to protect self-excluded gamblers.

Europe was a brighter story, with regulated market revenue up 28%, driven by a 21% rise in Spain, 888’s second-largest market ($33.5m, 12% of group revenue). 888 launched poker operations in Italy’s regulated market in January, but the country’s new gambling marketing ban will “reduce the opportunities for continued growth.”

As for the US market, 888 launched its sports betting product in New Jersey this month, complementing its online casino offering in the same state and the launch this spring of shared poker liquidity with Delaware and Nevada. In May, 888 re-upped its B2B deal with the Delaware Lottery and the company expects to launch online in Pennsylvania in Q1 2019.