888 Holdings Records Major Profit Increase Despite UK Market

888 Holdings Plc has released its financial results covering the first half of the year, and while its revenue noted only a slight 1% increase to $273.2 million for the period, the online gambling giant’s operating profits actually swung to a $60 million gain compared to a $17 million loss in H1 of 2017. Commenting upon the hugely positive figures, Itai Frieberger (photo), the Chief Executive Officer at 888, stated:

“We have maintained strong momentum in Casino and Sport particularly in continental European markets. In the UK, we are pleased to report that since the period end (June 30) we have started to see positive trends in revenue.”

UK Market Down 18%

While 888’s revenues were driven higher by an impressive performance across European markets, the company’s operation in the UK took a major hit and sunk by 18% year-on-year to $86.5 million.

According to Frieberger, this was partly due to revisions made to the firm’s practices in order to “align with the stricter regulatory environment across the market.” This is in reference to a record £7.8 million ($10m) fine handed to 888 by the UK Gambling Commission last August after significant failings were found in the way the operator went about protecting its vulnerable customers.

888 Holdings has since been tightening its anti-money laundering system and improving its customer due diligence measures in order to better position the company for long-term growth.

European Market Drives Growth

Excluding the UK, the group’s revenue across regulated markets actually increased by 30% in H1, with Spain and Italy instrumental in driving gains. Breaking the segments down, casino revenue was up by 10% to $161 million in H1 of 2017, although that figure would have risen to 24% if the UK was excluded from the numbers. In the meantime, sport revenue was up by 11% to $37.5 million, improving to a 34% gain without the UK.

On the flip side, bingo revenue declined by 11% to $17.6 million in H1 of 2017 versus the $19.7 million taken in the same period a year ago. Poker similarly reported a 28% fall in year-on-year revenue to $30.6 million, with the company blaming the dramatic decline on its withdrawal from a number of unregulated markets, including Australia. Nevertheless, 888 said that the vertical would still remain a major acquisition tool for the business.

US Opportunities

Referring to the US market, the company highlighted the exciting possibilities presented after the U.S. Supreme Court’s decision to repeal the Professional and Amateur Sports Protection Act (1992) in May, which had previously restricted sports betting nationwide to just a handful of states. Instead of just Nevada being able to offer the full range of sports betting products, and Oregon, Delaware, and Montana a more limited version of sports betting, individual states are now able to determine their own stance on the issue.

In September, the group launched its 888Sport operation in New Jersey, and is currently exploring the possibility of extending its operation to other regulated states. This will be facilitated by the significant presence it already enjoys in the US market via its poker product, which is currently in all three regulated states with active online gaming markets. In fact, 888 is the only operator to currently benefit from the interstate poker network agreed between New Jersey, Nevada and Delaware, and after its launch in May its partnership with Caesars (888, WSOP) soon leapfrogged Resorts (PokerStars) and Borgata (Borgata Poker, PartyPoker, playMGM) to top the Garden State’s online poker market.

Positive Outlook

Following release of the interim results, 888 Holdings shares are currently trading at 200.20p, giving the company a market capitalization of £729.98 million. Nevertheless, stock prices are still close to their lowest level for the year, and far down on the 326.60p price that they reached this summer. Commenting upon 888’s prospects going forward, Frieberger said:

“We have several exciting growth opportunities ahead and the board remains confident that the profit outlook for the full year will be in line with market expectations.”