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New taxes and currencies hit 888

Half-year numbers showed some strong underlying trends, but the UK Point of Consumption tax hit home
September 1, 2015

The seemingly unstoppable upward march of revenues and profits at 888 Holdings (888) in recent years slowed in the first half - but only due to taxes and currency impacts. Revenues rose 9 per cent on a like-for-like basis, but the reported numbers, which include the impact of a newly introduced consumption tax in parts of Europe, the UK's Point of Consumption tax and a strong dollar (the company's reporting currency) - fell 2 per cent. The tax issue is hitting all gambling companies and is one of the reasons for a slew of recent mergers.

160p

On which theme, acquisitions are a crucial part of 888's growth strategy, and these results were accompanied by the prospectus for its mooted takeover of rival Bwin.Party Digital Entertainment (BPTY). Brian Mattingley, executive chairman, was dismissive of the competing interest in Bwin shown by GVC Holdings (GVC), saying his company had "significantly greater intrinsic value" to offer.

With or without Bwin, 888 should continue to generate organic growth. Mobile now makes up 43 per cent of UK revenues, from 29 per cent last year. Mr Mattingley said its "very strong" analytics team was able to use data to boost customer recruitment - a crucial factor if the company is to improve casino revenues (up just 1 per cent in the first half) and reverse like-for-like revenue falls in poker.

Broker Peel Hunt expects pre-tax profits of $50m leading to EPS of 12.2¢ down from $73.1m and 17.4¢ for FY14.

888 HOLDINGS (888)
ORD PRICE:160pMARKET VALUE:£571m
TOUCH:159.8-160.3p12-MONTH HIGH:180pLOW: 115p
DIVIDEND YIELD:6.0%PE RATIO:21
NET ASSET VALUE: 45¢NET CASH:$142m

Half-year to 30 JunTurnover ($m)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (¢)
2014225348.63.5
2015220204.43.5
% change-2-41-49-

Ex-div: 3 Sep

Payment: 30 Sep

*Includes intangible assets of $159m, or 45¢ a share