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888 on top despite failed William Hill bid

The online gambling group generated healthy profits last year thanks to new casino and sport business
March 22, 2017

888 Holdings (888) has had two major acquisitions fall through during the past two years. However, last year's failed joint bid for William Hill (WMH) didn't have as negative an impact on its income statement as the failed takeover of Bwin.Party (BWIN) in the previous year, which added £17.5m in exceptional costs. This largely explains a near-50 per cent hike in operating profits, although the adjusted figure of £71.2m still represents a highly creditable 15 per cent increase, particularly as the gambling group had to contend with negative currency effects.

IC TIP: Buy at 252.75p

The core business-to-consumer (B2C) casino segment grew its sales by more than a quarter, increasing first-time depositors by around the same amount. The business added 57 new games and was also helped by the launch of 777.com at the tail-end of 2015. Meanwhile, the smallest business by revenue - sport - grew the fastest. A successful Euro 2016 tournament, as well as successful launches in Italy and Denmark, boosted revenue by more than half to $52m.

However, poker gaming sales fell by 3 per cent at constant currency as increased competition took its toll. This year, management will concentrate on new games specially designed for mobile devices. More of the group's B2C users accessed games via mobile devices last year - 60 per cent of all UK sales.

Analysts at Peel Hunt expect adjusted pre-tax profits of $78.3m during the 12 months to 2017, giving EPS of 18.4¢ (up from $70m and 17.1¢ in 2016).

888 HOLDINGS (888)

ORD PRICE:252.75pMARKET VALUE:£906m
TOUCH:252-252.75p12-MONTH HIGH:258pLOW: 173p
DIVIDEND YIELD:6.3%PE RATIO:21
NET ASSET VALUE:46¢*NET CASH:$173m

Year to 31 DecTurnover ($m)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (¢)**
201237640.810.27
201340153.214.214.4
201445567.916.115
201546232.58.315.5
201652159.214.419.4
% change+13+82+73+25

Ex-div: 6 Apr

Payment: 11 May

*Includes intangible assets of $159m, or 44¢ a share **Includes special dividends of 8¢ a share in 2015 and 10.5¢ in 2016 £1=$1.22