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Talking about 888's annual results to City analysts and shareholders must have been a much easier task this time round for chief executive officer Gigi Levy. Last spring, the City was particularly anxious about the group's future after the US effectively banned online gambling - removing half the group's revenue at a stroke.
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As a result, 888 had a complete rethink of its business model and has put in place a clear strategy for growth based on three key drivers. The first was to introduce new games on a regular basis and cross-sell them to customers. Secondly, 888 diversified its geographical mix with a refocus on Europe and expansion in Asia. And finally, the group re-developed itself as a white-label brand and entered strategic partnerships with, for instance, Rileys in the UK and Tower Torneos in Latin America.
One year on, Mr Levy believes this strategy has paid off. Revenue was boosted by a strong performance from Casino games and Poker, despite heightened competition, and from the growing popularity of Bingo following the acquisition of Globalcom a year ago.
Broker Numis Securities forecasts 2008 full-year EPS of 17.3¢ (12¢in 2007), rising to 21.3¢ in 2009.
888 Holdings (888) |
||||
|---|---|---|---|---|
| ORD PRICE: | 149p | MARKET VALUE: | £507m | |
| TOUCH: | 149-150p | 12-MONTH HIGH: | 161p | LOW: 104p |
| DIVIDEND YIELD: | 2.3% | PE RATIO: | 29 | |
| NET ASSET VALUE: | 27¢ | NET CASH: | $104m | |
| Year to 31 Dec | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2003 | 123 | 20.8 | ** | ** |
| 2004 | 171 | 43.1 | 12.2 | nil |
| 2005 | 271 | 50.2 | 14.2 | nil |
| 2006 | 157 | 13.4 | 22.1 | 13.38 |
| 2007 | 213 | 38.0 | 10.1 | 6.80 |
| % change | +36 | +184 | -54 | -49 |
Ex-div: 7 May Payment: 29 May *Includes intangible assets of $40.6m, or 11¢ a share **Prior to listing $1=£0.5074 |
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888's business has stabilised, and with plenty of cash on the balance it can now continue to grow through acquisitions. But in the short term, it will need to demonstrate that it can weather a slowdown in consumer spending. Trading on a forward PE ratio of 17, the shares are fairly priced.
Last IC View: Fairly Priced, 148p, 25 Mar 2008
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