New gaming duties meant a 35 per cent fall in 888’s (888) cash profits (Ebitda) last year, while the gambling operator warned that it could breach a loan covenant under a worst case scenario modelled for coronavirus trading disruption.
888’s ebitda dropped from $129m (£103.1m) in 2018 to $84.2m, a decline largely prompted by $25.6m in new duties. Duties rose 37 per cent to $95.5m, which the company attributed to its revenue growth, along with an increased duty rate in the UK. 888’s profitability was also cut by a 9 per cent rise in research and development costs to $35.6m, largely attributable to investment in its 2019 acquisition of BetBright, a sporting platform.
Sports betting is crucial to the business model, accounting for 16 per cent of 888’s 2019 turnover. The company has modelled for a range of scenarios, and its doomsday forecast, which assumes a “very substantial decline” in non-sports betting alongside no sports turnover until April 2021, could push the company beyond its finance cost to trading profit ratio covenant in its $50m revolving credit facility.
Peel Hunt analysts forecast full-year 2020 adjusted pre-tax profits and earnings per share of $53.4m and 12.5ȼ respectively, rising to $62m and 14.4ȼ in 2021.
888 (888) | ||||
ORD PRICE: | 133p | MARKET VALUE: | £ 612m | |
TOUCH: | 131-133p | 12-MONTH HIGH: | 183p | LOW: 68p |
DIVIDEND YIELD: | 3.6% | PE RATIO: | 15 | |
NET ASSET VALUE: | 45ȼ* | NET CASH: | $47m** |
Year to 31 Dec | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (ȼ) | Dividend per share (ȼ) |
2015 | 462 | 32.5 | 8.3 | 15.5 |
2016 | 521 | 59.2 | 14.4 | 19.4 |
2017 | 542 | 18.8 | 3.5 | 15.5 |
2018 | 541 | 109 | 26.3 | 12.2 |
2019 | 560 | 45.3 | 11.3 | 6.0 |
% change | +4 | -58 | -57 | -51 |
Ex-div: | 23 Apr | |||
Payment: | 22 May | |||
£1=$1.25 *Includes intangible assets of $240.4m, or 65ȼ a share **Includes lease liabilities of $34.8m |