- Integration of William Hill progressing
- Poor UK performance
The gambling sector is getting its house in order ahead of the possible introduction of more stringent UK rules, with companies nervously awaiting the government’s persistently delayed white paper, and 888 (888) is no exception.
In the UK, 888’s biggest market, revenue fell by a quarter to £121mn after the company pushed ahead with “more stringent safer gambling policies and increased player protections”. EMEA sales fell by 5 per cent to £113mn, with the business unable to trade in the Netherlands as it waits for a licence, and Italy and the Americas also saw revenue declines. The only market to post growth was “rest of world”, the company’s smallest, which is hardly cause for popping open the champagne.
The acquisition of William Hill completed on 1 July, which has “transformed” the business, according to chief executive Itai Pazner. It remains to be seen how this will play out in the long run, with Peel Hunt analysts arguing that 888 has “everything to prove” with the deal. Including William Hill in these results would have meant an overall revenue decline of 1 per cent, and adjusted cash profits rising by quarter, according to the business.
Numis analysts, who are more bullish on peer Entain (ENT), said that 888’s valuation “reflects its high leverage and its lack of geographic diversification”. The shares trade at six times earnings value against cash profits, according to the broker. As we have noted with other gambling company results, the upcoming white paper has contributed to an uncertain outlook for the sector. And we will wait to see how successful the William Hill synergies turn out to be. Hold.
Last IC View: Hold, 194p, 9 Mar 2022
888 HOLDINGS (888) | ||||
ORD PRICE: | 149p | MARKET VALUE: | £665mn | |
TOUCH: | 135-151p | 12-MONTH HIGH: | 494p | LOW: 138p |
DIVIDEND YIELD: | 0.5% | PE RATIO: | 13 | |
NET ASSET VALUE: | 70p* | NET CASH: | £281mn |
Half-year to 30 Jun | Turnover (£mn) | Pre-tax profit (£mn) | Earnings per share (p) | Dividend per share (p) |
2021 | 381 | 41.9 | 9.90 | 3.7 |
2022 | 332 | 14.4 | 2.90 | nil |
% change | -13 | -66 | -71 | - |
Ex-div: | - | |||
Payment: | - | |||
*Includes intangible assets of £92.5mn, or 21p a share NB: 2021 HY dividend of 4.5¢ was translated into sterling at £1=$1.22. |