Tightened regulation – including the proposed cut to the maximum stake at fixed-odds betting terminals in the UK – caused difficulties for 888 Holdings (888) in 2017. And yet, at constant currencies, the gambling group managed to report a 4 per cent increase in revenues and 19 per cent increase in adjusted cash profits. Shareholders will also benefit from another one-off dividend of 5.6ȼ, while management is confident that the substantial 2017 cash flow has given the group enough firepower to make acquisitions this year.
That’s not to say 888 completely sidestepped regulatory challenges in 2017. Reported profit figures were dented by the $45.3m (£32.4m) provision taken in case the group is forced to pay further VAT in Germany and the $5.5m fine for failing to protect UK customers from gambling addiction.
But the main problem is that Germany is in the process of banning online casinos and poker which may force 888 out of the market. Good diversification in other regulated markets including Italy and Spain could offset the potential loss of revenue, but Peel Hunt has suggested that withdrawal from Germany could cause a 5 to 10 per cent decline in adjusted cash profits in 2018. For now, the broker is forecasting pre-tax profits and EPS of $87.2m and 20.4ȼ (2017: $78.3m and 19.6ȼ).
| 888 HOLDINGS (888) | ||||
| ORD PRICE: | 279p | MARKET VALUE: | £ 1.00bn | |
| TOUCH: | 279.2-279.6p | 12-MONTH HIGH / LOW: | 309p | 226p |
| DIVIDEND YIELD: | 3.9% | PE RATIO: | 112 | |
| NET ASSET VALUE: | 31ȼ* | NET CASH: | $180m | |
| Year to 31 Dec | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (ȼ) | Dividend per share (ȼ)** |
| 2013 | 401 | 53.2 | 14.2 | 14.4 |
| 2014 | 455 | 67.9 | 16.1 | 15.0 |
| 2015 | 462 | 32.5 | 8.3 | 15.5 |
| 2016 | 521 | 59.2 | 14.4 | 19.4 |
| 2017 | 542 | 18.8 | 3.5 | 15.5 |
| % change | +4 | -68 | -76 | -20 |
| Ex-div: | 29 Mar | |||
| Payment: | 11 May | |||
| *Includes intangible assets of $160m, or 44ȼ a share £=$1.41 | ||||
| **Includes special dividends of 8ȼ a share in 2015, 10.5ȼ in 2016 and 5.6ȼ in 2017 | ||||
