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888 profits drop in first half

The online gaming company's profits were hit by higher duties and spending on marketing
888 profits drop in first half

Operating profit generated by 888 Holdings (888) more than halved during the six months to June, from $60m (£48.5m) to $24.7m. This was due in part to an increase in gaming duties, with payments up nearly a fifth to $44.9m, along with higher expenses around operating and marketing. Chief executive Itai Pazner also attributed the decline to unfavourable currency fluctuations, particularly between sterling and the US dollar. Earnings per share declined by 65 per cent year on year to 5.4ȼ, and management opted to cut the interim dividend from 4.2ȼ to 3ȼ.

IC TIP: Hold at 157p

Encouragingly, the increased spend on marketing is bringing in players. First time depositors (FTDs) across 888’s business to consumer (B2C) brands increased by a fifth, driven by new players in casinos, sport, the UK and Italy. The company also expanded into Sweden and Portugal, bringing the proportion of revenue coming from regulated markets to 74 per cent, up from 70 per cent this time last year. It’s added to its technology with the acquisition of sports betting platform BetBright for £15m, and bought a portfolio of brands from Costa Bingo for £18m.

Analysts at Numis expect pre-tax profits of $46.9m during 2019 giving EPS of 11.9ȼ, increasing to $60.2m and 14.5ȼ in 2020.

888 HOLDINGS (888)   
ORD PRICE:157pMARKET VALUE:£577m
TOUCH:156.7-157.4p12-MONTH HIGH:229pLOW: 127p
DIVIDEND YIELD:7.0%PE RATIO:10
NET ASSET VALUE:41ȼ*NET CASH:$89.4m
Half-year to 30 JunTurnover ($m)Pre-tax profit ($m)Earnings per share (ȼ)Dividend per share (ȼ)
201828460.115.44.2
201927722.25.43.0
% change-2-63-65-29
Ex-div:19 Sep   
Payment:18 Oct   
£1=$1.24 *Includes intangible assets of $242m, or 66ȼ a share