888 hit by regulatory crackdown in UK
Shares at 888 were down almost 9% this morning (Thursday) after the firm reported a slump in its UK performance.
Group revenue was up 1% to $273.2m (£208.2m/€233.4m) in the six months to June 30, driven by increases across both its casino and sports divisions. Profit before tax was at $60.1m compared to a loss of $17.3m a year ago.
However, in its core UK market revenue fell 18% to $86.5m, which it put down to revisions to its practices to “align with the stricter regulatory environment across the market”. It noted a crackdown on anti-money laundering processes and increasing customer due diligence and protection. Last August 888 was fined a record £7.8m by the Gambling Commission as a result of "serious failings" in its handling of vulnerable customers.
The company said that so far during H2 the company’s average daily revenue overall is down 4% year-on-year, but 6% higher excluding the UK.
In a statement, CEO Itai Frieberger (pictured) said: “We have been adapting the way that we operate for the long-term growth of our business by enhancing customer protection practices through innovation and automation as well as diversifying marketing investment into higher growth areas of the business, thereby reducing exposure to any one single market.
“I am pleased to report that since the period end we have started to see positive trends in the UK on the back of the optimisation efforts implemented over the past 18 months.”
888 cited a number of highlights during the first half, including the launch of its 888poker brand in Italy in January, as well as the launch of an interstate poker network in the US and the renewal of its deal with the Delaware Lottery, both in May.
Since the end of the period, 888 has built on its presence in the US by rolling out its 888sport brand in New Jersey earlier this month. Frieberger cited the US as a key growth market for the company moving forward, highlighting “exciting” opportunities in the wake of the Supreme Court ruling on PASPA.
“The repeal of PASPA in May was a very exciting development for 888 given our unique experience and established partnerships in the US market,” Frieberger said.
“We have continued to invest in our US operations for long-term growth including extending our inter-state poker network across all three currently regulated states, significantly enhancing our casino product and, most recently, launching sports betting in New Jersey.”
Speaking more broadly about 888’s performance in the first half, Frieberger said: “888 has continued to focus on enhancing compliance and customer protection, delivering growth in regulated markets and exciting product innovation.
“We have maintained strong momentum in casino and sport particularly in continental European markets.
“We have several exciting growth opportunities ahead and the board remains confident that the profit outlook for the full year will be in line with market expectations.”
Analysts at Regulus Partners registered concern about the company's decision to cut R&D and marketing costs by 4% and 3% respectively.
"We remain concerned that 888 is losing market share in most geographies and that cutting marketing and R&D (especially) is a short-term answer at best," Regulus analysts said.
"In a generation of evolution, the online gambling sector has become significantly more complex and challenging from a regulatory, technology and competitive standpoint, presenting near structural challenges for the ‘grandfather’ of vertically integrated .com online casino."