888 Books 2018 Profit Growth Despite UK Headwinds, But Analysts Chide ‘Underperformance’

Posted on: March 12, 2019, 03:12h. 

Last updated on: March 12, 2019, 04:06h.

888 Holdings has reported double-digit profit growth for 2018, despite a dip in revenues amid an increasingly challenging regulatory environment in the UK.

Itai Pazner, 888 CEO since January this year, praised his company’s performance, particularly for its growth in new regulated markets in continental Europe, but analysts weren’t buying it. (Image: 888)

The company reported an 11 per cent rise in profit, to $86.7 million, as well as record EBITDA (earnings before interest, tax, depreciation and amortization) of just over $107 million, buoyed by a profitable World Cup — and up six percent on 2017.

Total revenue came in at $540.6 million, down 2 percent from the previous year, falling across both B2C and B2B operations. Most concerning were its online poker and bingo operations, which fell 37 percent, to $49 to million, and 17 percent, to $32.4 million, respectively.

Positives included continued growth in online casino revenue — up 8 percent to $317.6 million — and sport betting, up 6 percent to $80.3 million.

Regulatory headwinds, including tax increases, in the UK were weathered by an economy drive that saw the company curbing operating expenses, including research and development and marketing expenses.

However, the company’s new CEO Itai Pazner highlighted continued growth for the company across several regulated markets, especially continental Europe, underpinned by momentum in casino and sports betting.

But analysts from Regulus said they were concerned about “underperformance” and that the company was “losing market share on an underlying basis in most of its core markets.”

US Maneuvers

The results come at the end of a year spent jostling for a position with many rival European brands within the newly liberalized US sports betting market.

888 launched its first online sports book in the US, in New Jersey — and in December completed the full acquisition of the All American Poker Network, which it previously owned jointly with Avenue Capital. It also entered into a sponsorship deal with the New York Jets.

888 has been at a disadvantage in the US. Despite being well-established in the US online gaming market, its expertise lies in casino and poker, and it lacks its own proprietary sports platform. 888sport is powered Swedish B2B sports book solution provider, Kambi, which itself has serious designs on the US sports betting market.

BetBright Deal Provides Proprietary Platform

Its acquisition, last week, of Irish sports betting platform BetBright appears to provide a solution to the problem. It seems 888 was after the company’s technology rather than its business and relatively small customer base, which is why BetBright ceased trading a day after the announcement of the deal.

The acquisition will allow 888 to acquire a sports betting platform of its own for a relatively cheap price.

“In my first report as chief executive I am delighted to update 888’s stakeholders on the significant strategic progress made by the group during 2018 and since the start of 2019,” said Pazner in an earnings call, Tuesday.

“Amongst other initiatives, we have continued our geographic expansion by obtaining important new licenses; launched our most significant product innovation in recent years in the form of [slots game] Orbit, a new casino platform; and announced three acquisitions including delivering on our long-stated ambition to add proprietary sports betting technology to 888,” he added.