888 in fine fettle despite bid reversal

888 in fine fettle despite bid reversal

Wednesday, August 31, 2016 Posted by Andy McCarron
Sport gains traction in key markets as operator powers on

888’s sports-betting product took centre stage in its first-half results presentation today as the company brushed off the failure of its consortium bid for William Hill and concentrated on discussing a trading performance that was lauded by the analysts.

The newly-broken out sports-betting segment was the fastest growing with revenues in the six months to June up 63% to $25m, helped by a strong performance during the recent football European Championships. Total revenues for the company were up 19% to $262m, with casino continuing to drive the company forward with a revenue increase of 31% to $137.4m.

Chief executive Itai Freiberger said the company was pleased with its sports-betting performance during the summer football tournament, suggesting the proposition was now competing on terms with the largest competitors in the company’s main markets. “The Euros were a great event for us as for the first time we were able to compete with the best of the bunch,” he told analysts.

During the Euros, the company said 888Sport enjoyed a 23% uplift in the number of bets versus this time last year, a 91% increase in revenue and a 100% rise in the number of football bets per event. “We have a clear strategic view for sport,” Freiberger added. “Since relaunch (in 2013), we are pleased with the progress. We offer markets on over 100,000 live events; we’ve been able to create volume.”

In particular, Freiberger said the sport offering had provided a boost to its operations in both Spain and Italy. In the first – where 888 is the clear number two in the market behind bet365 – he said the “hey takeaway” from the results was the degree to which the introduction of slots in the market had helped boost the sport offering.

In Italy, meanwhile, where 888 only recently introduced its sportsbook offering, saying that it gave the company “the acquisition channel we were looking for”. “We’ve been extremely preleased with the deployment of sport in Italy with then proposition capturing market share on the back of the Euros,” he added.

Alongside the launch in Denmark, the gains in Spain and Italy helped push the regulated market portion of 888’s earnings up to 63%, a 5 percentage point rise on the same period last year. The UK remains 888’s largest market, accounting for 46% of total revenues in the first half compared with 47% in the prior-year period.

The flipside of the regulated market growth is the rise in gaming duties which went up from $21.8m to $30.2m. Meanwhile, marketing spend as a percentage of total revenues also rose to 34.4% from 30.5%.

Freiberger shrugged off the failure of the recent William Hill bid – which he attributed to a press leak at a formative stage of the discussions – but he said that the attempt demonstrated the management team’s “strategic state of mind”. “M&A should not be a goal in itself, but a mutual extension of our organic growth,” he added.

Richard Stuber, analyst at Numis, noted that despite the distraction of the failed bid, the company had continued to deliver strong, double-digit growth. “We suspect that the combination of impressive momentum, market-leading technology and ambitious management means it may yet participate in the ongoing industry consolidation but we also see an attractive outlook on an organic basis.”

Similarly impressed was Simon Davies at Canaccord Genuity who suggested the company had “reverted to what it does best” which is providing strong operational delivery. He too believes the company is likely to be involved in further corporate activity in the coming months, though as a likely target rather than as an acquirer.

Totally Gaming says: You can’t fault the ability of 888 to drive revenues even at times of stress. The company focused on sports in the presentation this time around, proving that it is competing with the very largest full product-suite operators in key markets such as the UK, Spain and Italy. Whether that means it will definitely be involved in any further M&A is debatable. But there is no doubting the company’s attractiveness as a leading operator in the space.

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