888 revenue growth slowed by UK struggles
888 revenue growth slowed by UK struggles
888 Holdings has seen revenue growth slow in the first half of 2018, as a result of “proactive and prudent” player protection measures introduced in the UK over the past 18 months.
The operator reported a 1% year-on-year increase in total revenue to $273.2m for the six months ended June 30th, with revenue from B2C operations accounting for $246.7m of the total.
B2C revenue was up 2% from the previous year, though this division suffered in particular from declines in the UK market. Casino revenue was the largest source of B2C revenue, up 10% to $161.0m, boosted by strong growth in the Spanish and Italian markets. Excluding the UK market, casino revenue was up 24% year-on-year.
Dot.com casino revenue was positively impacted by the launch of 888’s new Orbit casino platform, which contributed to a 9% increase in average active days per casino player, and a 7% increase in average revenue per casino player.
The company reported a similar story in its sports betting vertical. Revenue was up 10% from H1 2017 to $37.5m. Stripping out the UK, sports betting revenue would have grown 34% for the period. The vertical was boosted by a successful FIFA World Cup, which 888 said continued into the second half of the year.
However both 888’s poker and bingo verticals struggled. Poker revenue was down 28% year-on-year at $30.6m, which the operator blamed on its exit from a number of markets, including Australia. Despite this, 888 said that poker remained an important acquisition tool, reflected in its decision to launch a Dot.it poker offering in January this year. A new cross-territory poker platform, Poker 8, is currently being developed.
Bingo, meanwhile posted revenue of $17.6m, down 11% year-on-year. However, average revenue per player was up 12%, which the operator said reflected its effective customer relationship management tools. Bingo’s struggles reflected the highly competitive nature of the UK bingo market, 888 said, as well as steps taken by the company to address stricter UK regulations.
"We are pleased with 888's performance during the first half of the year which has resulted in further progress against the group's strategic objectives,” 888 chief executive Itai 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,” he continued. “In the UK, we are pleased to report that since the period end we have started to see positive trends in revenue. This follows the proactive and prudent customer protection measures that we have implemented over the last 18 months which have adversely impacted revenue.”
B2B revenue from 888’s Dragonfish division was down 4% to $26.5m, which the operator said again reflected the competitive nature of the UK bingo market, as well as a gradual reduction in marketing spend by Cashcade. The Foxy Bingo operator, one of Dragonfish’s longest-serving clients, has decided not to extend its partnership, and is in the process of migrating its brands to a proprietary platform. This, 888 said, would have a small but negative impact on group EBITDA in its 2019 financial year.
Dragonfish signed up 13 new clients to its platform in H1, while the offering has been developed further with 109 new games added, alongside new features and functionalities.
The B2B division looks set to be boosted by the opening-up of US state sports betting markets following the Supreme Court’s repeal of the Professional and Amateur Sports Protection Act. There is also scope for US iGaming growth, which saw the 888 add New Jersey to its interstate poker network alongside Delaware and Nevada during the reporting period.
“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 commented. “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.”
Revenue was boosted by $10.7m of accrual liability, which 888 released after receiving tax assessments from the German authorities relating to the 2015-17 period. When this is included with revenue from operations, the group total rose to $283.9m for H1 2018.
Operating expenses rose to $80.5m, with gaming duties rising marginally to $37.8m.
Research and development expenses were down marginally to $16.6m, as were selling and marketing expenses, which dropped to $82.7m. Administrative expenses were down at $13.3m.
Adjusted earnings before interest, tax, depreciation and amortisation rose 10% year-on-year to $52.4m, and 888 was positively impacted by a $12m exceptional item. This related to the provision of $45.3m set aside in 2017 to cover legacy tax liabilities relating to the provision of gaming services in Germany before 2015.
The operator recorded an exceptional item of $12m, also relating to its legacy German operations, for total profits after tax of $55.4m, having posted a loss of $17.9m.
Looking ahead to the second half of the year, Frieberger said: “The board continues to believe that 888 is very well positioned for future growth underpinned by our diversification across products and markets, technology leadership and a first-class team.
“Trading during the second half of the financial year to date has been in line with the board's expectations with average daily revenue excluding the UK 6% higher year on year, 4% lower overall and an encouraging 9% increase in group new customers acquisition,” he said. “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."