888 Holdings slips into loss in first half

888 Holdings, ahead of its promotion to the FTSE 250 later this month, sank to a first half loss as sales growth slowed and it took an exceptional charges mostly relating to potential historical VAT charges and a settlement with the UK Gambling Commission.

Underlying revenues grew 9%, driven by casino growth of 11% and sports growth of 45%, with softer performances from bingo and poker that slowed the group from the 11% pace reported for the year to 21 March.

Owing to its more than a third of revenues being exposed to the weak pound, at the reported level revenues were only 3% higher than last year's at $270.1m.

Profit margins increased slightly as a result of lower marketing spend, so earnings before interest tax depreciation and amortisation of $47.6m were 8% higher, or 22% better on an adjusted constant currency basis at $53.8m.

Adjusted profit before tax increased 12% to $37.6m and reported loss before tax was US$17.3m as a result of exceptional charges of $50.8m, of which $45.3m relates to doubts over whether it owes VAT in some European countries and $5.5m in connection with the Gambling Commission settlement.

Directors declared an interim dividend of 4.0 cents per share, up from 3.8¢ a year ago.

Chief executive Itai Frieberger was pleased with the outcome, which he said was driven by continued growth in 888's core casino vertical, strong momentum in the fast-growing 888Sport and a good performance in poker.

"The group's strong strategic momentum continued as 888 developed its positions in regulated geographies, achieved greater diversification across products and markets and further enhanced operational efficiencies. Our progress was driven by 888's technology, leading CRM capabilities and cutting-edge marketing expertise."

He acknowledged that the industry will face regulatory headwinds in the second half of the year, but said trading in the third quarter "has started well and in line with the board's expectations", up 5% despite "unusually lower gaming margins" and several market exits including from Australia.

Further regulation comes in the shape of expansion of gaming duty on casino, poker and bingo free bets in the UK, which will increase the cost base, while enhanced UK regulation around areas such as television advertising and bonuses will impact overall UK market growth, the company said.