888 shares fruits of mobile and casino winnings with dividend spike
888 Holdings (DI)
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A focus on its mobile offering helped online gaming group 888 to deliver another set of record interim results, with strong cash flows leading to a 17% increase in the dividend.
Revenue increased 13% to $225.1m as the strength in mobile led to the consumer business growing revenues 9% to $192m, while the much smaller business-to-business unit lifting sales 40% to $32.3m.
Although adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) increased 27% to $49.0m, ahead of expectations due to a decline in marketing spend boosting operating margins, currency translation effects dragged profit before tax down 4% to $34m.
Earnings per share were down 6.5% to 8.6 cents.
Chief executive Brian Mattingley said casino games were the "standout performer", with resilience seen in both bingo and poker despite a competitive market backdrop, aided by bingo's strong growth from a revamped mobile offer.
The 888sport offering more than doubled revenue year-on-year after it was re-launched.
Management expect the first half to contribute more significantly to the full year performance than in prior years, but it was noted that performance since the period end has remained strong, with average daily revenue during the third quarter more than 15% higher compared to 2013.
Below the line, losses from the US joint venture increased to $4.4m. 888 said trading in New Jersey, the largest of the three regulated states in which it now operates, has been slower than expectations due to technical issues, unregulated competition and "a more general lack of awareness in the market of legalised online gaming".
Cash generated from operating activities increased 22% to $46.7m, helping the board with a decision to lift the interim dividend 17% to 3.5 cents a share.
It was also announced that, after the 2015 annual general meeting, current chairman Richard Kilsby will retire and that Mattingley is to become executive chairman.
Broker Shore Capital said the third quarter revenue improvement suggests full year EBITDA estimates are likely to increase from its current $88m, which had implied broadly flat second half earnings.
Panmmure Gordon issued a 'sell' on the shares as it sees downside risk due to the UK's introduction of a point of consumption tax in December, the entry of Pokerstars into the online casino market and a slow start to US online gambling trading.
Shares in 888 were down 3.1% to 126.53p at 09:35 on Wednesday.
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