Online gambler 888 Holdings axes dividend
Wednesday 01 September 2010
888 Holdings reported a double-digit bounce-back yesterday after its online poker and casino gambling businesses slumped during the World Cup, but it scrapped dividend payments over uncertainty about future regulation in its key European markets.
The company's first-half financial results showed revenues up 10.5 per cent to $130m (£85m) but pre-tax profit fell by 56 per cent to $4.3m (£2.8m).
888 blamed the slump on weakness in the online poker market, adverse foreign-exchange movements and the distraction of the football tournament in June and July. "Our business experienced a difficult first half against the backdrop of a challenging economic environment," said Gigi Levy, the chief executive of 888 Holdings.
To address the challenge, the company is putting in place $6m of cost-cutting measures, reorganising its technology divisions and upgrading product offerings. It says the business has already started "returning to seasonal trading patterns" since the World Cup. Trading has shown double-digit growth in recent weeks, led by a 15 per cent increase in revenue from 888's newly released poker platform in August.
The global online poker market has been in decline for more than a year as two major US sites – PokerStars and Full Tilt Poker – continue to accept US players despite legislative restrictions and draw in European business as a result. 888 Holdings says it is working hard to address the general decline, upgrading its software and launching new marketing schemes. But it already relies more on bingo, which generated revenue of $23.5m in the first half, compared with $19.6m from poker and $59.3m from its casino division. The company is upping its marketing spend by 40 per cent – the majority of it on bingo – and also spending an extra 16 per cent on technology research and development.
In the meantime, the company will pay no dividend as it looks for growth opportunities against a backdrop of regulatory uncertainty across several European markets. France and Italy are already in the process of regulating online gambling; Denmark, Belgium, Germany, Greece and Spain are all expected to follow.
"In order to continue investing for future growth and to support potential acquisitions, the board has decided not to declare an interim dividend at this time and finalise the full-year dividend when the full-year results are available," Mr Levy said.
"We remain confident in the underlying fundamentals of the business and believe the move of 888, and the industry, to become a locally regulated gaming-entertainment operator, presents significant opportunities for growth and merger and acquisition activity."
The dividend position will be reassessed at the end of the financial year. Simon French, a leisure analyst at Panmure Gordon, said: "The suspension of the dividend is about uncertainty. The company is just being cautious."
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