888's 3Q a Smashing Success

2 November 2005

A tremendous third quarter for 888 Holdings Plc could go a long way toward solidifying investor confidence in the extraordinarily volatile I-gaming market.

The Gibraltar-based online gambling group disclosed in a trading update Tuesday (just over a month after its float on the London Stock Exchange) that the number of real-money gamblers at its properties during the three-month period ended Sept. 30 has increased 118 percent to 316,553 compared to the same period of 2004. The jump translates to a 56 percent increase in revenues to US$70 million for the quarter.

Although the company's online casino sites, 888.com (also known as Casino-on-Net) and Reef Club Casino, serve the world's largest pool of online casino gamblers, their 88,301 players represent a relatively small portion of the company's overall real-money customer base. The remaining 228,252 gamblers came to 888 to play poker at PacificPoker.com. Compared to the third quarter of 2004, the number of poker players in Q3 2005 was up 143 percent, while poker revenue was up 178 percent to $29.5 million.

The poker figures could build on the confidence boost in October from Sportingbet, which reported an 89 percent increase in poker revenue. With that news it became evident that Sportingbet was not suffering the same decline in player and revenue growth that PartyGaming had reported in September. Sportingbet CEO Nigel Payne told investors at the time that the lack of faith in online gaming stocks following PartyGaming's financial report was due to an incorrect assumption that the rest of the industry was faring the same as PartyGaming.

888 Holdings CEO John Anderson echoed Payne's comments in an article published Tuesday by Reuters. "As we said on the roadshow to all the investors who asked that question," Anderson explained, "I thought that it was a company-specific issue and not an industry-specific issue, and I think that has been borne out to be correct."

Greg Feehely, an analyst at Altium Securities, said that 888's trading statement "suggests that the online poker market is either growing more strongly than PartyGaming would have us believe, or that 888.com is taking market share, possibly both."

Meanwhile, Bridgewell Securities analyst Charles Wilson stated, "The robust Q3 statement from 888 should also help restore the market's confidence in the online gaming sector."

Although 888 has far fewer online casino gamblers than it has poker players, its 88,000 casino players still represent a 73 percent increase over the third quarter of 2004--an improvement that led to an 18.3 percent increase in casino revenues to $40.5 million.

Further, 888's casino sites are bringing in 62 percent of the company's revenues. Compared to the same period last year, overall revenues for the first nine months of 2005 have increased by 51 percent to $194 million, with casino revenues constituting $120.4 million (up 16 percent) and poker revenues constituting $73.4 million (up 100 percent).

The company says the final quarter of the year has begun well despite investors' fears that online poker growth is slowing.

Despite the upbeat trading statement, 888's share price fell 4.5p (2.64 percent) on the day Tuesday to close at 166p, slightly lower than the float price of 175p a little over a month ago. PartyGaming shares, meanwhile, rose 6.25p (7.16 percent) to 93.5p.

Bradley Vallerius

Articles by Bradley P. Vallerius, JD manages For the Bettor Good, a comprehensive resource for information related to Internet gaming policy in the U.S. federal and state governments. For the Bettor Good provides official government documents, jurisdiction updates, policy analysis, and many other helpful research materials. Bradley has been researching and writing about the business and law of internet gaming since 2003. His work has covered all aspects of the industry, including technology, finance, advertising, taxation, poker, betting exchanges, and laws and regulations around the world.

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