Emerging Offerings Catalyze 888 Growth

28 August 2008

888 Holdings today revealed a 36 percent first-half rise in total net gaming revenue against the previous-year period, driven primarily by strong performance in the company's emerging offerings.

So-called emerging offerings -- a revenue segment covering bingo, sports betting, live-dealer casino and other products -- grew 660 percent to $19 million year over year.

Gigi Levy, the company's chief executive, said these newer products -- in tandem with the company's up-and-coming business-to-business arm -- will "continue to be the foundation of our future growth."

In the 2008 fiscal year, 888's b-to-b arm has attracted poker licensees including PokerDome, a skin of a licensee formerly on Playtech Ltd.'s iPoker Network, as well as Sportech, soon to be a former client of CryptoLogic Ltd.

Mr. Levy told the Financial Times in June that the company had between 10 and 15 b-to-b deals in the pipeline.

By segment, casino revenue rose 30 percent to 70 million, although poker -- like other major operators this quarter -- struggled, having risen only 5 percent to $43 million.

888's poker network, Pacific Poker, remains just outside the top 10 networks by liquidity on PokerScout.com, a Web site monitoring online poker traffic.

"Given the desire for greater liquidity among several key and well-established operators (including the likes of Lottomatica, GigaMedia, 888 Holdings and CryptoLogic all featuring outside the top five most liquid sites), we would expect several groups to be in discussions with regards combining liquidity," James Hollins, an analyst with Daniel Stewart & Co. in London, wrote in a sector note last week.

The Gibraltar company's profit before tax, meanwhile, came in at $26.3 million, up 39 percent against the comparable period last year.

Richard Carter and Wyn Ellis, analysts with Numis Securities in London, suggested in a research note this morning that the year-over-year increase was spurred mainly by lower marketing costs, which fell to 32.1 percent of total revenue versus 35.1 percent last year.

Moving to the company's discussions with the United States Department of Justice -- ongoing since June 2007 -- the company said pithily: "It remains too early to assess any particular outcome of these discussions."

Looking ahead, the company said trading for the third quarter has started "as expected" -- a phrase on which it did not elaborate, but that Numis took to mean a slight slowing in revenue growth during what is widely considered a seasonally slow month.

Poker revenue, however, has been "stronger" during the first days of this quarter, a trend which the company called "reassuring."

"Importantly, Q3 is in line with expectations with poker growth since Euro 2008 and emerging games performing well, with, we expect, bingo and sports being the key drivers," Andrew P. Lee, an analyst with Dresdner Kleinwort, wrote in a research note today.

IGamingNews was unable to reach Mr. Levy for comment.

Chris Krafcik is the editor of IGamingNews. He lives in St. Louis, Mo.