Forex Havoc, Weaker Demand Hit 888 in Fourth Quarter

5 February 2009
Despite a disappointing set of fourth-quarter performance indicators Thursday, Gigi Levy, the bullish chief executive of 888 Holdings, said there are a significant number of companies that "probably find the downturn a lot more challenging than we do."

The strength of the United States dollar, the company's reporting currency, versus depositing currencies like the British pound and euro contributed to a decline at the top line, with operating income down 8 percent to $65 million against 2007.

Relative to the fourth quarter of last year, net gaming revenue from casino, $29 million, was down 19 percent, and poker, $16 million, was down 25 percent. But its emerging offering segment -- comprised of bingo, sports betting, live-dealer casino and other products -- was up 100 percent to $12 million.

The Gibraltar company said that top-line losses were partially offset by cost savings, given an undisclosed portion of its expenses is in currency other than the dollar.

January trading, meanwhile, has started "positively," the company said, with customer-recruitment levels up 20 percent, net gaming revenue, 10 percent, and deposits, 4 percent, compared to December -- a month Ivor Jones, analyst with Evolution Securities, called the "trough in trading."

Much was made of M&A on Thursday's analyst call, with Mr. Levy speaking at length about market conditions he considers conducive to smaller-scale, cash-based pickups.

"On the M&A side, tentatively we're seeing some reality sinking in, both on the prices side and the willingness to sell," he said. "Some of the dreams, like everybody's dreams, are being put down a little bit. That's why we think that in the short term, it's going to be a great time to do these acquisitions."

He said the company plans to make "one or two" acquisitions this year.

Prospective business-to-business deals were also the topic du jour; intriguingly, the company announced its first of the year with a partner it didn't identify by name. (Mr. Levy described the partner as having a Central European focus with "a significant presence in the European media.")

888 is looking to sign "many more" b-to-b deals, Mr. Levy said, and that a deal commensurate with one it inked with Sportech last spring could be announced "within the next few months."

After two consecutive quarters of decline, Mr. Jones thinks the b-to-b strategy "has the potential to revive growth and, with it, the share price." The company's shares have recovered some since hitting an all-time low in December, but continue to trade well below their 52-week high, 170 pence.

Ahead of its annual report, due out this April, 888 reported full-yearly operating income of $263 million, up 21 percent on 2007. Emerging offerings were up 209 percent to $45 million; casino, 13 percent to $118 million; and poker, down 6 percent to $81 million.

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