888.COM OPTIMISTIC ON FUTURE GROWTH

Online gambling group 888 Holdings plc reported this week that the industry has been impacted by slowing economies and a drop in consumer spending during what it describes as the worst recession since World War II.
 
The group's second-quarter 2009 operating income fell 12 percent to $61 million from a year earlier, and the number of active casino and poker customers declined 8 percent to 180 000, the company informed in a statement. Both income and player numbers bottomed in the first quarter.  
 
First-half sales, which are reported in dollars, were hurt by the strength of the dollar against the Euro and pound sterling this year, Levy said. At the end of the second half, the pound had slipped 17 percent against the dollar compared with the same period last year, and the Euro 11 percent.
 
Despite the gloomy news, CEO Gigi Levy remained optimistic, forecasting sales growth of 20 percent or more next year as consumer confidence returns.
 
Levy told Bloomberg business news: “We feel a lot more confident the industry’s going back to its normal growth trend, rather than continuing to be hurt by the recession. We’re looking at Q1 as the lowest point, and aiming to grow from there.”
 
Levy said that the group plans to set up operations for other businesses to offset its reduced revenues from online poker and casino activities hurt by the recession.
 
888's business-to-business division, Dragonfish, turned in a creditable performance, contributing a 42 percent increase in operating income to $24 million (2008: $17 million), ameliorating the drop in H2 operating income and confining it to a 13 percent decline to $118 million (H2 2008: $135 million).
 
In contrast, 888.com's business-to-consumer operations recorded a 21 percent decline in operating income on 2008, from $118 million to $94 million. A positive exception was the emerging offering division, where operating income rose 151 percent to $11 million (2008: $5 million).
 
Levy revealed that the group has 22 contracts with other businesses to set up online gambling operations, and is talking to television stations, media companies and state-owned lotteries about joint ventures. Online gambling, which once had an 85 percent-male customer base, is now increasingly used by women in the UK due to the growth of Internet bingo, Levy said.
 
The sports betting field will be seeing more of 888.com, it appeared from further Levy comments on the group's future plans, which include a more aggressive entry into football and more sports betting activity. The company will be pushing online bingo harder in Europe, and there are plans to launch a live dealer product later this (2009) year.
 
The 888.com CEO referred to the United States legal situation, pointing out that legally the Americans do not need to allow any European company to licence, although 888 would be keen to clinch deals with US licensed businesses as a provider of online gambling services and software.
 
However Levy continued that one of 888’s “key targets on the B2B side is making US deals” and that 888 hopes to sign deals with US companies that operate in Europe.
 
888 shares rose a few percentage points on the back of the statement. According to Bloomberg, the shares have dropped 14 percent so far this year, giving the company a market value of GBP 293.8 million.