Interactive Investor

Why 888 is firing on all cylinders

1st September 2021 08:28

Richard Hunter from interactive investor

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Despite some headwinds, 888 shares have been hugely popular, but will it last? Our head of markets assesses latest results. 

888 Holdings (LSE:888) is seeing the benefits of a burgeoning betting and gaming market, and continues to plough ahead despite increasing headwinds.

The reopening of retail and leisure venues by competitors after lockdowns were eased has had an inevitable impact on revenues, where growth slowed in the months of July and August. Meanwhile, regulatory and compliance charges continue to weigh and the new regulatory regime in Germany is one to which the company needs to adjust.

In the near term, 888 is also battling against its own strong comparatives, with a particular challenge ahead in the fourth quarter, although the company remains optimistic on a favourable outcome for the year.

For the most part, however, 888 is firing on all cylinders.

Revenues for the first half to 30 June increased by 39% and pre-tax profit by 14%, underpinned by exceptional performances from Gaming and Betting, where revenues spiked by 35% and 82% respectively. By geography, growth was also strong in its core UK market, with an additional boost from Italy.

The strategic partnership with Sports Illustrated of the US is another example of the sector increasing its exposure to a potentially huge market, as restrictions on gaming are eased in any number of states. While US revenues currently account for just 12% of overall revenues, the potential is evident as the market is opened up, and there have been a number of partnerships between UK and US companies looking to benefit from the mutual advantages of technology platforms and a new generation of users.

Increasing marketing spend to raise general awareness of the company has also helped to propel revenues without a negative effect on the financials overall, as evidenced by an increase of 48% in net cash and an increased dividend showing confidence in prospects.

888 is well placed to build on its expertise, experience and technology platforms as it searches for further expansion possibilities.

The share price has had a powerful run, having jumped by 105% over the last year, as compared to a rise of 37% for the wider FTSE250. Indeed, since the lows of the pandemic in March 2020 the price has added an extraordinary 475%, which has not been enough to dull the optimism of investors, with the market consensus of the shares as a 'strong buy' remaining firmly in place.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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