U.s. Market Withdrawal Expensive For 888.com

U.S. MARKET WITHDRAWAL EXPENSIVE FOR 888.COM
2007 numbers show a 54 percent drop in profits

The cost of voluntarily withdrawing from the US market in the wake of the UIGEA was again illustrated this week when Gibraltar-based Internet gambling group 888.com released its financials for the full year 2007.

The second-largest U.K. online gambling company said profit fell 54 percent in 2007 after the crackdown on financial transactions with online gambling companies forced its exit from the lucrative US market.

Net income dropped to $34.2 million (2006: $74.5 million), below the $36.7 million average estimate of three analysts compiled by Bloombergs. About 85 percent of the 2006 profit came from activities that have now been curtailed.

888 has cut jobs, purchased an Internet bingo operator and arranged partnerships with gaming companies including Blue Square in the Rank group (see previous InfoPowa report) to reshape its activities after losing 55 percent of sales when the U.S. Congress passed the Unlawful Internet Gambling Enforcement Act in the second half of 2006.

Revenue climbed 36 percent last year excluding the U.S. as 888 signed up more European and Asian customers.

“2007 was a year of transformation,” Chief Executive Officer Gigi Levy said in the statement. “With many strategic initiatives now underway, we see a bright future.”

Annual pre-tax profit more than doubled to $46 million excluding the U.S. withdrawal, the statement reveals. Sales totaled $213 million, down 27 percent when American gamblers are included.

The 888 stock has dropped 14 percent from the price of 175 pence at which it was first sold to investors, significantly less than the plunge of 82 percent by PartyGaming plc, which similarly departed the US market.

888’s annual revenue from casino games, the main contributor, increased by a third to $118 million last year outside the U.S. Poker sales rose 18 percent to $81 million. 888 had 4.7 million accounts at the end of 2007, up 30 percent from 2006.

Turning to the new fiscal year, 888 revealed that it has started strongly, generating confidence in future prospects.

888 spent $32.4 million in March 2007 to buy bingo operators including Bingo Ballroom and started taking online sports bets from Italy in October. 888 and Rank, owner of the Blue Square sportsbetting company, unveiled their partnership in November and last month began accepting Internet sports wagers from six European countries including Germany.

“There is a high likelihood we will make another acquisition in 2008,” CEO Levy told Bloomberg News this week. “We are looking at a few companies.”