888 pays price for RG measures as UK revenues fall 18%

888 has reported an 18% decline in UK revenues for H1 2018, as the firm felt the pinch from responsible gambling measures and fierce competition.

The UK made up 32% of group revenues, although the operator said it had started to see “positive trends” after the reporting period, with responsible gaming measures now completely installed.

“This follows the proactive and prudent customer protection measures that we have implemented over the last 18 months which have adversely impacted revenue,” group CEO Itai Frieberger said.

He told EGR Intel the firm was seeing “very positive KPIs in the UK” and would start regaining market share as other firms started implementing their own RG measures.

“We started doing this two years ago, before anyone else, and a lot of companies have been taking our customers because of that, but now everyone has to do these things and we expect to start taking their customers back,” Frieberger said.

Elsewhere group revenue climbed 1% (-5%cc) in the period to $273.2m, and up 30% in regulated markets ex. UK, driven by Spain and Italy.

EBITDA was up 10% to $52.4m, well ahead of expectations, reflecting cost-cutting in marketing and R&D.

“We are pleased with 888’s performance during the first half of the year which has resulted in further progress against the Group’s strategic objectives,” said Frieberger.

“888 has continued to focus on enhancing compliance and customer protection, delivering growth in regulated markets and exciting product innovation.”

Casino revenue increased by 10% to $161m, while sport revenue increased by 11% to $37.5m, and bingo declined by 11% to $17.6m, reflecting heightened regulatory scrutiny in the UK.

“We have invested in product innovation to ensure that 888 customers continue to enjoy fresh and differentiated entertainment,” Frieberger added.

“In May, we launched ‘Orbit’, an innovative new Casino platform, across our .com markets and we have seen exciting early results.

“We plan to extend Orbit across a number of major regulated markets during the second half as well as introducing new features to 888Sport and launching ‘Poker 8’, 888’s next generation poker platform.”

Cannacord analyst Simon Davis maintained his ‘buy’ rating on the stock, saying the stabilising UK growth was a “reassuring message”.

Regulus Partners analyst Paul Leyland was less positive, saying that Spanish growth was “very underwhelming” compared to the market, while 11% sports growth was a “desultory performance in a World Cup period, regardless of comps”.

Regulus added: “We remain concerned that 888 is losing market share in most geographies and that cutting marketing and R&D (especially) is a short-term answer at best.”

888 shares were down 8% in early trading.