888 Holdings shares slump after profit warning
May 31, 2010
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LONDON (MarketWatch) — Shares in online gambling operator 888 Holdings slumped as much as 18% Friday after the group warned a sharp drop in the number of online poker players and the impact of the upcoming soccer World Cup would leave its profit “significantly lower” than market expectations.
Trading has been weak across most parts of the business, but the group’s online poker tables have been the hardest-hit, with the average number of players per day dropping 18% between January and May.
/quotes/comstock/23s!e:888 888 54.00, -14.00, -20.59%
The group said it believes the sharp decline in poker activity is part of an industry-wide trend.
Shares in 888 Holdings /quotes/comstock/23s!e:888 (UK:888 54.00, -14.00, -20.59%) slumped 15% on the London Stock Exchange, having fallen as much as 18% earlier in the session.
Rival PartyGaming /quotes/comstock/23s!e:prty (UK:PRTY 258.68, -10.80, -4.01%) , which also operates a major poker network, fell 5.3%, while shares in U.K. bookmakers William Hill /quotes/comstock/23s!a:wmh (UK:WMH 176.81, +0.20, +0.11%) and Ladbrokes /quotes/comstock/23s! e:lad (UK:LAD 142.80, +1.40, +0.99%) , which are predominantly involved in sports betting, both edged higher.
While bookmakers are set to benefit from the FIFA World Cup, 888 said trading will be difficult for companies that offer casino games and other gambling online.
On top of those problems, revenue for the group has also been hurt by the weakness of the euro and sterling against the dollar and the introduction of new gambling regulations in France will result in significant further marketing costs as the group is required to move to a new regulated platform.
“The board has revised its outlook for the remainder of the year and now expects profit to be significantly lower than previous market expectations,” the group said.
“A number of steps, including cost cutting, have already been implemented and the board remains confident about the future strategy and prospects,” the company added, noting that it has continued to make a profit.
While 888 said its poker problems are part of an industry trend, Daniel Stewart & Co. analyst James Hollins said he views the group’s overall trading issues as company-specific.
Hollins said 888 has a “weak poker offering” in a highly competitive market and that its casino is too reliant on high-roller players. Hollins cut his price target on the shares to 92 pence from 123 pence, however he stuck to his buy rating, noting the company has a strong dividend yield and an ongoing share buyback and that it’s likely to play an active role in industry consolidation.
The shares were trading at 57 pence on the LSE Friday.
Simon Kennedy is the City correspondent for MarketWatch in London.
888 Holdings shares slump after profit warning
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