Shares in online gambling operator 888 Holdings slumped as much as 18 per cent last week after the group warned that 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 per cent between January and May. The group said it believes the sharp decline in poker activity is part of an industry-wide trend.
Shares in 888 Holdings slumped 15 per cent on the London Stock Exchange, having fallen as much as 18 per cent earlier in the session.
Rival PartyGaming, which also operates a major poker network, fell 5.3 per cent, while shares in UK bookmakers William Hill and Ladbrokes, 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.
While 888 said its poker problems are part of an industry trend, Daniel Stewart and 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 92p from 123p, but 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.
