888 has upgraded its FY earnings targets after 888Poker’s performance in Spain provided a further boost to the operator’s trading.
888Poker went live in the newly regulated dot.es Spanish market on 5 June, and is currently No 2 in the market behind PokerStars according to 888, a statement backed up by recent data from cash games traffic tracking site PokerScout.
888 revealed in a pre-close trading update this morning that the strong trading in the second half of 2011 has continued into 2012 for casino and poker, “the latter of which has been further boosted through obtaining significant market share in Spain”. House broker Panmure has correspondingly revised its 2012 earnings target for 888 up 22% to $56.1m EBITDA.
In contrast to the owner of the No 3 poker room in that market, PartyPoker, 888 confirmed that it has not been hit by the German federal government’s introduction of the Rennwettlotteriegesetz, a prohibitive 5% turnover tax on all sports bets, given the small size of 888’s sportsbook business in that country. bwin.party has projected an earnings hit of up to €10m due to the new German law, while Betfair, whose core betting exchange is rendered unviable by a turnover tax, has pledged to continue in the market as is and pay taxes on its licence in the federal state of Schleswig Holstein.
To the downside, 888 said it expected margins in the second six months of 2012 to be hit by the increased investment in marketing in Spain required to secure the strong No 2 position there, spending that has largely had to be pushed back until the second half of the year due to Spain delaying the opening on several occasions. H2 margins would also be hit by investment in infrastructure ahead of delivering B2B poker platforms in Nevada for Caesars Interactive and WMS Gaming, as well as “the unknown impact” of the forthcoming Olympic Games, which open in London on 27 July.
But while the second half was expected to return weaker margins than the strong H1, 888 said today its still expected “EBITDA for the full year will be materially ahead of current expectations,” excluding the impact of May’s one-off €8.7m payment to Spanish authorities to settle its back-dated tax bill. Following the publication of the trading update this morning, the company’s share price was up nearly 15% by midday.
888’s rejuvenated poker product has been the second major beneficiary behind PokerStars of last year’s shutdown of US-facing sites such as Full Tilt due to the timely introduction of recreational player-focused initiatives such as its Poker 6 platform and PokerCams. Revenue nearly doubled year-on-year in the last reported quarter to the end of March, rising 88% to US$21m, which helped the company record the highest ever monthly revenue in its history in March.
The operator’s first half poker performance contrasts with that of PartyPoker owner bwin.party, that announced in its pre-close trading update this week that “the competitive challenges experienced in April” due to the traditional seasonal downturn continued into May and June, blamed by the operator on the Euro 2012 Championship and PokerStars’ launch of new fast-fold variant Zoom Poker in May. It added that it did expect some improvement in its poker business in the second half , however, due to the merging of PartyPoker’s liquidity pools with merger partner bwin’s brands and the launch of its own fast-fold poker game.
888 will publish its first-half results for 2012 on 29 August.