Unexpected Charges Cause Profit Loss at 888 Despite Increased Revenue

UK betting firm 888 Holdings Plc. has enjoyed a financial upswing in the first half of 2017 but it won’t bank a profit due to regulatory and tax issues.

888 Itai Frieberger

888’s Itai Frieberger brushes off a drop in profits by pointing to the company’s diversification and innovations. (Image: thisismoney.co.uk)

According to 888’s financial report to the six months ending June 30, 2017, revenue increased to £207.8 million compared to £201.5 million generated during the same period in 2016. In addition to a jump in total revenue, the company saw adjusted profit before tax improve by 12 percent year-on-year to £29 million when various penalties were excluded.

However, despite the positive momentum across its various betting platforms, 888 actually suffered a £13.3 million loss for H1 2017 thanks to the UK Gambling Commission and the German tax authority.

As noted in the report, “exceptional charges” linked to “potential” past VAT matters in Germany saw £33.4million wiped from the operator’s takings. Additionally, a “settlement” with the UKGC for regulatory infringements cost 888 a further £4.2 million.

Innovations Keeping 888 Alive

These unexpected costs have driven down the firm’s overall profit, but Chief Executive Itai Frieberger believes 888 is heading in the right direction. Commenting on the results, Frieberger pointed to greater diversification of the group’s products and improving technology as the reason for an increase in revenue before penalties.

Continued action in the sports betting arena helped the company’s takings stay strong, but one of the most interesting highlights is the growth of its mobile activity in the UK. As detailed in the report, 69 percent of UK revenue came from mobile bets in H1 compared to 56 percent during the same period.

This figure tallies with the UKGC’s findings that betting via laptops is gradually decreasing while mobile activity is on the up. Looking at the latest stats, the UKGC’s Gambling Participation study found that 56 percent of online bettors in 2016 now use their laptop, which is down 6 percent compared to 2015.

In tandem with this, the UKGC’s data also shows that mobile betting was up 10 percent in 2016 and now accounts for 43 percent of all UK betting. 888’s figures certainly demonstrate this shift which something more operators may look to as taxation and regulation continues to impinge on profits.

Regulation Forcing Operators to Improve or Fall

As 888 released its figures, Sky Betting and Gaming announced that it will be terminating its affiliate program in the UK. The move has been described as a reaction to the UKGC’s increasing crackdown on how betting products are advertised both in-house and via affiliates.

With Lottoland and bgo recently receiving a £150,000 and £300,000 fines respectively for failing to adequately describe their offers and services, Sky Betting and Gaming isn’t willing to risk similar penalties.

Based on this, its affiliate scheme will cease operations in the UK the start of October.

Sky Betting and Gaming’s decision is just one reaction to the ever-increasing demands of the UKGC. However, as 888’s report suggests, regulation and increased oversight doesn’t have to stunt growth. Even in spite of the recent fines, tech improvements and innovations can help keep punters engaged and, ultimately, revenue flowing in the right direction.

Share Now: