By Louisa Nesbitt
April 30 (Bloomberg) — 888 Holdings Plc, the Internet gambling company that ended takeover talks last week, said annual profit increased 55 percent as European customers played more online casino and poker games.
Net income rose to $ 74.5 million, or 21.8 cents a share, from $ 48 million, or 14.2 cents, in 2005, the Gibraltar-based company said today in a statement. Sales climbed 7 percent to $ 290 million and increased 28 percent outside the U.S., which was the source of just over half of sales until October.
888 was cut off from its main market when U.S. President George W. Bush signed a law aimed at shutting down Web gaming. In response, the company raised research spending to a record $ 19 million and introduced a new casino game almost every month in 2006’s last quarter. U.S. Representative Barney Frank this month introduced a measure that would loosen the ban.
The results were „significantly ahead of expectations,“ Richard Carter, an analyst at Numis Securities in London, wrote in a research note. Carter, who has a „buy“ rating, upgraded his forecast for 2007 pretax profit by 9 percent to $ 44 million.
Shares of 888 rose 0.75 penny, or 0.6 percent, to 120.25 pence in London, paring a gain of as much as 5.7 percent. They cost 175 pence each in the company’s September 2005 initial public offering. The stock plunged 26 percent on the first trading day after the U.S. ban was unexpectedly approved by legislators at the end of September.
„I think we turned it around relatively quickly,“ Chief Executive Officer Gigi Levy said in an interview, discussing the U.S. exit. Levy started the job at the end of December.
888, which sponsors the World Snooker Championship, said annual sales from casino games were almost unchanged at $ 160.8 million, and revenue from online poker rose 18 percent to $ 129.1 million. Outside the U.S., casino sales climbed 4 percent to $ 88.8 million, and poker revenue jumped 80 percent to $ 68.2 million. 888 also sponsored more sports events and published its first magazine during the year.
In this year’s first quarter, sales increased 16 percent compared with the last three months of 2006, 888 said in a separate statement. The company, which owns the Casino-on-Net and Pacific Poker brands, now gets 45 percent of sales from the U.K. and 36 percent from the rest of Europe, Levy said.
Italy is expected to contribute a „significant part“ of European sales in 2008, according to Levy, after 888 was awarded a license there in December. The Asia-Pacific region, which accounts for 8 percent of sales, should see „quicker growth,“ Levy said.
888 gets more than half of its sales from Web casino games such as roulette and blackjack. The company turned to bookmaker Ladbrokes Plc as a potential partner after the U.S. ban on credit- card payments for online gambling. 888 and Ladbrokes said April 23 they agreed „amicably“ to end the discussions after almost six months.
Ladbrokes probably shied away because of associated legal risks, analysts including Ivor Jones at Panmure Gordon in London said at the time. U.S. authorities have arrested managers from British Web gaming companies including bookmaker Sportingbet Plc as part of a crackdown on the business.
Frank’s bill would let Americans bet online with licensed Internet operators that have safeguards against underage and compulsive gambling and agree to be subject to U.S. jurisdiction and taxes. Frank is the Massachusetts Democrat who heads the House Financial Services Committee.
„We would more than welcome the opportunity to go back into the U.S. market,“ Levy said, though he said it was „too early to predict“ the outcome of Frank’s action.
888 plans to pay a second-half dividend of 8.88 cents a share. Investors received 4.5 cents a share in respect of the first half plus a 4 cent-a-share special dividend.
To contact the reporter on this story: Louisa Nesbitt in Dublin at email@example.com