888 forecasts H1 revenue drop amid Dutch exit, tightened UK measures

Online betting and gaming company 888 Holdings on Thursday warned of lower mid-year revenue amid tightened UK online gambling safety measures and the closure of its Dutch operations, sending its shares more than 6% lower. The company now expects £330-335 million ($403-$409 million) for the six months to 30 June 2022, ahead of its planned acquisition of William Hill’s international business on July 1.

The UK has tightened restrictions in recent years, including a cap on the maximum stake on terminals, stricter age and identity checks for online gaming, and more support for those addicted to gambling.

This week, Britain's Gambling Commission issued new guidance for gambling firms, ahead of rules that are set to come into effect on September 12. The guidance provides further information for remote gambling businesses on identifying vulnerable customers, indicators of harm they must monitor for, when to use automated systems and processes, and how to evaluate the impact of customer interactions.

UKGC Chief Executive said operators will need to take into account the guidance ahead of the stronger requirements coming into effect, with the regulator "giving the industry time to prepare for the changes" and expecting full compliance by September.

But as the regulatory landscape shifts, London shares in 888, which enjoyed huge gains as COVID-19 lockdowns boosted online gambling, have now lost about 43% this year. The stock was down nearly 3% by 0826 GMT after falling as much as 6%.

"Deregulation is a huge theme for the gambling industry in the USA but the opposite is happening in many other jurisdictions," said Russ Mould, AJ Bell investment director, as reported by Reuters.

"Notably the UK, where affordability checks, maximum stakes, and other safer betting measures could affect turnover, depending upon the government's final conclusions and legislation," Mould stated, adding that 888's share fall could be due to the ongoing regulatory uncertainty.

888, which last year agreed to buy William Hill's international assets from U.S.-based owner Caesars Entertainment, also proposed to raise about 1.02 billion pounds ($1.25 billion) in debt.

The London-listed firm expects revenue of 330-335 million pounds ($403-$409 million) for the six months ending June 30, "broadly in line" with its expectations, it said. However, the revenue is significantly down from that reported in the same period a year earlier: $528.4 million. William Hill's revenue is expected to come in between 620-630 million pounds ($760-$772 million) for the 26 weeks ended June 28, 888 stated.

“The performance of both businesses largely reflects a continuation of the trends outlined in the prospectus dated 29 April 2022, with the positive impact of retail reopening and strong performances across a number of regulated countries being offset by the closure of the Netherlands and the impact of additional safer gambling measures within the UK online segments of both businesses," 888 said in a statement.