"We're firing on all cylinders," says 888 chief

Steps taken to mitigate substantial increases in taxes have left 888 Holdings in better shape than ever, according to its chief executive Itai Frieberger (pictured).

Speaking to eGaming Review following the publication of its full-year results, which saw a 40% fall in EBITDA following additional taxes and negative FX movements, Frieberger said 888 had improved as a result of measures adopted to mitigate the levies.

“The business was strong before but it is very strong now,” Frieberger said.

“These challenges, like VAT, Point of Consumption, etc., what they do is actually make us better as we need to work harder, we need to be more efficient, and we need to be more innovative in order to continue to be competitive in the marketplace,” he added.

Scratch the surface

And as Frieberger was keen to point out, the drop-off in recorded profits doesn’t tell the whole story.

When taking out the impact of FX movements, EBITDA fell by 20%, or by $20.1m (?14m), which against the back-drop of $42.4m (?30m) in additional taxes and levies meant the firm had been able to mitigate almost half of the increased costs.

In addition, revenues on a like-for-like basis were up 12% across the year to $507.7m (?355m), driven by an 18% rise in casino and a 13% increase in active customers, while the firm also reported a 20% increase in revenues for Q1 2016 to date.

“The part I am extremely proud of is very strong results in the last quarter and the very strong start to 2016 which makes me feel very confident that the business is in great shape and firing on all cylinders,” Frieberger said.

In order to mitigate the costs and improve the business, Frieberger said the firm had rolled-out approximately 270 separate projects during 2015, a year which he admitted to entering with a sense of trepidation.

“The year was a very challenging year,” he said. “We started it, as we all did, quite concerned about the impact of PoC and VAT, and on top of that we realised there were some forex movements.

“However, we had time to prepare for this in advance and the fact we own our own technology allowed us to create certain things that mitigated the impact of PoC and VAT which have worked very well.”

Cashing in

While Frieberger wanted to keep his cards close to his chest, he gave one example of the firm having launched a new cashier, which he said was already producing positive results.

“This [the cashier] is a very sensitive and important part of the customer journey where we meet them and ask them to share with us some kind of payment method – it’s a very important part of any ecommerce website,” Frieberger said.

“So we launched a new version and we can now use certain things and take certain actions with that piece of software which is connected to the backend and to very strong analytics and segmentation that actually allows us to extract more value at that specific point.

“There are so many other things that we’ve done but I don’t really want to go into that as I want them to remain our unique advantage,” he added.

The recently installed chief exec was also buoyed by the continued growth in what he described as a “saturated” casino market, which was made even more competitive in the UK as a result of its H2 launch of 777.com.

Small and nimble

Frieberger said PoC had created an opportunity in the market but felt it was one that could be best seized upon by a smaller brand, hence the launch of 777.com.

“Size matters but I think when you cross a certain level of threshold on size you are better off being smaller than the giants, particularly if you own your own technology,” Frieberger said.

“With 777, we saw the potential, we saw the opportunity, it’s a great brand and we took a different approach and we are seeing incremental revenue already coming out of a new brand in the UK, which is a very saturated market,” he added.

The firm’s regulated market revenues were also given a boost, up 4pp to 59%, following a full year of sports and six months of slots in Spain plus launches into the licensed markets of Denmark, Romania and Ireland.

888’s Kambi-powered sportsbook was also launched into Italy a few weeks ago and Frieberger was excited about the prospects for the product and the positive impact it would have on the performance of its casino.

Widening the net

“If you look at the Italian market, we had a very nice market share there but it was becoming difficult to maintain with a single product and if you look at casino with its high CPAs it is very hard to compete with a casino-only product,” Frieberger said.

“We saw the impact of adding sports into Spain – we had a very healthy market share, around 20% in both casino and poker, but by adding sports we saw an increase in FTDs which means revenues and profits coming out of sports in Spain but also a new acquisition channel for poker and casino.

“One of our USPs is our ability to analyse the market and segment those people that come and then cross them over more effectively than anyone else between sports and other products,” he added.

And the market appeared to agree with Frieberger’s upbeat analysis with 888’s share price up 4p to 185.5p this morning, while a number of analysts upped their target prices on the back of its results.

“888 has turned its relatively small size and the burden of additional duties to its advantage,” Peel Hunt analyst Ivor Jones noted.

“It has emerged from a tough 2015 growing rapidly, paying an increased overall dividend and with multiple opportunities to reinvest in further accelerating revenue growth,” he added.