888 Holdings, the gaming operator which owns 888poker, announced Tuesday that it will be cutting costs in order to address a loss in profits for the first half of 2010. The company has also decided to scrap its dividend in order to pay for acquisitions after the weak economy and World Cup caused a decline in poker revenue.
888’s first-half financial results showed revenues were up 10.5 percent to $130 million (£85 million), but pre-tax profit dropped by 56 percent to $4.3 million (£2.8 million). Poker revenue dropped 25.2 percent to $19.6 million compared to $26.2 million in the first half of 2009. 888 also saw an increase in operating expenses from $41.6 million in 2009 to $45.8 million in 2010 as the search for business forced an increase in spending on marketing from $35 million to $48 million.
“Our business experienced a difficult first half against the backdrop of a challenging economic environment with trading impacted by a number of factors including general online poker weakness, adverse foreign exchange movements, and, in relation to Poker and Casino in quarter two, the FIFA World Cup,” said Gigi Levy, the chief executive of 888 Holdings.
To help alleviate the first-half losses, the company is putting in place $6 million of cost-cutting measures, reorganizing its technology divisions, and upgrading product offerings. It says the business has already started returning to seasonal trading patterns since the World Cup. “Trading in August has been significantly stronger than in July, with a double-digit daily revenue increase especially in casino and poker,” said Levy. “Poker has seen an increase of more than 15 percent in revenue in August.”
888poker had an eventful first half of 2010. The company announced the release of the sixth version of its poker software following a complete re-coding of the client with fresh new look and an online loyalty store. 888 also partnered with Microgaming, the worldwide leader in online gaming software, to gain a license to operate in the new French gaming market.
The company will continue to look for ways to boost poker revenue by upgrading its software and launching new marketing schemes. In the meantime, 888 will pay no dividend due to uncertainty about future regulation in its key European markets. France and Italy are already in the process of regulating online gambling and several others are expected to follow.
Said Levy, “In order to continue investing for future growth, and to support potential acquisitions, the board has decided not to declare an interim dividend at this time and finalize the full year dividend when the full year results are available.”
Following the recent merger between PartyGaming and Bwin, Levy stated his desire to try and consolidate 888 with other successful online companies, adding: “We look at consolidation as one of the possible routes to realizing our full value. We feel that longer term this is the direction the industry will take.”