The chief executive of 888, Itai Pazner, stated that the growth which is above the 51.6% growth in earnings in 2020, implies that the business scale has changed since 2019 ended. This is because revenue is now almost twofold the amount indicated that year.
He added that 2021 was a year of great success for 888 as they continued to navigate the company to become a world leader in the gaming and online betting sector. He mentioned that from a financial point of view; it was one more record year, and that they had truly changed the business scale over the last two years.
He wrapped up by stating that the change in scale was due to a focus on controlled markets, which now account for three-quarters of income, and where they were observing positive share trends in the market.
B2C operations accounted for almost all the revenue earned by 888, with takings from this sector totalling $941.9m, which is 15.7%. This was better in comparison to the B2B technology that brought in $38.3m, making it only up by 7.7%. Taking a more extensive look into the B2C earnings, gaming was the largest income driver, as it brought in $814.5, amounting to an increase of up to 17.7%, in comparison to betting, which amounted to $127.4m, attaining a 4.3$ increase of the overall betting in 2020.
Earnings Based on Geography – UK, Africa, Middle East & Europe
When considering the revenue based on geography, the UK accounted for 40% of 888’s total earnings, as it brought in $388.9m, up to 17%. According to the operator, the UK growth amounted to a 63% increase from 2019 – to 2020. But most of this revenue from the UK came in during the first half of the year, as a mix of increased measures for responsible gambling and reopening of retail outlets had a significant impact on revenue in H2.
In Italy, there was a 37.1% increase in revenue, making up $118.3m, while Africa, the Middle East, and the remainder of Europe earned $333.5m, translating to up to 4%. Taking a further look into these other markets, the operator’s income was affected by its withdrawal from the Netherlands when it kicked off its market for online gambling. The Fourth State Treaty on Gambling in Germany and other measures that accompanied it also had an impact.
According to the group, Germany indicates an appealing opportunity for growth in the future under the new regulations. Thus, it is making constant efforts to invest and boost the presence of its brand there. 888 further stated that their goal was to apply for a Netherlands license and have hopes to launch its services there again on a regulated market in the H2 of 2022.
In the Americas, revenue rose to $125.6m, which was a 33.7% increase. However, earnings from other parts of the world were reduced by 8.9% to $13.8m. From these earnings, the US brought in $22.0m. Furthermore, the operator attained a license for the Ontario iGaming market, which will begin operations on the 4th of April.
The operator stated that the Canadian market signifies an appealing long-term opportunity for growth for the team, where 888 brand presence has already been established and can leverage its competitive advantage sources.
Other Company Expenses – Increases in Cost of Marketing & Decrease in Share-Based Benefit
After the operator had paid $184.0m in game-related taxes and $149.1m in costs, the gross profit settled at $647.0m, which was 15% more than what was attained in 2020. However, costs of marketing increased by $23.9%, while operating costs had a 2.8% or $175.5m increase. The implication of this is that the adjusted earnings of 888 before tax, interest, amortization, and depreciation amounted to $165m, which indicated a 6.0% increase than in 2020.
Costs of share-based benefit also reduced to $8.4m, although the business suffered foreign exchange losses of $9.4, even though this was not the case in 2020. Exceptional costs made a total of $24.0m, lower than a third of the exceptional costs of 2020. This majorly consisted of regulatory and legal costs that had to do with the purchase of the non-US assets of William Hill. However, there were also other exceptional costs consisting of deferred restructuring costs and gaming duties. In 2020, exceptional costs were majorly a result of diminishing intangible assets.
Also, the business had costs worth $36.3m for amortization and depreciation, making an increase of up to 10.2%, which resulted in an operating profit of $87.0m. In comparison to 2020, this was a 165.1% increase.
In addition to revenue and expenditure related to finance making a total of $5.4m, the profit before tax of 888 was $81.3m, which was triple what was documented in 2020. Notwithstanding the increased earnings, 2020 had a lower tax rate which means profit amounted to $68.9m, which was x6 of the profit made by the operator the year before.
During the year, 888 entered into an agreement to purchase William Hill’s non-US assets after Caesars had purchased the business, with the goal of disposing of all its operations asides from those based in the US. According to 888, the deal would more than double its business size when it ends in Q2 for the year. This suggests a combined earning of over $2.5bn.
888 also revealed that it recently entered a deal with Sports Illustrated, the recognized media brand. This new deal will allow it to establish a sportsbook with the SI brand, allowing it to expand its services into more states in 2022. Also, in 2021, the operator sold its bingo business.
Pazner States That the Board’s Confidence Is Unwavering
According to Pazner, considering the strong operational and financial performance, the board is still confident, knowing that the group is still in a good position to deliver its sustainable growth to all its stakeholders going forward. This is with the help of its products, advanced technology, and market diversification.
The GM Gambling Commission recently hit the business with a fine of £9.4m just last week. This was after it revealed some failings in anti-money laundering and social responsibilities. Most of these were because the business placed a £40,000 threshold for carrying out financial checks on deposits.
During the 888 earnings call, Pazner spoke about the fine, stating that the business is not happy with the failings and is working hard to make an effort that it does not repeat itself. He stated that they were not delighted with it as an organization and that they viewed themselves as responsible operators that were serious about customer security and following the highest standards.
He also stated that they had a few plans that failed to work at the time as they were meant to, and they deeply regret it. He concluded by stating that they have made efforts to fix those as quickly as possible.