888 downplays US legal threat as profit surges
Adds analyst comment, other detail LONDON (AFX) - 888 Holdings PLC, the world's third biggest internet gaming group, posted a 59 pct rise in 2005 profit helped by an ongoing poker boom, and moved to downplay the threat of a fresh legal challenge to online gambling in the United States. A Congressional committee yesterday approved legislation designed to outlaw companies such as 888 from accepting payment via credit cards or electronic funds transfers, hitting shares in the sector. 888 shares fell 2.5 pence, or 1.9 pct, to 177 by 11.25 am, valuing the business at 596 mln stg. Elsewhere in the sector PartyGaming and Sportingbet shares declined by a similar amount. The Gibraltar-based group's chief executive expressed confidence the bill, sponsored by Republican senator Jim Leach, will fail like others before it, pointing out that it still has many obstacles to clear before becoming law. 'I feel quite confident that we'll get the same results as we have for the last six years and that it won't get through to the next stages,' John Anderson told AFX News. A series of previous attempts to stamp out online gambling in a country where the owner of the Pacific Poker and Reef Club Casino websites reaps 55 pct of its revenue have failed to attract sufficient support. Altium Securities analyst Wayne Brown believes shares in the sector may be in for a bumpy ride over the next year or so 'as news on US regulation seeps out.' But he says should Leach's bill be thrown out that would likely sound a death knell for attempts to outlaw the industry. Opponents of online gambling argue that it encourages minors to bet, contributes to addiction, and increases the likelihood of fraud. Some critics also say offshore gambling sites could be used for money laundering and could support terrorists or other criminals. Net profit, before share options charges, rose to 65 mln usd. Anderson described that as a 'cracking' performance and said the company was in prime position to benefit from an inevitable wave of industry consolidation. Despite his confidence over the regulatory outlook, Anderson is scouring the globe for acquisitions as he looks to diversify revenue streams and cut reliance on the United States. He is looking for a non-US sports betting business and is hopeful of announcing a deal within the next six months. He believes such a business would help with the cross-selling of games. 888 is also looking to reduce dependency on its flagship casino unit. Offering games such as blackjack, roulette and slot machines, it has been facing stiffer competition from rivals such as PartyGaming PLC. 888 in January revealed sales had risen 52 pct to 271 mln usd after extra languages and increased marketing expenditure helped spur a 178 pct surge in poker revenues.