However, the stock was trading at 458p just over 18 months ago. So it will take a Herculean share price rally to ever reach those heights again.

What’s been causing this extreme volatility?

Turbulent times

To recap, the online bookmaker has been in almost permanent turmoil in recent times. Last year, it was fined £9.4m by the UK’s Gambling Commission for social responsibility and money laundering failings. This followed a £7.8m penalty in 2017, which was a record at the time.

Then in January, chief executive Itai Pazner announced his resignation after revealing the firm had launched an internal investigation into suspected money laundering by VIP customers in the Middle East. Prior to this, the chief financial officer had announced he was stepping down.

Also worrying is that the firm is saddled with around £1.7bn of net debt after merging with William Hill International last summer. And William Hill has itself been hit by a record £19.2m fine by UK regulators this year, though this settlement relates to the period before 888’s ownership.

In 2022, the company posted a £115m pre-tax loss due to costs associated with this merger. It is yet to appoint a new CEO.

Why are the shares rising?

It emerged yesterday that certain executives within the gambling industry have taken a fancy to the company’s fallen shares. Regulatory filings revealed that US-based FS Gaming Investments had built a 6.6% stake in the company.

This investment group includes Kenny Alexander, Lee Feldman, and Shay Segev. Alexander was formerly chief executive of GVC Holdings, the Ladbrokes and Coral owner now known as Entain. He was replaced by Segev, who subsequently stepped down to lead sports streaming platform DAZN. Feldman chaired GVC Holdings for 11 years before moving on in 2019.

So these are gambling industry veterans who are building a substantial holding in 888. The natural assumption then is that a takeover bid may be on the cards. If so, this could presumably result in a refinancing of the company’s debt, which might help rebuild value.

To buy or not?

Based on recent issues, I don’t think I’d sleep easy at night investing in this stock. I wouldn’t know what headlines I might wake up to next!

To be fair though, this is an industry where lots of bookmakers are falling foul of regulators. Entain, for instance, recently said it expects to incur a “substantial financial penalty” following an investigation by UK authorities. This relates to possible bribery offences by one of its former Turkish subsidiaries.

Long term, I don’t see any let-up in the regulatory scrutiny of betting firms, both in the UK and abroad. Even the Premier League recently announced a ban on gambling sponsorship on the front of football shirts, which will begin at the start of the 2026/27 season.

There may well be further share price gains if an actual takeover offer materialises. However, I think there are safer stocks to buy today. So I’ll be focusing on those instead.

The post Why has the 888 share price soared back above £1 today? appeared first on The Twelfth Magpie.

The shares dipped a further 6% Tuesday morning. So what happened? And what do shareholders need to watch for now?

It’s all about the suspension of a number of the Gibraltar-based gambling operator’s VIP accounts in the Middle East. It follows failure to adhere best anti-money laundering practices. Oh, and chief executive Itai Pazner has departed.

The company said: “Following an internal compliance review, it has come to light that certain best practices have not been followed in regard to KYC (Know Your Client) and AML (Anti-Money Laundering) processes for 888 VIP customers in the Middle East region. While further internal investigations are underway, the Board has taken the decision to suspend VIP customer accounts in the region, effective immediately“.

Modest sums

The sums involved, around £50m, represent only around 3% of total revenue. The problem also affects only the one region, the company said. So investors should probably not expect any global fallout, at least not at this stage. Even if the selected accounts remain suspended, it looks like the hit to the bottom line should be minimal.

Chairman Lord Mendelsohn will take on the role of executive chair while the board looks for a new boss.

At the moment, the ongoing investigation is purely an internal one. So investors shouldn’t assume there’s going to be any regulatory fallout. But they will be aware that 888 Holdings has faced financial penalties before. Only last year, the UK Gambling Commission fined the firm £9.4m for compliance failings.

Regulatory eye

According to the Financial Times, Gibraltar’s gambling commissioner will be reviewing the situation. They told the newspaper: “It is too early to say what the regulatory outcome will be, but on the known facts, and because of the level of commitment to resolution, licence suspension or revocation is highly unlikely“.

If I owned 888 Holdings shares, I think I’d be concerned about the possibility of action. But probably not unduly so. UK regulators however, have yet to comment on the events.

My main concern, right now, would be with the company’s debt situation. And any impact on its plans to boost revenues and cash flow.

Debt

As of 30 September 2022, the 888 balance sheet was groaning under £1.8bn of gross debt. It was a result of paying £1.95bn for William Hill’s non-US operations in July the same year. The company is valued at just £321m.

Now ex-CEO Pazner said at Q3 time, that the board was “focused primarily on successful integration, execution and de-leveraging in order to unlock the huge potential from our enlarged business” following the William Hill acquisition.

Will the latest revelations, coupled with Pazner’s departure, damage those plans? We shall have to wait and see. Meanwhile, full-year results are due in late March. Close scrutiny would seem wise.

The post After 888 shares crash, here’s what investors need to know appeared first on The Twelfth Magpie.

As I write on Monday morning, 888 Holdings shares stand at 74.85p, down a whopping 27.5% on Friday’s close. They fell even further earlier in the day to a 52-week low of 73.3p. That’s a far cry from their 52-week high of 292.8p, hit almost a year ago on 11 February 2022.

Here’s how the 888 Holdings share price has crumbled in the short and medium term:

888 Holdings shares have crashed by more than seven-tenths over one year and by almost three-quarters over the past half-decade. So what’s the latest bad news?

CEO quits after suspected money laundering

In the latest of a long line of unpleasant updates, the company revealed that it had launched an internal investigation into suspected money laundering by VIP customers. This led to several Middle East accounts being suspended. In total, these customers account for about £50m in yearly revenues, or around 3% of 888’s total.

Following this shock revelation, chief executive Itai Pazner announced his resignation, after four years leading the group. Pazner had been at the Gibraltar-based company for more than 20 years. Earlier this month, finance chief Yariv Dafna announced his departure at the end of March.

The group is burdened with debt

To be honest, this bad news is just the latest in a series of unfortunate events for 888 and its share price. In 2022, the group was fined £9.4m by the UK’s Gambling Commission for compliance failings.

Also, the company paid £1.95bn in July 2022 for the non-US operations of rival William Hill, including 1,500 UK betting shops. This has left the group with £1.8bn of debt on its balance sheet, more than five times its current market value of around £330m. Yikes.

888 Holdings looks too risky for me

I don’t own shares in 888 Holdings — and I wouldn’t buy any today, even at their much-reduced price. With discretionary spending falling due to soaring inflation and sky-high energy bills, Brits are cutting their outgoings. I imagine few people bet heavily when they can barely cover their basic expenses.

Also, with interest rates rising, the group’s floating-rate debt pile looks like a huge burden to me. Indeed, the company has already made reducing net debt its top priority until end-2025. Also, a UK government review is likely to tighten ‘safer gambling’ rules, hitting 888’s revenues yet further.

In summary, I see 888 Holdings as a high-risk stock and, therefore, unsuitable for me as a veteran value and income investor. However, I could be wrong and the gambling group might bounce back as the economy rebounds. But I will leave these plunging shares to investors with bigger risk appetites than mine. As one old stock-market saying goes, “Never catch a falling knife!”

The post 888 Holdings shares crash 25% on legal probe appeared first on The Twelfth Magpie.

Let me explain.

Heir and a spare investing

In his book, Prince Harry argues that having two children in royalty is an insurance policy. The heir is destined for greatness, the spare (such as Harry) is an insurance policy, just in case anything happens to the eldest.

How does that translate to a portfolio of UK shares? It all comes down to two approaches to investment.

Firstly, I have shares I believe are destined to lead my portfolio growth and dividends – the heirs.

In my case, this includes Unilever (LSE: ULVR), National Grid and GSK.

The heir

For example, Unilever shares are a solid foundation for building my portfolio, both through long-term growth and through dividends.

That’s because it underpins people’s lives. From cooking to cleaning, its brands include everything from Ben and Jerry’s ice-cream and Knorr stock cubes to Comfort, Dove, and Domestos.

It has more than 400 brands that are household names, of which 13 have sales of around £1bn. 81% of its brands are the top two in their markets. It’s even leading the way in developing plant-based foods as meat alternatives.

Like any share, it is prone to rises and falls, but the changes tend to be slow and steady. Its long-term performance is strong, with its shares rising around 18% in the past year. There is also a healthy dividend yield of 3.5% to smooth out stock price changes.

There are no guarantees on future performance, but quarterly dividend payments keep me updated on its value for money.

The spare

Now it’s onto the spare. In the case of investing, my approach is to look for something a little more risky. I choose shares that have potential, although I am ready to sell if things don’t work out.

In this case, I have my eyes on bookmaker 888 Holdings (LSE:888). It had a significant fall from grace in the past year, when its share price fell by more than half.

Furthermore, it has announced its chief financial officer is leaving, which is always a time of uncertainty for a business and investors.

Total revenues were down slightly last year, and investors are yet to see how its £2.2bn purchase of William Hill will drive future growth.

Despite this, it remains a very profitable business, with revenues of £1.8bn and historically strong profit margins. Following its recent falls, I think this share could go on to achieve a strong recovery, so I plan for it to be my ‘spare’ for 2023.

If it doesn’t work out, we can always part ways, and I can be sure there won’t be a Netflix series or tell-all book if we do.

The post Why Prince Harry has inspired which UK shares I will buy in 2023 appeared first on The Twelfth Magpie.

With this in mind, here are a couple of FTSE shares I’d start buying on Monday.

A losing bet… for now

First up is gambling firm 888 (LSE: 888). Having done extremely well during the multiple pandemic-related lockdowns, 888 shares hit the heights of just over 450p almost one year ago. Since then, trading has (inevitably) moderated.

Actually, that’s putting it mildly. A quick glance at the firm’s figures for the first six months of 2022 shows how much the cost-of-living crisis has impacted performance. Total revenue fell 13% to £332.1m. Profit tumbled 66% to £14.4m. Ouch!

Perhaps it’s no wonder the shares have halved in value this year.

Cheap growth share

Despite this, I can’t help but think this might be a contrarian itch worth scratching.

Following the recent acquisition of William Hill’s international assets from US firm Caesars Entertainment, 888 now has a huge opportunity to grow its market share. Moreover, the stock also has a PEG (price/earnings to growth) of just 0.2. That suggests I’d be buying at a seriously low price for the potential on offer.

Obviously, gambling firms are no strangers to headwinds. The ongoing risk of regulation is very much a ‘known unknown’. Competition isn’t exactly thin on the ground either.

Nor do I expect a recovery to be swift. In fact, management believes revenue in the second half of 2022 is likely to be similar to that seen in the first.

So long as I can remain patient, however, I’d feel comfortable buying today.

Post-pandemic loser

A second growth share I’d buy now is AIM-listed music and audio product company Focusrite (LSE: TUNE). Like 888, the business did exceptionally well during the pandemic as musicians and creators took to making content from home.

But purple patches only last so long. As lockdowns eased and normality returned, Focusrite saw demand taper off. Some of this was evident in the firm’s half-year results covering the period to the end of February.

Group revenue of £92.9m was lower than that achieved over the same period a year earlier. And based on the share price action since, it looks like investors are concerned about how the cost-of-living crisis is impacting the company. Focusrite stock is down over 40% in a year and 35% in 2022 alone.

Again, I reckon this may be an excellent opportunity to bag a slice of a high-quality company that consistently generates great returns on the money it invests in the business.

Worse to come?

This is not to say this growth share doesn’t have further to fall. A lot will depend on what Focusrite has to say in its next trading statement, due mid-September, particularly in relation to component supply issues and spiraling freight costs.

On a more optimistic note, a price-to-earnings (P/E) ratio of 18 already looks enticing to me. This is especially if, as the company has suggested, the release of seven new products in H1 looks likely to provide a boost to the full-year numbers.

I think the investment case here remains solid.

The post 2 growth shares I’d buy now without any hesitation appeared first on The Twelfth Magpie.

The UK government, for instance, is set to announce reforms to the industry very soon. And if rumours are to be believed it could be scary reading for gaming companies. The Times has reported that measures like maximum stakes and the banning of free bets could be introduced.

But despite this danger I believe 888 in particular could be a great dip buy following recent share price weakness.

City analysts think annual earnings here will rise 37% in 2022 and a further 25% next year. These forecasts leave 888 shares looking dirt cheap. They command a sub-1 forward price-to-earnings growth (PEG) ratio of 0.2.

Expanding for growth

As a long-term investor I’m excited by 888’s aggressive expansion programme that could light a fire under earnings growth.

The firm’s in the process of acquiring William Hill, a move that will boost its size between three and four times current levels. It will also significantly bolster its position in Europe and gives 888 one of the most popular brands in the business.

The FTSE 250 firm also has excellent revenues opportunities in the US, a fast-growing market where the business has also been expanding to capitalise on loosening gambling laws.

Research suggests that the global online gambling market will enjoy compound annual growth of 11.7% between now and 2030. Growth in the US is expected to be even stronger in the period at 11.9%. I think internet gambling giant 888 is in great shape to capitalise on this trend.

A falling AIM share

Like 888 Holdings, Begbies Traynor Group (LSE: BEG) has also been extra active on the acquisition front in recent years.

Its commitment to M&A has seen the company significantly broaden its range of services and expand its geographical footprint. This in turn has led to a long record of robust annual earnings growth. And pleasingly, the AIM-quoted insolvency specialist is showing no signs of slowing down. Just last week it sealed the purchase of chartered surveyor Budworth Hardcastle.

A top stock for tough times

Begbies Traynor’s share price has risen strongly in the past four months. This is perhaps no surprise as demand for its insolvency services rises when economic conditions worsen. Yet it’s fallen back a tad more recently and so I’m thinking of jumping in.

Insolvency rates in the UK have ballooned. Latest government data showed a leap of almost 80% year-on-year in May to 1,817. The number is likely to grow still further as the UK economy likely enters a recession.

City analysts think Begbies Traynor’s earnings will grow 8% this financial year (to April 2023) and 3% next year. This leaves it trading on a forward price-to-earnings (P/E) ratio of 14.7 times. In my opinion this is a bargain given the company’s long track record of earnings increases and growing business opportunities.

The post A sinking FTSE 250 stock (and a falling AIM share) to buy in July! appeared first on The Twelfth Magpie.

However, the gains were not sustained and it lost some of its progress on Thursday afternoon. It dipped a further 6% on Friday and 5% in early morning trading on Monday. As I write, the stock sits at 204p a share, down from 244p on Thursday morning.

Why so much volatility?

On Thursday, 888 announced that it had renegotiated a cheaper deal for the acquisition of William Hill’s non-US business from American casino operator Caesars Entertainment. The deal had previously been valued at £2.2bn. The new figure is between £1.95bn and £2.05bn.

The renegotiated price reflects a “change in the macroeconomic and regulatory environment,” with a review of William Hill currently being undertaken by the UK Gambling Commission, 888 said. The announcement sent the share price soaring.

888 performance

Like its peers, 888 experienced a stellar 2020 as the pandemic and several lockdowns saw a surge in online gaming. Revenue in 2020 reached $849m, up from $560m in 2019. The staggering growth appeared unsustainable but revenue grew by 15% to a record $980.1m in 2021. Profits also grew at an impressive rate. The firm said profit before tax surged 205% to $81.3m in the year ended December 31. 

However, 2021 wasn’t all good. Fourth quarter revenue fell 16% as Covid-19 curbs were lifted and policy changes in the Netherlands led to its exit from the market. The fall was largely in line with expectations.

William Hill acquisition

Analysts have been fairly upbeat about the acquisition, which is predicted to quadruple the size of the betting firm. The renegotiated deal and the new financing plan should reduce some of the risk involved in the takeover too. Under the previously agreed terms, 888 was aiming to raise £500m in equity to pay for the deal. Shareholders will vote for the William Hill deal in May, it is understood. The purchase would therefore be closed in June. 

Should I buy?

888 has delivered impressive growth in recent years, partially on the back of extraordinary operating conditions during the pandemic. It can also be considered one of the most profitable companies on the index. Over the past six years, return on capital employed — an important metric for measuring profitability — has averaged 30%.

However, I still don’t think the stock looks overly cheap. At Friday’s closing price, the price-to-earnings ratio was around 14.7. For me this is problematic because I’m concerned about the long-term trends in the gambling sector. There’s certainly a risk that policy changes could force companies to stop certain operations. But I think that’s unlikely given the tax revenue generated by the industry.

I’m more concerned about whether gaming firms can continue to their impressive performance post-pandemic. With no Covid curbs, I’m sure many people will find more enjoyable ways to spend their money.

I’m not buying now but I’ll be keeping an eye on this stock as well as on general trends in the sector.

The post Should I buy 888 Holdings after today’s slide? appeared first on The Twelfth Magpie.

But 888 Holdings’ sharp jump today is eye-catching not just for this reason. It also follows a six-month slide in its share price. During this time, the stock has halved. But if it starts retracing its steps to its November 2021 highs again, it might just make a good buy now. Whether it can, though, is the question. 

Why is the 888 Holdings share price up?

To answer it, the first step for me is to consider what brought about this jump in the first place. It follows the company’s update from earlier today saying that its acquisition of the non-US business of William Hill will now happen at a lower price. The price has now been reduced to a range of £1.95bn-£2.05bn, down from the £2.2bn pencilled in earlier. 

The company will, as a result, have to raise less equity to finance the deal than earlier envisaged. This is probably the key reason for investor bullishness on the stock, since less equity will now get diluted. Moreover, 888 Holdings posted a stellar set of results for the year 2021 in March, which saw a 500% increase in its earnings, so a sharp share price rise was probably overdue anyway. 

The downside

The company did not pay dividends, however, owing to the spending required for the acquisition of William Hill. For investors hoping for dividend payouts, this could be disappointing. It could also hold the stock’s price back to some degree. 

Also, it is possible that sports betting could come under greater regulation, given its potentially addictive nature. UK authorities are due to release regulatory updates anytime now on the segment. There are similar reports from the US too. This could mean that structural changes are afoot for the industry, which would impact 888 Holdings too. 

The saving grace

At the same time, at present the company’s revenues are derived primarily from online gaming, with sports betting accounting for only 15% of the total. It was also the slower growing segment last year, with growth of only 4.3% while overall revenues grew by over 15%. 

Its valuations are also pretty moderate. The company’s price-to-earnings ratio is below 14 times, which is not terribly pricey for a fast growing one. I think it could make for a good investment. All analysts seem to believe that. In fact many of them even think that the 888 Holdings share price will rise above its all-time highs, seen last November, in the next 12 months. 

What I’d do about the FTSE 250 stock

There is an ethical aspect to buying gambling stocks, though, for me. Until I am convinced that it is well regulated, I will steer clear. Also, I want to dig further into how the acquisition will impact the company’s distribution of revenues between gaming and betting. It would also be important to figure out what it means for its currently very healthy earnings. That will take its time to work through, anyway.

The post The 888 Holdings share price is up by almost 18% today. Can it rise more? appeared first on The Twelfth Magpie.

What’s behind today’s rise?

The shares rose as 888 Holdings announced a new financing structure for its now cheaper acquisition of betting competitor William Hill.

In September, the FTSE 250 firm agreed to buy the non-US business of William Hill from American casino operator Caesars Entertainment for £2.2bn. 888 anticipated that it would need to raise around £500m to cover the cost of the deal.

On Thursday, 888 Holdings announced that it had now agreed a new deal to purchase William Hill’s non-US assets. The new figure is between £1.95bn and £2.05bn.

The renegotiated price reflects a “change in the macroeconomic and regulatory environment,” noting a review of William Hill currently being undertaken by the UK Gambling Commission, 888 said.

The new financing plan is considerably scaled back from its previous bid to raise £500m in equity to pay for the deal. It is understood that shareholders will vote for the William Hill deal in May. The purchase would therefore be closed in June.

888’s shares are still considerably lower than when the company announced the deal in September. This is partially due to the fallout of Russia’s invasion of Ukraine as well as the general pullback from gambling stocks post-pandemic.

Last year, analysts suggested the takeover would quadruple 888’s size.

888’s performance

Investing in gambling stocks isn’t for everyone, but the industry can be very profitable. At yesterday’s closing price, the price-to-earnings ratio was around 13.5. This doesn’t mark it out as being particularly cheap. However, other indicators suggest the firm is well run.

Over the past six years, return on capital employed — an important metric for measuring profitability — has averaged 30%. The figure suggests that it is one of the most profitable on its index.

In March, the firm said profit before tax surged 205% to $81.3m in the year ended December 31. 

The company’s long-term strategy makes sense too. It recently announced the sale of its Bingo business to a unit of UK-based Broadway Gaming Group. Instead, the group intends to focus on its core offerings in the US.

888 anticipates further growth in 2022, albeit not at the rates seen in 2020. Profits are likely to be several times higher than they were just half a decade ago.

I’m not buying just yet but this FTSE 250 stock certainly could be an interesting proposition for my portfolio. It also offers an attractive 4.2% dividend yield if I were to buy in at the current price. That’s better than the index average but still less than recent inflation figures.

The post Here’s why the 888 Holdings share price just jumped 28%! appeared first on The Twelfth Magpie.

888 Holdings

Online gambling firm 888 Holdings (LSE: 888) is a stock I once owned and would consider owning again for two reasons.

First, the shares just look too cheap. True, the trading momentum enjoyed by 888 during multiple UK lockdowns is now over (which partly explains the 50%+ fall in the share price in the last year). However, a forward P/E of just nine strikes me as a steal. This is a highly profitable and practically debt-free company. 888 also boasts a strong brand and great growth prospects, especially in the US. If its next update proves even remotely better than expected, we could be in for a nice bounce.

Second, the income stream is worth grabbing. Assuming analysts are right (which, admittedly is a big assumption), the FTSE 250 member will return the equivalent of 11p per share to holders this year. That gives a juicy yield of 5.8% based on the share price as I type. That’s far, far more than I’d get from a Cash ISA or standard savings account. It’s also a lot more than I’d receive from an index fund tracking the UK market.

Naturally, buying individual company stocks carries more risk. This is certainly the case with 888. The annual dividend has actually been increased and cut a number of times in recent years. That could be a red flag for me if I were utterly dependent on shares for covering my living expenses. Further regulation in the industry is another potential headwind. Some investors also seem wary of the recent deal to buy parts of peer William Hill. This would include the latter’s 1,400 UK betting shops (and the not-insignificant costs that come from running them)

Of course, I would never rely on 888 for all my passive income needs. As such, I still reckon there are enough positives here to make this cheap stock a strong contender for a dividend portfolio.

Liontrust Asset Management

Investment manager Liontrust Asset Management (LSE: LION) is a second cheap FTSE dividend share I’d consider buying alongside 888 for the income it offers.

In addition to offering diversification, Liontrust boasts a great track record when it comes to increasing its payouts. For the last few years, the annual payout has been hiked by double-digit percentages.

As things stand, analysts have the FTSE 250 firm returning 64.5p per share for this financial year. That becomes a yield of 5% based on the share price at the close of play yesterday.

Potential negatives to consider here include the cutthroat nature of asset management. The possibility that Liontrust may need to lower its fees to compete with rivals can’t be overlooked. This would lower earnings, potentially causing trouble for the dividend. Through no fault of their own, even the most successful firms in this space can also suffer if geopolitical events conspire to push frightened savers to withdraw their money.

On a more comforting note, Liontrust’s dividend looks set to be easily covered by profits this year. A cheap valuation (11 times earnings) also helps mitigate some risk.

No investment is perfect, but the £800m cap ticks a lot of my boxes.

The post 2 dirt-cheap FTSE dividend shares to buy today appeared first on The Twelfth Magpie.