Warne plays a strong hand as 888 trumps online rival

888 posted a 59 per cent jump in underlying profits to $20 million (£12m) for the six months to 30 June on the back of a surge in new customers using its sites.

In contrast, Bwin – which was created in March through the merger of Bwin and Party Gaming – reported a 21 per cent drop in underlying profits to €72.4m (£64.1m) for the same period after an increase in competition among poker sites.

American states and countries within the European Union are tightening up their online gaming laws, introducing more regulation in some previously lack markets and creating additional costs for online gaming businesses.

Bwin’s like-for-like revenues were down 3 per cent to €398m, following the closure of its French casino business and tough comparisons with last year’s World Cup.

But 888’s turnover increased, rising by 18 per cent to $153.8m on the back of “record levels” of activity on its sites.

Average daily revenue for the first 26 days of August was 40 per cent higher than last year, 888 said, but warned that it expected its second half to be hurt by potential investments in regulated markets.

Deputy chairman Brian Mattingley added: “However, given the strength of current trading, the board is confident that the company will report a financial performance for the full year to 31 December in line with current market expectations.”

Shares in the two online gambling firms headed in opposition directions yesterday, with Bwin’s stock surging after it declared a maiden interim dividend of 1.56p and initiated a €75m share buy-back scheme after saying it would step up cost-cutting following the merger to €65m from €55m.

Bwin jumped 13.91 per cent or 15.3p to close at 125.3p, while 888 edged down 0.5p to 30.5p.

In April, high street bookmaker Ladbrokes terminated talks with 888 after four months of wrangling over price with the firm’s founding shareholders.

Bwin has been the subject of takeover speculation in recent weeks, which has lifted the company’s share price.

Nick Batram, an analyst at Peel Hunt, said Bwin’s interim results were “reassuring” but said it was “frustrating” the company did not quantity the possible affect of regulatory changes in Germany. He said: “These numbers were towards the top end of consensus forecasts and this, together with a positive start to the third quarter, should see the shares move better.”

On 888, Batram said the company was “rebuilding its credibility”, helped by its new casino and poker products.

“However, there are still the questions of a stretched balance sheet and a patchy track record of delivery,” added Batram, who has “hold” recommendations on both companies.

Over at Numis Securities, analyst Ivor Jones has “buy” ratings on both stocks.

Jones said Bwin was in “great shape” and that it was an “excellent time to get on board” for investors. He added 888 had posted “excellent” trading results, drawing a line under its previous “failed expansion strategy”.