888 Holdings has unveiled a significant brand makeover and a fresh strategic roadmap, despite enduring financial setbacks in the 2023 fiscal year.
888 Holdings’ adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in the 2023 fiscal year amounted to £308.3 million ($390.4 million/€359.6 million), surpassing the £217.9 million recorded in 2022.
The company’s annual revenue reached £1.7 billion, exceeding the £1.24 billion generated in the preceding year. The net loss was £56.4 million, a reduction from the £120.5 million loss incurred in 2022. The basic loss per share from continuing operations was halved to £0.126, compared to £0.283 in 2022.
Despite the rise in revenue and adjusted earnings compared to 2022, the adjusted post-tax profit witnessed a 25% decline to £48.1 million.
While the financial figures are considered “discouraging,” the company’s 2023 fiscal year results align with the trading update issued in January 2024. At that time, the company announced a series of job cuts, asserting that it would facilitate the realization of their long-term objectives. 888 refrained from disclosing the specific departments that would be impacted.
Overall, revenue of £1.7 billion experienced a 38% increase on a non-proportional basis compared to 2022. This growth was attributed to a proactive shift towards markets that do not rely on demand and modifications to the UK customer portfolio, a consequence of “additional betting measures.”
Marketing expenses also underwent a substantial reduction, decreasing by nearly £20 million year-over-year, from £257 million to…
In the year 2023, the company’s earnings reached a remarkable £237.6 million, a substantial increase compared to the modest £8 million recorded in the previous year.
However, the cost of operations nearly doubled, climbing from £448.5 million in 2022 to a significant £819.1 million in 2023. Despite this considerable difference, the company’s operating profit remained a positive aspect of its financial performance. After experiencing a loss of £4.8 million in 2022, the group reported an operating profit of £33 million in 2023.
The adjusted EBITDA margin for the 2023 fiscal year was a notable 18.0%. This aligns with the previously indicated range of 18%-19% in the January trading update. It also represents a 1.2% increase from the 16.8% recorded in the 2022 fiscal year. 888 attributed this positive development to enhanced profitability and a strategic focus on higher-return marketing expenditures. The company stated that this offset the impact of changes in the online marketplace.
As of December 31, 2023, the company’s cash reserves (excluding customer balances) stood at £128 million. When combined with an undrawn revolving credit facility (RCF) of £150 million, the company’s total liquidity approaches £278 million.
Net debt also experienced a slight decrease to £1.7 billion. This reduction was partially attributed to favorable exchange rate movements. Overall, this resulted in an adjusted net debt/EBITDA ratio of 5.6x, which remained stable year-on-year.
**Market Performance**
The UK and Ireland region continues to be the primary source of revenue for the group. Revenue in this region also witnessed a significant increase, rising from £455.5 million in 2022 to £658.5 million in 2023. Adjusted EBITDA also experienced a notable increase, climbing from £61.6 million in 2022 to £152.3 million in 2023.
It is noteworthy that the UK still accounts for 81.5% of adjusted EBITDA, even after the group’s challenges.
The negative effects of the UK market’s performance may have already been seen, suggesting that the group’s performance in the UK is anticipated to improve in the coming year.
888 also intends to adopt a more eco-friendly approach in the UK market, which will be implemented across the industry over the long haul. This has resulted in a shift in the UK market’s revenue structure, with plans to target customers who wager smaller amounts but generate higher profit margins. Wagering volume also declined by 11.3%, but this was offset by an increase in net profit margin from 10.8% to 12.1%.
Looking at its international operations, revenue also increased considerably in 2023 to £517.4 million, compared to £508.3 million in 2022. Despite the sector being affected by changes in peer-to-peer market compliance, double-digit growth was still achieved in Spain and Italy.
According to the company’s financial report, 888 may withdraw from unprofitable markets or monetize assets through alternative business models, such as local partnerships. As part of the decision to exit the US market, the company also wrote off £28.1 million from its balance sheet, which was used to develop a new platform for the US.
Retail revenue also increased substantially in 2023 to £535 million. 888 attributes this to strong underlying performance, driven by enhanced product offerings through new investments. The operator stated that this offset the impact of a 3% decrease in estate size during the year.
**A New Chapter Begins**
In an unexpected move, 888 will be rebranded as Evoke plc.
This will depend on stockholder approval at the upcoming shareholder meeting. 888 states this will “better reflect the strength of the group’s multi-brand operational model.”
The group’s operational model has been “restructured” as part of the 888 VCP. Widerström and the company’s top management team will implement the plan to achieve a long-term “success strategy.”
The company also revealed its new value creation plan (VCP) this morning.
“It’s incredibly exciting to announce our value creation plan, our success strategy, our new financial goals, and our new corporate identity. Today marks the start of an exciting new chapter for this business,” Widerström stated.
888’s “new strategic framework” will include “a clear vision of what success looks like and the strategy to achieve it.” This will be comprised of six strategic initiatives, which may include rebranding to Evoke.
The new CEO, Per Widerström, joined 888 after spending eight years as CEO of Central and Eastern European business Fortuna Entertainment Group. He stepped down from that position in 2022.
Before that, Widerström held executive positions at several operators over a 17-year career. This includes well-known brands like Bwin.party and Gala Coral Interactive.
The rebranding proposal was announced this morning on 888’s earnings call and was interpreted as part of a new strategy to enhance profits.
The organization now intends to set aside an extra £30 million in expenses each year.
The enterprise has a “clear vision for success and a plan to attain its objectives,” and intends to disclose six strategic initiatives. These initiatives will “drive operational excellence, generating significant value for the business.”
The enterprise will also embrace a streamlined market approach, divided into two groups. The first group is core markets (UK, Italy, Spain and Denmark), which have domestic scale and market leadership. The second group is optimized markets, where the focus will be on investing in markets where the group will “produce strong returns while maximizing cash flow across all markets.”
In line with this market focus, a strategic review of the US B2C business, launched in the first quarter of 2024, will also consider potential cost reductions. 888 announced earlier this month that it could sell its US B2C business. In terms of figures, 888 plans to achieve new medium-term targets to attain “high return on equity.” This will enable a sustainable earnings growth rate of 5%-9% per year.
888 will also endeavor to enhance efficiency, with adjusted EBITDA margins increasing by approximately 100 basis points per year. The organization also aims for more disciplined capital allocation, with leverage below 3.5x by the end of 2026.
Present trading and CEO outlook
Although Widerström characterized the firm’s financial performance as “discouraging” during today’s earnings call, he maintains a positive outlook for the company’s future.
“It’s incredibly stimulating to unveil our value creation plan, successful strategy, new financial objectives, and new corporate identity,” he stated. “This day marks the start of an exciting new chapter for this enterprise.
“I am certain that the group now possesses all the vital components for long-term triumph: a leading position in expanding markets, high and escalating barriers to entry; robust proprietary technology; a world-class leadership team; and some of the most powerful betting and gaming brands globally.”
The company anticipates revenue in the initial quarter of 2024 to fall between £420 million and £430 million, and has established a revenue growth objective of 5%-9% for 2024. 888 also intends to decrease leverage to below 3.5x by the close of 2026. This translates to a reduction of £650 million in company debt. This also necessitates an increase in its adjusted EBITDA profit margin by 100 basis points annually.
This could be a highly ambitious goal – as 888 aims to expand both revenue and profitability while diminishing leverage. It’s noteworthy that 888 will not distribute dividends until company leverage drops below 3x. However, considering the target is 3.5x by the end of 2026, investors might have to wait a considerable period.
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