In total, 888 Holdings reported adjusted EBITDA of £308.3m ($390.4m/€359.6m) for FY2023, compared with £217.9m in 2022.
For the full-year, the company reported revenue of £1.70bn compared to £1.24bn a year ago. Net loss was £56.4m compared to £120.5m in 2022. Basic loss per share from continuing operations halved to £0.126 compared to £0.283 in 2022.
Overview of 888’s 2023 earnings
While revenue and adjusted earnings were up compared to 2022, adjusted profit after tax was down 25% to £48.1m.
Despite the “disappointing” numbers, the company’s FY23 performance was in-line with its January 2024 Post Close Trading Update. At the time, the company announced a raft of redundancies, which it said would help it achieve its long-term plans. 888 did not disclose which departments will be impacted.
In total, revenue stood at £1.70bn, up 38% from 2022 on a non-pro forma basis. This was driven by a pro-active shift away from dotcom markets and customer mix changes in the UK as a result of “additional gambling measures”.
Marketing costs were also significantly down, with a reduction of close to £20m for the year from £257.8m in 2022 compared to £237.6m in 2023.
Operating expenses, however, almost doubled, from £448.5m in 2022 to £819.1m in 2023. Despite this variation, operating profit remained a bright note on the balance sheet. Starting with a loss of £4.8m in 2022, the group reported £33.0m operating profit for 2023.
Adjusted EBITDA margin for FY23 stood at 18.0%. This was consistent with the previously indicated range of 18%-19% in January’s trading update. This was also up by 1.2% from 16.8% in from FY22. 888 attributed this to improved profitability and focus on higher return marketing spend. This, it says, more than offset the impact of dotcom market changes.
Cash – excluding customer balances – as of 31 December 2023 stood at £128m. Together with an undrawn revolving credit facility (RCF) of £150m, this gave the company total liquidity of close to £278m.
Net debt also fell slightly to £1.7bn. This was partially due to beneficial FX movements. In total, this resulted in an adjusted net debt/EBITDA ratio of 5.6x, stable year over year.
Performance by market
The UK and Ireland segment still remains the group’s main source of revenue. Revenue from this segment was also significantly higher at £658.5m, compared to £455.5m in 2022. Adjusted EBITDA also doubled from £61.6m in 2022 to £152.3m in 2023.
Notably, the UK is 81.5% of adjusted EBITDA even after the group’s struggles. The negative impact of the changes in strategy have most likely already been felt, which suggests the group’s UK results are likely to see improvements in the next year.
It is also likely hoped by 888 that a more sustainable approach in the UK is viable in the long term across the industry. This has led to a change in revenue mix from the UK market, with plans to target lower staking, higher margin, recreational customers. Stakes were also down 11.3%, offset by an increase in betting net win margin from 10.8% to 12.1%.
Turning to its international business, revenue was also significantly up at £517.4m for the year, compared to £508.3m for 2022. This was despite the segment being impacted by compliance changes in dotcom markets but saw double-digit growth in Spain and Italy.
As per the company’s earnings report, 888 is likely to exit unprofitable markets or monetize assets through alternative operating models, such as local partnerships. As part its decision to exit the US market, the company has also written off £28.1m from its balance sheet, accounting for the construction of a new US-facing platform.
Retail revenue was also significantly higher at £535m in 2023. 888 put this down to a strong underlying performance driven by improved product offering through new investments. This, the operator said, more than offset a 3% reduction in estate size during the year.
Evoking a new era
In an unexpected move, 888 is also set to rebrand to Evoke plc. This will depend on shareholder approval at the 888’s next AGM. 888 says this will “better reflect the strength of the group’s multi-brand operating model”.
The rebrand proposal was announced this morning on 888’s earnings call and was explained as being part of a new strategy to improve profits.
This follows the appointment of new CEO Per Widerström joining 888 after eight years as CEO of Central and Eastern European business Fortuna Entertainment Group. He stepped down from this role in 2022.
Prior to this, Widerström worked in executive roles for a number of operators in a career spanning 17 years. These include high-profile brands such as Bwin.party and Gala Coral Interactive.
“It is incredibly exciting to announce our Value Creation Plan, our strategy for success, our new financial targets and our new corporate identity. Today marks the beginning of an exciting new dawn for this business,” said Widerström.
888’s “new strategic framework” is set to include “a clear vision of what success looks like and the strategy to get there”. This will be formed of six strategic initiatives and could involve the rebranding to Evoke.
New “Value Creation Plan”
The company also announced its new Value Creation Plan (VCP) this morning. Widerström and the company’s senior leadership team is set to deploy this plan to deliver a long-term “strategy for success”.
As part of 888’s VCP, the group’s operating model has been “reset”. The group now plans to deliver approximately £30m of additional annual cost savings annually.
With a “clear vision of what success looks like and the strategy to get there” the company plans to unveil six strategic initiatives. These will “drive operational excellence and prepare the business for step-change value creation”.
There will also be a simplified market approach, with two categories. The first will be core markets (UK, Italy, Spain and Denmark) with in-country scale and market-leading positions. The second, optimise markets, will see a greater focus of investment where the group will “generate strong returns while maximising cash-flow from all markets”.
In line with this market focus, the strategic review of the US B2C business initiated in Q1 2024 will also consider potential for cost savings. 888 announced the potential sale of its US B2C operations earlier in the month. In numbers, 888 plans to deliver new medium-term targets to deliver “high return on equity”. This will see a target of sustainable profitable growth of 5%-9% per year.
888 will also aim to improve efficiency with an adjusted EBITDA margin expansion of c100 basis points per year. The group will also target more disciplined capital allocation, with leverage of below 3.5x by the end of 2026.
Current trading and CEO’s outlook
While the company’s earnings were categorised as “disappointing” by Widerström on this morning’s earnings call, he remains upbeat about the company’s future.
“It is incredibly exciting to announce our Value Creation Plan, our strategy for success, our new financial targets and our new corporate identity,” he said. “Today marks the beginning of an exciting new dawn for this business.
“I firmly believe that the group now has all the key ingredients for long-term success: leading positions in growing markets with high and rising barriers to entry; powerful proprietary technology; a top-class management team; and some of the strongest betting and gaming brands in the world.”
With revenue for Q1 2024 expected to be between £420m and £430m, the company is also targeting revenue growth of 5-9% for 2024. 888 is also aiming for leverage of below 3.5x by the end of 2026. This is the equivalent to reducing company debt by £650m. It will also require it to grow its adjusted EBITDA margin by 100 basis points per year.
This is likely a highly ambitious goal – given that 888 is aiming to increase revenue and profitability while also reducing leverage. Of note also is that 888 will not pay a dividend until the company’s leverage is below 3x. However, given that the target is 3.5x by end of 2026, investors are will likely have a while to wait.
Original article: https://igamingbusiness.com/finance/888-announces-major-rebrand-dissapointing-2023-financial-results/
