888 soothes growing pains as H1 losses mount to £33m

888 Holdings Plc has reaffirmed its full-year corporate guidance as the LSE gambling group navigates a period of multiple transitions impacting its business and future outlook.  

Publishing its H1 2023 interim trading results, 888 registered a 165% surge in corporate revenues to £881m (H1 2022: £332m) as headline growth was attributed to “the addition of William Hill following completion of the acquisition as of 1 July 2022”.

An enlarged 888 declared an adjusted EBITDA of £155m, results reflecting x3 jump on H1 2022 comparatives of £50m.

Yet enlargement aside, on a pro-forma front 888 registered a 7% decline in corporate revenues, which failed to match the H1 2022 result of £943m.

The pro-forma decline primarily stems from an 11% downturn in online revenue of its UK business to £335m, as a result of continued compliance and regulatory adjustments of its UK operations. 

888 notified investors that “proactive actions are driving a significant mix shift in the player base to lower spending groups, providing a more sustainable and profitable base to drive future growth in the UK, as well as putting the Group in a strong position ahead of any changes from the White Paper, with various consultations ongoing”.

Elsewhere, 888’s international unit reported a 14% decline in pro-forma revenues of £226m, combined with a 25% decrease in adjusted EBITDA to £53m, as results  reflected implementing new compliance changes in dotcom markets, and a slowdown in the Middle East.

Period trading saw 888’s newly incorporated retail unit marked as the standout performer, generating revenue of £27m and Adjusted EBITDA of £60m – results displaying a ‘strong cash generation’ for the unit’s future performance.

Lord Mendelsohn, Executive Chair of 888, commented: “I am very pleased with the progress we have made in the first half of the year as the Group delivered against the plans we committed to at our investor day last year, while also successfully navigating business, market and regulatory volatility. “

Of significance, 888 highlighted marked progress on its synergy delivery, which reaped £66m of cash synergies in H1 2023, as corporate governance increases its full benefit to £150m by 2024.

Period Costs soared to £294m from £118.3m, primarily because of the William Hill acquisition, although on a pro forma basis, 888 saw a  slight reduction by 3% to £291m. The increase in cost of sales as a percentage of revenue, reflects a “shift towards more locally regulated and taxed revenues.”

Accounting for heavier operating expenses and William Hill amortisation costs, 888 declared an interim loss of £33m, compared to profit after tax of £12m in H1 2022.

Debt management was further highlighted in the report as group debt was slashed by £68m to £1,6bn – debt results were buoyed by a rise in cash (net of customer balances) of £11m.

Mendelsohn continued: “We made very strong progress with the execution of our integration plan and we now expect to realise the full £150m of synergies in 2024, a year earlier than the original plan. Our strong cash discipline and higher profits also enabled a 0.5x reduction in our leverage.

“We have successfully delivered against our focused market strategy, changing the mix of our revenue and creating a more profitable and sustainable platform for future growth.”

The H1 report concluded with Lord Mendelsohn confirming the inbound appointment of Per Widerström as Group CEO effective from 16 October 2023.

“I was thrilled to be able to announce the appointment of Per Widerström as our next CEO. Over the coming weeks I will be working closely with Per to ensure a smooth handover and I am highly confident in his ability to lead the team to realise the full potential of this business.”

“The strategic progress made during the year to date has created a fundamentally stronger business with higher profit margins and we remain on track to deliver against expectations for the full year.”