SBC News Voice of the Sports Betting Industry
Acknowledging several new opportunities and challenges following the enlargement of its operations this year, 888 Holdings has published updated targets at its Capital Markets Day..
Having acquired William Hill’s non-US assets from Caesars Entertainment for £2.2bn in July, the company has noted emerging operating challenges, increased levels of debt exposing it to the impact of higher interest rates, and moderation of growth rates in its active markets.
Core overview
Seeking to address these potential hurdles, the firm has set a goal of achieving £2bn in revenue by 2025 via a ‘refined strategic focus on a number of key markets’ to enhance its share and leadership positions in said markets.
Additionally, 888 aims to build scalability into its enlarged operating model and leverage proprietary technology to reach an adjusted EBITDA margin of 23%. The group also seeks to achieve net debt of less than 3.5x existing EBITDA targets, whilst honing in on equity growth drivers to secure earnings per share (EPS) of 35 pence. 
CEO Itai Pazner said: “Today we set out our approach to unlocking the significant benefits of the combination of 888 and William Hill and I am pleased to share a more detailed view of our strategic direction and priorities.
“As a newly combined business we have significant scope for improving our operating model and delivering efficiencies. Over the next two years we plan to fully integrate our business – creating a bigger, stronger and better organisation with higher profit margins.”
The group’s financial targets are accompanied by a planned acceleration and increase in anticipated cost synergies, including a rise in pre-tax cost synergies from £100m to around $150m.
This will see capital expenditure related synergies rise from £15m to £34m, alongside an acceleration of delivery which will include a hike in operating cost synergies from £54m to £87m in 2023.
Three-year plan
Evaluating its current position, 888 asserted that it maintains market-leading status in ‘the most attractive’ global markets via its ‘world-class brands’ – with the caveat that these brands sometimes compete against each other, such as 888sport and William Hill’s sportsbook.
This, it said, creates ‘certain inefficiencies’ such as lower profit margins than competitors, coupled with a financial leverage above its mid-term target of 3x, with group debt driven heavily by the costs of the William Hill takeover.
To address debt, Pazner’s firm detailed that ‘in the coming weeks and months’ it may look to access debt capital markets to repay loans of up to £347m which were taken out to redeem William Hill 2026 Notes.
Between 2023 and 2025, 888 aims to put further plans into motion, specifically to create a streamlined business by further integrating William Hill for a ‘scalable and efficient model’.
The group hopes that by developing a single global tech platform and focusing on its key markets it will achieve higher profit margins and net debt of less than 3.5x by 2025.
Pazner continued: “We are focused on building a customer-led business with a portfolio of world class brands that provide complementary offerings, supporting our ambitions to drive market share growth in some of the most attractive betting and gaming markets in the world.
“This will be enabled by a scalable, unified proprietary technology stack that will underpin our product and content leadership focus.”
Current and future prospects
Looking ahead past 2025, 888’s Board predicts that the multinational operator will be ‘well positioned’ for long-term and sustainable growth, bolstered by its plans for scaled business activity and its product range. 
Providing an update to current trading, the group projects revenue of around £1.85bn and adjusted EBITDA between £305-315m, with Q4 EBITDA of around £88-98m due to cost mitigation actions taken during the second half of the year and 2023 EBITDA of ‘at least’ 20%.
888 closed Q3 with year-to-date revenue of £1.39bn – down 3% on 2021’s nine-month earnings of £1.43bn – and adjusted EBITDA of $217m, whilst quarterly revenue fell 7% year-on-year to £449m (Q3 2021: £484m). The firm maintains that it is continuing to trade ‘broadly in line with Board expectations’.
Pazner concluded: “While our financial leverage is currently higher than our mid-term target, our streamlined operations and capital discipline will give us a clear path to deleverage to less than 3.5x by the end of 2025.
“Our long-term potential remains exciting. Building our unified tech platform will present us with real future growth opportunities as we take advantage of our world class brands, product and content leadership, and customer excellence to set our business for the next decade of growth.”
