888 informs investors of UK and Middle East confidence against regulatory headwinds

Regulatory headwinds – both current and forthcoming – were the biggest talking point in 888’s presentation and Q&A on 2022 and Q1 2023 trading results, after the firm declared net losses of £116m.

Updating and answering queries from its LSE investors, 888 Chairman, Lord John Mendehlson, asserted that the international gambling group has ‘very clear priorities to deliver a leaner, high margin, more efficient business’.

However, with regulatory reform in the UK imminent and 888’s 2022 performance marred by the suspension of several VIP accounts in the Middle East, the group’s Board members had a few burning issues to address.

Boarding the regulatory rollercoaster

888 divides its business model between the UK and Irish markets and ‘international’ markets – i.e. the US, Africa, Latin America etc – and has encountered difficulties across a number of countries.

Delving deeper into 888’s accounts, Chief Financial Officer Yariv Dafna explained that UK and Ireland full year online revenue had fallen 20% to £717.4m (2021: £898.9m), largely due to ‘regulatory and compliance headwinds’.

Dafna emphasised that these results ‘mainly reflect the ongoing impact of our social gambling measure, including reducing the stake limit for slots to £5 and £10 and implementing more affordability checks as soon as a customer deposits £500’.

However, the takeover of William Hill – which saw the firm integrate a 1,400+ retail estate of high-street betting shops – has seen its bricks and mortar operation unsurprisingly grow significantly by 54% to £519m (£336.8m).

“I’m pleased to say that we are seeing and expect to see in the full year 2023 higher profits from the UK online segment and strong performance from the retail business,” Dafna continued.

Answering an investor query on retail operations, group Chief Strategy Officer, Vaughm Lewis, emphasised the resilience of the William Hill sportsbook offering, but also noted that 888 is focusing on rolling out an enhanced gaming offering across its high-street stores.

He said: “If you look across the high street business, we have a significantly higher market share of sports than we do in gaming and we see really significant upside potential on the gaming side as that product and that hardware experience leapfrogs our peers and we become the best in the market in terms of that gaming experience. Overall, the High Street is robust, we’re seeing really good customer engagement.”

Whilst reasserting the claim made in the group’s report this morning that 888 expects no further impact on its UK performance as a result of the UK Gambling Commission’s (UKGC) record £19.2m fine against William Hill, Mendelsohn was asked to address another pressing regulatory topic.

The Gambling Act review White Paper, apparently due in the coming weeks with significant changes for Britain’s legislative framework on gambling, was raised by one interested investor.

“We believe that much of the impacts of the White Paper are baked into our figures, but we’ll wait to see the full details,” he said.

“We don’t think this will be a significant departure from our numbers, but certainly the additional steps that we take to make sure that we have an effective response on safer gambling have really put us in a position where we believe that it’s largely affected.”

International – back in business?

In the Middle East, 888 is apparently back in the game, having recovered around 40% to 50% of lost customer income from suspended accounts, many of which have now been reopened, according to Mendelsohn.

The group’s Chair also confirmed to one interested investor that it reported its operations in the region to the Gibraltar Gambling Commission, as it uses a licence from this regulator for Middle Eastern business.

“The board, once fully briefed, took the decision to suspend these accounts while the compliance team investigated the situation,” the 888 Chairman explained.

“Whilst this was a very disappointing development, I am pleased with how the business responded and that we’ve been able to quickly remedy the failings.

“I’m confident, highly confident, that our policies and procedures are robust. And this failure was isolated to a very specific cohort of players.”

Mendelsohn asserted that the group ‘continues to discuss with all regulators across our range of regulatory issues’, and that overall its proposition of revenue from regulated markets stands at 90%.

However, the suspension of Middle Eastern VIP accounts did have a bearing on the group’s international financial performance, which saw revenue drop 9% to £615.7m from £671.4m the year prior.

Looking away from the Middle East, 888 remains confident in its operations in the US and Africa, where it is active via the SI Sportsbook in the former – in partnership with Sports Illustrated – and in the latter via 888Africa, a joint venture led by Stars Group CMO Christopher Coyne.

“We’ve been really pleased with our pipeline markets with our Africa JV launching its first for locally regulated markets in the second half of 2022,” Lewis explained.

“We’ve seen really strong progress in those markets with over half a million customers having enjoyed our products already. We’re looking forward to further launches here.”

Meanwhile, in the US, Mendelsohn stated that 888 has encountered ‘encouraging’ signs from its launch in Michigan, and putting faith in the Sports Illustrated partnership as being able to reach older customers with longer life-time value.

Lewis, who also discussed the integration of William Hill’s Mr Green brand, which Mendehlson detailed the call group aims to onboard fully on its own in-house 888 platform in Sweden this year, provided a summary of its brand portfolio.

“Sports Illustrated is an American icon, famous for its high production values and consistent quality,” he said. “These brands enable us to compete hard in our chosen markets using the strength of our brands and our marketing expertise to drive more efficient marketing spend.”

Lastly, Menhdelson informed investors that re-entry into the high-value Netherlands market remains a long-term priority, with the exit from this market having also impacted its international trading, and that a replacement for former CEO Itai Pazner can be expected in the coming months.