888 warns of rocky Q3 but projects 2024 revenue recovery

888 Holdings has told a similar story to that of other high-profile gambling plcs., cautioning its investors that its Q3 performance has fallen below expectations.

The LSE-listed betting and gaming group cited investment in sustainability and clearing compliance hurdles as the primary reasons behind an expected 10% slump in Q3 revenue.

This puts 888 revenue at around £400m for Q3 2023. Corresponding results last year saw revenue of £449m, which was itself 7% down on Q3 2021 revenue of £484m. Similarly, the implementation of enhanced UK compliance measures was also cited last year.

888 is currently set for new leadership as Per Widerström prepares to assume CEO duties, whilst the firm continues to work towards its 2025 targets of repaying loans related to the £2.2bn acquisition of William Hill, higher-profit margins and net debt of less than 3.5x.

Lord Mendelsohn, Executive Chair of 888, said: “This has been an important quarter for the business with the announcements of Per Widerström as our new CEO and Sean Wilkins as our new CFO, who I am very confident will lead the business through its next phases of growth and I look forward to Per starting as CEO in mid-October.”

Explaining the projected 10% decline in revenue this quarter, 888 – as mentioned above – cited safer gambling changes in the UK as having a consistent impact alongside ‘customer friendly sports results,’ in both the British and international markets which had an effect on win margin.

Various compliance changes in dotcom markets, coupled with slower recovery in customer activity and revenue (lower?) than expected was also cited, although the group maintains that revenue growth will bounce back in 2024 due to ‘strong growth in active customers’.

Lastly, 888 stated that Q3 performance had been affected by its change in marketing approach, with the firm now focusing on ‘higher return marketing’ in line with its market focus and brand-led strategy.

Following the takeover of William Hill’s non-US assets from Caesars Entertainment, 888 maintains a broad brand portfolio consisting of the 888sports, 888casino and 888poker, as well as William Hill UK, William Hill International and Mr Green brands.

The acquisition significantly bolstered 888’s retail presence with the integration of William Hill’s chain of over 1,400 betting shops and on a more positive note, the firm stated that this segment is performing strongly with ‘broadly stable revenues’ against 2022 comparatives.

Looking ahead, 888 expects improvements over the remainder of the year with Q4 revenue projected to be sequentially higher than Q3, albeit still lower year-over-year ‘by a mid-single digit’, but reiterated that growth will occur in the new year.

Despite investment in sustainability apparently biting into its Q3 revenue, 888 stated that it continues to prioritise sustainable growth in 2024. As such, the FY23 EBITDA margin is expected to be 18-19% as the group continues to invest in achieving its 2025 objectives.

Lord Mendelsohn: “We are making significant strides to improve the quality and long-term sustainability of our revenues, but performance in Q3 has been below our expectations, and this means we now expect to end the year with EBITDA below our prior expectation.

“The hard work the team has undertaken so far this year has set very strong foundations for the future of the business and our synergy delivery is well on track. 

“We are strongly focused on investing to deliver good levels of expected revenue growth in 2024 as we progress towards our clear target of more than £2bn of revenue in 2025 and I look forward to the coming years with confidence.”

888’s update comes shortly after competitor Entain issued a similar statement to investors, warning that Q3 revenue will likely dip in comparison to 2022 as the FTSE100 group also adjusts to new compliance and safer gambling conditions.

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