888 Holdings declared a significant brand makeover and a fresh strategy, even though it continued to announce a net deficit in the 2023 fiscal year.
888 Holdings’ adjusted EBITDA in the 2023 fiscal year was £308.3 million ($390.4 million/€359.6 million), compared to £217.9 million in 2022.
The company’s annual revenue was £1.7 billion, compared to £1.24 billion the previous year. The net loss was £56.4 million, compared to £120.5 million in 2022. The basic loss per share from continuing operations was halved to £0.126, compared to £0.283 in 2022.
Despite the rise in revenue and adjusted earnings compared to 2022, adjusted post-tax profit dropped by 25% to £48.1 million.
Although the figures were “disappointing,” the company’s 2023 fiscal year results were in line with its post-trading update in January 2024. At that time, the company declared a series of job cuts, stating it would help it achieve its long-term objectives. 888 did not reveal which departments would be affected.
Overall, revenue of £1.7 billion was up 38% on a non-pro rata basis compared to 2022. This was due to a proactive shift away from dot-com markets and a change in the UK customer portfolio, a result of “extra gambling measures.”
Marketing costs also fell significantly, decreasing by nearly £20 million year-on-year, from £257 million.
During the year 2023, the firm’s income reached a remarkable £237.6 million, a substantial increase from the £8 million recorded in the previous year, 2022.
However, operational expenditures nearly doubled, rising from £448.5 million in 2022 to a significant £819.1 million in 2023. Despite this notable difference, operating profit remained a key highlight of the company’s financial performance. The group reported an operating profit of £33 million in 2023, a significant improvement compared to the £4.8 million loss incurred in 2022.
The adjusted EBITDA margin for the 2023 fiscal year was a notable 18.0%. This figure aligns with the 18%-19% range previously indicated in the January trading update. This also signifies an increase of 1.2% from the 16.8% recorded in the 2022 fiscal year. 888 attributed this positive trend to enhanced profitability and a strategic focus on higher return marketing expenditures. The company stated that this offset the impact of changes in the internet marketplace.
Cash reserves (excluding customer balances) stood at £128 million as of December 31, 2023. When combined with an undrawn revolving credit facility (RCF) of £150 million, this brought the company’s total liquidity to nearly £278 million.
Net debt also experienced a slight decrease, settling at £1.7 billion. This reduction was partly attributed to favorable exchange rate movements. Overall, this resulted in an adjusted net debt/EBITDA ratio of 5.6 times, consistent with the previous year’s figure.
Market Performance
The UK and Ireland region continued to be the group’s primary revenue generator. Revenue from this region also experienced a significant increase, rising from £455.5 million in 2022 to £658.5 million in 2023. Adjusted EBITDA also doubled, increasing from £61.6 million in 2022 to £152.3 million in 2023.
It is noteworthy that even after the group’s challenges, the UK still accounts for a substantial 81.5% of adjusted EBITDA.
The detrimental effects of modifying tactics may be evident, hinting that the group’s performance in the UK might see an uptick in the coming year.
888 also aims to embrace a more eco-friendly approach in the UK market, a strategy that is achievable across the sector. This has resulted in a change in the UK market’s income structure, with plans to target customers who engage in recreational activities, characterized by low volume and high profitability. Wagering volume also experienced a decline of 11.3%, but net profit margin saw an increase from 10.8% to 12.1%.
Shifting focus to its international operations, revenue also saw a substantial increase in 2023, reaching £517.4 million, compared to £508.3 million in 2022. Despite the industry being affected by changes in peer-to-peer market compliance, double-digit growth was still achieved in Spain and Italy.
According to the company’s financial report, 888 may withdraw from markets that are not profitable or leverage assets through alternative operating models, such as local collaborations. As part of the decision to exit the US market, the company also wrote off £28.1 million from its balance sheet, which was used to develop a new platform for the US.
Retail revenue also experienced a significant increase in 2023, reaching £535 million. 888 attributed this to strong underlying performance, driven by enhanced product offerings through new investments. The operator stated that this offset the impact of a 3% decrease in property size during the year.
**A New Chapter Begins**
In a surprising move, 888 will be rebranded as Evoke plc.
The proposition will be presented to shareholders for approval at 888’s upcoming shareholder gathering. 888 stated that this will “more accurately mirror the strength of the group’s diverse brand operational model.”
The rebranding scheme was revealed earlier today during 888’s earnings conference call and was explained as part of a fresh strategy to enhance profits.
The move comes after the arrival of new CEO Per Widerstrom at 888, who previously held the position of CEO at Fortuna Entertainment Group, a Central and Eastern European enterprise, for eight years. He departed that role in 2022.
Before that, Widerstrom held leadership positions at various operators during his 17-year career. These included well-known names such as Bwin.party and Gala Coral Interactive.
“It’s incredibly exciting to announce our value creation plan, our winning strategy, our new financial goals and our new brand identity. Today marks the beginning of an exciting new chapter for this business,” Widerstrom stated.
888’s “new strategic framework” will encompass “a clear vision for success and the strategy to achieve it.” This will consist of six strategic initiatives, which may include rebranding to Evoke.
New “Value Creation Plan”
The company also announced its new Value Creation Plan (VCP) this morning. Widerstrom and the company’s senior leadership team will implement the plan to achieve a long-term “winning strategy.”
As part of 888’s VCP, the group’s operational model has been “restructured.”
The organization intends to accumulate an extra £30 million in cost reductions annually.
The enterprise possesses a “distinct vision of triumph and a plan to accomplish it,” and intends to unveil six strategic undertakings. These initiatives will “propel operational effectiveness and create a transformative value for the enterprise.”
The market strategy will also be streamlined, categorized into two classifications. The initial classification encompasses core markets (the UK, Italy, Spain, and Denmark), which exhibit domestic scale and market dominance. The second classification comprises optimized markets, where augmented investment will be allocated to markets where the organization will “generate substantial returns while maximizing cash flow across all markets.”
Based on this market focus, a strategic evaluation of the US B2C business, which commenced in the initial quarter of 2024, will also contemplate potential cost reductions. 888 disclosed earlier this month the possibility of divesting its US B2C business. Numerically, 888 aims to attain new medium-term objectives to deliver “high return on equity.” This will result in a sustainable profit growth rate of 5%-9% annually.
888 will also endeavor to enhance efficiency, with adjusted EBITDA margin expanding by approximately 100 basis points annually. The organization will also target stricter capital allocation, with leverage below 3.5 times by the conclusion of 2026.
Present trading and CEO outlook
Although Widerström characterized the firm’s profits as “unsatisfactory” during today’s earnings conference call, he remains hopeful about the company’s future prospects.
“I am thrilled to unveil our value creation plan, our effective strategy, our fresh financial goals, and our new brand identity,” he stated. “This day marks the commencement of an exciting new chapter for this enterprise.
“I am firmly convinced that the group now possesses all the essential elements to achieve long-term success: a dominant position in expanding markets, substantial and escalating barriers to entry; robust proprietary technology; a top-tier management team; and some of the world’s most renowned betting and gaming brands.”
The company anticipates revenue ranging from £420 million to £430 million in the initial quarter of 2024 and has established a revenue growth objective of 5%-9% for 2024. 888 also intends to decrease leverage to below 3.5x by the conclusion of 2026. This translates to a £650 million reduction in company debt. It will also necessitate an increase in its adjusted EBITDA profit margin by 100 basis points annually.
This is a challenging goal – as 888 aims to enhance revenue and profitability while simultaneously reducing leverage. Notably, 888 will not distribute dividends until its leverage falls below 3x. Consequently, investors may need to exercise patience before witnessing a dividend payout.
Sign up for the iGaming newsletter