17th Jan 2024 12:48
(Alliance News) - 888 Holdings PLC on Wednesday said it has a "positive" outlook for 2024 and announced a cost savings programme, with the bookmaker's new boss keen to draw a line under the firm's recent struggles.
Shares traded 5.1% lower at 76.90 pence each in London on Wednesday afternoon.
The Gibraltar-based betting operator, which owns the William Hill and Green brands, said it expects a revenue decline of 7.2% to GBP424 million in the fourth quarter of 2023 from GBP457 million a year prior.
For all of 2023, 888 anticipates a revenue fall of 7.5% to GBP1.71 billion from GBP1.85 billion in 2022.
Chief Exective Per Widerstrom said: "In FY23 the group made important strategic and operational progress in the face of some significant regulatory and compliance headwinds."
Looking ahead, 888 said the outlook for 2024 was "positive", noting consistent growth in active players. It expects 2024 adjusted earnings before interest, tax, depreciation and amortisation at the low end of the consensus range of GBP340 million to GBP397 million, still higher than GBP217.9 million in 2022.
The company expects to release its 2023 results on March 26, alongside its business plan for 2024 to 2026.
888 said it initiated a "global cost savings programme of approximately GBP30 million" in December. The savings will "support an increase in marketing spend in 2024".
Analysts at Jefferies commented: "With a suite of new management and GBP30 million additional cost savings announced today, we sense a step change in urgency."
Jefferies cut its 2023 and 2024 earnings before interest, tax, depreciation, and amortisation prediction for 888 by 3% and 13%, respectively. However, it believes the firm has "material upside from the successful execution of the William Hill integration".
888 in 2021 struck a GBP2.2 billion deal to purchase William Hill's non-US business from Nevada-based Caesars Entertainment Inc.
This was a deal that left it with a chunky debt pile, however. However, Jefferies sees little leverage and liquidity risk for 888.
"We do not see covenant concern, with no requirements on the primary debt and an unrestrictive covenant on the RCF that only applies when [over 40% is] drawn (currently undrawn). At GBP275 million, liquidity remains robust," Jefferies added.
Away from its balance sheet, 888 also faces risk from the regulatory outlook, particularly in the UK.
Third Bridge analyst Alex Smith commented: "The larger operators have adopted a more cautious approach as there are huge uncertainties on the long-awaited white paper. This paper could bring about significant changes in how online gambling is regulated, especially concerning consumer protection and marketing. Our experts predict that it will take 2-3 years for these regulations to be fully put into practice."
Smith added that initially, however, 888 could see a slight market share increase once measures come into effect.
"In late 2024, 888 Holdings might see an improvement in their market share, as smaller regulators may leave the market. These smaller operators don't have the time or expertise to focus on compliance. Additionally, the potential increase in Gambling Commission fees will financially impact them even more," Smith added.
888 named Per Widerstrom as its new chief executive officer in July, after a bit of turbulence at the top in the months before that. Former CEO Itai Pazner stepped down immediately last January, around the same time 888 reported it had suspended some activities in the Middle East amid a customer compliance probe.
In September, it named Sean Wilkins as its new chief financial officer, with Yariv Dafna stepping down from the role in October.
Back in July, 888 said the UK gambling watchdog was reviewing its licence, after a vehicle backed by former executives of GVC Holdings PLC proposed additions to the bookmaker's board.
FS Gaming, which had at one point almost a 7% stake in 888, suggested adding to the firm's board.
FS is backed by Kenny Alexander, Lee Feldman and Shay Segev. Alexander was formerly chief executive of GVC Holdings, the Ladbrokes and Coral owner now known as Entain PLC. Alexander was replaced at Entain by Segev, who then stepped down as chief executive in January 2021 to head up sports streaming platform DAZN.
FS proposed adding Feldman, Alexander and Stephen Morana as chair, chief executive and chief financial officer. Morana previously held the CFO post at Betfair.
The involvement of former executives at the Ladbrokes and Coral owner caused concern for the Gambling Commission, as Entain was subject to an investigation at the time surrounding its former Turkish business.
More recently, and supporting the firm's shares, 888 received takeover interest from gambling software provider Playtech PLC, the Sunday Times reported in December.
Citing City sources, the newspaper said Playtech had made an indicative approach in July, pitching an offer at 156 pence per share, around GBP700 million in total. Bookmaker 888 believed this undervalued the firm.
By Eric Cunha, Alliance News news editor
Comments and questions to newsroom@alliancenews.com
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