888 has reported a group uptick in revenue and adjusted EBITDA for 2022, but a significant net loss after tax of more than £120m.
Still searching for its new CEO, the company noted that the net loss in profit occurred due to the “increased financing costs from the debt on acquisition of William Hill” in July 2022, “offsetting the increased earnings from the enlarged group”.
Publishing its 2022 results, 888 declared a revenue improvement of 74 per cent year-over-year to £1.2bn (2021: £712.3m) when considering the consolidation of Wiliam Hill revenues across H2 2022.
On a pro forma basis, revenue fell by three per cent YoY to £1.85bn (2021: £1.9bn), which the company says “primarily reflects the additional player safety checks implemented in the UK&I online business across both brands over the previous two years with a 20% reduction in UK&I online revenue in FY 2022 compared to FY 2021”.
International business declined by nine per cent YoY to £613.7m (2021: £671.4m) following “regulatory changes across a range of markets, most notably the impact of the Netherlands business closing at the end of Q3 2021”.
Per vertical, retail revenues improved by 54 per cent YoY to £519m (2021: £336.8m) following a full year of lockdowns and other restrictions being lifted across properties compared to H1 2021.
Online gaming revenue, however, dropped by 11 per cent YoY to £968m, while online sports betting revenue fell by 24 per cent to £363.1m.
888 attributed the online decline to “the same factors as above, with the decline larger in sports due to country mix, with more of the sports business being in the UK” adding 2022 had “a tough comparator from a sporting fixture perspective, with 2021 containing additional fixtures as major football leagues caught up post COVID-19 disruption”.
The group reported an adjusted EBITDA for 2022 of £217.9m, an 82 per cent increase YoY (2021: £119.7m) with a margin of 17.6 per cent (2021: 16.8 per cent).
Pro forma, adjusted EBITDA rose by 15.1 per cent to £310.6m (2021: £269.9m) with a margin of 16.8 per cent (2021: 14.2 per cent). 888 noted the rise was “driven by the focus on cost efficiency alongside the early benefits of synergy delivery, particularly marketing savings from the optimised brand marketing strategy across different markets”.
As previously mentioned, 888 reported a net loss in profit before tax for 2022 of £120.6m (2021: net profit £50m) with profits falling to £64.2m on an adjusted basis (2021: £82.6m). The group also declared net debt of £1.73bn.
Lord Mendelsohn, Executive Chair of 888, commented: “The combination with William Hill transformed the group and brought together two exceptional and complementary businesses to create one of the world’s leading betting and gaming businesses.
“The group’s financial performance in the period primarily reflected the extensive actions being taken to drive higher standards of player protection. While recent compliance issues in the Middle East were very disappointing, they have underlined the importance of our enhanced and proactive risk management framework.
“We have made positive progress with the integration enabling us to upgrade our synergy target from £100m to £150m. In 2023 we remain on track to deliver higher profitability as we deliver against our clear strategic priorities. Our clear priorities of integration, market focus, and deleveraging give us confidence in our 2025 targets, as we build a stronger and more sustainable business for the future.”
On 30 January 2023, 888 announced the departure of Itai Pazner as its CEO and Executive Director with immediate effect. The group also stated that CFO Yariv Dafna would leave the business at the end of 2023.
These announcements came as the group reported safer gambling policy failures in relation to Middle East VIP customers. Mendelsohn stated the failure was “isolated to a very specific cohort of players” and that he is “highly confident” that the policies and procedures are robust.
On 28 March 2023, William Hill was fined £19m by the UK Gambling Commission in relation to historic player safety failings before 888 owned the operation. 888 noted that it shares the UKGC’s commitment to improving compliance standards across the industry.
Looking ahead, the 888 board expects 2023 revenues to be lower by a low to mid single digit percentage compared to 2022, but adjusted EBITDA to be higher as the group focuses on creating sustainable revenue streams with a margin of at least 20 per cent.
The group added that it is confident in reaching £2bn in revenue by 2025 and an adjusted EBITDA margin of 23 per cent and an adjusted net debt to EBITDA of below 3.5x, as it believes it will make “strong progress in the realisation of synergies and effective implementation of the new market focus plan post acquisition of William Hill”.
888 included a five-priority strategy to achieve these goals:
- Integrate businesses and realise synergies
- Focus on select markets and key growth opportunities
- Invest in its sources of sustainable competitive advantage
- Support sustainable growth through Players People Planet ESG framework
- Prioritise debt reduction through focus on capital efficiency
