888 has stated that a foundation of “sustainable” future growth has been achieved in the fourth quarter and 2023 overall despite headline figures being down in comparison to the previous year.
CEO Per Widerström highlighted that the business – which operates several brands including William Hill, 888 and Mr Green – has laid its foundation for growth by “significantly strengthening compliance, refining its approach to marketing investment, and increasing its focus on recreational customers”.
888 Q4 & FY23 revenue declines
Publishing a trading update, 888 declared a Q4 revenue of £424m, a five per cent increase on the previous quarter (Q3: £405m), but down seven per cent year-over-year (Q4 2022: £457m).
However, the group noted that “ongoing growth in the customer base” is “setting the foundation for sustainable future revenue growth”, as the average monthly online actives – any player placing a bet during the measuring period – had improved by five per cent on the year.
Per segment, UK&I online led the way with £165m in revenue, a four per cent decline YoY (Q4 2022: £172m), followed by retail with £130m, a one per cent drop (Q4 2022: £131m), and international operations with £129m, a 16 per cent decrease (Q4 2022: £154m).
For the 2023 full year, total revenue has fallen by eight per cent to £1.7bn (2022: £1.85bn), which 888 attributes to “a proactive mix shift away from dotcom markets” which impacted revenues by approximately £80m.
In addition, the group noted that revenue was also affected by “customer mix changes in the UK as a result of additional safer gambling measures, alongside the change in the group’s marketing approach to focus more on sustainable revenue and profitability”.
“I am pleased to say that the business has enhanced its foundations for sustainable and profitable growth including significantly strengthening compliance, refining its approach to marketing investment, and increasing its focus on recreational customers.”
888 CEO Per Widerström
888 added that these changes together have “created a higher quality and more sustainable business mix”, which includes approximately 95 per cent of revenue for the year coming from regulated and taxed markets.
Per segment, UK&I online revenue dropped by eight per cent to £658m (2022: £717m) which the group says was impacted by “safer gambling changes and a refined marketing approach”.
The region had strong customer engagement with an 11 per cent increase in average monthly active users, but this was offset by an 18 per cent decline in average revenue per customer.
888 added that synergy delivery and focus on efficient marketing means the segment’s adjusted EBITDA will be significantly higher YoY despite the revenue reduction.
For retail, revenue improved YoY by three per cent to £535m (2022: £519m) as the group stated that the year’s performance was “driven by improved product offering through investment in SSBTs and gaming cabinets” offsetting a three per cent reduction in estate size.
International revenue dropped by 16 per cent YoY to £517m (2022: £614m) following a “significant impact from compliance changes in dotcom markets”. Both Italy and Spain grew by double digits.
“I have joined the business at both an exciting and important time. There are clear opportunities to unlock our significant potential, but as a business, we know that going forward we must be more proactive in adapting to changes in regulation and technology.”
888 CEO Per Widerström
888 noted that the £150m synergy target savings is to be delivered in 2024, helping to “partly mitigate the impact of regulatory and compliance changes”.
Adjusted EBITDA margin for 2023 will also be approximately 18 per cent, while cash, as of December 31, 2023, is approximately £125m. Alongside undrawn RCF of £150m, total liquidity stands at approximately £275m.
Widerström commented: “In FY23, the group made important strategic and operational progress in the face of some significant regulatory and compliance headwinds.
“I am pleased to say that the business has enhanced its foundations for sustainable and profitable growth including significantly strengthening compliance, refining its approach to marketing investment, and increasing its focus on recreational customers.
“I have joined the business at both an exciting and important time. There are clear opportunities to unlock our significant potential, but as a business, we know that going forward we must be more proactive in adapting to changes in regulation and technology.
“We are now taking rapid actions to position the group for future success, reducing our overhead costs and freeing up funds to invest in growth based upon our new strategy and value creation plan.
“The financial performance of the group must improve, and the actions we are taking will build a leaner, more agile, and more effective organisation structure, as well as establish a more effective management of the customer and product life cycle. These plans support material value creation and significantly higher profits over the coming years.”
Management structure & 2024 outlook
Alongside Widerström’s CEO appointment in October, 888 has made significant changes to its management structure over the past few months.
Sean Wilkins has been appointed as CFO, Rik Barker has been added as Chief Information Technology Officer, Ian Gallagher has been hired as Chief Product Officer, Fredrik Ekdahl has been appointed as Group General Counsel, and Jeffrey Haas has been added as Chief Growth Officer.
These appointments, along with the aforementioned foundations laid, have given 888 a positive outlook for 2024, as they believe growth can be achieved in revenue and active players across its UK and international segments.
The group also expects compliance and safer gambling impacts to annualise in February as well, producing “a more positive outlook for average revenue per user”.
2024 will also see the utilisation of an approximately £30m global cost savings programme, alongside investment to strengthen the group’s core capabilities in areas such as intelligent automation and AI-powered data and insights.
Cost savings are also expected to support an increase in marketing spend, with “superior returns supported by a more effective customer and product lifecycle management plan”.
While all of this is expected to enhance long-term profitability, the group added that the additional investment means 2024 adjusted EBITDA is expected to be “at the low end of the consensus range”.
Further details on 888’s strategic and value creation plans, including new medium-term financial and strategic targets, will be provided by the group on March 26, alongside its full-year results.
Widerström concluded: “I have been working hard with the board, our strengthened executive team and the talented people across the business to refine our strategic framework, which is being translated into a value creation plan, and am confident that we are poised to deliver deleveraging and strong shareholder returns in the coming years.
“I am looking forward to outlining our 2024-2026 plan alongside our full-year results in late March.”
