888 Q3 2022 Financial Review – the creator of 888 live casino reports year-on-year Q3 declines, but plans are in place to bonuce back. Tune in for the full financial report! (Photo by Mediamodifier Productions on Pixabay.com)
888 (LSE: 888), one of the top betting and gaming firms globally, with well-known brands like 888Casino, 888Sports, 888Poker, Mr. Green, SI Sportsbook, and William Hill, released a market update for the three months ended on September 2022 (The “Period” or “Q3 2022”).
On July 1, 2022, the acquisition of William Hill’s foreign (non-US) business was finalized.
The financial figures and related commentary contained in this statement, unless otherwise noted, are presented to enable comparison.
As mentioned, incorporate the pro forma1 results for each of the following periods as if 888 had owned William Hill, and omit the outcomes of the 888 Bingo company, whose sale was finalized on July 7, 2022.
Pro Forma Q3 Financial Highlights
- Retail revenue of £124 million was stable year on year despite a c.£4 million repercussions of the three-day temporary shutdown as well as cancellations of sporting events and adjournments during the time of national mourning of the Queen’s passing.
- 888 Group revenue of £449 million, a decline of -7% year over year, primarily driven by improved UK online player safety measures and the closure of the Netherlands
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- Total income (online) was £325 million, a 10% decrease from the previous year, mostly due to the closure of the Netherlands and the regulation of player safety in the UK. Online sales outside of the UK and the Netherlands were flat year over year.
- UK Online player safety measures: The total UK online income of £171 million was down 13% from the previous year due to a decrease in the average player spending, which fell by 14% from the previous year after the implementation of stricter controls between Q3 and Q4 of the previous year
- The Netherlands closure will only have an annual impact, accounting between 4% and 6% of Q3 2021 of 888 and William Hill International’s relative revenues
- Sports betting staking was impacted year over year by the Euro 2020 tournament taking place in the prior year period, along with race cancellations brought on by the UK heatwave in Q3 2022. Sequential decline in online revenue due to seasonality, especially in July with no major football leagues in action, along with the effects of race cancellations and athletic event cancellations/postponements during the time of the Queen’s passing.
- The 888 Group has made significant early progress with recognizing synergy effects, generating a more cost-effective operation within this time period, and contributing to provide an enhanced adjusted EBITDA margin in Q3 2022 versus H1 2022, with further improved performance anticipated in Q4. The business’s primary focus is on integration, execution, and deleverage.
Integration Revision
According to its plans, the 888 Group has maintained making good integration progress, and initial steps have already resulted in cost savings and synergies.
The 888 Group is taking action to ensure the expanded company’s operating model is suitable to handle these short-term headwinds while also being able to deliver based on the promising potential of enlarged business. The 888 Group is aware of the increased cost of debt as well as the impact on industry trading conditions in the UK.
To be able to achieve product and content leadership at scale and to enable an effective rise in profitability and market share in some of the most coveted locations worldwide, the 888 Group’s future operating model will make use of a unified global technological stack.
At its Capital Markets Day in November, the 888 Group will go into more detail about integration, its operational model, and the changed strategy.
Financing Update
With maturities ranging from 5 to 6 years, the 888 Group’s long-term debt structure is made up of several different securities. The 888 Group has entered into a number of hedging agreements, meaning that about 35% of interest expenses are fixed. The effective debt is roughly 36% in GBP, 8% in USD, and roughly 56% in euros. The 888 Group continues to look into additional hedging arrangements to provide more certainty, notably with regard to interest rates, even though it already benefits from partial natural hedging on the Euro exposure due to its Euro-based cash production.
- Cash interest costs are now anticipated to be roughly £75 million in H2 2022 and would be approximately £150 million for the entire year 2023, given the hedging in place, current market circumstances, and spot rates.
- Cash interest costs for the entire year 2023 would be about £170 million after taking into account the present forward curve, which also accounts for anticipated rate increases in the following year.
- Current gross debt is £1,810 million after taking current currency rates into account for non-GBP denominated debt. As of September 30, 2022, cash (net of customer balances) was £186 million, undrawn committed facilities were £150 million, and total liquidity was £336 million.
Outlook
- The Board forecasts that despite the macroeconomic conditions changing and continuous impact with respect to long-term UK revenue targeting improved safety measures for gaming, Q4 2022 revenue will increase above Q3 2022 and be comparable to Q4 levels in 2021.
- The 888 Group has taken initiatives to speed up synergies and create a more pragmatic operational price base, and it anticipates a higher Adjusted EBITDA margin in the second half of 2022 to match the prevailing market anticipations for the full year’s adjusted EBITDA in 2022.
Capital Markets Day in November
On November 29, 2022, the 888 Group will host a Capital Markets Day to give delegates more information on the strategy and operational model of the larger group as well as an update on integration progress.
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