888 Holdings trims full-year guidance after weaker third quarter

William Hill owner 888 Holdings lowered its earnings guidance for the full financial year on Thursday after a weaker-than-expected third quarter.

The FTSE 250 gambling and betting operator said it was expecting a decrease of about 10% in third-quarter revenues, estimating a figure close to £400m, with its full-year EBITDA margin now set to come in at between 18% and 19%.

It put the weakness down to a significant influence from the compliance modifications introduced in dotcom markets, which saw a more gradual resumption of customer engagement and earnings than initially projected.

September specifically saw more customer-favourable sports outcomes, impacting win margins across UK and international markets.

Changes related to safer gambling measures within the UK were also cited, although 888 said robust growth in active customers was expected to spearhead a revenue growth resurgence in 2024.

There was also a transient effect due to a shift in marketing strategies that now centred on higher-return marketing and corresponded with the company's refined brand-focused approach.

On a brighter note, the company said its retail sector maintained a robust performance, with revenue consistent with the prior year's figures despite the customer-oriented sports outcomes.

As of 22 September, the company's liquidity stood at over £300m, with cash net of customer balances approximating £162m and unused committed facilities of £150m.

Looking ahead, 888 foresaw fourth-quarter revenues surpassing those of the third quarter but predicted a mid-single-digit drop year-on-year.

It anticipated a return to growth in 2024.

Delivery of key synergies continues as planned, with significant cost reductions having been realised to offset the year-to-date revenue performance.

Additional synergy opportunities were in the pipeline, with any extra savings to be reinvested in growth strategies.

For 2023, 888 said its adjusted EBITDA margin projection of 18% to 19% aligned with its emphasis on sustainable growth for 2024 and on meeting its previously announced targets for 2025, which remained unchanged.

“This has been an important quarter for the business with the announcements of Per Widerström as our new CEO and Sean Wilkins as our new CFO, who I am very confident will lead the business through its next phases of growth and I look forward to Per starting as CEO in mid-October,” said executive chair Lord Mendelsohn.

“We are making significant strides to improve the quality and long-term sustainability of our revenues, but performance in the third quarter has been below our expectations, and this means we now expect to end the year with EBITDA below our prior expectation.”

Lord Mendelsohn said the work the firm had undertaken so far this year had set “very strong foundations” for the future of the business, adding that its synergy delivery was on track.

“We are strongly focused on investing to deliver good levels of expected revenue growth in 2024 as we progress towards our clear target of more than £2bn of revenue in 2025, and I look forward to the coming years with confidence.”

Reporting by Josh White for Sharecast.com.