888 reports overall revenue drop in Q3 trading update

888 has stated changes in the UK and Netherlands markets have impacted its overall revenues in a trading update for the third quarter of 2022.
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888 has stated changes in the UK and Netherlands markets have impacted its overall revenues in a trading update for the third quarter of 2022.

Despite the decrease in revenue, the group is confident that it can finish the year strong, as it expects Q4 2022 revenue to be similar to Q4 2021 results.

888 online impacts overall revenue

Posting a Q3 update, 888 declared group revenues of $507.6m, down 7% year-over-year (2021: $547.2m), while its online portfolio – 888, William Hill UK, and William Hill International – reported a 10% YoY drop in revenues to $367.4m (2021: $407m).

The group noted that the decline in Q3 online revenues is reflective of “the impact of UK player safety measures and the closure of the Netherlands”. Excluding UK and Netherlands, online revenue is flat YoY.

Meanwhile, the group’s retail revenue stands at £140.1m, which is stable YoY despite an estimated $4.5m impact from three days of temporary closures together with sporting fixture postponements during the period of national mourning following the passing of Queen Elizabeth II.

888 did not delve into any specifics regarding its operations in the US and Canada during its Q3 trading update.

CEO Itai Pazner commented: “Having completed our transformational combination with William Hill, I am pleased to report that during Q3 our teams continued to make rapid progress in integrating these two market-leading and highly complementary businesses.

“This has enabled us to progress towards our new target operating model while delivering a series of ‘quick win’ synergies, that will benefit our adjusted EBITDA margin for the second half of this year.

“Revenues during the third quarter continued the trends we have seen in recent quarters, with relatively resilient trading across our main international markets and in our retail estate, but continued pressure on our UK online revenues in light of the ongoing impact of the enhanced player safety measures.

“We are changing the mix of our business to a lower spending, more recreational player base that gives us confidence in the long-term potential for our UK business.”

Year-to-date, 888’s revenues stand at $1.57bn, down 3% on YoY (2021: £1.62bn) as a result of double-digit revenue declines across all its online units – 888 (-10%), William Hill UK (-24%), and William Hill International (-24%).

The group’s operating focus is the continued integration of the William Hill business to deliver early progress on associated costs and enlargement synergies. 

Financial hedging arrangements

Regarding financing, 888 has entered into a “series of hedging arrangements” that will fix interest costs on its current dollars, pounds, and euros debt holdings.

However, the group noted: “Given the hedging in place, and based on current market conditions and spot rates, cash interest costs are currently expected to be approximately £75m ($84.8m) in H2 2022 and would be approximately £150m ($169.5m) for the full year 2023.”

888 is confident that, alongside the increasing cost in debt, “the operating model of the enlarged business is appropriate to address these near-term headwinds whilst also being able to deliver on the strong potential of the enlarged business.”

Early progress with realizing synergies, the group stated, has resulted in “a more efficient operating cost base”, delivering “an improved adjusted EBITDA margin in Q3 2022 versus H1 2022, with further improvement expected in Q4, with the primary focus of the business on integration, execution and deleverage”.

Q4 and H2 2022 outlook

Looking ahead, 888 expects revenues in Q4 to grow over Q3 and be similar to Q4 2021 levels “despite the changing macroeconomic environment and ongoing pressure on UK revenues from long-term focused enhanced safer gambling measures”.

The group also added that it has “taken actions to accelerate synergies and drive a more efficient operating cost base” which should result in an improved adjusted EBITDA margin in H2 2022 to meet the current market expectations for FY2022 adjusted EBITDA.

Pazner added: “As we look forward, we remain focused primarily on successful integration, execution, and de-leveraging in order to unlock the huge potential from our enlarged business.

“We are building a stronger group that will leverage our leading technologies and portfolio of world-class brands to create a leading global betting and gaming company, with clear plans to grow market share and profitability in some of the most attractive markets in the world.”