888 puts faith in ‘transformational’ Hills merger as H1 profit sinks 66%

By | August 12, 2022

The group-wide revenue and profit of 888Holdings  took a heavy hit across the first six months of the year, as the LSE-listed firm continues to adjust to its acquisition of William Hill.

Publishing its interim report this morning, the FTSE250 group revealed that revenue and profit for H1 2022 were both down by 13% and 66%, standing at £332.1m and £14.4m – in comparison to 2021 figures of £380.9m and £41.9m.

Meanwhile, adjusted EBITDA is reported at £50m (2021: £70.3m), a decline of 29%, attributed by the group to compliance costs and increased US investment in the SI Sportsbook brand.

Financial results were further compounded by debt of £1.8 billion, with maturities ranging between five and six years, much of which is due to the acquisition of William Hill’s non-US assets from Caesars Entertainment, completed on 1 July.

According to reports last month, the two banks which underwrote a £1bn debt bond to support the £1.9bn takeover of Hills’ international units – JP Morgan and Morgan Stanley have been struggling to find buyers

Commenting on H1 results, Itai Pazner, 888 CEO, said: “The combination with William Hill, which we completed soon after the period ended, transformed the Group and creates very strong foundations to support our ambitious growth plans. 

“This combination of two exceptional and complementary businesses creates one of the world’s leading online betting and gaming groups with superior scale, leading front-end and back-end technology, increased diversification across products, markets and channels, and a world class team.”

Asserting that group-wide growth remains stable, 888 detailed that on a market-by-market basis, the UK and Netherlands were the biggest drags to its H1 performance – although online revenue in the former experienced sequential growth.

Mirroring industry concerns, in the UK, 888 cited stringent safer gambling policies as the main factor impacting revenue – 47% of its British customers now have enhanced safety limits in place. 

This was coupled by the loss of Dutch income following the re-regulation of the online market in October 2021, which resulted in 888 being forced to withdraw Dutch brands and reapply for licences.

“The Group’s financial performance in the period primarily reflects market conditions in the UK,” Pazner continued.

“However, we believe the proactive actions we have taken to increase player protections and drive higher standards of player safety have put the Group in an even stronger position for the future.”

Looking ahead, the group maintains strong confidence in the sustainability of its business following one of the industry’s biggest M&As in years, pointing to the ‘iconic’ name of William Hill as well as the popularity of the Mr Green casino brand.

The ‘transformational’ acquisition has enabled the company to position itself as a ‘top three operator in the UK and Spain’ whilst increasing its mix of regulated and taxed revenues to 85%.

This will provide 888 with a ‘platform for strong future growth’, the firm emphasised to investors, also noting that the addition of William Hill’s retail units has added another dimension to its commercial pipeline. 

Working on implementation of a new operating model for its business, 888 expects H2 revenue to remain inline with first half earnings, as William Hill continues to settle into its portfolio of brands. 

“In the second half of 2022, our main focus is on integration, delivering on our synergy plans, and driving higher profitability across the business,” Pazner added. 

“This focus on integration, execution and de-leverage will unlock the huge potential from the enlarged business.”

Further overseas, 888 has also put faith in developments in North America and Africa, having made ‘strategic investment’ in the latter via the 888AFRICA brand, with the goal of creating ‘a long-term growth platform for regulated African markets’.

In North America, the group has embarked on the aforementioned investment in the SI Sportsbook, which launched in Virginia during July and has secured market access in Michigan, planning to go live in H2.

Further north, the 888.ca betting site has entered the highly prized Ontario betting market under a local licence. 888 projects a strong performance in Canada’s largest province, having successfully migrated and reactivated ‘the vast majority’ of its existing customer base. 

Lastly, a second major M&A development during the first half saw 888 shed some weight and sell off its Dragonfish B2C and B2B bingo unit to Saphalata Holdings for £37.4m, a significant step in its corporate restructuring. 

Corporate changes have been reflected with the launch of the ‘Made to Play’ brand strategy which has seen a unification of 888’s products to enhance marketing effectiveness, alongside further integration between SI Sportsbook and SI.com in the US. 

Pazner concluded: “These actions will position us to take advantage of significant growth opportunities ahead of us, as we leverage our leading technologies to create a best-in-class global betting and gaming platform, and our portfolio of world class brands, to grow market share and profitability in some of the most attractive markets in the world.”

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