888 forecasts 10% revenue dip in mixed Q3

Speaking in a trading update, 888 says it has been impacted by a number of major factors in Q3. These include compliance changes implemented in dotcom markets, with slower recovery in customer activity and revenue than initially anticipated.

888 also referenced safer gambling changes in the UK. However, it adds that with ongoing strong increase in customer numbers, it expects to return to revenue growth in the market in 2024.

Other factors impacting performance include customer friendly sports results in September hitting win margin across the UK and international.

In addition, 888 highlighted the short-term impact from a change in marketing approach. The operator says it is now focusing on higher return marketing and a refined brand-led marketing approach.

However, it is not all bad news for 888, with the operator saying its retail business continues to perform well. Revenue was broadly stable relative to last year despite customer-friendly sports results. As such, there is no change to expectation of mid-single digit revenue growth for the full year.

888 expects to miss full-year EBITDA targets

Looking ahead to Q4 and full-year results, 888 offers a mixed overview. It says synergy delivery is on track and significant cost savings are being delivered helping mitigate year-to-date revenue performance against initial expectations.

Further synergy opportunities have been identified, with these to be reinvested in growth initiatives. 888 adds its new operating model and brand-led marketing strategy have opened new growth opportunities for the business.

In terms of Q4, 888 expects revenue to be sequentially higher than Q3. However, revenue is likely to fall year-on-year by a mid-single digit before returning to growth in 2024.

Meanwhile, full-year adjusted EBITDA margin is now expected to be between 18% and 19%. This, 888 says, is aligned with its priority of driving sustainable growth.

“We are making significant strides to improve the quality and long-term sustainability of our revenues,” 888 executive chair Lord Mendelsohn said. “But performance in Q3 has been below our expectations and this means we now expect to end the year with EBITDA below our prior expectation.

“The hard work the team has undertaken so far this year has set very strong foundations for the future of the business and our synergy delivery is well 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 £2.00bn of revenue in 2025. I look forward to the coming years with confidence.”

Key management changes in Q3

Lord Mendelsohn also referenced a number of major changes to the 888 board that were confirmed in Q3.

Per Widerström will be taking over as chief executive next month. He was confirmed as CEO in July and will assume the role with effect from 16 October. Following this appointment, Mendelsohn returns to a non-executive position. Since the removal of Itai Pazner in January, Mendelsohn has run the business as executive chair.

Earlier this month, 888 also announced the appointment of Sean Wilkins, formerly of Superbet and Tesco, as its new chief financial officer. Wilkins will assume the role with effect from 1 February 2024. He replaces Yariv Dafna, who announced in January he would be leaving the business. 

“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,” Lord Mendelsohn said. “I am very confident they will lead the business through its next phases of growth. I look forward to Per starting as CEO in mid-October.”

FS Gaming fails in 888 management bid

Confirmation of the new management team came as FS Gaming, the investment vehicle backed by former Entain CEO Kenny Alexander, tried and failed to take charge of 888.

The group acquired a 6.75% stake in 888 in June. A proposal then emerged for former GVC chairman Lee Feldman to reprise the same role at 888. Alexander and former GVC director Stephen Morana would take over as CEO and CFO, respectively.  

The proposal also would increase FS Gaming’s stake in 888 beyond the 10% threshold to trigger a change of corporate control. This would have required approval from the Gambling Commission.

However, the Commission raised concerns over an ongoing HRMC investigation into GVC’s historic Turkish operations. This prompted the Commission review 888’s suitability to hold a licence. 

The 888 board then unanimously agreed to terminate discussions with FS Gaming, saying the bid would put its GB licences at risk.