TIDM888
RNS Number : 8511H
888 Holdings plc
29 November 2022
29 November 2022
888 Holdings Plc
("888" or "the Group")
Launch of updated strategy for sustainable value creation at
Capital Markets Day
Plan focused on delivering shareholder returns, driven by rapid
deleveraging and improved profit margins, supported by accelerated
and increased cost synergies
888 (LSE: 888), one of the world's leading betting and gaming
companies with internationally renowned brands including 888,
William Hill, Mr Green and SI Sportsbook, will today hold a Capital
Markets Day ("CMD") in London, beginning at 2pm (GMT).
The CMD will comprise a series of presentations from members of
888's executive leadership team. The presenters will outline the
enlarged Group's updated strategy and priorities, including its key
growth opportunities, financial targets, and an update on the
anticipated cost synergies following the acquisition of the non-US
assets of William Hill ("William Hill") (which completed in July
2022).
KEY FINANCIAL HIGHLIGHTS: INCREASED COST SYNERGIES AND NEW
MID-TERM FINANCIAL TARGETS
In connection with the CMD, 888 will present a series of new
financial targets for 2025, consisting of:
-- Revenue of above GBP2 billion : Refined strategic focus on a
smaller number of key markets, with clear targets to drive greater
market share and build sustainable long-term market leadership
positions;
-- Adjusted EBITDA margin above 23%: Focus on building
scalability into the enlarged Group's operating model, using the
benefits of unified proprietary technology and operations to drive
higher profit margins;
-- Adjusted net debt / EBITDA of less than 3.5x : Extremely
disciplined approach to capital allocation, with a focus on
leverage reduction to less than 3.5x by end of 2025; and
-- Adjusted EPS of at least 35p : Strong focus on core equity
growth drivers to deliver the benefits of the enlarged Group.
In addition, the Group will announce both an acceleration and
increase in anticipated cost synergies, with:
-- An increase in the pre-tax cost synergy target to
approximately GBP150 million (previously at least GBP100 million),
of which approximately GBP34 million are expected to be capital
expenditure related synergies (previously GBP15 million); and
-- An acceleration of delivery, with approximately GBP87 million
operating cost synergies expected to be achieved in 2023
(previously GBP54 million).
KEY STRATEGIC HIGHLIGHTS: AN UPDATED STRATEGIC ROADMAP TO DRIVE
SHAREHOLDER RETURNS
At the CMD, the Group's management team will present its evolved
strategic roadmap following the acquisition of William Hill and
reflecting the Group's current operating and macroeconomic
environment. The Board believes this roadmap provides a clear
direction for the next phases of the Group's evolution, while
continually aiming to drive shareholder returns.
The fundamental rationale for the acquisition is as compelling
as ever and provides robust foundations for the Group's next decade
of growth:
-- The enlarged Group is one of the world's leading online
betting and gaming groups with significantly increased scale,
greater revenue diversification and an increased proportion of
regulated and taxed revenues;
-- The acquisition has given the Group stronger positions across
its core markets of the UK, Italy, and Spain;
-- The combination of the two businesses has significantly
strengthened the Group's brand portfolio which now includes the
iconic William Hill brand and popular Mr. Green brand alongside the
award-winning 888 brand and SI Sportsbook brand;
-- The enlarged Group benefits from a larger combined talent
pool and a high-quality management team with significant industry
experience formed from the best of both businesses; and
-- The business has an attractive retail proposition in the UK,
which is highly complementary to its online business.
However, since announcing the acquisition in September 2021
there have been material external changes that the Group must
address:
-- The Group's operating environment has become more
challenging. Global macroeconomic conditions are shifting and key
countries in which we operate are facing increasingly high
inflation, energy costs hikes, higher interest rates, and, in some
cases such as the UK, potential further regulatory changes.
-- The Group is more exposed to the effect of higher interest
rates given our current levels of debt. The ultimate structure of
the William Hill acquisition resulted in the Group's net debt being
higher than was anticipated when the acquisition was initially
announced. This has left the Group more exposed to changes in
interest rates (36% of gross debt is fixed and 64% has floating
rates), which has in turn impacted its ability to reinvest excess
cash flow in accelerating growth in the short term. In the coming
weeks and months, the Group may look to access debt capital
markets, using proceeds to repay up to GBP347m (equivalent) of bank
loans which were drawn to redeem the William Hill 2026 Notes.
-- Overall market growth rates across the Group's key online
markets have moderated. At the outset of the global COVID-19
pandemic in 2020, consumers around the world rotated overnight
towards e-commerce and digital forms of entertainment. This in turn
drove significantly higher growth rates for the Group over the
course of 2020 and 2021 compared to what it had achieved
previously. Since 2020, the 888 organisation increased operating
costs to manage the greater number of customers as well as
increasing regulatory and player protection requirements. The
William Hill organisation experienced the same trends, which were
compounded by corporate M&A activity distracting its focus and
allowing operational inefficiencies to creep in. Across the
organisation this means the Group needs to readjust the cost base
and its priorities to reflect the wider market environment.
888's updated strategic framework seeks to build on its
fundamental strengths and address these challenges through swift
actions and a clear plan, enabling the Group to realise its strong
potential. The roadmap is based around three phases:
-- Position (2022): Today we are a newly combined business with
world-class brands and market-leading positions across some of the
most attractive betting and gaming markets globally. However, today
the Group operates across multiple platforms and multiple teams,
with brands that are often competing against each other. These
factors currently result in certain inefficiencies, leading to
profit margins lower than industry peers. Additionally, financial
leverage is significantly above our mid-term target of 3x.
-- Plan (2023-2025): With clear strategic priorities of
integration and market focus, we will create a more streamlined
business focused on more select markets where the Group's
combination of high-quality products, exceptional brands, and
proven operating capabilities provide strong potential to create
additional market-leading positions. The integration to a single
global technology platform will deliver a scalable and efficient
business model, operating at higher profit margins. A highly
disciplined capital allocation plan will target net debt / EBITDA
of less than 3.5x by end of 2025.
-- Potential (2025+): With a powerful platform for future
growth, scaled business operations, and a robust and defensible
suite of competitive advantages, the Board believes the Group will
be well positioned to deliver strong, long-term, and sustainable
growth.
KEY EQUITY GROWTH LEVERS:
At the CMD the Group will also outline its clear framework to
drive enhanced shareholder returns, with a 2025 target of at least
35p of Adjusted EPS supported by the following key levers:
-- Revenue growth : every 1-point improvement in revenue growth
is estimated to be worth approximately 1p to EPS. The Group will
outline its approach to focus on a smaller number of the most
attractive markets globally in order to deliver its revenue growth
plans.
-- Adjusted EBITDA margin: every 1-point improvement in adjusted
EBITDA margin is estimated to be worth approximately 3p to EPS. The
Group has clear levers to pull to drive higher margins, including
integration synergies, optimisation of operations, a new brand
strategy, and increased focus on key markets.
-- Debt reduction : every GBP100 million in debt reduction is
estimated to be worth approximately 2p to EPS. The Group's capital
allocation model will prioritise debt reduction with a clear plan
to reach 3x adjusted net debt / EBITDA.
-- Debt optimisation: every 100bps in the cost of debt is
estimated to be worth approximately 3p to EPS, with some
flexibility in the debt structure enabling the Group to potentially
capture the future benefits of deleveraging.
CURRENT TRADING AND OUTLOOK:
Since the Q3 Trading Update on 18 October 2022, the Group has
continued to trade broadly in line with Board expectations, with
customer friendly results in October leading to slightly lower than
expected betting revenues.
As previously announced, revenues in the first nine months of
2022 were GBP1,393 million. Adjusted EBITDA for the same period was
approximately GBP217 million, with Q3 adjusted EBITDA margin of
approximately 16%.
For the full year 2022, the Group expects proforma revenue of
approximately GBP1.85 billion and Adjusted EBITDA in the range of
GBP305-315 million.
Q4 2022 adjusted EBITDA is expected to be in the range of
GBP88-98 million, which reflects significant cost mitigation
actions taken during H2 2022 together with the successful delivery
of initial synergies.
In 2023, the group expects an Adjusted EBITDA margin of at least
20%.
Itai Pazner, CEO of 888, commented:
"Today we set out our approach to unlocking the significant
benefits of the combination of 888 and William Hill and I am
pleased to share a more detailed view of our strategic direction
and priorities.
As a newly combined business we have significant scope for
improving our operating model and delivering efficiencies. Over the
next two years we plan to fully integrate our business - creating a
bigger, stronger and better organisation with higher profit
margins. We are focused on building a customer-led business with a
portfolio of world class brands that provide complementary
offerings, supporting our ambitions to drive market share growth in
some of the most attractive betting and gaming markets in the
world. This will be enabled by a scalable, unified proprietary
technology stack that will underpin our product and content
leadership focus.
While our financial leverage is currently higher than our
mid-term target, our streamlined operations and capital discipline
will give us a clear path to deleverage to less than 3.5x by the
end of 2025.
Our long-term potential remains exciting. Building our unified
tech platform will present us with real future growth opportunities
as we take advantage of our world class brands, product and content
leadership, and customer excellence to set our business for the
next decade of growth."
Attending the CMD
To register your interest in attending the CMD today please
email ir@888holdings.com . A live webcast of the event will be
available at
https://stream.brrmedia.co.uk/broadcast/637ba385b9c242479d555b58
and presentation materials will be made available at the Group's
corporate website shortly after 2pm GMT.
Enquiries and further information:
888 Holdings Plc +44(0) 800 029 3050
Itai Pazner, Chief Executive Officer
Yariv Dafna, Chief Financial Officer
Vaughan Lewis, Chief Strategy Officer
Investor Relations ir@888holdings.com
James Finney, Director of IR
Media 888@hudsonsandler.com
Hudson Sandler
Alex Brennan / Charlotte Cobb / Andy Richards +44(0) 207 796 4133
About 888 Holdings Plc:
888 Holdings plc (and together with its subsidiaries, "888" or
the "Group") is one of the world's leading betting and gaming
companies. In 2022, the Group acquired the international (non-US)
business of William Hill to create a global industry leader.
Headquartered in Gibraltar, and listed in London, the Group
operates from 15 offices around the world and employs over 12,000
people globally.
The Group's mission is to lead the gambling world in creating
the best betting and gaming experiences, bringing unrivalled
moments of excitement to people's day-to-day lives. It achieves
this by developing state-of-the-art technology and content-rich
products that provide fun, fair, and safe betting and gaming
entertainment to customers around the world.
The Group owns and operates internationally renowned brands
including 888casino, 888sport, 888poker, William Hill and Mr Green.
In addition, the Group operates the SI Sportsbook brand in the US
in partnership with Authentic Brands Group.
Find out more at:
http://corporate.888.com/
http://williamhillgroup.com/
Important Notices
This announcement may contain certain forward-looking
statements, beliefs or opinions, with respect to the financial
condition, results of operations and business of 888. These
statements, which contain the words "anticipate", "believe",
"intend", "estimate", "expect", "may", "will", "seek", "continue",
"aim", "target", "projected", "plan", "goal", "achieve", words of
similar meaning or other forward looking statements, reflect 888's
beliefs and expectations and are based on numerous assumptions
regarding 888's present and future business strategies and the
environment 888 will operate in and are subject to risks and
uncertainties that may cause actual results to differ materially.
No representation is made that any of these statements or forecasts
will come to pass or that any forecast results will be achieved.
Forward-looking statements involve inherent known and unknown
risks, uncertainties and contingencies because they relate to
events and depend on circumstances that may or may not occur in the
future and may cause the actual results, performance or
achievements of 888 to be materially different from those expressed
or implied by such forward looking statements. Many of these risks
and uncertainties relate to factors that are beyond 888's ability
to control or estimate precisely, such as future market conditions,
currency fluctuations, the behaviour of other market participants,
the actions of regulators and other factors such as 888's ability
to continue to obtain financing to meet its liquidity needs,
changes in the political, social and regulatory framework in which
888 operates or in economic or technological trends or conditions.
Past performance of 888 cannot be relied on as a guide to future
performance. As a result, you are cautioned not to place undue
reliance on such forward-looking statements. The list above is not
exhaustive and there are other factors that may cause 888's actual
results to differ materially from the forward-looking statements
contained in this announcement. Forward-looking statements speak
only as of their date and 888, its respective parent and subsidiary
undertakings, the subsidiary undertakings of such parent
undertakings, and any of such person's respective directors,
officers, employees, agents, affiliates or advisers expressly
disclaim any obligation to supplement, amend, update or revise any
of the forward-looking statements made herein, except where it
would be required to do so under applicable law. No statement in
this announcement is intended as a profit forecast or a profit
estimate and no statement in this announcement should be
interpreted to mean that the financial performance of 888 for the
current or future financial years would necessarily match or exceed
the historical published for 888
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