Shares in London-listed 888 are trading lower today, after the business announced it had turned to a loss after tax in H1 2023.

Group revenue was up 165.5% year-on-year to £881.6m in H1, due to the operator’s acquisition of William Hill which completed following the end of the H1 2022 reporting period, in July last year.

On a pro-forma basis however, (calculated as if 888 had owned William Hill throughout the comparative period), group revenue was down by 6.5%, which the operator said was the result of compliance changes in dotcom markets, together with a newly refined marketing approach and market focus within the business.

Revenue breakdown

888 has “proactively shifted the business mix and improved sustainability” since last year by focusing on regulated markets, it said, with 95% of revenue deriving from locally regulated or taxed markets in H1 2023.

Still, in its UK and Ireland online operations, 888 reported revenue down 9%, with the lower revenue reflecting the implementation of proactive player safety measures and a refined marketing approach, it said.

Revenue across its UK retail arm grew by 6%, meanwhile, as international online revenue dropped 14% due to the implementation of compliance changes in certain dotcom markets, together with a slower than expected recovery in the Middle East.

Turn to loss

Group adjusted EBITDA more than tripled to £156m compared to the prior-year period before the acquisition, while pro-forma adjusted EBITDA grew by a more modest 9%.

The business declared a loss after tax of £33m for the half-year, however, compared to a £12m profit after tax in H1 2022.

The turn to loss was driven by increased interest costs on 888’s debt together with the amortisation of acquired intangibles and certain one-off costs related to the acquisition, the company said.

Net debt was reduced by £68m to £1.66bn, giving the business a leverage ratio of 5.1x as of June 2023, down from 5.6x in December 2022.

With cash reserves of £188m and an undrawn £150m revolving credit facility, 888 said it had total liquidity of over £300m at the end of the reporting period.

2023 outlook and commentary

Looking to the rest of the year, 888 expects revenue to be lower than pro-forma 2022 by a low- to mid-single digit percentage, it said.

Still, the business also expects “significantly higher” adjusted EBITDA at a margin of 20% for the full-year 2023.

That would mark a significant improvement from 2022’s full-year adjusted EBITDA margin of 16.8%, while the business also aims to have a leverage ratio of under 5x by year-end.

“I am very pleased with the progress we have made in the first half of the year as the group delivered against the plans we committed to at our investor day last year, while also successfully navigating business, market and regulatory volatility,” said 888 executive chair Lord Mendelsohn.

“We made very strong progress with the execution of our integration plan and we now expect to realise the full £150m of synergies in 2024, a year earlier than the original plan. 

“Our strong cash discipline and higher profits also enabled a 0.5x reduction in our leverage. We have successfully delivered against our focused market strategy, changing the mix of our revenue and creating a more profitable and sustainable platform for future growth.”

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