888 shares slide as firm anticipates 10% Q3 revenue drop
London-listed operator points to four key drivers impacting the business as 2024 pegged as growth year with further synergies planned
888 is expecting Q3 revenue to fall 10% compared to Q3 2022, to around £400m, as a myriad of factors have weighed in on short-term performance.
The operator joined fellow London-listed firm Entain in providing a brief Q3 market update, in which it forecast that revenue would be below expectations due to significant impacts on the business.
The news sent the firm’s share price sliding in early morning trading, down 16% at the time of writing to 92.60p.
888 outlined four key drivers of year-on-year revenue decline, which it said had led to “mixed” performance across the group.
Firstly, the firm pointed to the “ongoing significant impact” from compliance changes in its dotcom markets which has resulted in slower recovery across revenue and customer activity than initially expected.
Secondly, a series of customer-friendly sports results impacted win margin in the UK and international markets during September.
Staying with the UK, 888 added that the ongoing impact of the safer gambling changes in the market had taken its toll, although it added that with “strong growth in active customers” it was in line for a return to revenue growth in 2024.
Finally, a short-term impact derived from a change in marketing approach to focus on higher returns and a brand-led approach was also earmarked as a core reason behind the decline in revenue.
Despite the four key drivers, 888 said its retail arm continues to perform strongly with “broadly stable revenue” while, as of 22 September, the business had total liquidity of more than £300m.
Looking ahead to the remainder of the year and 2024, 888 noted its synergy delivery was on track and significant cost savings were being executed to mitigate year-to-date revenue performance against initial estimates.
The company confirmed it had identified further synergy opportunities across the business, but added any savings borne out of these measures would be reinvested into growth initiatives.
On revenue, 888 said that it expects Q4 revenue to be “sequentially higher” than Q3 but lower by “mid-single digit” compared to Q4 2022.
The operator added that adjusted EBITDA margin for full-year 2023 is expected to land between 18% and 19%.
Lord Mendelsohn, 888 executive chair, noted that while Q3 performance had been “below expectations”, he was confident in the future success of the business.
He said: “We are making significant strides to improve the quality and long-term sustainability of our revenues 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 £2bn of revenue in 2025. I look forward to the coming years with confidence,” he added.