Five things we learned from evoke’s H1 trading update

Evoke, the parent company to William Hill, 888 and Mr Green, is set to miss its H1 financial targets after posting a trading update for the first six months of the year.

Within that update, adjusted EBITDA could land between £35m and £40m short of previous expectations, with revenue down 2% to £862m for H1. On a Q2 basis, revenue is expected to land at £431m, which evoke said was “broadly stable both sequentially and versus the prior year”.

Highlights included a 6% increase in UK online gaming, while Denmark, Italy and Spain are showing double-digit growth. 

However, a four-pronged impact from marketing, customer segmentation, product changes in light of regulation and retail shortcomings led to the business missing its targets. Regulus Partners went as far as describing the update as a “profit warning”.

Taking on questions from analysts and the media in a post-update call, CEO Per Widerström and CFO Sean Wilkins laid out their frustrations to the start of the year, but cut a bullish and confident pair on their plan for future growth.

Here, EGR picks out five key talking points from the 40-minute presentation as Widerström and his team look to return the operator back to growth.

In the rearview mirror

In an open and honest slide included in the presentation deck, evoke outlined four key drivers that resulted in its H1 revenue and EBITDA shortfalls. Those came in the shape of planned marketing overspend returns being lower than expected, “sub-optimal” customer segmentation, impacts from short-term changes made in light of regulatory pressures and an uncompetitive retail product.

The marketing spend, focused on this year’s Cheltenham Festival, did not bear the fruit that was envisioned, with changes now having been made to the commercial leadership team and new ROI tracking put in place.

“Robust” player targeting is now set to be put in place, while changes to “pricing and promotions” that impacted brand consideration now have a more “consistent approach”. A new retail supply deal with tech firm Inspired Entertainment is expected to fix the woes in that department.

This manifested in EBITDA being roughly £35m to £40m lower than expected, with Wilkins noting this split would hit about £20m online, £10m in retail and a further £10m “elsewhere”.

He said: “On reflection, our UK plans, both online and retail, were far too optimistic, particularly in terms of expected online marketing returns. As you can see, we’ve taken decisive action to address this. I’m really confident the actions that we’ve taken put us back on track in the second half [of 2024] and beyond.”

Lapped up

No analyst call for a UK-facing operator would be complete without a reference to affordability checks and safer gambling measures which have hampered firms over the past few years. With the financial risk checks pilot due to begin next month, and a £5 stake limit on slots for over 25s and £2 for 18 to 24-year-olds in September, pressures are evident. 

Operators have been making action plans and deploying the measures well ahead of time, which has seen earnings impacted. Many have said that the implementation will actually result in a better environment for bookmakers and customers – something Wilkins reaffirmed in his comments during the call.

“With the regulatory headwinds, we’ve now lapped the implementations that we made to be in line with the requirements from the regulator. We took a cautious approach. I’ve talked about it before,” he said.

“A good example of that is that we implemented £5 limits on slots in line with changes that we’re going to see later in the year. 

“If anything, we see this as an improvement, particularly around the customer experience, to make sure that the safer gambling journeys we’re implementing are customer friendly.”

Bet builder boost

While it was heartbreak for England in Germany on 14 July, evoke said the first half of Euro 2024, which coincided with the end of Q2, was positive for the firm. Bookmakers across the board have hailed a strong tournament, with Kindred Group’s Ali Gill previously telling EGR it had been an “incredibly tough [time] for the punters”.

And it seems evoke brands were no different, with a particularly strong increase in bet builders given the business deployed its new product just before the tournament kicked off on 14 June.

Wilkins said: “You’ll all know that Euro 2024 was definitely bookie-favourable. Our new bet builder dropped just before the Euros and we were delighted to see that 20% of staking was on bet builders.

“The margin was good. The one caveat to that is when you do have bookmaker-friendly results, that does prevent that recycling back into turnover and staking. Turnover and staking was in line whereas margin was high.

“There is upside that we see from the Euros; being a good recruitment tool for customers.”

On the scales

Away from the UK and Ireland, bosses pointed to a 2% year-on-year rise for Q2 revenue from the international division, with revenue landing at £129m. On a H1 basis, growth was flat, with the first six months of 2024 returning £265m in revenue against £266m in H1 2023.

Within that division, evoke confirmed Italy, Spain and Denmark now equate to 60% of revenue, with double-digit growth found in the trio during the quarter. However, this was offset by reduced revenue from the firm’s so-called “optimise” markets which fall outside of the core of the above trio, plus the UK.

Evoke is live in Romania, Canada, Germany and Sweden, as well as a host of other international markets. When asked by EGR during the analyst call if the majority power of the triumvirate would lead to reviews of operations in smaller markets, Widerström said scaling up would come when the opportunity presented itself.

 “We are very happy to see the double-digit growth in Italy, Spain and Denmark, with some very good momentum there,” the CEO said. 

“When it comes to the other optimise markets, we are absolutely relentlessly focused on driving underlying cash flow, operating cash flow and profitable growth. 

“When we see the right paybacks of our investment, the right level of return on investment, we will scale up as we will scale down initiatives and investments when we don’t see the underlying growth and profitably. So, we are constantly, revising and optimising the way we go to the market.”

Confidence for future

“A disappointing start to the year” was how Widerström described H1 as part of his opening comments on the call. The Swede explicitly recognises the challenges that lay ahead but isn’t shying away. 

Being behind on expected adjusted EBITDA by between £35m and £40m was driven by missing the revenue target and the timing of cost savings. As mentioned, the planned marketing overspend resulted in lower-than-expected returns and a “sub-optimal” approach to customer segmentation also took a toll.

However, the CEO remains bullish on the future. He talked up the repositing of Mr Green and William Hill, as well as improvements across product, including the updates to the retail estate via a new deal with Inspired Entertainment.

Revenue is expected to grow between 5% and 9%, meaning H2 revenue should land between £871m and £904m, against H2 2023’s £829m, while the £30m cost optimisation programme should be fully realised in the second half of the year. EBITDA margin is also expected to hit 21%.

Widerström said: “I do not take this shortfall lightly, and I’ve been working with all of my team to address this. But despite the shortfall, I’ve been really pleased with improvement in business health and the clear signs the strategy is working.

“This is a new team undertaking a complete transformation of a business, and we must continue to relentlessly focus on mid- and long-term value creation.

“We are implementing our new global operating model, a lower cost, and a faster pace of execution. We are sticking with our plan, and with the enhancements we have made, we are even more confident about the future.”

EGR‘s Julian Rogers recently sat down for an exclusive interview with Widerström in which he lifted the lid on his plans for the multi-brand operator.