Evoke confirms 26% H1 adjusted EBITDA decline as Q3 green shoots come into view

Evoke has reported a 2% dip in H1 revenue from £881.6m to £862m, as bosses revealed initial Q3 performance is showing signs of progress of achieving company targets.

The 888 and William Hill parent company released its full H1 performance today, having published a brief trading update for the first six months of the year last month.

Management said the decline in group revenue was driven by underperformance in UK retail, where revenue fell 8%, against a small uptick in UK online revenue and flat international performance.

Reported EBITDA slumped 67% to £43.8m, with that figure impacted by £72m worth of exceptional items, primarily related to the company’s US B2C exit and integration costs.

Adjusted EBITDA declined 26% year on year (YoY) from £155.6m to £115.5m. Adjusted EBITDA margin sat at 13.4%, which was in line with the guidance laid out in the July trading update.

The 26% decline was attributed to a decline in revenue and a lower gross margin as a result of country and product mix shifts.

Post-tax losses soared 341% from £32.5m to £143.5m on a reported basis while on an adjusted basis, profit of £11.8m from H1 2023 slipped to a loss of £29.9m.

The main markets

UK and Ireland online revenue rose 0.8% to £338.6m, with a 5% increase in igaming revenue offset by a 5.3% dip in sports betting.

While the online casino benefited from “continued improvements in product and promotions”, the sports betting side of the business was hampered by lower-than-expected returns from Q1 marketing activities.

Marketing costs during H1 increased by £16m, or 12% YoY, as evoke said there had been a “significant shift in both commercial team and approach since”.

As a result, adjusted EBITDA in the division slipped 26% to £43.7m.

UK and Ireland retail revenue and adjusted EBITDA both slumped, by 7.5% and 37.5%, respectively. 

On the international front, revenue remained flat, with a 0.5% YoY decrease to £265m despite core markets of Italy, Spain and Denmark delivering a combined revenue improvement of 11.4%.

Evoke said reduced revenue in its smaller international markets, as well as the exits from the US and the sale of its Latvian assets to Paf, had pushed back against gains made elsewhere. 

Elsewhere, total revenue from sports betting fell 8.2% YoY to £321m alongside a 7.1% drop in stakes.

Gaming revenue of £541m represented a 1.7% YoY increase for the vertical.

On the right path

The H1 update also included insight into how evoke has performed mid-way through Q3, with the London-listed operator previously having guided for a 5% to 9% revenue rise in H2.

H2 revenue is expected to land between £871m and £904m against H2 2023’s revenue of £829m.

Evoke said Q3 revenue had been “consistent” with the target and there had been “clear drivers of improvement” in H2.

The group’s marketing ratio for the second half of the year is expected to be between 18% and 19% compared to 25% in H1 in line with the planned overspend.

This would translate to marketing costs being around £35m to £40m lower than H1, while operating costs are already £5m to £10m lower due to organisational changes.

The firm pointed to the repositioning of the Mr Green and Hills brands, the launch of a new bet builder product ahead of Euro 2024 and an “overhaul” of the development pipeline.

Evoke has also reduced the number of “layers” in the company from 10 to six as it looks to streamline operations.

The business added there were no changes in its full-year 2025 expectations, with an adjusted EBITDA margin of at least 20%.

Per Widerström, evoke CEO, said that while H1 was “disappointing”, the potential for growth in the business was evident.

He said: “As I said in our July trading update, while the financial performance in the first half was disappointing and behind our initial plan, the underlying health of the business is continually getting stronger. 

“The corrective actions we have already taken give us even more confidence that our strategic approach is sound and that we will achieve sustainable success. We are completely transforming this business.”

He added: “We have already taken bold, decisive actions to both instigate a turnaround in short-term trading performance while simultaneously investing into the group’s capabilities to drive step-change value creation and build a bigger, more profitable, more sustainable and more cash generative business in the future.

“We have a clear plan, vision and financial targets. As a result of our strategic progress and the enhancements already made to the business, I am even more confident about delivering our value creation plan and driving sustainable profitable growth over the coming years.”

Evoke shares were up 1% to 55p, at the time of writing, although the stock is down 42% so far this year.