888 reveals debt woes as it targets revenue of £2bn in 2025

888 has unveiled its ambitious three-year growth strategy through to 2025 but confirmed the macroeconomic environment and rising interest rates were having a material impact on the business.

As part of its Capital Markets Days (CMD), the operator announced a new set of financial targets that it hopes to hit by 2025.

These include reaching revenue of above £2bn with 888 hoping to achieve this by refining its strategy to focus on a smaller number of key markets in an effort to achieve a greater market share.

The operator touched on the competing nature of its 888 and acquired William Hill brands, with profit margins being driven down due to this.

There is also the aim to have an adjusted EBITDA margin of above 23%. The London-listed operator is aiming to achieve this by building scalability into the now enlarged group’s operating model by using the unified proprietary tech to drive a higher profit margin.

888 has also set its sights on achieving an adjusted earnings per share of at least 35p by focusing on core equity growth drivers to deliver the benefits to the group.

However, 888 noted that it has faced a “more challenging” operating environment due to the shifting global macroeconomic environment.

The operator cited rising inflation, energy cost increases, higher interest rates and in the case of some markets, namely the UK, the potential for further regulatory change.

888 confirmed that due to rising interest rates, the group’s level of debt has been affected.

The fluctuation in interest rates has affected the firm’s ability to reinvest excess cash flow, and it announced that it would look to access debt capital markets in the coming months, using proceeds to repay up to £347m of bank loans as part of the William Hill deal.

Touching on the William Hill assets, 888 confirmed it would ramp up its cost synergies following the acquisition.

888 noted a new pre-tax cost synergy target of around £150m, up from the previous target of £100m, with £34m of this to be capital expenditure-related synergies.

Additionally, approximately £87m in operating cost synergies are expected to be achieved next year.

Following on from this, the operator has set out a plan for the next three years which will see it focus on the aforementioned key markets and put in place a new highly disciplined capital allocation plan that 888 hopes will target net debt of less than 3.5x by the end of 2025.

888 said it would drive to a “single global technology platform” across its global brands which in turn would deliver a “scalable and efficient business model, operating at higher profit margins”.

Itai Pazner, CEO of 888, said: “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,” Panzer concluded.

The firm also provided an update to current trading, with 888’s Q4 performance broadly in line with expectations, although customer-friendly results in October had led to slightly lower than expected betting revenue.

For full-year 2022, 888 projects revenue of around £1.85bn and adjusted EBITDA between £305m to £315m, with Q4 EBITDA expected to be between £88m and £98m due to cost mitigation actions taken in H2 2022.

Adjusted EBITDA margin in 2023 is anticipated to be at least 20%.

This update follows last month’s announcement of the firm’s dip in revenue, which 888 blamed on increasing safety controls for online users in the UK and the closure of its Dutch operations.

Total UK revenue fell 13% year-on-year to £171m, which the firm said was down to a reduction in average spend per player, which dropped 14%.