Betting Group 888 Reports £120m Net Loss in Latest Financial Report
888 Holdings, the group that owns betting sites 888sport and William Hill, has reported significant net loss in its financial reports for the 2022/2023 financial year. According to the financial statistics, the group has admitted a net financial loss of £120m. This is by no means a reflection of the company’s financial position however. By all accounts, 888 Holdings is performing well and has had a good year of growth and expansion.
Growth and expansion are exactly why 888 Holdings has seen a net loss of £120m. In July 2022, the group acquired one of the leading UK betting sites William Hill for £2bn. The financial statement points out that, while the group saw increased earnings, the purchase brought down the profit due to “increased financing costs from the debt on acquisition of William Hill”.
Putting aside the net loss, all other financial markers show that 888 Holdings is on top of its game. According to the report, the revenue improvement for 2022 is 74% compared to 2021, amounting to £1.2bn (compared to £712.3m). This includes revenues acquired through William Hill’s betting sites and physical betting locations. Considering the revenue on a pro forma basis, there was a drop of 3% year-on-year, from £1.9bn in 2021 to £1.85bn in 2022. In relation to this, the company stated that the drop “primarily reflects the additional player safety checks implemented in the UK&I online business across both brands over the previous two years with a 20% reduction in UK&I online revenue in FY 2022 compared to FY 2021”.
Looking at the numbers for 888 Holdings internationally, it appears that the company’s betting sites in other jurisdictions underperformed by 9%, bringing in £613.7m compared to £671.4m in 2021. This has been attributed to the series of regulatory changes that took place across Europe and the rest of the world, forcing the group to reform its operations. The biggest hit for 888 Holdings was the regulatory changes in the Netherlands, which led to the closure of its betting sites and all operations in the country at the end of the third quarter of 2021.
On the other hand, land-based betting performed a lot better than the betting sites, noting a 54% increase from £336.8m in 2021 to £519m in 2022. This is because all restrictions resulting from the Coronavirus pandemic have finally been lifted and it’s once again business as usual for retail betting. It appears that this has caused online revenue from iGaming to normalise itself through a drop of 11% (£968m), and sports betting fell by 24% (£363.1m). While a large number of bettors have been converted and prefer to use the comfort and advanced features of the UK betting sites ran by 888 Holdings, some die-hard physical customers have taken their business back to the retail locations. 888 also pointed out that some of the drop was due to 2021 having had a more favourable sports betting climate with additional fixtures across major football leagues.
888’s EBITDA has been adjusted accordingly to £217.9m, which is an 82% increase from 2021’s £119.7m, and a 17.6% margin, compared to a 16.8% margin in 2021. On a pro forma basis, the increase in EBITDA is 15.1% (£310.6m), with a 16.8% margin. The company points out that it has achieved this through focusing on cost efficiency and on cutting down on marketing costs through synergy delivery and saving through the “optimised brand marketing strategy across different markets”. The group’s debt currently sits at £1.73bn.
Commenting on the financial report, 888’s Executive Chair Lord Mendelsohn stated:
“The combination with William Hill transformed the group and brought together two exceptional and complementary businesses to create one of the world’s leading betting and gaming businesses. The group’s financial performance in the period primarily reflected the extensive actions being taken to drive higher standards of player protection. While recent compliance issues in the Middle East were very disappointing, they have underlined the importance of our enhanced and proactive risk management framework. We have made positive progress with the integration enabling us to upgrade our synergy target from £100m to £150m. In 2023 we remain on track to deliver higher profitability as we deliver against our clear strategic priorities. Our clear priorities of integration, market focus, and deleveraging give us confidence in our 2025 targets, as we build a stronger and more sustainable business for the future.”
In recent months, 888 Holdings was often in the spotlight, and not always favourably. On 30/01/2023, the company lost its CEO and Executive Director Itai Pazner, who decided to resign with an immediate effect. This is largely believed to be due to the company’s issues in the Middle East, where it was discovered that compliance and safer gambling policy failures took place in relation to the company’s VIP customers. The Chief Financial Officer Yariv Dafna is also due to leave the Group at the end of 2023, which is likely to cause a further period of instability. Unrelated to this, less than a month ago the company suffered a regulatory fine of £19m, the highest-ever imposed on any of the UK betting sites by the UK Gambling Commission, however this was due to historical failings of William Hill prior to the acquisition by 888 Holdings.
Despite all this, the company appears to have ambitious plans for its operations, and is planning on further expansion and growth. It expects a further drop in revenue in 2023, but a higher EBITDA, and is planning to focus on sustainable revenue streams from its betting sites and physical betting and gaming locations. The group is planning to work on its synergies and business integration, focus on its core markets and utilise growing opportunities, invest in what makes it a key competitor on the betting market, support sustainable growth, and, finally, reduce its debt and increase its capital efficiency.