888 888 Holdings Plc

26 March 2024

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

FOR IMMEDIATE RELEASE

888 Holdings Plc

("888" or "the Group")

FY2023 Results and Value Creation Plan

Clear strategy for success and enhanced leadership team sets foundations for future sustainable profitable growth

New Group identity, strategic framework and Value Creation Plan unveiled

888 (LSE: 888), one of the world's leading betting and gaming companies with internationally renowned brands including William Hill, 888 and Mr Green, today announces its audited financial results for the year ended 31 December 2023 ("FY23" or the "Period").

Financial summary:

·    FY23 financial performance in-line with January 2024 Post-Close Trading Update:

·     Revenue of £1,711m with higher quality mix driven by proactive mix shift away from dotcom markets and customer mix changes in the UK as a result of additional safer gambling measures, alongside the change in the Group's marketing approach to focus more on sustainable revenue and profitability.

·    Adjusted EBITDA Margin for FY23 of 18.0%, consistent with the previously indicated range of 18-19% and an increase from 16.8% in FY22 as improved profitability and focus on higher return marketing spend more than offset the impact of dotcom market changes.

·     Cash (excluding customer balances) as at 31 December 2023 of £128m, together with undrawn RCF of £150m, giving total liquidity of approximately £278m as at 31 December 2023. Net debt fell slightly to £1,717m, partially benefitting from FX movements, resulting in an adjusted net debt / EBITDA ratio of 5.6x, stable year over year.

New Value Creation Plan ("VCP") - A strategy for success:

·   Appointment of Per Widerström as Chief Executive Officer in October 2023, with swift and decisive actions taken to position the Group for long term success.

·   Strengthened executive team with outstanding skills and experience to drive execution - seven out of 10 positions are new appointments. Further to the January 2024 Post Close Trading Update the Group appointed Mark Kemp as Chief Commercial Officer and Stephen Sheridan as Chief Customer & Operating Officer in March 2024.

·  Group operating model reset, removing duplication and inefficiencies while enhancing accountability, as well as delivering approximately £30m of additional annual cost savings.

·    New strategic framework established, with a clear vision of what success looks like and the strategy to get there. As part of this the Group has commenced six strategic initiatives to drive operational excellence and prepare the business for step-change value creation. Through a laser focus on execution the Group will strengthen its core capabilities and competitive advantages, creating a stronger platform for profitable growth.

·    Simplified market archetypes to two categories: Core Markets (UK, Italy, Spain, and Denmark) with in-country scale and market-leading positions, and Optimise Markets. This supports greater focus and investment in markets where the Group will generate strong returns while maximising cash-flow from all markets.

·     In line with this market focus, strategic review of the US B2C business initiated in Q1 2024 to consider all potential alternatives that can deliver value for the business, which will deliver significant cost savings.

·    Proposed change of the Group's name to evoke plc, subject to shareholder approval at the 2024 AGM, to better reflect the strength of the Group's multi-brand operating model and its vision and mission to make life more interesting by delighting players with world-class betting and gaming experiences. 

VCP will drive high equity returns with strong execution enhanced by reducing leverage:

·    Bold new medium-term targets to deliver high return on equity from sustainable profitable growth:

·       Drive profitable and sustainable revenue growth: 5-9% revenue growth per year.

·      Improve profitability and efficiency through operating leverage: Adjusted EBITDA margin expansion of c.100 basis points per year.

·      Deleverage through disciplined capital allocation: leverage of below 3.5x by the end of 2026.

Current trading and outlook:

·    Q1 2024 revenue expected to be in the range of £420-430m³.

·    Positive outlook for FY24 revenue consistent with medium-term targets, with consistent growth in active players driving confidence in strong revenue growth online in both the UK and International segments.

·    Trading is consistent with the Board's previously announced expectations for Adjusted EBITDA for 2024⁴.

Per Widerström, CEO of 888, commented:

"It is incredibly exciting to announce our Value Creation Plan, our strategy for success, our new financial targets, and our new corporate identity. Today marks the beginning of an exciting new dawn for this business.

Having joined the company in October 2023 my conviction in the significant opportunity for the Group is stronger than ever. We have acted with pace, decisiveness and urgency to build a clear strategy to deliver success. These actions include significantly strengthening our executive leadership team and developing a new strategic framework and Value Creation Plan.

I firmly believe that the Group now has all the key ingredients for long-term success: leading positions in growing markets with high and rising barriers to entry; powerful proprietary technology; a top-class management team; and some of the strongest betting and gaming brands in the world.

We are now clear on what success looks like, we have the team and capabilities to deliver, and I am confident that the execution of our plan will deliver a high return on equity from sustainable profitable growth, enhanced by deleveraging."

Notes

¹ FY22 is pro-forma as if 888 had owned William Hill for the entire period (acquisition completed 1 July 2022) and excludes the 888 bingo business (sold in July 2022).

² Adjusted EBITDA is defined as earnings before interest, tax, depreciation and amortisation, and excluding share based payment charges, foreign exchange losses and exceptional items and other defined adjustments. Adjusted measures, including Adjusted EBITDA, are alternative performance measures ("APMs"). These APMs should be considered in addition to, and are not intended to be a substitute for, IFRS measurements. As they are not defined by International Financial Reporting Standards, they may not be directly comparable with other companies' APMs. The Directors believe these APMs provide additional useful information for understanding performance of the Group. They are used to enhance the comparability of information between reporting periods and are used by management for performance analysis and planning. An explanation of our adjusted results, including a reconciliation to the statutory results is provided in the CFO report.

³ Assumes normalised win margins for the remainder of the quarter.

⁴ 17 January 2024 Post Close Trading Update outlined expectations for 2024 Adjusted EBITDA to be approximately £340m.

Enquiries and further information:

About 888 Holdings Plc:

888 Holdings plc (and together with its subsidiaries, "888" or the "Group") is one of the world's leading betting and gaming companies. The Group owns and operates internationally renowned brands including William Hill, 888, and Mr Green. Incorporated in Gibraltar, and headquartered and listed in London, the Group operates from offices around the world.

The Group's vision is to make life more interesting and its mission is to delight players with world-class betting and gaming experiences.

Find out more at:

http://corporate.888.com/

Important Notices

This announcement may contain certain forward-looking statements, beliefs or opinions, with respect to the financial condition, results of operations and business of 888. These statements, which contain the words "anticipate", "believe", "intend", "estimate", "expect", "may", "will", "seek", "continue", "aim", "target", "projected", "plan", "goal", "achieve", words of similar meaning or other forward looking statements, reflect 888's beliefs and expectations and are based on numerous assumptions regarding 888's present and future business strategies and the environment 888 will operate in and are subject to risks and uncertainties that may cause actual results to differ materially. No representation is made that any of these statements or forecasts will come to pass or that any forecast results will be achieved. Forward-looking statements involve inherent known and unknown risks, uncertainties and contingencies because they relate to events and depend on circumstances that may or may not occur in the future and may cause the actual results, performance or achievements of 888 to be materially different from those expressed or implied by such forward looking statements. Many of these risks and uncertainties relate to factors that are beyond 888's ability to control or estimate precisely, such as future market conditions, currency fluctuations, the behaviour of other market participants, the actions of regulators and other factors such as 888's ability to continue to obtain financing to meet its liquidity needs, changes in the political, social and regulatory framework in which 888 operates or in economic or technological trends or conditions. Past performance of 888 cannot be relied on as a guide to future performance. As a result, you are cautioned not to place undue reliance on such forward-looking statements. The list above is not exhaustive and there are other factors that may cause 888's actual results to differ materially from the forward-looking statements contained in this announcement. Forward-looking statements speak only as of their date and 888, its respective parent and subsidiary undertakings, the subsidiary undertakings of such parent undertakings, and any of such person's respective directors, officers, employees, agents, affiliates or advisers expressly disclaim any obligation to supplement, amend, update or revise any of the forward-looking statements made herein, except where it would be required to do so under applicable law. No statement in this announcement is intended as a profit forecast or a profit estimate and no statement in this announcement should be interpreted to mean that the financial performance of 888 for the current or future financial years would necessarily match or exceed the historical published for 888.

CHIEF EXECUTIVE OFFICER'S REVIEW

Introduction

I am pleased to take this opportunity in my first statement as CEO of the Group to write to our stakeholders and outline our vision for the future, including our new strategic framework and exciting value creation plan.

The world of betting and gaming has changed significantly over the past decade. There has been a continued push towards local regulation and ever-increasing barriers to entry through significant compliance requirements. This is coupled with rapid technological advancements fundamentally changing the way customers interact with our products and brands.

What that means today is that for those businesses seeking to follow the locally regulated path, scale is critical. It is why industry consolidation continues at pace and was a key strategic benefit of 888 acquiring William Hill in 2022. Outsized returns also accrue to those operators that take leading positions within target markets. To build leading positions, operators need first-class brands, leading products, and excellent people. Our business has these key ingredients for success, but it has yet to unlock its full potential, in part because of the significant impact of regulatory and compliance changes we have made in the past two years.

Renewed focus and a new identity

The regulatory and compliance changes we have made in recent years in some of our key regulated markets as well as in our dotcom markets have changed the mix of our business. As a result of this, coupled with the integration activities undertaken to date, the combined business today is fundamentally different to the previous individual businesses that made up the combination.

The consumer brands remain as strong as ever, but to reflect the fact that this is a new company on a new journey, we are proposing to change the name of the Group to evoke plc. This will be subject to shareholder approval at our upcoming 2024 AGM.

We look forward to sharing more about our new corporate brand in due course, but we believe that creating an identity that better reflects the combined Group, our mission and values, alongside the clear strategic framework and value creation plan we are announcing today, will better support the business in reaching its significant potential.

Moving forward, creating value through clarity of what success looks like

In order for the business to achieve its full potential, as well as having a clear Group-wide vision and mission to explain why we are here, it is critical that everyone in the Company has absolute clarity on what success looks like, including what we plan to do, how we will execute our plans, and where we intend to focus in order to maximise our returns.

That's why since joining the business on 16 October 2023 I have made rapid progress in formulating our strategic framework, translating this into a value creation plan, and ensuring that everyone in the business is fully aligned behind it through our One Company programme.

Creating value

Starting with what we will do; we will deliver high return on equity underpinned by the following key principles:

1.     Driving profitable and sustainable revenue growth. We will deliver profitable and sustainable revenue growth by both increasing our player base and by growing share of wallet with our customers. We will utilise our improved customer lifecycle management capabilities to ensure strong sustainable revenues, always underpinned by a clear customer value proposition and our uncompromising safer gambling principles.

2.     Improving profitability and efficiency through operating leverage. We will improve profitability by investing into capability build up, in particular through insights, AI, and intelligent automation. Along with our 'Glocal' operating model and supported by our proprietary technology, this will increase our efficiency and deliver greater productivity at lower cost, ensuring that the operating leverage in our business model delivers profitable growth.

3.     Being highly disciplined with our use of capital. Our financial leverage is relatively high in the context of our sector, but I firmly believe this will be a significant positive driver of our return on equity and will magnify the returns that we will generate in the coming years. Our business is highly cash generative and we will use this cash wisely to ensure we deliver profitable growth and deleveraging, thereby multiplying our return on equity.

The above key drivers of return on equity underpin our bold medium-term targets, which further define what success looks like for the company:

·      Revenue growth of 5-9% per year

·      Adjusted EBITDA margin expansion of 100 basis points per year

·      Leverage of below 3.5x by the end of 2026

Executing our plan

Our success in achieving these goals will be underpinned by our ability to drive successful operational execution, which will be my key priority over the coming years. This is the how of our strategic framework.

Our focus will be on strengthening the Group's core capabilities and competitive advantages to create a scalable platform for profitable growth while being laser focused on our customer value proposition. This will comprise three key components:

·      First-class and consistent customer value propositions: Ensuring our distinct brands and products are tuned in to our customer needs, offering personalised value with sustainability embedded into every offering.

·      Operational excellence driven by data insights and intelligent automation: This allows us to build scalability to drive operating leverage, ensure consistent execution, deliver high quality outcomes for customers, and unlock new opportunities for efficiency.

·      A winning culture: We are committed to fostering a culture that empowers our colleagues to unleash their full potential and contribute to our collective success.

In order to turn this into tangible actions, drive execution and value creation we have created six strategic initiatives, which provide the roadmap for delivering our value creation plan:

1.     Customer lifecycle management: Building personalised and long-term customer relationships which are critical to sustainable growth, driven by intelligent automation.

2.     Customer value propositions: Continuously differentiating our brands from the competition and being relevant to specific customer needs.

3.     Operations 2.0: Leveraging AI and automation to drive efficiency, effectiveness, and scalability.

4.     Product and Technology foundation: Unifying our proprietary technology platform while delivering outstanding products that are aligned with our brands and customer needs.

5.     Winning organisation: One Company with a "Glocal" operating model that has a shared culture that empowers everyone in the business and helps us to attract and retain the best talent to power our value creation journey.

6.     ESG: Integrating environmental, social, and governance principles into our core operations to ensure sustainable long-term value creation.

Refined market focus

Given outsized returns go hand in hand with market leadership positions, it is more important than ever in today's regulatory and competitive environment that we are laser-focused on where we invest in order to generate superior returns on investment.

Having reviewed our market focus approach, we have redefined our market archetypes to fall under two key categories: Core Markets and Optimise Markets. This simplified approach enables increased focus and investment in our core markets, while maximising cashflow from all markets.

We will remain laser-focused on our four Core Markets - the UK, Italy, Spain, and Denmark - which already generate approximately 85% of our total revenue and nearly 80% of our online revenue, and where we have established strong positions. These are markets that boast attractive long-term growth potential, high barriers to entry, and established regulatory frameworks. In these markets we will continue to leverage our local expertise and diverse brand portfolio to increase market share and drive sustainable profitable growth.

In all other markets, our Optimise category, we will prioritize cash flow generation and value maximization through leveraging our enhanced capabilities and scale. We will identify future potential core markets where we can target podium positions with our improved organic capabilities or through alternative strategic routes in the coming years. At the same time, we will exit unprofitable markets or monetize assets through alternative operating models, such as local partnerships.

New group executive team and operating model that is fit for purpose and future proof

One of the key ingredients to success and drive value creation is having the right people. We have some fantastic people in the business, and an important part of my job is to empower them to add real value as we deliver our strategic priorities. A critical part of this is ensuring we have the most effective management structure and operating model. Often this means fewer layers, optimisation of spans-of-control, and establishment of centres of excellence to provide world-class service. Clarity of accountability is also paramount.

Over recent months we have implemented several changes to our organisational structure to ensure it is fully aligned to deliver our new strategic framework and value creation plan. This has included the transformation of our operating model into a "Glocal" structure with a revised Group Executive team, with each member having clearly defined areas of accountability across the business. We have significantly strengthened our Group Executive team with seven new external hires to fill critical roles across product and technology, operations, commercial, finance, legal and growth.

We have assembled a truly top-quality Group Executive team that will be laser focused on delivering upon our strategic framework and value creation plan and I am absolutely confident we will unlock our full potential.

My commitment to our value creation journey

We are at the beginning of an exciting new journey. We will build on our strong foundations through a clear strategy and focused plan that will deliver sustainable profitable growth and unlock significant value creation. I look forward to updating shareholders and our wider stakeholders on progress against our plans over the coming months and years.

CHIEF FINANCIAL OFFICER'S REPORT - BUSINESS & FINANCIAL REVIEW

INTRODUCTION

Having joined the Group on 1 February 2024 it was clear that 2023 was a critical year for the business, with strong delivery against the previously increased and accelerated synergy target, as well as fundamental revenue mix shifts that have improved the sustainability of the business.

These mix shifts, both in terms of the country mix towards more regulated markets and the customer mix in the UK towards lower spending customers, had a significant negative impact on the financial results for 2023 and the year-over-year growth rates observed on a pro-forma basis.

The business is now at a critical but exciting juncture. We must invest in improving our capabilities in a few critical areas to successfully drive sustainable, profitable growth. Our clear plans are outlined in the CEO report and will be supported by robust financial governance including highly disciplined capital allocation. We will ensure our growth plans support deleveraging and enable strong shareholder returns in the coming years.

Outlook

We have a positive outlook for FY24 revenue with consistent growth in active players driving confidence in strong revenue growth online in both the UK&I and International segments.

At the end of 2023 the Group initiated a cost savings programme that is expected to drive approximately £30m of cash cost savings a year. This will be reinvested into further strengthening the Group's core capabilities in several areas such as intelligent automation and AI-powered data and insights, as well as marketing investment to support revenue growth. These actions, together with the ongoing strategic initiatives that support our value creation plan, are expected to drive improved long-term sustainable profitable growth.

As part of our value creation plan, we have outlined new medium term financial targets of:

1. Revenue growth of 5-9% per year

2. Adjusted EBITDA margin expansion of 100 basis points per year

3. Leverage of below 3.5x by the end of 2026

SUMMARY

Pro-forma results

Given the significance of the acquisition of William Hill midway through the prior year, the statutory results do not provide a clear comparison of performance against the previous period, as they do not consolidate the results of the William Hill business for all the prior period, given the completion date of 1 July 2022.  The pro forma results provide a clearer performance of the Group in 2023 compared to 2022.

Since the acquisition, the William Hill business has aligned to the monthly financial calendar of the Group and, therefore, the FY 2022 pro forma financial comparatives cover the period from 29 December 2021 to 31 December 2022.

On a pro forma basis, including the results of William Hill in full for both periods and excluding the 888 bingo business (which was sold during 2022) for both periods, revenue of £1,710.9m was down 7.5% (£139.2m) year-over-year. This was driven primarily by a proactive revenue mix shift away from dotcom markets, which impacted revenues by approximately £80m during FY 2023. Revenue was further impacted by customer mix changes in the UK as a result of additional safer gambling measures, as well as a change in the Group's marketing approach to focus more on sustainable revenue and profitability. Together, these changes have created a higher quality and more sustainable business mix, including approximately 95% of FY 2023 revenue being generated from regulated and taxed markets (FY22 revenue 89%).

Our focus on profitability and synergy delivery aided pro forma Adjusted EBITDA, with a marginal reduction to £308.3m from £310.6m despite the significant impact of our dotcom compliance changes, with dotcom markets typically being higher margin. Adjusted EBITDA Margin increased to 18.0% from 16.8%, reflecting the improved profitability and focus on higher return marketing spend which more than offset the impact of dotcom market changes.

Further segmental details and trends are discussed within the segmental section later in this statement.

Synergies

In 2023 the business took decisive actions enabling it to deliver £150m of cash synergies in FY 2023, having accelerated the timeline for full synergy delivery.

During 2023 the business implemented a range of operational changes, removing some duplication to create more efficient operations and begin delivering the scale benefits of the combination with William Hill. The Group also reviewed and adapted its marketing approach across markets with a focus on driving more efficient marketing decisions to support sustainable, profitable growth.

Following my appointment alongside that of Per, our new CEO, the business has reviewed its operating model in line with the new value creation plan. This process has identified further opportunities for savings as the Group delivers on its potential. These additional savings, along with any further efficiencies identified, will be reinvested into driving growth, including through increased marketing and investment in improving our core capabilities.

Deleveraging

At 31 December 2023 net debt was £1,716.9m, representing a £10.8m reduction from 31 December 2022. The reduction in net debt was primarily driven by favourable foreign exchange rate movements on the debt principal, offset by a £47.9m cash outflow (excluding customer balances) in 2023, which included £46.0m of exceptional costs paid out in the period. Leverage at 31 December 2023 was 5.6x, unchanged from the pro forma leverage at 31 December 2022.

Our disciplined approach to capital allocation includes reviewing opportunities to generate cash from lower-return, or non-core assets, and during 2023 the Group realised approximately £41.8m from non-core asset sales including the sale of our Latvia business, and the sale and leaseback of some freehold properties.

 Reconciliation of Statutory EBITDA to Adjusted EBITDA, Adjusted profit before tax and Adjusted profit after tax

* EBITDA is defined as earnings before interest, tax, depreciation and amortisation.

** Statutory Operating expenses of £643.4m includes Operating expenses of £590.8m (being the Operating expenses of £819.1m less Depreciation and amortisation of £228.3m) and Exceptional items - operating expenses of £52.6m per the Consolidated Income Statement.

*** Statutory Depreciation and amortisation of £228.3m has been separated from Operating expenses of £819.1m per the Consolidated Income Statement.

**** Foreign exchange within adjustments of £2.6m gain within Cost of sales, £1.6m expense within Operating expenses and £36.6m gain within Finance income and expenses.

Adjusted EBITDA is defined as EBITDA excluding share-based payment charges, foreign exchange losses and exceptional items and other defined adjustments. Foreign exchange losses and share benefit charges were excluded to allow for further understanding of the underlying financial performance of the Group. Further detail on exceptional items and adjusted measures is provided above.

In the reporting of financial information, the Directors use various APMs. These APMs should be considered in addition to, and are not intended to be a substitute for, IFRS measurements. As they are not defined by International Financial Reporting Standards, they may not be directly comparable with other companies' APMs. The Directors believe these APMs provide additional useful information for understanding performance of the Group. They are used to enhance the comparability of information between reporting periods and are used by management for performance analysis and planning. An explanation of our adjusted results to the statutory results is provided in note 3 to the condensed financial statements.

CONSOLIDATED INCOME STATEMENT

Revenue

Revenue for the Group was £1,710.9m for 2023, an increase on a statutory basis of 38.1% compared to 2022, reflecting the consolidation of William Hill revenues from H2 2022.

On a pro forma basis, revenue decreased by 7.5% primarily reflecting dotcom compliance changes and UK online customer mix changes as noted above.

Revenue from sports betting was £648.8m, representing a 0.9% decline on a pro forma basis. Stakes were down 11.3%, offset by an increase in betting net win margin from 10.8% to 12.1%. Both primarily reflect the customer mix changes in the UK online segment to lower staking, higher margin, recreational customers. Gaming revenue of £1,062.1m was down 11.2% year-over-year, predominantly driven by the factors mentioned above, with dotcom markets more heavily weighted towards gaming.

Cost of sales

Cost of sales mainly comprise of gaming taxes and levies, royalties payable to third parties, chargebacks, payment service provider ("PSP") commissions and costs related to operational risk management and customer due diligence services. Cost of sales increased on a statutory basis to £570.0m from £440.5m due to the acquisition of William Hill in H2 2022. On a pro forma basis, cost of sales decreased by 4.4% to £572.6m principally reflecting the reduction in revenue, with cost of sales representing 33.5% of revenues (2022: 32.4%). The slight increase in cost of sales as a percentage of revenue primarily reflects the change in country mix, with a higher proportion of locally regulated and taxed revenues in 2023.

Gross profit

On a statutory basis, gross profit increased to £1,138.3m from £794.4m with the consolidation of the results of William Hill from H2 2022.

On a pro forma basis, gross profit decreased by 9.0% from £1,250.9m to £1,138.3m, alongside a decrease in the gross margin from 67.6% to 66.5% with more revenue generated from regulated and taxed markets as described above.

Marketing expenses

Marketing is a significant investment for our Group to drive growth through investing in our leading brands, as well as customer acquisition and retention activities. On a statutory basis marketing decreased by 7.8% from £257.8m in 2022 to £237.6m driven by marketing synergies, as well as increased focus on higher return marketing investments. This represents a marketing to revenue ratio (marketing ratio) of 13.9% (2022: 20.8%), with the reduction being driven by both lower marketing and the inclusion of a full year of Retail results, where the marketing ratio is significantly lower.

On a pro forma basis, marketing expenses decreased by 28.4% from £331.8m to £237.6m. Certain marketing is demand driven and flexible, so part of the reduction is as a result of the reduced online revenue noted above. Further marketing savings were also achieved following the acquisition of William Hill and the development of a refined brand marketing strategy to focus on driving sustainable profitable growth with improved marketing efficiency. The marketing ratio decreased from 17.9% in 2022 to 13.9% in 2023. This partly reflects the mix of revenue with more generated from the Retail business where the marketing investment is significantly lower. Excluding the Retail segment, the online marketing ratio decreased from 24.4% to 19.7% reflecting the refined brand marketing strategy and improved marketing efficiency.

Operating expenses

Operating expenses mainly comprise of employment costs, property costs, technology services and maintenance, and legal and professional fees. On a statutory level, operating expenses increased to £643.4m from £425.3m in 2022. This increase is due to the acquisition of William Hill with the Retail business having a much higher proportion of operating expenses to revenue given the employment and property costs required to operate.

On a pro forma basis, adjusted operating expenses excluding depreciation and amortisation decreased by 2.4% from £608.7m in 2022 to £593.8m in 2023. The reduction in overheads reflects the successful delivery of synergies and focus on cost control more than offsetting underlying inflation challenges across the business, particularly within the Retail estate.

EBITDA & Adjusted EBITDA

Reported EBITDA increased by 126.2% from £115.5m to £261.3m. On an adjusted basis, the increase was 41.5% to £308.3m from £217.9m, with an Adjusted EBITDA margin of 18.0% compared to 17.6% in 2022.

On a pro forma basis, Adjusted EBITDA decreased marginally to £308.3m in 2023 compared to £310.6m in 2022. The Adjusted EBITDA Margin increased to 18.0% in 2023 from 16.8% in 2022 driven by the successful delivery of synergies and focus on cost efficiency more than offsetting the impact of compliance and regulation headwinds noted above.

Finance Income and Expenses

Net finance expenses of £154.3m (2022: £110.9m) related predominantly to the interest from the debt on acquisition of William Hill of £139.4m (2022: £97.7m), which is net of foreign exchange. The finance expense resulting from leases was £6.9m (2022: £3.0m) with the increase due to the inclusion of a full year of results from the acquired Retail business within William Hill, which operates primarily from leasehold sites. The finance expense from hedging activities was £12.1m (2022: £3.3m) predominantly due to foreign exchange movements.

(Loss) / profit before tax

The net loss before tax for 2023 was £121.3m (2022: net loss before tax of £115.7m). On an adjusted basis, profits decreased by 74.4% to a profit of £20.6m (2022: net profit before tax of £80.5m), with the increased financing costs from the debt on acquisition of William Hill offsetting the increased earnings from the enlarged Group.

Taxation

 On a statutory basis, the Group recognised a tax credit of £64.9m on a loss before tax of £121.3m, giving an effective tax rate of 53.5% (2022: tax charge of £4.9m and an effective tax rate of 4.2%). The tax credit and therefore the tax rate is higher than the expected tax credit arising on the loss of 23.5% primarily due to operating in territories with lower effective tax rates such as Gibraltar, Spain and Malta, additional prior year tax credits from filing submissions in Gibraltar and from the recognition of a previously unrecognised deferred tax asset relating to the Group's intangible assets.  These benefits have been offset by the reduced availability of tax relief arising on costs incurred in the period.  

On an adjusted basis, the Group recognised a tax credit of £27.5m on a loss before tax of £20.6m, giving an effective tax rate of 133.5%. (2022: tax charge of £16.3m and an effective tax rate of 20.2%). This higher rate reflects the mix of profits and losses before tax across the group giving rise to a lower consolidated base on which the rate is calculated.

Net (loss)/profit and adjusted net profit

The net loss for 2023 was £56.4m (2022: net loss of £120.6m). On an adjusted basis, profit decreased by 25.1% to £48.1m from £64.2m in 2022, reflecting the items discussed above.

Earnings per share

Basic loss per share reduced to 12.6p (2022: loss of 28.3p) because of the full year consolidation of William Hill in 2023.

On an adjusted basis, basic earnings per share decreased by 29.1% to 10.7p (2022: 15.1p). Further information on the reconciliation of earnings per share is given in note 7.

Dividends

The Board of Directors is not recommending a dividend to be paid in respect of the year ended 31 December 2023 (2022: nil per share). The Board's decision is to suspend payments of dividends until leverage is at or below 3x, as previously announced following the acquisition of William Hill.

Income statement by Segment

The below tables show the Group's performance by segment on a reported and pro forma basis respectively:

For the commentary on divisional performance below, the pro forma financials give a clearer comparative of performance compared to the previous period. Furthermore, it reflects adjusted results, since that is the basis on which these are reported internally and in our segmental analysis. An explanation of our adjusted results to the statutory results, is provided above and in note 3 to the condensed financial statements.

UK & Ireland (UK&I)

UK&I Online

On a statutory basis, revenue increased by 44.6% to £658.5m and Adjusted EBITDA increased by £90.7m compared to the previous period, driven by the acquisition of William Hill.

On a pro forma basis, revenue declined by 8.2% to £658.5m reflecting the impact of our business mix shifting towards lower-spending customers, with average revenue per customer down 18%, which more than offset strong growth in average monthly actives of 11%. This mix shift was driven by a range of proactive compliance measures adopted ahead of the upcoming regulatory change in the UK, including, among other items, significantly lowering thresholds for financial checks, increasing the level of customer interactions and interventions, and lowering stake limits on online slots.

Alongside the more proactive compliance measures and approach, revenue was impacted by the change in marketing approach to focus on higher return marketing and customer retention, rather than acquisition. This has been particularly prevalent in the 888 brands in the UK which had historically invested significantly in customer acquisition given its subscale market position, particularly in sports. With the range of brands and assets the Group now has in the UK it can be much more effective with its marketing investment, which has improved profitability but reduced revenue in the short term. 

Pro forma adjusted EBITDA increased by £40.4m (36.1%) with the Adjusted EBITDA margin improving by 7.5 percentage points to 23.1% as a result of optimised marketing and delivery of synergies.

Retail

On a statutory basis, Retail generated revenue of £535.0m and Adjusted EBITDA of £98.9m as the Retail business continued to deliver robust financial performance and strong cash generation.

On a pro forma basis, revenue increased by 3.1% to £535.0m in 2023 despite a 3% reduction in the number of shops. This was driven by continued strong customer engagement, and a slightly higher sportsbook net win margin year over year, particularly at some of the bigger racing festivals. During the year the Group replaced and upgraded approximately 2,000 SSBTs and added an additional 1,000 SSBTs (self-service betting terminals) across the estate, contributing to an improved product offering which supported revenue growth.

Pro forma Adjusted EBITDA increased by £8.2m to £98.9m in 2023 driven by the revenue growth, with high operating leverage within Retail, as well as excellent cost control including our refined staffing model.

There were 1,343 shops open at the end of 2023 compared to 1,386 at the end of 2022.

The small reduction to the already well optimised estate largely reflects the impact of inflationary cost increases making certain shops no longer commercially viable.

International

On a statutory basis, International revenue increased by 1.8% to £517.4m and Adjusted EBITDA decreased by £18.9m compared to the previous period. The revenue increase was driven by the acquisition of William Hill, with the dotcom compliance changes more than offsetting this impact at an Adjusted EBITDA level.

On a pro forma basis revenue declined by 15.7% to £517.4m, as double-digit growth in our core markets of Italy and Spain was more than offset by a significant reduction in revenue from our dotcom markets. This was a result of our regulatory and compliance changes, principally the suspension of VIP customer accounts in the Middle East, as the business did not recover as expected following the initial suspension.

Pro forma adjusted EBITDA declined by £36.6m to £99.4m with the Adjusted EBITDA margin declining by 3.0 percentage points to 19.2% primarily reflecting the loss of revenue from dotcom markets, where margins are typically much higher.

Corporate costs

On a statutory basis, corporate costs were £42.3m in 2023 compared to £4.9m in 2022. This is due to the timing of the release of staff incentive accruals in the prior year across the Group including those accrued prior to acquisition within William Hill.

On a pro forma basis, there was an increase in corporate costs of £14.2m to £42.3m due to capitalisation rate alignments across the Group, as well as reallocation of overheads across segments.

EXCEPTIONAL ITEMS AND ADJUSTMENTS

Operating exceptional items in the year totalled £43.6m in 2023 compared to £103.0m in 2022.

Exceptional items are defined as those items which are considered one-off or material in size or nature to be brought to attention to better understand the Group's financial performance. Refer to note 3 to the condensed financial statements for further detail.

There were £49.3m of costs incurred relating to the on-going integration and transformation of the William Hill business in order to achieve synergies. The cash costs to achieve the targeted integration synergies and the global cost saving programme has therefore now increased to cost approximately £115m, incurred through to 2025 with the majority incurred in 2023 or expected to be incurred in 2024. This includes the global cost saving programme of £30m, initiated in December 2023, as well as the original £150m synergy programme.

Corporate transaction related costs relate predominantly to the disposal of the Latvia and Colombia businesses, with prior year costs related to the acquisition of William Hill.

The Group paid £2.9m during the period related to a regulatory settlement with the Gibraltar regulator in relation to the previously disclosed failings that we identified in our Middle East business. Further to this there were £0.5m of professional fees incurred relating to this settlement.

Adjustments reflect items that are recurring, but which are excluded from internal measures of underlying performance to provide clear visibility of the underlying performance across the Group, principally due to their non-cash accounting nature. They are items that are therefore excluded from Adjusted EBITDA, Adjusted PAT and Adjusted EPS.

The amortisation of the specific intangible assets recognised on acquisitions has been presented as an adjusted item, totalling £114.3m relating to the William Hill acquisition. This amortisation is a recurring item that will be recognised over its useful life.

The other items that have been presented as adjusted items are fair value gain on financial assets of £4.1m, foreign exchange gains of £37.6m (foreign exchange loss of £26.7m in 2022), amortisation of finance fees of £17.2m (£7.4m in 2022), and share based payment (credit) / charges of £(0.5)m (£5.2m in 2022).

CONSOLIDATED STATEMENT OF FINANCIAL POSITION   

Non-current assets decreased by £169.9m to £2,298.5m compared to £2,468.4m at 2022, predominantly due to amortisation of Goodwill and Other intangible assets which have decreased by £170.0m. Deferred tax assets have increased by £31.8m to £37.0m compared to £5.2m in 2022, due to the recognition of a previously unrecognised deferred tax asset related to the Group's intangible assets.

Current assets are £449.1m, a decrease of £45.3m compared to £494.4m at 2022. Within this, cash and cash equivalents decreased by £61.4m to £256.2m from £317.6m, which includes £127.8m of customer deposits compared to £141.3m at 2022. Excluding client funds, cash and cash equivalents decreased by £47.9m from £176.3m in 2022 to £128.4m in 2023.

Current liabilities decreased by £49.3m from £703.4m at FY 2022 to £654.1m at 2023. This includes the reduction in client funds held, offset by an increase in trade and other payables. Provisions decreased by £33.0m to £78.5m primarily due to the payment of the regulatory settlement with the UKGC. Furthermore, there are provisions of £62.8m for gaming tax in Austria.

Non-current liabilities were £2,013.6m, a decrease of £86.6m from the balance of £2,100.2m at 2022. This reduction is predominantly due to the movement in borrowing driven by foreign exchange translations. In addition, the deferred tax liability decreased by £59.1m, mainly driven by the unwind of deferred tax on the acquisition accounting. Lease liabilities have remained broadly in line with prior year. Additionally, provisions for customer claims of £104.7m, include £98.8m relating to William Hill and Mr Green brands and £5.9m relating to 888 are currently recognised as non-current liabilities.

Net assets of £79.9m was a decrease of £79.3m compared to £159.2m at 2022.

CASH FLOWS

Overall, the Group had a cash outflow of £61.4m in the year, compared to an inflow of £128.2m in 2022. This resulted in a cash balance of £256.2m as at 31 December 2023 (£317.6m at 31 December 2022), although this included customer deposits and other restricted cash of £127.8m such that unrestricted cash available to the Group was £128.4m compared to £176.3m in 2022.

Cash flow from operations was a £151.4m inflow compared to an outflow of £30.2m in 2022. This increase was partly due to a full year of EBITDA from the enlarged business in 2023, as well as lower working capital outflows.

Disposals of £41.8m represented the proceeds on the sale of non-core assets including the Latvia business and the sale and leaseback of certain freeholds.

Capital expenditure was £68.4m in 2023, a reduction from £76.8m reflecting synergies and on-going cost control.

Payment of lease liabilities represented £31.8m of lease liability payments in the period, with the increase over the prior year driven by the acquisition of William Hill and its associated retail estate, as well as from the sale and leaseback of freehold properties in the year.

Included within net movement in borrowings were £4.0m of principal payments, relating to the 1% annual amortisation on the US$ Term Loan B.

Net interest paid of £138.1m predominantly related to the borrowings undertaken.

Settlement of derivatives of £10.8m paid in the year related to hedging instruments.

Other movements included £4.3m further investment in 888AFRICA, as well as dividend income received from associates of £5.9m.

NET DEBT

The gross borrowings balance as at 31 December 2023 was £1,757.7m. The earliest maturity of this debt is in 2026, which is £11m, with most of the debt maturing across 2027 and 2028. In addition to this, the Group has access to a £150m Revolving Credit Facility maturing in January 2028, which was undrawn at 31 December 2023, consistent with 31 December 2022.

The debt is across GBP sterling, Euro and US Dollar; with 49% of the debt in Euro; 43% in GBP and 8% in USD. The Group has undertaken hedging activities such that 70% of the interest is at fixed rates and 30% at floating rates with the hedging relationships in place for three years to 2025. The Group continues to assess all opportunities to optimise its debt capital structure and manage its debt facilities.

The net debt balance at 31 December 2023 was £1,716.9m with a net debt to EBITDA ratio of 5.6x. This compares to £1,727.7m and 5.6x respectively as at 31 December 2022. The reduction in net debt is predominantly due to foreign exchange movements on the USD and EUR denominated debt principal amounts, together with lower loan transaction fees. This is partly offset by lower closing cash position following outflow of cash detailed above.

PRINCIPAL RISKS AND UNCERTAINTIES

The principal risks and uncertainties that are considered to have a potentially material impact on the Group's future performance, sustainability and strategic objectives are set out below. This list is not exhaustive but encompasses management's assessment of those risks which require considered response at this time.

Regulatory and Compliance Risks

Compliance with regulatory requirements is critical to maintaining the Group's licences, protecting our customers and driving growth. With most of our revenue generated from licensed jurisdictions and more countries looking to regulate, the importance of such licenses to the business is constantly increasing.

Our strategic focus is on regulated markets, as these represent the best opportunity for sustainable growth as regulation drives better outcomes for customers, for the business, and for wider stakeholders. 

The integrity of our privacy and data protection framework, including the holding and processing of personal data, is crucial to ensure compliance with our regulatory obligations and build customer trust. 

888 Holdings accepts that regulatory compliance risks may be present in the ordinary course of business, however the enterprise risk management approach allows us to identify these as they arise and implement mitigations and controls targeted at removing and reducing these risks and, where possible, improving player experience, regulatory transparency and stakeholder engagement. The growing complexity of the Company's regulatory footprint means a robust understanding of the legal, and regulatory position in key locations worldwide is crucial to mitigating this risk combined with strong relationships with regulators.   

Anti-Money Laundering Risk

Ensuring compliance with regulatory requirements and the prevention of money laundering is critical to maintaining our licences. We are committed to combating financial crime and ensuring that proceeds of crime do not enter the business. 

The EU Supranational Risk Assessment 2022 estimates the risk level for online gambling is very high for both money laundering and terrorist financing in the absence of controls. Therefore, we make every effort to ensure that controls related to AML and CFT are robust and reviewed regularly to provide assurance.

Brand & Reputational Risks

The Group relies on its world-class brands across its key markets, with brand reputation being a key driver of customer choice. As such, maintaining a strong reputation is critical to the ongoing success of the Group.

In various regions where our business operates, there is an ongoing trend towards the enhancement of regulations focused on safer gambling and the protection of consumers. This trend is particularly aimed at safeguarding underage individuals and players who are vulnerable or at heightened risk of harm.

Media reporting on the industry has seen continuing and increased criticism of how individual customers have been treated. This has led to further calls for additional regulation, particularly around responsible gambling, affordability and advertising, any failure to ensure the business is fully compliant would result in significant reputational damage, in addition to sanctions imposed by regulators.

ESG Risks

The Group is dedicated to implementing and maintaining robust policies, procedures, and controls that ensure the effective delivery of our Environmental, Social, and Governance (ESG) objectives.

ESG issues include risks such as climate change, player protection, diversity & inclusion, cybersecurity concerns and social responsibility not just to employees and customers but also to the communities where the business bases its operations and retail outlets.  ESG risks, particularly those related to climate, often present unique characteristics distinct from other types of risk. They are typically marked by a lack of extensive historical data and exhibit non-linear patterns, complicating their forecasting and management efforts.

The Group's strategic focus is on protecting our players from gambling related harm, creating an engaging and inclusive environment where colleagues can thrive and protecting the environment by achieving net zero direct carbon emissions by 2030.

Market Risks

The acquisition of William Hill was funded through various means, including significant debt facilities. The Group has implemented a series of hedging strategies, securing approximately 70% of our interest costs at fixed rates for the next two years, while also aligning the currency composition of our debt more closely with that of the Group's financial profile. Despite these measures, the Group remains susceptible to risks associated with changes in interest rates and currency values. Such fluctuations could elevate our borrowing costs, potentially diverting financial resources away from critical areas such as growth initiatives, marketing efforts, and the development and launch of new products and projects.

The Group is also exposed to foreign exchange rate fluctuations and risks in its financial reporting. A substantial part of the Group's deposits and revenues are generated in GBP, EUR and other currencies, whilst the Group's operating expenses are largely incurred in local currencies, primarily GBP, EUR, ILS and USD with incremental exposure to operating expenses in Swedish krona and Polish zloty. The Group also has debt servicing costs which are denominated in USD and EUR, partially hedged in GBP.

Liquidity & Capital Management

Liquidity risk is the risk that the Group has insufficient funds available to settle its liabilities as they fall due. The Group generates strong operating cash flows and aims to maintain sufficient cash balances to meet its anticipated working capital requirements based on regularly updated cash flow forecasts. Liquidity requirements that cannot be met from operational cash flow or existing cash resources would be satisfied by drawings under the Group's revolving credit facility and overdraft facility.

We fund our investments in people, product, marketing, and technology with positive cash flows generated from our trading activities and its available cash resources. As the business continues to invest in strengthening its core capabilities there could be increased need to reduce operating costs and improve liquidity by removing duplications, delivering best in class and scalable shared functions, and driving efficiency to reinvest in growth.

People Risk

Our colleagues across all our business functions are vital to ensuring our day-to-day operations are undertaken efficiently and effectively and to the successful delivery of our strategic business objectives. Competition for highly qualified personnel is elevated in many of the locations in which the Group is based. Ensuring our colleagues are well remunerated, managed and supported is fundamental to the success of the business. 

The integration and operating model changes following the acquisition of the William Hill have introduced some uncertainty for our colleagues across the business, which does carry a risk with regard to staff retention in particular, but also recruitment in the short term.

Third Party Risk

To effectively deliver our products and services to customers the Group has reliance upon certain critical suppliers of technology, payment services, marketing, gaming products, sports content and media. The effective management of critical third-party relationships and performance is key to delivering our strategic objectives. Any failure of our suppliers to provide services to us may have a significant adverse impact on our own operations. 

The Group also has certain strategic partnerships where we supply third party operators with business to business (B2B) gambling services in the United States. Any risks to our B2B partnerships or meeting our contractual obligations with them must be managed to ensure the long-term viability of our operations linked to these relationships, and to ensure we can meet our strategic growth targets.   

Information Security Risks

There is an ongoing risk that cyber-attacks, such as Distributed Denial of Service (DDoS) by malicious third parties, could impact our technology systems and, consequently, our operations. This risk extends to the potential theft or misuse of customer and business data by both internal and external entities.

Cyber-attacks leading to data theft could expose the Group to "ransom" demands or regulatory sanctions including fines and reputational damage, which could lead to loss of customer confidence in the business.

The loss of availability of our technology and communication systems, or those in our key suppliers' infrastructure could cause significant disruption and cost to the business, and lead to revenue loss both during the incident and in the aftermath if customers move their business to our competitors. Lengthy down-time could also cause us to breach regulatory obligations.

Product & Technology

As a company, we acknowledge the importance of innovation and digital transformation, and we recognize that these initiatives come with inherent risks. We recognize that consolidating multiple systems can be complex and challenging and may lead to potential disruptions in our operations. 

In pursuing our goal of building one unified global scalable technology platform, we understand that it requires us to take on higher levels of risk in the short term. However, we believe that the potential rewards outweigh the risks. By creating a unified platform, we will be able to streamline our operations, improve efficiency, and enhance our ability to respond to changing market conditions.

We recognize the importance of developing high-quality products to meet the evolving needs of our customers, however, acknowledge that this comes with inherent risks. We understand that product and content development require significant investments in resources, time, and expertise. Additionally, the fast-paced and constantly changing nature of the market may require us to take on higher levels of risk in the short term.

Condensed Consolidated Income Statement

For the year ended 31 December 2023

Condensed Consolidated Statement of Comprehensive Income

For the year ended 31 December 2023

Condensed Consolidated Statement of Financial Position

At 31 December 2023

¹  Cash and cash equivalents includes customer deposits of £127.8m (2022: £141.3m) which represent bank deposits matched by customer liabilities of an equal value. Cash and cash equivalents excludes restricted short‐term deposits of £22.6m which are presented in Trade and other receivables (2022: £21.6m).

² Since the disclosure of the provisional fair values for the acquisition of William Hill on 1 July 2022, an adjustment of £15.7m has been made to increase the fair value of provisions, with a related £4.4m reduction in deferred tax liabilities, and an equivalent movement in goodwill. This adjustment has been made after the 31 December 2022 year end accounts and during the measurement period.

Condensed Consolidated Statement of Changes in Equity

For the year ended 31 December 2023

The following describes the nature and purpose of each reserve within equity.

Share capital - represents the nominal value of shares allotted, called-up and fully paid.

Share premium - represents the amount subscribed for share capital in excess of nominal value.

Treasury shares - represents reacquired own equity instruments. Treasury shares are recognised at cost and deducted from equity.

Foreign currency translation reserve - represents exchange differences arising from the translation of all Group entities that have functional currency different from £.

Hedging reserve - represents changes in the fair value of derivative financial instruments designed in a hedging relationship.

Retained earnings - represents the cumulative net gains and losses recognised in the Condensed Consolidated Statement of Comprehensive Income and other transactions with equity holders.

Condensed Consolidated Statement of Cash Flows

For the year ended 31 December 2023