Evoke Plc missed its H1 2024 adjusted EBITDA target by £35m to £40m due to high marketing costs and lower than expected revenue, it said in a trading update today.
The 888, William Hill and Mr Green parent company expects to mitigate its losses in H2 by employing up to £30m in cost savings and meeting its full-year earnings expectation.
A change in leadership and operational overhaul were cited as key drivers for cost efficiencies in the second half of the year. This includes 888’s new strategy and value creation plan, set out in March.
As a result, the firm expects H2 2024 revenue growth to be in line with its medium-term guidance of 5%-9%. It also hopes to deliver a 20% EBITDA margin in 2025. Marketing costs will be between £35m and £40m lower in H2 than in H1.
In an analyst note, Regulus Partners said the profit warning was “neither small nor unlucky”.
On the impact from marketing spend, Regulus said: “What is slightly alarming is that such poor tactics were allowed to unfold while a new strategy was being unveiled.”
Online betting and US exit impacts H1 earnings
Overall group revenue for H1 came in at £862m, with an EBITDA of £115m.
In Q2, UK online revenue increased 3% year-on-year, while sports betting for the period was hit by higher than expected marketing costs. But, the group said, its BetBuilder product has seen early success.
UK retail took a hit during the first half of the year, down 8% on the previous year. The company expects “new future-proof gaming machines and an improved SSBT product” to benefit poor retail figures later in the year. William Hill’s retail estate made up a third of the group’s EBITDA loss for the six-month period Regulus noted.
“With a first class product, a very clear brand proposition, [betting offices] run for customers rather than cash and effectively executed emerging markets growth, there is no reason why Evoke cannot deliver at least high single digit revenue growth on double digit incremental margins,” the law firm said.
Internationally, its core markets of Italy, Spain and Denmark saw double-digit growth and now represent approximately 60% of the division. However, 888’s US exit in March impacted the vertical’s earnings during Q2.
Per Widerström looks ahead
Evoke CEO Per Widerström said of the results: “While it is disappointing H1 financials are behind our plan, the underlying health of the business is getting stronger. The corrective actions we have taken make us more confident our strategic approach is sound and will achieve sustainable success.
“Our strategy defines what good looks like and how we get there and, while no journey is ever straightforward, we have learned a lot already so far this year as we pursue our goals.”
Widerström joined Evoke as CEO in July last year. He said the firm had made “bold, decisive changes to improve almost every area of the business”, as it undertakes a “complete reset and transformation of the business”.
In March 888 CFO Sean Wilkins admitted the firm’s financial performance in 2023 had been “disappointing”. On a pro forma basis, revenue for 2023 fell 7.5% year-on-year.
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