888 Holdings plc

We can start. So, good morning everyone and thanks for joining us today for our 2023 full year results. I am Per Witteström and I joined as CEO of this great business in October last year. And today it gives me huge pleasure to tell you about the significant progress we have made since then and how excited I am about our value creation plan for the coming years. We have the agenda for this morning's presentation on slide two here. And today is really about the future, our obsession and commitment to value creation. And as a result, that is where we're going to focus our time today. So after a quick introduction from me, Sean will give a short overview of our 2023 results. And this will give the context of why this is such a critical and exciting time for the group and why we are acting decisively and with pace to ensure we reach our full potential. I will then outline our new strategy for success and provide some details about our value creation plan. This is our promise to our shareholders and explains what, how and where we will deliver value in the coming years. Surely we then outline the financial aspects of our plan before we open up to take questions. And for the Q&A session, I'm pleased to say that Sean and I will be joined by Vaughan Lewis, our Chief Strategy Officer. So let's turn to slide three. So I wanted to start by saying that this is the beginning of a new chapter in the history of this business. We are resetting the business and embarking on a transformation journey to unlock our full potential. I mean, we still possess the same great attributes you already know about. We operate in fantastic markets. and enjoy leading position in the growing total addressable market with high and rising barriers to entry. We have the key ingredients for success. I mean, namely robust preparatory technology and some of the strongest betting and gaming brands in the world. However, it was my incoming belief that this business was not performing anywhere near the level it could and should. That's the reason why I took this job. We have a fantastic opportunity ahead of us, but we must make bold changes to ensure we reach our potential. Before and after I started, I took the time to visit nearly all of our offices and met with many colleagues across various departments. It was clear that there was a burning hunger for change, particularly in terms of our ways of working due to unclear roles and responsibilities. It was also clear to me that we needed to strengthen our group executive team with first class people who knew and who know what work class looked like and have deep understanding how to get there. There was also a clear message from all the colleagues about the need to become a one company with a clear united strategy, mission and vision. Our new strategy and value creation plan is all about defining what success looks like and how to get there. We are taking these key ingredients of success and building a robust execution plan based on key value creation drivers. We now have the right team in place and are building the capabilities to maximize the opportunities that these foundations give us. This is a new plan. It will be delivered by a new team obsessed about value creation. And we will have a new corporate identity and name. So let's turn to slide four. I would like to outline some of the immediate actions I have taken to set us on the right path. I set an ambitious 100-day plan when I began my role, and this instilled a real sense of urgency for me and the business. I wanted to move at high pace and with boldness. We have quickly established an almost entirely new group executive team with outstanding skills and track record, and this to ensure we can successfully drive execution for value creation. In a short time, we have totally reset our operating model. This new operating model has set us up for success with the removal of duplication and efficient ways of working. We now have the right spans and layers of control with clear accountability to drive value creation. It will also deliver around £30 million of cost savings. We initiated a strategic review of the US B2C business and I look forward to update you on the outcome of this as soon as we can. The plan here is to free up tech and marketing resources to invest at high returns consistent with our value creation plan and the strategic focus to be sustainable market-leading positions. We have taken decisive action on the destination product and tech platform and the roadmap to get there, including bringing in exceptional talents to support this transition. All of this has been underpinned by the creation of our strategy, with a clear strategic framework and market consideration that drives our focus on sustainable profitable growth, And these combine to underpin our evaluation plan. So turning to slide five, I mean, this gives a snapshot of my new top-class executive team. Many businesses have an attractive strategy, but success is driven by execution. And this is the team who will be executing and delivering this plan. Most of the team have significant industry experience, but crucially, Whether in the industry or not, I mean, this team has a very strong track record of creating value, executing change, and delivering success. So, for example, you will hear from Sean shortly. He's someone who has spent over 17 years as a CFO across public and private equity companies. He has a proven experience of delivering value creation, including highly leveraged companies. And Ian and Rick, on the product and tech front, are at the top of the game, having made a significant lasting impact on the success that Tally Power, Skybet, and the wider Flutter group have enjoyed in recent years. Mark Kemp and Stephen Sheridan are the most recent joiners, having just started this month. Mark brings a wealth of experience from the industry and knows the UK market inside out, having worked at the top of Labrador, Labrador Coral, TOTE, Boresports, and Dassault Invert. And Steven adds huge knowledge and capability from outside industry, having delivered value creation across highly regulated multinational multi-product businesses. He brings an excellent track record of delivering of process improvement, automation, AI, and management of large and diverse operational teams. But beyond executive team, we have also strengthened the core capabilities of the wider leadership team, bringing in world-class experience in areas like intelligent automation, AI, MarTech, and customer lifecycle management. It is a new team for a new business. We are sometimes called 888, sometimes 888 William Hill, sometimes just William Hill. I mean, these are great customer-facing brands, but we need a corporate brand that brings together everything we do and speaks to our combined brand power and shared values. We need a new company name that is memorable, translatable for our ambitions, and helps us tell the value creation story for our shareholders, our colleagues, and one that stands out from our competitors. On slide six, we have our proposed name, a new corporate identity, Evoke marks the start of a new era, a new direction, a new sense of purpose. As Evoke, we have come together to go further and faster, to make life more interesting, to evoke delight in our customers with world-class betting and gaming experiences. Our new name is a clear signal of our new direction. We are embracing the strengths of our past, but building on this for a much brighter future. I am incredibly excited for the future, and I have no doubt it will be a positive one. So turning to slide seven, an introduction to our new strategy. As Evoque, we know what success looks like. We know how to outperform the competition and win in the market. We are clear on what we focus the business and resources on. and what we are not going to focus on. Our clear vision and mission unites the company and means we will focus on driving sustainable, profitable growth and building market-leading positions. I will return to expand on this, but before that, I'd like to hand over to Sean to run through the financials for 2023 and how the changes in the finance function are setting us up for future success. To Sean.

Thanks, Per, and good morning, everyone. I'm Sean Wilkins, the CFO, and I'm delighted to have joined this business in February. This is a hugely exciting time for the group as we embark on a plan to deliver material value creation. Before we talk about the future, I'd like to spend a few minutes running through the financial results from 2023, which start on slide nine. On a reported basis, we saw 38% revenue growth, and 41% adjusted EBITDA growth, driven by the acquisition of William Hill in the middle of 2022. In the appendix to this presentation, there are some more slides on the reported results, including details of the exceptional items and adjustments, being mainly the purchase price allocation amortization and integration costs. I believe it's more representative to look at the results on a pro-forma basis, including William Hill in both periods. On that basis, revenues were down 8% impacted by regulatory and compliance headwinds and adjusted EBITDA was about flat with those pressures offsetting some of the positive gains from synergies. On the right hand side here, we show the main items in the bridge between 2022 actuals to pro forma results and then to our 2023 actual results. Retail revenues are 16 million pounds higher primarily reflecting the benefit of the CapEx spent in the last two years, which has included a completely new till system and over 3,000 new proprietary SSBTs going into our shops this year to both replace legacy ones and increase density. UK online revenues are £59 million lower, reflecting both the impact of the player mix shift towards lower spending customers and the short-term top-line hit from the removal of lower return marketing spend. International revenues are £96 million lower, mainly reflecting the impact of regulatory and compliance changes, but also the refined focus of marketing in sustainable markets. On the bottom, you can see that the same bridge for adjusted EBITDA, with similar drivers to revenues I've just described. The notable difference being UK online, where despite the £60 million drop in revenue, EBITDA was up £40 million, reflecting strong synergy delivery and that shift in marketing approach I discussed. You'll also note corporate costs are up £14 million, but it's worth noting this is not a real increase in costs as such, and more harmonisation of accounting, with a decrease in the capitalisation rate, meaning more expenses to the P&L. On slide 10, we present the revenue and adjusted EBITDA by segment on a pro forma basis. I've just talked through the drivers, so I won't repeat myself, but you can see overall UK pro forma revenues were down 3% in 2023, reflecting good trends in retail being more than offset by the structural changes in our online business that I talked about. For our international business, revenues were down 16%, but we ended the year with a smaller but higher quality business. Over the last two years, the business has absorbed an incredible amount of change with regulatory, gaming tax and safer gambling changes impacting EBITDA. We are under no illusions that this financial performance has been disappointing and means that at the end of 23, our financial leverage of 5.6 times was above where we want it to be. While the financial performance has been difficult, it means the business has already absorbed a lot of external shots. and has a higher quality base to build from. Our value creation plan builds on this history and will establish a foundation for profitable growth. Crucially, the growth potential ahead of us, I know that our leverage position will soon be seen as a positive, with its impact enhancing the returns on equity that we deliver in the coming years. Turning to slide 11 and our cash flow. Net cash, excluding customer balances, dropped by £48 million in the year Our adjusted EBITDA was £308 million, and this generated £165 million of underlying cash after reflecting tax, networking capital, capex and rent. During the year, we incurred approximately £65 million of exceptional costs, which were primarily costs to achieve synergies or restructuring charges, together with a payment of the legacy regulatory settlement in the UK for William Hill of £19 million, and a £3 million settlement for the Gibraltar regulator, related to the Middle East issues last year. We then had £172 million of interest payments, and while this was partially offset by £42 million of non-core asset sales, the net impact was a reduction in the cash position of £48 million. Our debt position moved a little due to forex movements, and this meant that we ended the year with net debt of £1.717 billion, slightly lower than at the start of the year. Turning to slide 12 and to cover current trading, the first quarter of 2024 still has some of the headwind impact from the regulatory and compliance measures I just talked through, as we only fully lapped these during February. We expect revenues to be around $420 to $430 million for the first quarter, broadly flat sequentially and down mid-single digit relative to the first quarter of 2023. Within this, gaming should be slightly up year over year, which is good considering the dot-com timing headwind I just mentioned. The drag is coming from the betting side, and this reflects a tough comparative in terms of win margins, as well as significant investment into our Cheltenham offer, which drove over 750,000 actives up around 66% on the prior year. This investment, together with the increased marketing, will support growth through the remainder of the year, and we expect a return to year-on-year growth in Q2 2024 onwards. We are seeing strong trends in actives and player days and have turned the corner on revenue. With our new team and plans in place, we are well-placed to accelerate growth from here. In early January, we outlined that we expected adjusted EBITDA for the year to be around the £340 million level. I am pleased to say that with what we have seen so far in Q1, I remain comfortable with that expectation. Turning to slide 13, and just before I hand back to Per to walk you through the details of the operational and strategic elements of the new plan, I'd like to outline my key focus areas for the finance function and how we are setting up for success. Firstly, we are driving and embedding a cultural shift in the business. This is all about a shift in mindset to deliver value creation. I have quickly restructured the finance team to set a structure that will support greater rigour of our plans and provide greater support to our decision makers to drive high returns. Secondly, resource allocation is fundamental to creating value. Our strategic review of B2C in the US is a clear example of how we are improving our resource allocation and making quick decisions to drive superior returns. We will only spend money where we are seeing sustainable, profitable returns and investing in line with our strategy. We will scale this quickly in an agile manner, protecting the downside with rapid actions to manage profitability and where we see excess returns and performance, we will scale up to drive higher profitability. Thirdly, I am obsessed with operating leverage. This is a business that fundamentally has high operating leverage. We can service more customers and deliver more revenue from our scalable operations. But operating leverage doesn't just happen. And I see it as one of my fundamental roles to ensure that the finance team is driving this. This is about ensuring we deliver efficient growth. I'll now hand back to Per to provide some more details on our exciting value creation plan.

Thank you so much, Sean. And so let's go to slide 15 now. And I'd like to outline our commitment to shareholders to create value. So firstly, we will drive profitable and sustainable revenue growth. We are not here to take market share for the sake of it. We are not here to build an empire. This is all about driving sustainable high profits. It's also commitment to growth. We cannot and will not shrink our way to success. Secondly, we will drive improved profit margins. The plan I'm outlining today will deliver a bigger business, but also a more profitable business. This is about expanding our capabilities, leading the industry in intelligent automation, and as Sean said, an obsessive focus on operating leverage. Thirdly, we will deliver through highly disciplined capital allocation. We will grow the business, generating materially improved cash generation and enabling rapid deleverage. Our capital structure with elevated leverage means deleveraging magnifies the return on equity. Turning to slide 16. This is our strategy on the page. This is our strategic framework and explains what success looks like and how to get there. This is our guiding light for what to do, but also what not to do. Ultimately, we are the laser focus on value creation delivery. We have a clear vision and a mission with clearly set goals. This is what success looks like for Evoke. And we have a clear strategy translated into our value creation plan. I am, along with all the executive team members, absolutely committed to this plan. And we look forward to telling you about our progress against this plan. I joined this business because I love betting and gaming. Betting for me adds further excitement to sports events. For others, it's about having fun, discovering a new slot machine, or playing poker against a friend. For others, it's about relaxation, some quiet me time to relax and enjoy. For all of us, this is about making life more interesting. And this is what we will do as a business, make life more interesting for our customers. And we will do this by delighting our players with world-class betting and gaming experiences. So what do we mean by world-class betting and gaming experiences? I mean, this is delivering our customer value propositions. So while we have a wide range of amazing brands, they will all deliver these key elements and raise the standards. So we will be easier to use than the competition. We will live our brand values across all interactions, whether it is our adverts, our promotions, our customer service, or our products. We will offer personalized values using data insights to deliver the right products at the right time, at the right point of sale, and at the right price. We are moving towards a world of infinite personalization. And we will be famous for doing the right thing for our customers. No misleading offers, no confusion, just clear, trustworthy interactions. And to deliver this for our customers, we will invest to build three clear competitive advantages. And these are the key enablers that will ensure we win in our markets. So these are, firstly, operational excellence, driven by data insights and intelligent automation. This allows us to build scalability to drive operating leverage, ensure consistent execution, and deliver high-quality outcomes for our customers. and unlock new opportunities for efficiency. Secondly, a winning culture. Our success is driven by our people, and we are committed to fostering a culture that empowers our colleagues to unleash their full potential and contribute to our collective success. And thirdly, ensure we have leading distinct brands and products. I mean, we have an amazing head start with three strong brands. But we will build on this by ensuring our distinct brands and products are tuned in to our customer needs, offering personalized value with sustainability embedded into every offering. In order to drive incremental value, we have initiated six strategic initiatives that will help instigate operational excellence into everything we do. and build a foundation that is scalable and ready for step change value creation. We are also crystal clear on where we are focused to deliver the best returns on our resources. And I will touch on our strategic initiatives and market focus in more detail shortly. Let's turn to slide 17. Our strategic framework provides the guiding ways for our value creation plan. Over the last few months, we have built a really powerful multi-year plan with clarity about what does success look like, where will we focus, how we will operate, and how each component will create value. This chart shows this concept in graphical form in terms of how we will drive success. And the focus of driving increments the value on top of the business as usual run rates. I should point out that this is illustrative and conceptual, not the actual forecast. We know this is a highly competitive industry, with significant pressures from regulatory changes, taxes and cost inflation. If we had done nothing and continued in the old BAU mode, business as usual mode, we believe that profits would have steadily declined over time. We have rapidly built a plan to address this and deliver robust growth. We have six strategic initiatives across the business, and these are global initiatives that drive improved operations through operational excellence and create a step change in future profitability. These SIs, as we call them, are managed by the executive team and include the best people across the business. As we implement these, we will deliver significant improvements in our capabilities. And once fully effective, these SIs will be transferred to BAU. This will dramatically enhance our BAU capabilities and also free up capacity for future SIs and future step change in value creation. This is a model and approach that I have employed multiple times in the past both in executive roles and as a share. It is a model that works and a model that drives value. It is a model that will deliver a step change in our capabilities and our profitability. So turning to slide 18, I'd like to provide a few additional details about our four strategic initiatives that will instigate operational excellence. Customer value propositions. We have a portfolio of world-class brands, the envy of many in the industry. These are some of the strongest brands in any category in terms of brand awareness. But all of these brands have somewhat lost their way with inconsistent usage that undermines their power. Our customer value propositions, or the CVPs, will provide complete clarity about our brands, who they are for, what good looks like for the customer, and how we will deliver these brands consistently across all touch points with our customers. It is our customer promise. So what? Yeah, I mean, through brand clarity, we deliver us improved cost per acquisition as we're able to focus on the right customers in the right markets, and we provide improved lifetime value as we improve loyalty and share a wallet. Customer lifecycle management. We are mapping out every stage of the customer lifecycle from awareness through to becoming a loyal brand advocate. We want every customer to recommend our brands to their friends. And we will do this by using intelligent automation to provide a better experience to our customers. We will provide the right offer with the right product at the right price at the right time. we are moving towards a world of infinite personalization. This with our customers benefiting from safe and personalized betting and gaming experiences. So what? Providing personalized world-class betting and gaming experiences will reduce churn and grow share wallet, growing our revenues and driving margin. Winning organizations. Fundamental to our plan is the quality of our people. We have totally reset to operate the model of the business, ensuring it is both fit for purpose and future-proof. We are building leading capabilities in cutting-edge areas like AI, automation, and customized cycle management. We will make Evoke the most exciting place in the industry for the best talent to grow their careers. So what? I mean, this SI is fundamental to delivering operating leverage. We will have greater productivity and pace at lower cost, ensuring we are driving strong, profitable growth. ESG. So driving profits in itself is not enough. We must make this business future-proof. We must increase the sustainability of the business to ensure we maximize the valuation opportunity. Our ESG plans are being embedded across the business and are fundamental to the way we think about the future. So what? I mean, the business has suffered in the past from less sustainable earnings. We will continue to increase the quality and sustainability of our earnings by embedding ESG in everything we do. Turning to slide 19, I'd like to spend a couple of minutes on our step change essays. These are the strategic initiatives that provide a real step change in our capabilities and future profitability. The first one is our product and tech foundations. We have quickly determined our destination platform based upon the value creation opportunity using the best companies from both 888 and William Hill. So what? I mean, this future platform will provide greater productivity, enhance our competitive capabilities, and ultimately drive significant cost savings. This SI will drive higher revenue at lower cost. The second one is our Operations 2.0 initiative. This is about building data, AI, and automation foundations that make the future-proof business. This will deliver a fundamentally different way of operating and support improved personalization for our customers and a step change in our capabilities to deliver better experiences. So what? We aim to be the leading operator in the sector for AI and automation, which will drive a step change in our efficiency and profit margins. Turning to slide 20, and this is about where we will focus our efforts. Our capabilities allow us to invest almost anywhere in the world, but we know that we must be selective with our time and our shareholders' money, deploying investments where we will generate a strong return and where we generate sustainable market-leading positions. Having reviewed our market-focused approach, we have redefined our market archetypes to fall under two key categories, core markets and optimized markets. This simplified approach enables increased focus and investment in our core markets while maximizing cash flow from all markets. We will remain laser-focused on our four core markets, the UK, Italy, Spain, and Denmark. which already generates about 85% of our total revenue and nearly 80% of our online revenue, and where we have established strong positions. These are all large, attractive markets with high and rising barriers to entry through regulation and established brands. And this slide shows the online market size for these markets. It's also worth calling out that it's a long runway of growth to come from online migrations. Particularly in Italy and Spain, where only about 20-30% of gambling is currently online. In all other markets, our optimized category, we will prioritize cash flow generation and value maximization through leveraging our enhanced capabilities and scale. We expect to have more core markets in the future. But in order to become a core market, we need to see a route to sustainable, profitable markets. market-leading positions. We will add more markets through a combination of expansion of our capabilities, as well as high-impact capital-like partnerships or M&A. In our other markets, these will generate high cash returns, leveraging our scalable platform. Turning to slide 21, and a few notes on executions. As I touched on earlier, you can have the best strategy in the world, but it's meaningless until you can execute effectively. Since joining, I have already instilled a step change in focus and execution and value creation through our ongoing regular performance reviews, as well as setting up what I call a one-company program management office. This is a small group of experienced professionals headed up by Warren Lewis through his role as Chief Strategy Officer. They provide the governance of the strategic initiatives and support delivery and execution, ensuring everyone is aligned in making the most effective decisions. Outside of the strategic initiatives, I'm also obsessed with business-as-usual run rates and the underlying customer-centric key value drivers. Delivery gains, agreed plans, and ensuring accountability across my executive team for executing what we said we would. We are aiming for world class. And that is a constantly moving target. So our relentless focus on driving successful execution will not stop. I will now pass back to Sean to tell you what this all means for our financials.