888 Holdings plc

Good morning everyone and thanks for joining us today for our H1 2024 results. I am Per Widerström and have now been the CEO of Evoke for 10 months. We already gave you the key headlines of our first half in our trading update a month ago and the action numbers for H1 are exactly in line with the guidance we gave. So we are going to keep today fairly brief. I will start with a short summary, including the actions we are taking to address performance, including details of our current trading before Sean walks through the financials. And then I cover our strategic progress before taking your questions. The first half financial results are exactly in line with our trading update announcement a few weeks ago. But let me start by reiterating what I said before, that these results are disappointing and are not acceptable. We understand exactly what went wrong and we have taken corrective actions to address the problems. This is what I will take you through in more detail shortly. We are seeing good traction from our decisive actions and I'm pleased to say that Q3 to date is in line with our 5-9% growth targets. We are laser focused on delivering our commitments for H2, and we have implemented a number of tactical actions focused on short-term performance turnaround to ensure we deliver these targets in the second half. But be in no doubt that the actions we are taking are much more significant than this, and are much more strategically positive. Focus on our value creation plan and setting up the business for the longer term. We are seeing steady improvements in our run rates, but I am really excited about our growing capabilities and what this means for our future profitability. Turning to slide three and to cover current trading and what we are seeing and expect to see in the second half. There is a short summary on the page on what we covered in our trading update around why the H1 performance was behind the plan and actions we have taken to address it. You can also see some of the wide range of initiatives and improvements that will be landing across the second half, in particular improvements in our products, the way we do customer lifecycle management, and our overall customer value propositions. These are fundamental shifts that will drive significant longer-term benefits, but we also expect to see some immediate uplifts as things lands during the course of the second half. We have already made several changes in the past few months to address short-term performance and drive improvements. It's fair to say that a lot of the real exciting initiatives are still to come in Q3 and Q4. In terms of what we are seeing in the business right now, both the end of Q2 and start of Q3 have seen strong underlying progress in our year-on-year growth rate. And revenue growth in Q3 up to the 10th of August is consistent with our 5% to 9% growth target range. The period benefits slightly from the timing of the Euros, but the main driver of growth has been strong trends in our core customer cohort of mid-value customers and also strong ongoing growth in online gaming in our core markets. This is really the heart engine of the business, so it's pleasing to see this is where the growth is coming from. With that, I'm going to hand over to our CFO, Sean Wilkins, to run through our financials and wider outlook first. And then I will come back to expand on some of these strategic changes we have been making.

Thanks Per, and good morning everyone. I'm Sean Wilkins, the CFO, and I've now been with the business for six months. This is a hugely exciting time for the group as we are undertaking a total transformation of the business. This will deliver stronger revenues, stronger growth, higher margins, and more sustainable market leading positions. As with any transformation of this scale, the route to success is never a straight line. We had some successes and some challenges in the first half, and the results you can see on slide five for the first half are not where we wanted them to be. We already provided the main financial headlines last month with revenues down 2% and an adjusted EBITDA margin of 13 to 14%. So there are no surprises here. As we discussed in the trading update, we didn't see the returns we expected from our increased marketing investment. And with the operational gearing in our retail business, this meant that the adjusted EBITDA of 116 million was about 35 to 40 million lower than we had expected. This is what we explained in our post-close trading update in July. 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, integration costs and the US termination fees already disclosed. What we will cover in more detail today is that the first half is not reflective of all the actions we've taken to secure our performance in H2. and beyond is much stronger. I'll talk a bit more about this after covering our cash flow. Turning to slide six and our cash flow. Net cash, excluding customer balances, dropped by £12 million in the half, resulting in net debt of £1.73 billion. Given the phasing of our marketing investments and cost savings, our adjusted EBITDA on an LTM basis reduced from £308 million at the end of December to £268 million at the end of June 2024. This means that the leverage increased from 5.6 times to 6.4 times. Alongside this drop in adjusted EBITDA, you can see we paid out over £50 million for exceptional costs in the first half. which is driving the small cash outflow. This includes significant items like costs to exit our US B2C business, which will deliver clear and high returns in future periods. We expect this increase in leverage to be temporary and expect leverage at the end of 2024 to be much closer to where we began the year. Looking forward, we plan for rapid deleveraging to our 2026 target of below 3.5 times. It is important to note that despite profits being below our plan, the business remains highly cash-generative, with almost £79 million of underlying business-free cash flow in the period. We also have really strong liquidity, with nearly £300 million of total liquidity at the end of June. Turning to slide seven, I'd like to provide some more details on the improvement in profitability that we expect in the second half. As Per already said, the actions we have taken have driven an improvement in our trading. We are pleased with the improving momentum in our revenue run rate. This chart walks through the main bridging items from half one adjusted EBITDA of £116 million to a half two guidance of £185 to £195 million. Marketing phasing will add 35 to 40 million. We significantly increased our marketing in the first half and are seeing some of the benefits of this in our improved run rates into half two. The lower marketing spend in H2 will be a marketing ratio of around 18 to 19% of online revenues, which we see as a more normal rate than the elevated 25% in half one. The phasing of employment costs will add 5 to 10 million in H2, given the full half impact of actions taken during the first half to improve our operating model. Revenue initiatives will add around 15 million to EBITDA. We have a deep pipeline of initiatives here, some of which Per talked through. We have completely changed the way the finance function supports the business in tracking and driving business. Each of these initiatives is tracked individually, enabling the business to take corrective actions to ensure we're hitting our financial plans. An example of a new initiative which is driving improved revenue and profitability is our recently launched upgraded BetBuilder. This has made it much easier for our customers to place combination BetBuilder bets. With a high quality product in place, we then skewed the marketing and promotions towards this in the Euros and into the start of the new football season. This new product drives both a revenue and profit uplift on its own as more players can place the bets they like and also increases the efficiency of our marketing and bonuses as we are able to promote a really attractive product. As you know, we are in the process of selling and closing our US B2C business, and this will add a further £4 million to EBITDA in the second half. Finally, we have taken a range of additional cost initiatives, which will save a further £10 million in H2. One of the key learnings in my first six months in the role is that we have loads to go for on the cost side. We continue to see a wide range of manual processes, duplication and inefficiency in our cost base. This ongoing work will lead to a structurally lower cost base with further annualisation impact into 2025, giving us confidence in our 2025 plans. Finally, on slide eight, a quick update on my financial priorities that I outlined at our full year results. 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 rigor of our plans and provide greater support to our decision makers and drive high returns. We built rigorous daily, weekly and monthly tracking and increased our reforecasting cycle to monthly to ensure that we can be more accurate and confident with our forecasts. Each element of our plan is tracked and monitored to ensure we are delivering. This enables the business to take corrective actions if we are off course and to quickly scale up investments where we are over delivering. Secondly, resource allocation is fundamental to creating value. We are in the process of exiting the US B2C business and have made structural changes in our approach to marketing and product investments to drive higher returns through pursuing our strategy. Thirdly, we're making strong progress with our efficiency and operating leverage. We continue to take cost out of the business, following our strategy to deliver a more targeted business, investing in the right products and brands in the right countries. We are building a more scalable, more efficient business powered by intelligent automation and AI. I'll now hand back to Per to provide some more details on how we have set up the business for success in H2 of this year and beyond.

thanks sean turning to slide 10 this is a reminder of our commitment to shareholders to create value as we outlined today in our trading update last month we are not happy with the financial performance in the first half the scale of transformation is significant and it is needed for us to deliver a short-term training turnaround as well as ensuring long-term profitable growth and value creation Our value creation plan does not change, and with the structural improvements we have made in the business, I'm even more confident about our plan to create shareholder value. Turning to slide 11, with a reminder of our strategy. This is a complete reset of the business built around a clear and compelling strategy. We know where to invest in our core markets, and we know how to invest and how to win customers in these markets. During the first half, we have made strong progress with our strategy, building an almost completely new team, new modus operandi ways of working, and our clear strategic framework to guide the success and value creation of the business. There is, of course, lots still to do, and I will not rest until this business is performing the way it should and can do. But I'm really pleased with the progress we have made here to set us up for profitable growth in H2 2024 and beyond. Turning to slide 12 and just to reiterate and expand on some of the changes we have been making to transform the business. Our first competitive advantage we are investing behind is operational excellence driven by data and automation. We have hired a world-class team for data, intelligent automation, and artificial intelligence who are already driving a step change in our capabilities. We have become much more sophisticated in our play segmentation, enabling us to provide better products and promotion to our core customers who value them the most. Driving retention, loyalty, and also higher play values. These improvements are enabling us to do more with less, delivering 30 million pounds of cost savings while providing better outcomes for our customers. And we are already seeing tangible short-term benefits here to our run rates with an improvement in, for example, our bonus ratios. Our second competitive advantage being invested into is our winning culture. We rebranded the group as Evoke, a critical step to bring together our business into one company focused on execution of our strategy. We have an almost entirely new executive team bringing in leading talent and experience from inside the sector and outside, as well as strengthening the wider leadership community. And we have radically restructured operating model, removing layers and broadening spans of controls, getting our people across the business closer to the customer and speeding up decision making. Our third competitive advantage we are investing behind is our lead in distinct brands. We have relaunched Mr. Green as the most distinctive casino brand in the market. And we are repositioning William Hill with successful campaigns now being based around, for example, top price guarantee in racing and top prices on football and gradually shifting our marketing focus from pure promotions towards highlighting our product excellence. Our investment in our competitive advantages and value creation is underpinned by our 6 strategic initiatives. These initiatives are fundamental to creating a leaner, more profitable business with investments in capabilities that are enabling us to win customer and win in our target markets. Put simply, we have taken decisive actions to ensure we hit our plans for the second half, and we are making significant structural improvements in our business to ensure we create a better, more profitable business for the future. Turning to slide 13 and how our actions and priorities are both delivering short term trading improvements while at the same time building significantly enhanced capabilities for the future. We will deliver 5 to 9% revenue growth in H2 2024. We are already seeing the benefits of our short term changes, which include the benefit of new product launches like the bet builder with further new product launches and UX enhancements coming in the next few weeks. This is enabling us to be much more laser focused with our personalized promotions and more effective with our marketing as we highlight the benefit of our leading products rather than just giving free bets. These capabilities will grow substantially in the long term as we roll out our automated customer lifecycle management model, which has already been well under development and will lead to a step change in retention and monetization as we deliver our strategy to give customers a personalized experience delivered by our clear premium brands. Stronger revenues will be magnified for profitability with our more efficient cost base. The second half of this year will benefit from the full £30 million cost savings plan that we announced at the start of this year. The benefits of reducing losses from our US B2C exit and lower marketing ratio with our more targeted marketing. Over the long term, there is substantial upside potential for our profitability. as we capture the benefits of our strategic initiatives. Evoke is becoming a business with leading scalable technology powered by AI and intelligent automation with a winning organization operating with pace, decisiveness, and urgency to deliver improved profit models. And finally, deleveraging will enhance our return on equity. As Sean mentioned, while leverage is temporarily elevated in the first half, we see a clear route to rapid deleveraging, which will deliver high shareholder returns. Thank you for your continued support, and we are now ready to take your questions.