888 Holdings plc

Good morning, everyone, and thanks for joining us today for our 2024 results. I am Per Witteström, and I'm joined today by Sean Wilkins, our CFO. I've been CEO of Evolve for nearly 18 months now, and in today's presentation, I'm delighted to report on the strong progress we are making with our business transformation and turnaround. We start with the agenda on slide two, and while we already gave you the key headlines on 2024 performance and our full year trading update in January, I'm pleased to say that our adjusted EBITDA was actually two million pounds ahead of the top end of our previous update. I'm delighted to report we met or exceeded our commitments from the interim results, and Sean will talk through the details of this, as well as covering our current trading and outlook for the year ahead. I will then cover our strategic progress and how we are executing gains that value creation plan before taking your questions. Turning to slide 3 with a reminder of our commitment to shareholders to create the value that we laid out exactly a year ago today. Firstly, driving growth. We have made great progress focusing the business towards our five core markets, which now make up 90% of our revenue. The business is powered by these market leading positions, which deliver strong, sustainable and profitable growth and support our confidence in achieving our 5% to 9% revenue growth targets. Secondly, we are improving operating leverage. Our adjusted EBITDA margin was 22% in the second half of 2024. While we expect this to be more like 20% for full year 25, we are on the positive upwards trajectory and continue to see significant long-term upside to our profitability as we build our enhanced capabilities. Thirdly, we are highly disciplined with our capital and use of cash and are committed to reducing financial leverage in the coming years, accelerating return on equity for our shareholders. Turning to slide four, and just before handing over to Sean to cover the financial results in more detail, I would like to give my personal highlights of my first full year as CEO. Firstly, and perhaps most importantly, we returned the business to growth for the first time in three years. We delivered full-year revenue growth of 3%, with growth in the second half of 8%, consistent with our mid-term target of 5% to 9%. We further improved the mix of the business during the year. The acquisition of Winne created our fifth core market in Romania, and online core markets grew 12% year over year. The business is powered by these market leading positions, which will continue to underpin our strong, sustainable, and profitable growth. We transformed almost every area of the business with a complete reset and transformation, bringing in new talent and laying the foundation for significantly enhanced capabilities going forward. The strategy is working and we are pleased with our progress, but we know there is a lot more to do. But laser focus on execution as we strive to deliver our exciting potential and create value. Sure, we now cover the financial results.

Thanks, Per, and good morning, everyone. I'm Sean Wilkins, the CFO, and I've now been with the business for just over a year. As you can see on slide six, for the full year, our revenues were up 3% and adjusted EBITDA was up 4% to £312 million. It's worth just pointing out here for the eagle-eyed that the fiscal 23 EBITDA of £300 million is £8 million lower than what was reported last year. due to an accounting adjustment on a UK gaming duty where it had been under accrued. On the face of it, you'd be forgiven for thinking that this was quite a pedestrian year, but the full year figures alone don't tell the story of the radical transformation that we were undertaking during the year. A transformation that drove significantly better performance in the second half and has positioned the business for both stronger revenue growth and higher profitability in the future. Revenue in the second half was up 8% year over year, including 12% growth online with double digit growth in Q4 across both UK and international online. In UK online, we returned the business to strong growth in the second half and gaming for the full year was up 9%. At an EBITDA level, the significant increase in marketing in half one last year did not generate the desired returns as we've discussed previously. Our international business delivered fantastic operating leverage with 7% revenue growth alongside a reduction in both marketing and other operating costs as we refined our brand marketing plans and improved efficiency. This led to an adjusted EBITDA growth of 31%. We saw the opposite effect of this in retail where the high proportion of fixed cost meant EBITDA declined by 33%. With a new management team and improved gaming offering, we are confident the business is much better placed in 2025. 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. Turning to slide seven, this chart really highlights the extent of the transformation the business has been through. We are now really well positioned with 90% of our revenue coming from core markets and 96% from regulated and taxed markets. Within our core markets, we have strong positions and the right brands and products to grow share, supporting our 5% to 9% revenue growth plans. The mix of revenue and quality of the business has improved significantly over the last three years, reflecting a few factors which you can see in the chart. Firstly, our UK revenues are lower. This reflects the proactive change in brand strategy to reduce investment in low margin business and focus on investing in profitable growth. It also reflects a mixed shift within the player base to more sustainable customers, as we have implemented nearly all of the actions from the government white paper in the UK. Secondly, there are a whole range of markets like the Netherlands, Middle East and Latvia, where we have either closed, sold or totally restructured the way we operate. These markets made up 14% of the 2021 pro forma revenue and are now under 5%. Thirdly, in the rest of the world, which is a mixture of dot-com and locally licensed, we have changed the focus to drive sustainability. And finally, in our other core markets, revenues have increased by approximately £100 million, or 36%, reflecting our market focus and the strength of our leading brands and products in these attractive markets. The net impact of all these changes is that we now have a really strong business mix with 90% of our revenues coming from our core markets, where we have market-leading positions and support our sustainable 5% to 9% revenue growth plan. Turning to slide eight, I'm delighted to report that we have met or exceeded all our commitments from the interim results. In August, we outlined that we were disappointed with the financial performance in the first half but have taken bold, decisive actions to correct this and drive a stronger performance in the second half. This chart compares half one 2024 adjusted EBITDA to half two and progress against all of the key areas that we discussed at the interim results. As you can see, we beat the top end of our guidance range with revenue growth towards the top end of the range alongside overachieving on cost savings. Turning to slide nine, while we delivered efficiency gains in 2024, I am pleased to say there is a lot more to go for. As Per highlighted, the central pillar of our value creation plan is to become more efficient as a business, delivering higher profit margins as we achieve sustainable revenue growth. The business already successfully achieved £150 million of synergies from the combination. which offset some of the significant regulatory and compliance headwinds I've already mentioned. Per then announced a 30 million pound cost optimization program soon after he became CEO, which was successfully executed in half one last year. In addition, as I've just laid out on this previous slide, we executed a further 15 million pounds of cost saving actions in half two. Not all of these will annualise, but we do expect to be able to drive 15 to 25 million further savings in 2025 from further operating model refinements, as well as supplier efficiencies. This drive for efficiency will continue, particularly where we see cost headwinds, such as the national insurance and national living wage changes in the UK, which are around a 10 million pound headwind this year, that we have been able to absorb into our existing guidance through additional efficiencies. Turning to slide 10 and our cash flow. Net cash, excluding customer balances, increased by £19 million in the year, although we used £85 million of the RCF at the end of the year, resulting in net debt increasing by £30 million to £1.79 billion. Cash burn for the year of around £65 million was primarily driven by exceptional cost to deliver on the transformation, coupled with the poor first half performance. You may recall at the interims I said that we expected to be broadly cash neutral over H2 and the eventual outflow of a little under 30 million was primarily driven by M&A timing, with the winner acquisition not factored in at the time and a delay to the sale of USB2C. On an underlying basis, we were around neutral. The leverage multiple dropped 0.2 times on a full year basis to 5.7 times and we made strong progress from the interims. with LTM leverage reducing by one time from 6.7 times over the second half. Looking into our trajectory for this year, we expect continued rapid deleverage with the multiple expected to be around five times by year end. As we look forward, the group had previously guided to net leverage below 3.5 times by 2026. We now expect to meet this target in 2027. primarily reflecting the additional time needed to build out world-class capabilities, alongside the further exceptional costs and capex required to execute such a significant transformation in the business. While leverage is high, the resilient business model and significant cash generation ensures we comfortably cover our debt servicing demands. We are on a clear path to de-level the business and support a high return on equity. Turning to slide 11, a quick update on my financial priorities that I outlined at our 2023 full year results. Firstly, we're driving and embedding a cultural shift in the mindset to deliver value creation. We have built much better ongoing tracking and reforecasting to ensure we are delivering. This enables the business to take corrective action if we are off course and to quickly scale up or scale down investments. Secondly, resource allocation is fundamental to creating value. We have sold businesses in non-core countries such as the USA, Latvia and Colombia, and are highly selective in our capex and MA investments, such as our low-capital, high-impact partnership with Winner in Romania. Thirdly, we are making strong progress with our efficiency and operating leverage. As I mentioned before, we have identified further cost savings for 2025. And in parallel, we are investing in our strategic initiatives to deliver a step change in capabilities and productivity. Turning to slide 12 with some comments on current trading and our outlook for the year. I am pleased to say that following a robust start to the year, we're comfortable with our annual revenue growth guidance of five to 9%. We're likely to be a touch below this in Q1 for a number of reasons. Firstly, short-term impact of new customer journeys as part of additional safer gambling measures introduced at the end of Q4 in UK online. But these have been mitigated with the implementation of improved product and customer experience, which will reduce the impact going forward. Secondly, the prior year had elevated marketing and promotional activity. Thirdly, strong wind margins in Q4 and racing cancellations in January have impacted volumes into Q1. And finally, last year had one extra day, which is worth one percentage point for the quarter. The exciting product pipeline, the improvements in retail, the full implementation of the Customer Value Proposition, or CVP, for William Hill, and our ever-improving capabilities around data and personalisation are all driving our confidence in Q1. and being in the 5% to 9% range for the full year. Importantly, though, we continue to evidence the step change in profitability and expect the Q1 adjusted EBITDA to be £18 to £28 million higher than last year, with LTM EBITDA expected to increase to around £330 to £340 million at the end of Q1 2025. This should step up again through the year as we deliver our plans with an expected margin of at least 20%, which supports an expected significant step down in leverage this year. I'll now hand back to Per to provide some more details on our strategic progress last year and the plans for this year.

Thanks, Sean. Turning to slide 14 with a quick reminder of how we're going to deliver the value creation plan and our strategy to execute on this. The detailed strategic framework is in the appendix, but this slide summarizes what it means across the key areas of what we will do, how we will do it, and where we will do it. Over the following slides, we'll bring each of these to life a bit more, but I just want to start by reiterating again, this has been a complete reset of the business. We have built a clear and compelling strategy, We have built an almost completely new team who are highly motivated and incentivized to deliver this plan. We have a new modus operandi and ways of working across the business. We know where to invest in our core markets, and we know how to invest and how to win customers in these markets. The strategy is working, and while there is, of course, a lot still until this business is performing the way it should and can do. But I'm really pleased with the progress we have made here. Turn to slide 15, and while Sean has covered a lot of this already, I wanted to start with the evidence of what we are doing. I'm delighted to say that we returned the business to growth during 2024, and our strategy reel has been beginning to pay off, with H2 2024 delivering year-on-year revenue growth of 8% and adjusted EBITDA growth of 29%. As Sean outlined, the shape and mix of our business is very different today compared to just three years ago, with a significant increase in the quality and sustainability of our revenues. Our core markets enjoy leading market positions powered by our world-class brands. These strong market positions support our plans for 5% to 9% annual revenue growth in the coming years. In terms of profitability, the designs and actions we took last year to improve performance have had a positive impact. In particular, on the cost side, and as you see here, we delivered a significant improvement in margin in the second half to levels this business has not seen for years, and with a significantly higher regulated revenue mix as well. This focus on profitable growth delivered a significant leveraging in the second half. As Sean mentioned on current trading, with the last 12 months EBITDA having improved again, we are already bringing leverage down so far in 2025, and we remain laser focused on bringing leverage down quickly and consistently to have a new target of under 3.5 times by 2027. Turn to slide 16 and to focus on the first of our core competitive advantages, operational excellence driven by data insights and automation. This slide has just a few highlights from the developments during the year. We have hired a truly world-class AI and talent automation team who have significant experience in delivering large-scale transformation, and we are investing in the right tools. We've had some quick wins across customer operations and trading, building on a lot of good automation work that was already happening, but there's significantly more to go for in 2025 and beyond. Earlier, the evidence of our improved use of data insights can be seen in our more efficient use of bonuses and free bets. We have become much better at segmenting our core customers, which together with improved products and customized second management has enabled us to drive better personalization and ensure we are spending on the right customers. This has also helped drive a substantial increase in RPU, being up 6% for the year Turning to slide 17, 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 experience from inside the sector and outside, as well as strengthening the wider the leadership community. We have radically restructured and reshaped the operating model, removing layers and broadening spans of controls, getting our people across the business closer to the customer, and speeding up decision making. We made sure we support the colleagues through such a large transformation, including significantly expanding the well-being support we offer, including funded sessions with coaches across a wide range of topics, We still have more to do in this area, but it's pleasing to see the improvements in employee NPS across the second half of the year from plus 4 to plus 10 as they really embed the new strategy. Turning to slide 18, our third competitive advantage we are investing behind is our leading distinct brands. We have relaunched Mr. Green as the most distinctive casino brand in the market. We are repositioning William Hill and have just launched our new visual identity in March, ahead of the Cheltenham Festival. And we have begun the detailed work on 888 now as well, which will launch in 2025. All of this work is designed to develop and deliver a clear and consistent customer value proposition, giving customers a reason to choose us to stay as a loyal customer. We're becoming much more sophisticated in our segmentation and we are striving for infinite personalization to become the brand of choice in all our core markets. On the product side, we fundamentally overhauled the entire product and tech function and development pipeline. This has enabled improved speed to market with new features, with some particular highlights for the year being the new bet builder product and impact sub feature, both of which are resonating really well with customers. And we are the only operator offering impact sub features in retail. Also, in retail, we began the rollout of our new gaming cabinets with 5,000 installs now complete and positive early signs with accelerating growth performance and market share gains in Q1. We continue to progress the move towards a single platform with William Hill's trailing engine, now integrated into the 80-day platform. All Mr. Green markets now migrated onto the 80-day platform, and Section 8 can roll out onto William Hill and Mr. Green. We have loads of exciting products to come in 2025 as well, alongside a continued drive to simplify the UX and improve ease of use. I hope you were all using the William Hill app at Cheltenham. If you were, you would have seen our new improved horse racing pages. That's just another example of this. Turning to slide 19, alongside our investments in capabilities and competitive advantages, we've been highly disciplined about investing where we can deliver best returns for our shareholders, which is our five core markets, the UK, Italy, Spain, Romania, and Denmark. As you can see on the slide, we have really strong positions here. And in the markets where we are outside the podium positions, we are really close to the top three positions. there is a bigger gap given a significant consolidation that's happened there in the recent years. However, we are a top three online casino operator in Italy. These are all large, attractive and growing markets with high barriers to entry. Our strong positions here and our clear market focus helps us to deliver our 5% to 9% revenue growth target and builds us a more focused and more profitable business. Finally, on slide 20, with our conclusions before taking your questions. 2024 was a full transformation and reset. We started to see the impact of this with the business return to growth after two years of declining revenue. As well as improving short-term trading trends, we have been investing heavily behind our strategy, focusing our resources on our core markets and investing in our long-term capabilities. who are well-placed to deliver our commitments with 5% to 9% revenue growth and at least a 20% EBITDA margin in 2025, leading to material deleveraging. Finally, just before we hand over to Q&A, I wanted to take a moment to say that on behalf of the board and the whole team at DeVoke, I would like to thank Vaughan Lewis, Chief Strategy Officer, who will leave the business in the summer of 2025 Born has played a very important role in many aspects of the business over the past four years, including helping to deliver the transformation acquisition of William Hill, assuming the role of interim CFO prior to Sean's arrival. playing a critical role in developing our value creation plan and deliver the value added M&A, such as the positional winner and the development of the group's 888 Africa joint venture. With the business returned to growth and the group's value creation plan in place, Warren has decided the time is right to seek new opportunities and that we wish him every success in the future. With that, I will say thank you for your continuous support, and we are now ready to take your questions.