Company Report: Hiccup in Earnings Expected After 888's WH Acquisition

Despite its bold acquisition of William Hill holdings, powerhouse operator 888 warns investors of a revenue drop leading up to the acquisition.

H1 Drops

The first half of 2022 will result in a revenue dip announcement, which 888 is attributing to stricter regulations in the UK and withdrawal from the Netherlands market.

Raise to Maintain Shares

The William Hill acquisition nonetheless moves forward: to protect shareholders, 888 released an update indicating a raise of up to £1.7bn of funded debt to finance the William Hill global acquisition, expected to complete on 1 July.

Revenue Figures

In the same update, 888 reports revenue income between £330-335m for H1 2022, representing a substantial drop from $528.4m (£431.8m) from H1 2021.

Mitigating Factors

Nonetheless, 888 assures that the numbers are not a surprise: they were expected after observing growth in some European markets; stricter safer gambling measures in the UK requiring further adaptation; and the elimination of income from the Netherlands, from which 888 withdrew entirely.

Greater Performance Measures

As for the 12 months ending 28 February 2022, financial figures report that 888 brought in revenues of £690m and adjusted EBITDA of £109m, with the international (non-US) business of William Hill generating £1.37bn and adjusted EBITDA of £238m for the same period.

Statement from 888

A statement released by 888 explained that the results were no surprise:

“The performance of both businesses largely reflects a continuation of the trends outlined in the prospectus dated 29 April 2022,” while acknowledging that gains from new openings were “offset” by the “withdrawal from the Netherlands” and “tighter UK safe gambling restrictions.”

Next Measure

The next step according to 888 is to market £1.02bn this week and take over £750m worth of various loan vehicles to fund the debt, fees, and acquisition price necessary to complete the William Hill acquisition from Caesars Entertainment.

Final Acquisition Price

The acquisition last May ended up totaling £1.95bn, including £200m in equity and £200m in 888 cash, a total price that was reduced from the initially agreed upon total of £2.15bn after it was revealed that William Hill was already facing a licence review in the UK.

H1 Year-on-Year

Last April, 888 turned in an 18% year-on-year drop in revenue for Q1 2022 $224m (£172m/€207m), down from Q1 2021's total of $273m.

Outlook

With the measures to offset the adjusted WH acquisition effectively projected, the environmental elements leading to short-term losses appear as territorial characteristics which a powerful company such as 888 can absorb and adapt to correct growth in the near term.