888 shares rose in morning trading as the gambling giant performed in line with market expectations despite costs from the acquisition of William Hill and compliance failures.
The gambling giant reported a pretax loss of £115.7m, swung from a £59m profit last year, due to costs associated with its June acquisition of William Hill.
On an adjusted basis, the firm’s pretax profit dropped 10 per cent, reflecting the increased interest costs following the acquisition.
However, while the William Hill takeover imposed additional costs, it allowed 888’s revenue to rocket 74 per cent to £1.2bn. Its adjusted earnings before interest, taxation, depreciation and amortisation also climbed 82 per cent due to the merger.
Lord Mendelsohn, executive chair of 888, commented: “The combination with William Hill transformed the Group and brought together two exceptional and complementary businesses to create one of the world’s leading betting and gaming businesses.”
The two firms merged last June, with 888 taking on William Hill’s 1400 betting shops as well as its online gaming brands. However, 888 took on a large amount of debt to finance the deal which has concerned investors.
Since then the company has been hit by scandals. In January the chief executive stepped down following an internal money laundering investigation into the firm’s Middle Eastern business. It expects to take a £25-30m hit due to the failings.
However, 888 also expects to recover some of the £56m of revenue from its Middle Eastern business which boosted its performance.
“Recent compliance issues in the Middle East were very disappointing, they have underlined the importance of our enhanced and proactive risk management framework,” Mendelsohn said.
Then, on March this year, 888 was fined £9.4m by UK authorities for failing to make adequate checks on whether some of its customers could afford to gamble during the pandemic.
The firm said it expects no further impact on its UK operations following the settlement with the Gambling Commission.
The gambling giant also issued an update on its performance in the first quarter of 2023. Revenue dropped five per cent year on year as revenue from its international business fell 11 per cent.
The firm is also reviewing whether it could sell “non-core assets” to help pay off its debts.
The board expects 2023 revenues to be lower than 2022 by a low to mid single digit percentage. However, adjusted EBITDA will be “significantly higher” as the firm attempts to build “sustainable revenues”.