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888 will rebrand to evoke plc and focus more closely on its core markets as part of a strategic reset for the business.

The William Hill operator today (26 March) announced its new value creation plan (VCP), a wide-ranging rethink of the company’s strategic vision.

The news comes in the wake of a difficult 2023, which saw increased regulatory risk and disappointing financial results that culminated in reduced FY2024 guidance.

CEO Per Widerström previously suggested the business would use its Q4 2023 results as an opportunity to lay out a new strategy.

Analysts at Peel Hunt previously noted similarities with 888’s November 2022 investor presentation, which also aimed to lay out something of a strategic reset.

Markets have so far reacted positively to the VCP, with 888’s share price rising approximately 7% to 89.65p in morning trading.

“We are under no illusions that this financial performance has been disappointing and that at the end of 2023 our financial leverage of 5.6x was above where we want it to be,” said CFO Sean Wilkins during the earnings presentation.

“While the financial performance has been difficult, it means the business has already absorbed a lot of external shocks and has a higher quality base to build from.”

Management said the VCP will work to deliver a high return on equity from sustainable profit growth.

Specific medium-term objectives include revenue growth of 5%-9% per year, as well as improved profitability and efficiency through operating leverage.

The business also said it wants to expand its adjusted EBITDA margin by 100 basis points per year.

Through disciplined capital allocation, the company said it aims to achieve a leverage ratio below 3.5x by the end of 2026.

888 took on huge debt during its 2022 acquisition of William Hill’s non-US assets. The subsequent rise in interest rates has made serving that debt more expensive than was first predicted, complicating the company’s strategy.

The VCP: 888 promises “laser focus” on execution

Following the appointment ex-Fortuna head Per Widerström as CEO in October 2023, the operator has shaken up its senior management team.

Seven of the 10 C-level roles are new appointments dating from after Widerström assumed his position.

New executives appointed since after the firm’s January 2023 trading update include Mark Kemp as chief commercial officer and Stephen Sheridan as chief customer and operating officer.

Following these leadership changes, the company has announced a reset of its operating model.

This will involve removing duplication and inefficiencies, while enhancing accountability and delivering around £30m in additional cost savings.

The business will also implement a new strategic framework, with six newly commenced strategic initiatives intended to drive operational performance.

The business also committed itself to a “laser focus” on execution to strengthen its core capabilities and competitive advantages.

Simplified market archetypes

The company will also simplify its market archetypes into two new categories.

These will be core markets, including the UK, Italy, Spain and Denmark, representing 80% of current revenue, and optimise markets, which are the remaining regions where 888 is active.

Peel Hunt noted the core markets will be the company’s main geographic focus in the future.

“These are markets that boast attractive long-term growth potential, high barriers to entry, and established regulatory frameworks,” said Widerström.

“In these markets we will continue to leverage our local expertise and diverse brand portfolio to increase market share and drive sustainable profitable growth.”

Meanwhile, the optimise markets will act as cash cows – “either finding routes to relevance, sold or injected into local partnerships,” added Peel Hunt.

In line with this new model, 888 said of the ongoing strategic review of its US B2C business, that it will consider “all potential alternatives” to deliver value for the business.

Highlighting its multi-brand operating model, the company also said it intends to rebrand to evoke plc, subject to shareholder approval at the 2024 AGM.

New 888 strategic initiatives

Widerström said his key focus over the coming years will be on operational execution, which he termed the “how” of 888’s strategic framework.

To provide the roadmap for execution, 888 has created six new strategic initiatives to drive long-term value.

The first of these is customer lifecycle management, which will involve building personalised customer relationships driven by automation.

Second is the customer value proposition. This is the business aiming to differentiate its brands from the competition and be relevant to customer needs.

888 said it also aims to leverage AI and automation to drive efficiency, effectiveness and scalability.

Next is product and technology. The company said it will unify its proprietary technology platform to deliver products that are aligned with its brands and customer needs.

The business also said it aims to improve its culture. Widerström said this will involve a “Glocal” operating model that empowers staff.

Finally, the company said it will integrate ESG principals into its core operations to ensure long-term value creation.

“I firmly believe that the group now has all the key ingredients for long-term success: leading positions in growing markets with high and rising barriers to entry; powerful proprietary technology; a top-class management team; and some of the strongest betting and gaming brands in the world,” said Widerström.

“We are now clear on what success looks like, we have the team and capabilities to deliver, and I am confident that the execution of our plan will deliver a high return on equity from sustainable profitable growth, enhanced by deleveraging.”

Rocky road

Overall, Peel Hunt was relatively bullish on the strategy, stating it was “clear implementation has already begun”.

As such, it reiterated its “Buy” rating, with a 175p target price.

The analysts noted the business’ decision to reduce its FY24 guidance will work to give the company headroom to invest in marketing and technology to implement the VCP without having to reset forecasts.

However, Peel Hunt also suggested the company’s Q1 outlook may create some doubts about whether the strategy will be a success.  

“Assuming normal win margins, the company expects Q1 2024 revenue to be £420m-£430m, implying c.5% YoY revenue decline,” it said.

“Management needs to be convincing that the business is still on track for its targets despite this poor start to the year.”

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