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888 Holdings soars as bleeding stops in FY22: Shares surge

License: Pexels, Free to use, Author: Enrique Hoyos

Today, the troubled gaming operator 888 Holdings saw a 17.5% surge in its shares since the start of trading, following the release of its 2022 full-year financial report. Despite ongoing regulatory and financial pressures, the business performed in-line with market expectations, providing cause for cautious optimism. Over the past year, 888 Holdings has received much negative news, but its financial results revealed that the company remains committed to executing its long-term strategy of deleveraging its debt to EBIDTA ratio from 5.6x to 3.5x by the end of 2025. While debt servicing will continue to be a concern, the company has hedged 70% of its interest rate exposure, fixing its interest rates for the next three years. Additionally, the company is focusing on profitability for the foreseeable future and has raised its synergy target with William Hill's non-US operations from £100m to £150m.

In January, the business's CEO Itai Pazner resigned in the wake of anti-money laundering failures in its Middle Eastern VIP operations. This led to regulatory uncertainties and a hit to the company's revenue. However, 888 Holdings has concluded its internal investigation into certain "shortfalls in best practices" and has implemented new policies and procedures to mitigate AML risk. The company has initiated the process of reopening accounts and onboarding new customers, and the board expects to recover 40-50% of revenue from the cohort, resulting in a £25-30m revenue headwind for FY23.

In 2022, 888 Holdings recorded a 74% increase in revenue to £1.24bn, as well as an adjusted EBITDA rise of 82% to £217.9m. However, once the revenue impact of the William Hill acquisition is taken into account, the company saw its organic revenue decline by 3% compared to 2021. The company blamed this decline on self-imposed safer gambling measures implemented in the UK ahead of gambling reform and the closure of the company's Dutch operations from Q4 2021.

888 Holdings has £170m cash on hand and £150m in loans it can access, but it made a loss of £115.7m in 2022, compared to the £59m profit it achieved in 2021. The company is currently searching for a new CEO, with Chairman Lord Mendelsohn acting as executive chair on a temporary basis. Chief financial officer and executive director Yariv Dafna will remain in his posts until the end of 2023 to provide continuity to the board and executive team.

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