Evoke misses H1 Adjusted EBITDA target amid higher marketing costs, UK retail revenue drop

Evoke, the parent company of 888, William Hill, and Mr Green, reported that it fell short of its H1 2024 adjusted EBITDA target by £35 million to £40 million ($45.44 million to $51.93 million). The shortfall was attributed to high marketing costs and lower-than-expected revenue, as disclosed in a trading update Thursday.

In response, the company plans to mitigate its losses in the second half of the year by implementing up to £30 million ($38.95 million) in cost-saving measures and aims to meet its full-year earnings expectations.

Key drivers for these cost efficiencies include a change in leadership and an operational overhaul, particularly through 888’s new strategy and value creation plan announced in March.

Evoke projects H2 2024 revenue growth to align with its medium-term guidance of 5%-9%. The company also anticipates achieving a 20% EBITDA margin in 2025, with H2 marketing costs expected to be £35 million to £40 million ($45.44 million to $51.93 million) lower than in H1.

Regulus Partners, in an analyst note, described the profit warning as "neither small nor unlucky," highlighting concerns over the marketing spend. "What is slightly alarming is that such poor tactics were allowed to unfold while a new strategy was being unveiled," Regulus noted.

Evoke’s overall group revenue for H1 2024 was £862 million ($1,119 million), with an EBITDA of £115 million ($149.29 million). UK online revenue increased by 3% year-on-year in Q2, driven primarily by gaming improvements, although sports betting was impacted by higher-than-expected marketing costs. The company reported early success with its BetBuilder product.

However, UK retail revenue declined by 8% compared to the previous year. The company expects future-proof gaming machines and an improved SSBT product to improve retail performance later in the year. Regulus highlighted that William Hill’s retail estate accounted for a third of the group’s EBITDA loss in the six-month period.

Internationally, core markets in Italy, Spain, and Denmark saw double-digit growth, now representing approximately 60% of the division. However, the exit from the US market in March affected earnings during Q2.

Evoke CEO Per Widerström stated: “The underlying health of the business is getting stronger. The corrective actions we have taken make us more confident our strategic approach is sound and will achieve sustainable success.”

Since joining Evoke as CEO in July last year, Widerström has led changes to improve the business. “We’re undertaking a complete reset and transformation of the business,” he stated, adding the necessity of these changes for long-term growth.

Widerström reiterated that the company's strategy focuses on mid- and long-term profitable growth and value creation. "Our plans for 2025 and beyond are unchanged," he said. "The strategic and operational progress we have made during the first half gives me increased confidence about delivering our value creation plan."

David Brohan, a gaming and leisure analyst with stockbrokers Goodbody, described Evoke's trading update as "mixed." While the growth in the UK online division is encouraging, the performance of the UK retail sector was viewed as weak. Brohan remains optimistic about Evoke's future, noting that significant re-rating is unlikely until the company delivers on its targets.

Evoke's share price fell by 10.02% to 77.65p following the profits warning.