The owner of William Hill, 888 Holdings PLC, has issued a profit warning due to the impact of compliance and regulatory changes, as well as “customer-friendly” sports results. The company expects its third-quarter revenues to decline by 10% to approximately £400 million, with fourth-quarter revenues projected to be sequentially higher but lower year-over-year by a mid-single-digit percentage. As a result, 888’s full-year earnings before interest, tax, depreciation, and amortization (EBITDA) are anticipated to be lower than previous expectations, with EBITDA margins now expected to be between 18-19%, down from an earlier projection of over 20%.
The decline in revenues is attributed to compliance changes in certain markets, positive sports results for customers throughout September, and the ongoing impact of safer gambling measures introduced by the UK government. The UK market, which accounts for around two-thirds of 888’s revenues, is particularly affected. This profit warning follows similar concerns raised by Ladbrokes owner Entain, which also cited regulatory changes as a reason for a drop in revenues. In response to the news, shares in 888 fell over 16% to around 92p during morning trading in London.
This profit warning adds to the challenges faced by Per Widerström, 888’s incoming CEO, who will need to address management changes, compliance issues, and the company’s significant debt following the acquisition of William Hill’s non-US operations. Furthermore, the company’s license is under review by the UK Gambling Commission due to concerns about the backers of FS Gaming Investment Consortium and their possible links to a bribery investigation. Despite these difficulties, Lord Jonathan Mendelsohn, 888’s executive chair, expressed confidence in Widerström and newly-appointed finance chief Sean Wilkins to guide the business through its growth phases. Analysts, however, consider the trading update disappointing and expect a downgrade of 888’s full-year EBITDA projection by 9% to £320 million.