Examining the factors contributing to Evoke’s first-half financial decline

Lea Hogg July 18, 2024

SiGMA news

Examining the factors contributing to Evoke’s first-half financial decline

Evoke, previously known as 888, recently experienced a significant drop in its shares by over 8 percent to 79.3p. This decline was instigated by a profit warning for the full year, issued by the company that operates under the renowned brands of William Hill, 888, and Mr Green.

The company’s first-half adjusted EBITDA (Earnings Before Interest, Tax, Depreciation, and Amortisation) was reported to be running £35 million to £40 million behind the planned figures. This shortfall is anticipated to have a substantial impact on the full-year outcome, casting a shadow over Evoke’s financial performance.

The second quarter revenue, ending in June, was approximately £431 million, showing no significant change compared to the prior year. However, the company’s marketing costs were heavily weighted towards the first half of the year. This resulted in an expected adjusted EBITDA margin on revenue of around 13 percent to 14 percent, falling short of the plan by 23 percent.

Evoke had always planned for the marketing phase to be weighted towards the first half of the year, with an expected decrease of between £35 million and £40 million in the second half. Along with anticipated cost optimisation benefits expected to deliver £30 million in savings within the year and operating leverage, the company’s profitability in the second half is projected to increase significantly. This would equate to an adjusted EBITDA margin of around 21 percent.

Despite the disappointing first-half financials, Evoke remains optimistic about its future. The company’s 2025 expectations remain unchanged, with an adjusted EBITDA margin of at least 20 percent expanding by approximately 1 percent per year by the end of 2026. Evoke is also targeting a medium-term revenue growth of between 5 percent and 9 percent per year.

Expert Opinions on Evoke’s Performance

Evoke’s Chief Executive, Per Widerstrom, expressed his confidence in the company’s strategic approach despite the first-half financials falling behind the plan. He emphasized the strengthening underlying health of the business and the effectiveness of the corrective actions already taken.

Paul Leyland, an analyst at a gambling consultancy, commented on Evoke’s earnings miss. He pointed out that the shortfall was neither small nor unlucky. According to Leyland, the primary reason for this significant undershoot was the large amount of marketing spend in H1, which did not yield the expected revenue uptick, thereby creating negative operational gearing.

Leyland further argued that the heart of the firm’s current setback lies in maturing markets, increased competition, and marketing ‘me-too’ products without effective customer segmentation. However, he also noted that there was no reason Evoke could not deliver on its medium-term goals with a first-class product and clear brand proposition.

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