- Firm warns on full-year earnings
- First-half profit well behind plan
- Medium-term guidance unchanged
Shares in online gambling firm Evoke (EVKOK), formerly known as 888, dropped over 8% to 79.3p after the William Hill, 888 and Mr Green branded business issued a full-year profit warning.
The company said first-half adjusted EBITDA (earnings before interest, tax, depreciation, and amortisation) was running £35 million to £40 million behind plan which would clearly impact its full-year outcome.
FIRST-HALF COST WEIGHTING
Second quarter revenue to the end of June of around £431 million was broadly flat on a sequential basis and compared to the prior year while marketing costs were heavily weighted to the first half.
This means the adjusted EBITDA margin on revenue is expected to be around 13% to 14%, some 23% below plan.
The company said marketing phasing was always planned to be first half-weighted and was expected to drop by between £35 million and £40 million in the second half.
Together with cost optimisation benefits expected to deliver £30 million in-year savings and operating leverage, second-half profitability is expected to increase ‘significantly’ equating to an adjusted EBITDA margin of around 21%.
The company insisted 2025 expectations remained unchanged, meaning an adjusted EBITDA margin of at least 20% expanding by circa 1% per year by the end of 2026. Evoke is targeting medium-term revenue growth of between 5% and 9% per year.
Chief executive Per Widerstrom commented: ‘Whilst it is disappointing that the first-half financials are behind our plan, the underlying health of the business is getting stronger, and the corrective actions we have already taken make us even more confident that our strategic approach is sound and will achieve sustainable success.’
WHAT ARE THE EXPERTS SAYING?
Analyst Paul Leyland at gambling consultancy Regulus Partners said the earnings miss was neither small nor unlucky.
‘Most of the reason for this spectacular undershoot was that a large amount of marketing spend in H1 did not deliver the expected revenue uptick, creating negative operational gearing’, Leyland said.
Leyland argues that maturing markets, increased competition and marketing ‘me-too’ products without effective customer segmentation lays at the heart of the firm's current setback.
On a more optimistic note, Leyland said 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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