- Double-digit Q4 revenue growth
- Full year profit to be top end of range
- Earnings upgrades expected
Gambling firm Evoke (EVOK), formerly known as 888 Holdings, reported double-digit fourth-quarter revenue growth and raised its full-year profit guidance to the top end of consensus forecasts.
Investors responded positively, sending shares in the William Hill and Mr. Green owner up by a tenth to 75.5p. The strong share price reaction had a positive knock-on effect on peers Entain (ENT) and Flutter Entertainment (FLTR) whose shares were up 5% and 1% respectively.
ONLINE STRENGTH
The strong fourth quarter was driven by online growth of around 18% to 19% in constant currencies, aided by ‘operator friendly’ sports results.
This should not come as a complete surprise after gambling peers Entain and Flutter both flagged favourable results in the UK Premier League in recent trading updates.
The current football season has been one of the most unpredictable in years with favourites regularly beaten by the apparent underdog.
Second-half revenue growth is now expected to be 8%, towards the top end of the firm's previous 5% to 8% guidance.
Strong cost control and operating efficiencies mean adjusted EBITDA (earnings before interest, tax, depreciation, and amortisation) is also expected to be at the higher end of the guidance range of £300 million to £310 million.
The new guidance is above the current consensus average 2024 adjusted EBITDA forecast of £294 million, which should prompt earnings upgrades.
INFLECTION POINT?
Analysts at Jefferies said they believe the scale of fourth-quarter online growth implies a return to double-digit UK online growth from 2% in the first three quarters of the year and an ‘inflection point’ to positive retail growth.
Investment analyst Dan Coatsworth at AJ Bell said: ‘Today’s (17 Jan) positive update follows on from the first positive quarterly revenue growth in two years reported in October and suggests the company is starting to lay the foundations for recovery.’
‘One of the big negative factors that’s weighed on its share price is an onerous debt pile. Therefore, when the company announces its numbers in full, investors will want to see evidence of strong cash generation and that the company is bringing its borrowings back under control,’ added Coatsworth.
Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The author (Martin Gamble) and the editor (Ian Conway) own shares in AJ Bell.
