iGaming Daily

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Good afternoon and welcome to today's iGaming Daily brought to you by OptiMove, the number one CRM marketing solution for the iGaming market and as a special offer OptiMove are giving new clients a free first month when they buy OptiMove. For more information and to claim the free month go to OptiMove.com slash SBC. Links will of course be left in the podcast episode description. This morning Evoque The rebranded business of 888 announced interim trading losses of £146 million. That's a 300% increase in H1 losses. It reflects a myriad of challenges faced by the new leadership team of the gambling group. Understandably, CEO, Per Widestrom has demanded an instant turnaround for the firm. Moving into H2, trading attention is focused on Evoque's executive short-term action value creation plan. that is aiming to improve efficiencies of the business unit. Ted, we're going to analyse Evoke today. We're going to analyse the UK market. We're going to analyse kind of what's gone wrong and what they can do in H2 to really achieve this transformation. Before we get into it though, there have been just a sea of results. It is results season. I guess my question to you is how are you coping? How are things? Yeah, very early mornings for me. Hope that comes through the podcast. Um, but yeah, it's, it's that time of the year and, uh, where we see what comes out in the wash and we're looking at very good, interesting results, uh, throughout the board. So good, good to be able to comment on them. Yeah. There really have been some, uh, some fascinating numbers, some, some interesting trends as well, I think, you know, we were looking at. various different things on Casino Beats earlier, from Genting in Singapore to Rank. It's really an interesting time to kind of try and get a handle on where the industry is going. I think the one thing that was clear was Evoque were very forthright with the challenges. We kind of almost knew what was coming. It is always, though, a bit of a surprise when these types of numbers in results, but Ted, should we have been surprised by this morning's results? Well, in terms of its financial performance and what's been said to investors, no, as the Vogue's new leadership team revised and downgraded guidance back in July. Its new team has pledged to return the company back to positive revenue drive of 5 to 9% in H2. But the important metric will be whether Evoke can claw back margin points on a beta where the LSC firm is really bleeding. For me, this morning's results really highlights the challenges faced by Evoke, which is transitioning to new operating model. It has deep scars are highlighted in its retail unit with a beta nose diving by 40% and management stating that William Hill retail declines have a direct impact of 10 million in corporate losses. Elsewhere questions will be asked as to why, despite high expenditure, Evoke sees no gains in its UK online portfolio. This is a company facing big challenges that it cannot hide from. Mason- Yeah, I think it's important to note there really was no hiding from Evoke this morning. They have kind of come out fighting. There is a real fighting spirit. They're ready to go from that relatively new executive team. kind of ready to push on into H2 and turn this around as much of a challenge as it is. You touched on some of it there and obviously the William Hill retail one is a massive one, but the 300% increase in H1 losses, what can that exactly be attributed to? Okay. So put simply, this is a big receipt for Evoque with regards to its ongoing transformation value creation plan. Krubicarns detailed that total operating costs during H1 trading amounted to 360 million, with costs primarily attached to special items. Now, if you look at the balance sheet, those special items expenses were related to 30 million related to integration programs, platform upgrades of 11 million, plus another 10 million in redundancy costs for staff, and 4 million on tech relocation projects. Period Trading also saw Group Accounts book circa 38 to 40 million pounds in termination fees related to its former US joint venture of Sports Illustrated that had to be booked in. If we kind of narrow down here, look, what we're seeing from the balance sheet in Group Accounts is that Evoke is spending money whilst it's underperforming on its headline metrics of generating a beta and underlying profits. I expect analysts to really look at the balance sheets moving forward. Plus, let's not forget that leadership, its new leadership team has pledged to generate 30 million pounds in cost savings by the end of the year. These are big, big pledges to put to the mask. Yeah, they are big pledges for sure. They've really set the bar of what they're going to do. It will be interesting to see in Q3 and Q4 and H2 overall how they can put those into action. One of the areas they kind of drained from them in this previous period was the retail performance of William Hill. Just how exposed are they to the UK retail sector, William Hill's poor performance? And I guess a follow-up to that would be, is this kind of cut fixable? Can they bring it together? Can they repair this damage? Good question. Look, the answers to how exposed are they? Very much so. And I believe that for leadership, they face kind of critical decisions in what to do with the retail unit and its future outlook. Retail generated 258 million pounds in revenues, ran about 30% of corporate contribution. However, returning back to beta, what accounts really show us is how poor the revenue to beta margins are. So when you transfer them over, they stand at about 14%, which is low. You can say that retail downturns are across the industry, but even with William Hill, even William Hill, it's stated that it's retail offering, especially with regards to install games is clearly behind competitors. Now, for me, the key question is how much time and resources can evoke commit to retail recovery, if any? Let's not forget that unlike online changes, retail upgrades take longer to be noticed and visible on company accounts. You've asked me if the cracks are fixable. My reply to that is, let's be on my paycheck, John. Well, not to be very Anglo-Saxon about this discussion, but Is this an issue here that is almost a British high street issue that we see, you know, numerous retail outlets closing all through the time. Giants that we thought were, and I'm speaking beyond the betting sector here, giants that we thought were kind of untouchable, you know, closing up stores or losing stores. The idea that William Hill's retail stores could be turned around. Are we really kind of just, are we on Mission Impossible here? Again, I'd go back to, if you look at the numbers, retail still contributes a significant portion of revenues. And even with the acquisition of, if we go back to the acquisition of 888 and William Hill, it underlined that the retail unit would go under a transformative period. Now, it's been a conflicting decade for any retail business in light of the pandemic, inflation and higher costs. What we saw in the last Q2 is that Evoke is minimizing its retail. It's reduced shop numbers by 1%. What we need to see in H2 coming up is what are the kind of criteria for retail recovery and where can it find kind of its easy wins within that department? which actually is an issue across the industry. It's a very, very hard one to solve. Yeah. They were very specific about their, you mentioned it about their gaming, retail gaming kind of lagging behind. And that is a tough one because I mean, you know, regulations are tight on that front. It's not an easy one to kind of innovate in. And I'm actually, I actually have kind of... boots on the ground experience of this. I worked in a Ladbrokes and a Coral for, I think, like six or seven years, only maybe like 10 years ago, maybe a bit less than that. But the market in some of these high streets, the market is so competitive. There are so many bookmakers kind of vying for the same land space, if you will. And they're also vying with online as well, where more and more customers are shifting to that space. It's a really challenging one and you really do need to pull into the top tier of innovation to increase the footfall and increase engagement within the retail market. A really challenging proposition. Perhaps we will see a more focus on the omnichannel experience and if you can bring the two together, kind of intertwine them. Something we've sort of seen in recent years. Perhaps we'll see more of a focus on that. I don't know. One of the avenues that they may have fought for prosperity would have been Euro 2024, obviously a big time for betting operators. We didn't quite see that growth for Evoke with Euro 2024. Their sportsbook was a little bit stagnant. What do you put that down to? I believe that for investors in the company, this must be the key area of concern. Its UK portfolio revealed stagnant revenues and a beta decrease of 15 million. Spore spending revenues decreased by 5% despite a period of high activity featuring Euro 2024 trading. And Evoque increased its marketing expenditure during Q2 to meet demand, which just didn't follow through. Furthermore, again, reverting back to the beta margins, the operating margin for iGaming is at 12% for the H1 trading period, which is poor. Of concern, Vogue states that online brands continue to adjust to implementing a recreational model. But this is somewhat late for a UK PLC to be saying that in 2024. And as noted before, kind of if we go back to their expenditure costs on tech projects, integration and platform upgrades, yes, costs are significantly expanding in those areas, but investors will be asking why is there kind of no end result or no end positive to where EvoCar at the moment? Yeah, that will definitely be the I think one of the areas they've invested a lot is in marketing. And there were, you know, there was the sentiment in their results that they weren't happy with the ROI from marketing. It didn't quite come out as they'd anticipated. Will we see, I think we will see maybe even across the industry, just a different approach, a different strategy to marketing, whether it's using influencers or using sports sponsorship. We've obviously seen a glut of new deals from new operators looking to kind of get in on the Premier League partnerships. But do you think we're going to kind of see? as maybe budgets tighten, do you think we're going to see a different strategy when it comes to sports marketing, influencer marketing, and just these different approaches? Are companies really going to want to see a more stronger ROI on their marketing expenditure? Well, specific to Vogue and looking at the value creation plan, one of the things that they highlighted is that, again, they want to, in brackets, reposition William Hill. And my belief is, look, that's a big job in itself because you're talking to a heritage brand, brand that the majority of UK punters recognise. Is it just the case of the William Hills marketing is not connecting with the customers? I don't think so. I think William Hill is sluggish behind its main market competitors in the UK. The other thing is reflecting back on what was said, It detailed that in the UK, it's had a really tough time of applying or getting customers to kind of apply to a recreational model. And that is going up against your Bet365s, your Betfares, your SkyBets, who have already undertaken those changes, I'd say pretty much two to three years ago. is playing catch up. I don't think it's just a case of marketing or revising its marketing strategy. That will be an element to it, but it needs upgrades throughout its business. Mason- Yeah. To bring it back a little bit, I think that was underlined by the fact that even in terms of retail gaming, something that's relatively simple, the limitations are very much there. They've managed to fall behind on that front. I think that really underlines the problem for William Hill of how they've kind of just slipped behind the competitors even in something as simple as that. When we talk about them being a legacy brand, them kind of resonating with the kind of legacy UK punter they have sponsored the SPFL this year. I think that kind of does, as a marketing approach, that does speak to that. that player, that's an interesting one. But yeah, when we get into the finer details of what their strategy is going to be for evolution, it will be very interesting. And we are, as we mentioned at the top of the show, Ted, we are coming to the end of, you'll be happy to hear, we are coming to the end of an industry interim trading period. Yeah, so it's always good to just kind of pick your brains if you can decipher between the myriad of results we've had. What are the results indicating with regards to the landscape for the gambling PLCs as we move forward and as we look back as well? Well, for this question, I'm going to focus more on the UK with regards to the PLC makeup. I just see that many PLCs are still adjusting to the terms of play. And on top of that, whether they can stomach these higher costs of compliance and marketing and trying to acquire players within an ultra saturated market, right? Where you're not necessarily going to get back the ROI that you were getting post 2020. The other thing here is that we have seen the makeup of the PLC or the PLC landscape change in the UK. just because there is now this new kind of gigantic NYC enterprise in Flutter. And that's just waiting on the sidelines. And Flutter is there knowing that any fault by its competitors in the UK, it will just take up more market share and just leave them behind. So they are viewing kind of the transitions of evoke and entain and others and saying, look, that's, you know, we don't... we can just vulture off them. For me, the market just gets tougher and tougher. And even for PLCs, which, you know, when times are saturated, you'd expect them to actually get more gains. I think when we look back at 2024, I think this will be the year where kind of like the playbook for PLCs is rewritten, as in who can compete and what strategies are there, they're undertaken to market. Oh yeah, that's interesting. It's a nice lead on to my kind of final question on this as well. And in this tough market, in this changing market for PLCs that we're kind of predicting what will happen, is there going to be room for a vote? Can their leadership team deliver this comeback? That's the million dollar question. I mean, Per and Co have pledged to turn around and it's on the H2 menu. However, look, come December, come the end of year, I believe that the investors will be pleased with the green shoots in UK online improvements, especially if they improve a bit in underlying profits. I think that should be the key priority. The other factor is if they can stabilize retail. and stop it eating kind of profits, that will be a huge endeavour, but it's a huge ask. It is a huge ask and I agree with that as well. I think they don't need retail to thrive. They just need to turn it around, stabilise it, stop it being the kind of, almost stem the bleed in a little bit. And I think with that, I'm boy- I'll just finish off by saying, look, they've made big pledges. and they put the terms down of what they want to deliver by the end of the year. Look, if you see an improvement, good, yes, but I just don't think that this new leadership team wants to come to the end of the year and say, well, I hope you like the rebrand. No, I know what you mean. I agree as well that I think that we'll be, in six months time, we'll be talking about Evoque. in a more and a far more positive way. I think that they will have turned it around very buoyed by the kind of fighting talk of the new leadership team as well. And yeah, Ted, before I let you sign off back into the new cycle, we are on the cusp of the return of Premier League football. Incredibly exciting. I know you can't wait. Yeah, give me a prediction anything for the Premier League this season. What you got? Oh, I'm kind of big on Manu doing something. Okay. Not winning, but doing, and I don't mean like doing slightly better, but I think that they could maybe challenge, but to me it's anything but, anything or anyone, but is it City would have won this five times in a row? They're on the fourth now. Yeah. They would have gone. So this would be the fifth if they won it this season. Okay. Yes. So, so damn man, Sizzy. Yeah. Sentiment that just about everyone can get behind, I think. And yeah, I like that talk. I like that optimism for a Man United turnaround. So we'll go with that. And on a similar note, I'm going to under, I've dealt with a long time manager leaving And then you have to kind of go into this underwhelming appointment with some strange activity in the transfer market. So on that note, I'm going to back Liverpool to finish outside the top eight. Maybe I'll go bottom half. I'll stick my neck on the line. I think Liverpool in the bottom half of the table. Keep it tribal Joe. Yeah, exactly. Nice one. And yeah, thanks ever so much guys for joining and let's... Yeah, look ahead to what's been a really interesting period. Thank you, Ted.