Gambling company 888 has issued a warning that its profitability for the next year will be impacted by increased investments in artificial intelligence and marketing.
In an announcement on Wednesday, 888 stated that it anticipates its adjusted earnings before interest, tax, depreciation, and amortization for 2024 to be at the lower end of the projected range, which falls between £340mn and £397mn.
This profit alert marks the second such warning from 888 since September of the previous year. The surge in expenditure on automation, AI-driven data analytics, research, and marketing initiatives is cited as the primary reason for this development, overshadowing the expected benefits of a £30mn cost-saving initiative initiated in December.
Following this announcement, the London-listed company witnessed a 6.7% decline in its shares during morning trading, with share prices dropping to 75p and the market capitalization shrinking to £340mn.
Despite the challenges, Per Widerström, who assumed the role of 888’s chief executive in October, expressed confidence in the company’s strategic direction. He highlighted the strengthening of compliance measures and a heightened focus on enhancing the experience for recreational customers as key pillars for sustainable and profitable growth.
888 reported an 8% decrease in full-year revenues for 2023, amounting to £1.7bn. This decline is attributed to market shifts away from less regulated territories, changes in the customer demographic due to stricter gambling regulations in the UK, and adjustments to the company’s marketing approach.
In response to these developments, Widerström has revamped the executive team by appointing new leaders in finance, technology, and product management. He emphasized the necessity of enhancing the group’s financial performance through organizational efficiency and effectiveness.
Looking ahead, Widerström plans to unveil new medium-term financial objectives and strategic goals during the full-year results presentation in March. Notably, 888 has been a subject of acquisition talks, with reports suggesting discussions with DraftKings, a sports betting operator based in Boston.
Analyst James Wheatcroft from Jefferies noted a sense of increased urgency within the company following the introduction of a new management team and the announcement of £30mn in additional cost savings. He also highlighted the potential for significant benefits from the successful integration of William Hill, acquired by 888’s non-US business from Caesars Entertainment in a £1.95bn deal in 2022.
