888 hints at large-scale M&A once debt levels significantly reduce
Chief strategy officer Vaughan Lewis says organic growth and low-scale investment have priority in short term until net leverage satisfactorily reduced
888 chief strategy officer (CSO) Vaughan Lewis has suggested large-scale M&A could once again play a part in the company’s strategy in the future.
Speaking as part of an investor call following the publication of 888’s H1 report yesterday, Lewis said that while the group was focused on improving market share across its core and growth markets, inorganic expansion was a possibility.
The London-listed firm is aiming to secure between 10% and 15% market share in its core markets of the UK, Italy and Spain while it is looking for 5% to 10% in its growth markets of Ireland, Denmark, Germany, Ontario and the US.
Touching on growth markets, Lewis said organic investment would be key to strengthening the firm’s position.
He said: “If you take our growth markets, this is where we look to breakeven. The way to do that is by reinvesting the underlying profitability into more marketing, more customer growth and fuelling future market share gains.
“We’re always looking for new markets to join that growth group. What we look for is the right combination of market conditions in terms of regulation, tax, payments and so on, as well as the competitive dynamics and how strong are our brands,” he added.
The CSO went on to explain that smaller investment would also play a role, as demonstrated by 888’s African joint venture, 888AFRICA.
888 currently holds a 20% share in the business, with the option to take majority ownership in the future.
Lewis confirmed the funding to this point from 888 had been in the low-to-mid single-digit millions.
He continued: “We’re constantly looking to build new growth markets and that can be either organically, where we get the benefits of our tech migrations or breadth of product, or that can be through our pipeline investments.
“There are typically low capital investments into new territories. A good example of this would be our African joint venture. Those are the types of investments we’re talking about. It’s a low capex route to grow scale in new markets, leveraging our assets, capabilities and brand with our partners.”
On larger-scale M&A, which has been put on the backburner as the group moves to reduce its debt arising from its £1.95bn acquisition of William Hill International last year, Lewis did not rule out the possibility entirely.
Net debt sits at £1.7bn as of 30 June, with leverage having fallen to 5.1x compared to 5.6x as of 31 December 2022.
In its H1 report, the operator noted: “With a continued focus on deleveraging, and expected EBITDA growth in the second half of the year, net leverage is expected to be slightly below 5x at year end.”
Lewis acknowledged this core strategy of reducing the debt as a burden on large-scale M&A currently, but hinted that once these levels were reduced, bigger acquisitions could be back in focus.
He said: “We’re not looking at large-scale M&A at the moment. The priority is to reduce leverage. Longer term, this is a consolidating industry.
“We do have capabilities to benefit from M&A and I think we’re proving through the integration and delivery of synergies that we have the capacity to execute large-scale M&A successfully. So, nothing in the short term, but longer term, I think it could be a part of the plan,” the CSO concluded.