Evoke set to miss H1 financial targets but bosses remain confident on the rest of 2024

Evoke is expected to report a 2% dip in H1 2024 revenue to £862m, down from £882m in H1 2023, as the operator said it was behind on its initial plans to return the group to growth.

The London-listed firm delivered a H1 trading update this morning, 18 July, in which it detailed its expectations for final results for the first six months of the year.

Management noted the £862m figure was 4% ahead of H2 2023, with growth in the UK and Ireland online and international divisions being offset by UK declines in retail.

On an adjusted EBITDA basis, evoke’s H1 margin is set to be between 13% to 14%, which translates to around £35m to £40m behind the original guidance.

However, bosses said the outlook for H2 2024, 2025 and onwards remained unchanged, with the firm “well placed” to meet 2026 targets.

In fact, H2 2024 revenue growth is expected to sit between 5% and 9%, which would manifest as a figure between £871m and £904m.

Adjusted EBITDA margin for the second half of the year will be approximately 21%, with an incremental £5m to £10m benefit from the firm’s £30m cost optimisation strategy.

Following the publication of the results, evoke’s share price slipped 7.2% to 80p, at the time of writing.

UK and Ireland online H1 revenue is expected to land at £339m, up 1% from the £336m reported in H1 2023.

Q2 revenue for the segment is anticipated to increase 3%, up to £174m, as bosses pointed to “improved product and promotions”.

Within the vertical, gaming revenue will rise 6% year on year (YoY) but EBITDA is approximately £20m behind plans set out by the group.

Evoke said this discrepancy was due to “lower than expected returns from planned marketing overspend, particularly Cheltenham”.

The operator also noted a “sub-optimal” approach to customer segmentation, and targeting and impact from changes made in the second half of 2023 to drive short-term benefits.

Evoke confirmed these adjustments have been addressed via changes to leadership and commercial strategy, including a new price and promotions approach, which the group said is seeing “good early traction and strong results” from its new bet builder product.

On the retail front, revenue came in at £128m, down 8% from £140m on a Q2 basis.

Elsewhere, the international division saw revenue rise 2% for Q2 2024, up to £129m, but was flat on a H1 basis, sitting at £265m.

There was double-digit growth in Italy, Spain and Demark, with the three markets representing 60% of the division.

The growth in Europe was offset by reduced revenue from smaller markets as focus shifted to profitability, plus the exit from the US B2C market.

Looking ahead, evoke announced it was planning to launch a brand refresh for William Hill in Q3, while a brand revamp for Mr Green went live in Q2 this year.

There are also plans to implement a further enhanced William Hill customer value proposition, along with a supplier deal with Inspired Entertainment to bring new gaming terminals to the brand’s retail operations.

Per Widerström, evoke CEO, said he and his team were “undertaking a complete reset and transformation of the business” and recognised H1 2024 financials were “behind plan”.

The Swede said: “We are focused on mid and long-term profitable growth and value creation and during the first half [of the year] we have made bold, decisive changes to improve almost every area of the business.

“This transformation will take time but will enhance operational efficiency, leading to a bigger, more profitable and more cash-generative business in the future.

“Our strategy defines what good looks like and how we get there, and while no journey is ever straightforward, we have learnt a lot already so far this year as we pursue our goals.”

Widerström continued: “While 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.

“I am really pleased with the strategic progress we have made so far and I’m confident this will set us up for profitable growth in H2 2024 and beyond as we continue to invest for the mid and long term with high conviction.

“Our plans for 2025 and beyond are unchanged and the strategic and operational progress we have made during the first half give me increased confidence about delivering our value creation plan,” he added.

In a note reflecting on the results, Regulus Partners described the H1 trading update as a “profit warning” as EBITDA fell below expectations.

The Regulus Partners team said: “Most of the reason for this spectacular undershoot was that a large amount of marketing spent in H1 did not deliver the expected revenue uptick, creating negative operational gearing. The profit warning is neither small nor unlucky, in our view.

“Evoke has a plan to improve product and improve efficiency with a largely new management team, promising to deliver 20% EBITDA margins in 2025 (albeit into an increasingly uncertain UK regulatory outlook after a briefly positive hiatus when the Conservative government reined in the Gambling Commission).

“With a first class product, a very clear brand proposition, LBOs run for customers rather than cash, and effectively executed emerging markets growth,  there is no reason why evoke cannot deliver at least high single digit revenue growth on double digit incremental margins. However, if it doesn’t, there is unlikely to be a drawing board to go back to.”