888 Holdings Announces Plans to Focus US Market Activity in Debt-Cutting Measure

"Refined focus" to reduce debt includes reducing presence to just key markets, with a focus on U.S. states that offer iGaming in addition to sportsbook operations.

Nov 29, 2022 • 19:14 ET • 4 min read
William Hill sportsbook
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In response to escalating debt servicing costs, global legal sports betting giant 888 Holdings has announced plans to slash its £1.6 billion ($1.92 billion) debt load in the coming years, mainly changing the focus on markets where its sports betting sites are active.

The Gibraltar-based operator, which owns a number of betting brands, including 888sport, William Hill, and SI Sportsbook, has released this news in the wake of a disappointing 13% drop in third-quarter earnings reported last monthan adverse impact from the imposition of stricter UK player safety measures and its pullout from the Netherlands.

In comments made at its Capital Markets Day (CMD) today, 888 CEO Itai Pazner outlined a new strategic roadmap for the company as it fully integrates its massive William Hill International sports betting unit that it acquired from Caesars in September 2021.  

"We are focused on building a customer-led business with a portfolio of world-class brands that provide complementary offerings, supporting our ambitions to drive market share growth in some of the most attractive betting and gaming markets in the world," said Pazner. "Our long-term potential remains exciting. Building our unified tech platform will present us with real future growth opportunities as we take advantage of our world-class brands, product and content leadership, and customer excellence to set our business for the next decade of growth."

Making market adjustments

The 888 Holdings CMD presentation highlighted the plan in the U.S. market for SI Sportsbook, which is to move away from going all-in on a wide range of states (with blanket marketing) to doing focused promotions for target states — particularly those that offer iGaming in addition sportsbook operations, citing that online casino business is three times bigger than sports betting on a per-state basis.

By adopting a "refined strategic focus" on only key markets, 888 Holdings intends to improve its bottom line by means of greater market share and taking long-term leadership positions in key sectors. 

This follows a growing trend among other U.S. sportsbooks — such as Fubo's roller-coaster saga and Unibet leaving Iowa — that have decided to re-focus operation practices in existing markets, in addition to scaling back on marketing and promotional ad spending.

The strategic operating maxim today involves a decisive shift from customer acquisition to customer retention, and improving engagement with new in-play options as well as a number of parlay wagering offerings.

Sportsbooks in the U.S. have become increasingly cost-conscious as investors look at profitability as the most significant indicator of success. Thus far, of the leading U.S. operators, only FanDuel has attained profitability — with Caesars nearing that goal after having dramatically reduced its ad spend in 2022 by $700 million as compared to previous projections.

This trend is certainly influencing the new strategy adopted by 888, which is intent on taking advantage of synergies resulting from the William Hill acquisition as part of a new, expanded company operating model.

"As a newly combined business, we have significant scope for improving our operating model and delivering efficiencies," said Pazner. "Over the next two years, we plan to fully integrate our business — creating a bigger, stronger, and better organization with higher profit margins."

Not without a cost

The $2.35-billion William Hill takeover is now proving much more costly than anticipated in light of the sharp hike in interest rates by the UK, U.S., and other European central banks in response to soaring inflation rates.

According to 888, this has left the company "more exposed" to the variable component of its total debt load, which has "resulted in the group’s net debt being higher than was anticipated" when it first announced the acquisition of Caesar's non-U.S. William Hill operations.

"The ultimate structure of the William Hill acquisition has left the Group more exposed to changes in interest rates (36% of gross debt is fixed and 64% has floating rates), which has, in turn, impacted its ability to reinvest excess cash flow in accelerating growth in the short term," read a statement released with the CMD call

Pazner also stated that he "absolutely did not" in hindsight have any misgivings over the William Hill purchase which only became a drag on revenue due to an unforeseen inflationary environment that was out of their control.

"What is in our control is how we deal with it. We have very solid plans in order to deleverage and to create higher margins for our business," said Pazner. "I’m confident that we’ll be able to deliver those plans and deliver a much stronger balance sheet."

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