Good morning. On today’s agenda:

• 888 admits to net debt leverage being higher than expected.

• Geo-location data suggests a strong start in Maryland.

• Analysts believe the Macau concession news removes an overhang.

Hearing the water before seeing the falls.

888’s debt troubles

888 has admitted the worsening economic backdrop and exposure to floating interest rates means debt leverage is “significantly above” target.

Row back: Ahead of a Capital Markets Day later today, 888 said trading was “broadly in line” since its late October update but said the higher rate of interest on its net debt meant it might look to return to the debt markets to attempt to repay £347m of bank loans which were drawn as part of the William Hill takeover.

• 888 said that nearly two-thirds of its higher-than-expected net debt was subject to floating rates with only 36% on fixed rates.

• That has “impacted its ability to reinvest excess cash flow in accelerating growth in the short term”.

• Kitchen sink: On top of this, 888 said the operating environment was “more challenging” citing inflation, higher energy costs, higher interest rates and further regulatory uncertainty including in the UK.

• Meanwhile, it says that post-pandemic growth in its key online markets has “moderated”. In response it said it needs to “readjust the cost base”.

• It said profit margins were lower than among its peers.

• Recall, in October it said Q3 revenues were down 7% YoY to £484m, with William Hill in the UK down 14% and 888 down 5%.

Forward not backwards: 888’s “highly disciplined” plans for the next two years will see it hope to achieve leverage of 3.5x net debt/EBITDA by the end of 2025 including debt reduction and debt optimization.

• FY22 revenues are expected to come in at £1.85bn with adj. EBITDA of between £305m-£315m. Q422 adj. EBITDA is expected to be between £88m-£98m, reflecting “significant” cost mitigation in H2.

• Itai Pazner, CEO, said the capital discipline actions being undertaken gives 888 a “clear path” to deleverage to less than 3.5x by the end of 2025.

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Maryland opens

Data from GeoComply suggest there were 16.5m geo-located transactions during the opening weekend from nearly half-a-million unique accounts.

Hail Mary: Maryland enjoyed a “strong start” to its regulated OSB existence over Thanksgiving weekend with the number of transactions being well above previous broadly similar state openings in Colorado, Indiana and Virginia.

🔥Maryland opening compares well with similar states - GeoComply

Better than Kansas: The analysts at JMP noted that in the seven days following the soft launch in Maryland, downloads were up 186% YoY compared to a 39% rise in the first week of launch in Kansas. 

• Additionally, they point out Maryland is outpacing New York in the seven days post-launch. 

Download data

Big weekend: The JMP team also looked at wider download trends for week 12 of the NFL season showing total downloads of 713k which is the second biggest week after week 1. In total downloads are up 42% season to date with FanDuel remaining in the lead with 40% market share.

• No impact: The JMP team suggested DraftKings suffered no ill effects from last week’s hack with its download share unchanged.

Stock watch

Flutter has regained all the ground lost in the spring and summer as it ended yesterday at a 52-week high.

Bet boost: The recent good news surrounding FanDuel has helped restore investor confidence in parent company Flutter with the shares closing yesterday at a 52-week high. Notably, according to a notice yesterday shareholder Parvus Asset Management bumped up its investment to 7.2% from 6.8% recently. 

🗼Flutter closes at a 52-week high as Parvus buys more

Analyst takes – Macau

The two-step: The welcome news of the granting of the concessions for the next 10 years provided momentum to Macau-related stocks yesterday, although the “unclear reopening path” in China provided a “one-step back” element to the equation, said Wells Fargo.

• “Near-term, China remains at risk of rising social instability stemming from its zero-COVID policy,” they added.

• But the team suggested recent actions on e-visas and less stringent testing and flight requirements “justify some optimism”.

Pay the piper: WF also noted the $12.5bn+ extra investment that will be demanded of licensees in the next concession period. The team at Macquarie said this would include more hotel rooms, non-gaming attractions, or “even investments beyond the SAR”, such as lodging and infrastructure in the Greater Bay Area. 

• Macquarie said Macau represented a “coiled spring”.

Las Vegas

The Searchers: Staying with Macquarie, the team said its monthly Las Vegas survey points to a pick up in hotel searches in the near term with a 7.7% rise in October. They pointed out that this “aligns” with operator commentary during recent  Q3 earnings calls and “bodes well” for Q4 as a whole.

• The team expects Strip GGR to have increased by ~1% in October.

Earnings in brief 

Webis: FY handle was down 9% to $120m for the tote betting operator, with gross profits dropping 12% to $5.1m and net losses coming in at $374k vs. a profit of $824k in 2021. The group said its Cal Expo racetrack in Sacramento recorded “continued growth”.

Newslines 

Glitnor has “mutually and amicably” called off its acquisition of the affiliate Kafe Rocks citing unstable market conditions. It said the decision had nothing to do with the recent departure of Simon Pilkington as CEO of Kafe Rocks. Glitnor retains a significant stake in the company.

Jack Entertainment’s two Ohio properties have opened retail sportsbooks but will not take bets until January 1.

The Mohawk Council of Kahnawàke (MCK) has launched a legal challenge against the province of Ontario, arguing that its regulation of gambling is unconstitutional and deprives it of significant revenues.  

What we’re reading

Juve troubles: “The board have stepped down en masse ‘having considered the centrality and relevance of pending legal and accounting issues’,” says the BBC.

On social

Beale street

Chris McCall @Dennynews

Reporting Scotland is joined by an unexpected guest live from Ibrox tonight.

6:47 PM ∙ Nov 28, 2022

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Calendar

Nov 29: 888 Capital Markets Day, Rivalry Q3

Dec 6: The Startup Month #5

Dec 13: Deal Talk #5

Dec 20: Due Diligence #2

Contact

• Scott Longley scott@clearconcisemedia.com

• Jake Pollard jake@openmediaservices.com