Company Announcements

14 April 2023

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THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

FOR IMMEDIATE RELEASE

888 Holdings Plc

("888" or "the Group")

FY2022 Results and Q1 2023 Trading Update

FY22 pro forma revenue of £1.85 billion and Adjusted EBITDA of £311 million both in-line with expectations

Encouraging Q1 2023 performance; synergy delivery on track; FY23 Adjusted EBITDA and FY25 outlook unchanged

888 (LSE: 888), one of the world's leading betting and gaming companies with internationally renowned brands including William Hill, 888, Mr Green and SI Sportsbook, today announces its audited financial results for the year ended 31 December 2022 ("FY22" or the "Period"), together with a trading update for the three months ended 31 March 2023 ("Q1-23").

KEY HIGHLIGHTS

·    FY22 Results¹ in line with previously announced expectations

o Group revenue +74% to £1,238.8 million, and Adjusted EBITDA² +82% to £217.9m

o Group pro forma³ revenue -3% to £1,850.1 million, and Adjusted EBITDA of £310.6 million

·    Q1-23 revenue of £446m with unchanged outlook for Adjusted EBITDA to be in line with market expectations

o Pro forma revenue -5% year-over-year, with a strong performance in Retail

o As at 31 March 2023, cash (net of customer balances) was approximately £170m, with undrawn committed facilities of £150 million, giving total liquidity of over £320 million

o During Q1-23 the Group agreed the sale and leaseback of £10 million of freehold properties and is reviewing the potential monetisation of non-core assets

o The Board continues to expect FY23 adjusted EBITDA to be significantly higher year on year with an adjusted EBITDA margin of at least 20% as the Group focuses on building sustainable revenues

·    The Board is making good progress with its search for a new CEO with Lord Mendelsohn acting as Executive Chair on an interim basis. As previously announced, Chief Financial Officer and Executive Director Yariv Dafna will remain in his posts until the end of 2023, providing continuity to the Board and executive team

·    Conclusion of internal investigation into certain shortfalls in best practices in relation to Middle East VIP customers announced in January 2023 with robust policies and procedures implemented to reopen accounts and onboard new customers in the region. No further impacts expected and the Board currently expects to recover 40-50% of revenue from the cohort, resulting in a £25-30m revenue headwind for FY23

·    No further expected impact on our UK operations or revenue expectations arising from the settlement between the Gambling Commission and William Hill announced on 28 March 2023 in relation to historic player safety failings that occurred prior to the Group's acquisition of William Hill. Significant remedial actions have put the Group in a far stronger position from a compliance perspective

Lord Mendelsohn, Executive Chair of 888, commented:

"The combination with William Hill transformed the Group and brought together two exceptional and complementary businesses to create one of the world's leading betting and gaming businesses.

The Group's financial performance in the period primarily reflected the extensive actions being taken to drive higher standards of player protection. While recent compliance issues in the Middle East were very disappointing, they have underlined the importance of our enhanced and proactive risk management framework.

We have made positive progress with the integration enabling us to upgrade our synergy target from £100m to £150m. In 2023 we remain on track to deliver higher profitability as we deliver against our clear strategic priorities. Our clear priorities of integration, market focus, and deleveraging give us confidence in our 2025 targets, as we build a stronger and more sustainable business for the future."

FY22 RESULTS

The acquisition of the international (non-US) business of William Hill completed on 1 July 2022, and as such, to aid comparability, the financial results and associated commentary presented in this statement, unless otherwise stated, reflect the pro forma results as if 888 had owned William Hill for each of the periods below. The pro forma financial results, which are unaudited, also exclude the 888 Bingo business, the sale of which completed on 7 July 2022. 

Reported financial highlights

·    Group revenue +74% to £1,238.8 million, and Adjusted EBITDA +82% to £217.9m, both principally driven by the addition of William Hill results following completion of the acquisition on 1 July 2022

·    Adjusted profit before tax² -10% to £80.5m, reflecting the increased interest costs following the acquisition of William Hill

·    Reported loss before tax of £115.7m, impacted by exceptional costs and adjusting items of £184.8m primarily related to amortisation of acquired intangibles, impairment of historic US goodwill and William Hill technology no longer under development, together with transaction fees for the acquisition of William Hill, and integration and restructuring costs post completion as we began to realise synergies

·    Adjusted basic earnings per share² of 15.1p (2021: 22.2p), basic earnings per share (28.3p) (2021: 13.4p) with the year-on-year decline on an adjusted basis mainly reflecting additional interest costs, together with an increased share count following the capital raise in April 2022 to part fund the acquisition of William Hill

·    Several successful debt issuances through the year, with the proceeds used to repay the acquisition financing package for the acquisition of William Hill. The Group ended the year with £1.8 billion equivalent nominal debt, with 43% of effective debt in Sterling, 50% in Euros and 7% in USD, and approximately 70% of interest costs fixed for at least three years, increased from 35% in October 2022

·    Net debt of £1.73 billion at 31 December 2022, equivalent to 5.6x pro forma adjusted EBITDA leverage ratio

Pro forma financial highlights

·    Group revenue -3% to £1,850.1 million, with the normalisation of retail revenues substantially offsetting a -15% decline in online, which was driven by proactive investment in enhanced player safety measures in the UK Online segment, and the closure of the Netherlands from Q4 2021. Online revenue outside of the UK and the Netherlands was -4%, principally reflecting the strong comparative period and refined market focus under our evolved strategic framework

·    Adjusted EBITDA of £310.6 million (2021: £269.9 million), in line with guidance from the Capital Markets Day, and +15% year-on-year, driven by a positive retail performance since reopening following the pandemic

·    Adjusted EBITDA margin of 16.8% (2021: 14.2%)

Operational and strategic highlights

·    Priority 1: Integrate businesses and realise synergies

o Upgraded target of £150m of pre-tax cost synergies by 2025; increased 2023 target of £111 million (of which £87m relates to operating expenses and £24m relates to capex)

o Synergy delivery on track, with £25m (£17m opex, £7m capex) of synergies in 2022, slightly ahead of initial plans

o Accelerated decision to adopt 888's technology as the basis for the Group's platform of the future, with good progress made on the Mr Green migration in Sweden, the first major milestone for the integration, which is on track to launch in the coming months

·    Priority 2: Focus on select markets and key growth opportunities

o Implemented new operating model with country level focus in core and growth markets, to drive improvements in localisation and support market share gains

o Launched 888 on a locally regulated basis in Ontario, Canada and SI Sportsbook in Virginia and Michigan during the year, supporting our growth market agenda

o Strategic investment in 888AFRICA joint venture creating a long-term growth platform for regulated African markets, with rapid progress made and very encouraging performance since launch, now over 500k customers

·    Priority 3: Invest in our sources of sustainable competitive advantage

o Launched several exciting new products in parallel with integration work, to deliver a best-in-class product and content experience, including betslip tracking and cash out for #BuildYourOdds and improved personalisation within gaming for all brands

o Continued to cement world class brand positioning, with William Hill launching a new UK brand campaign focused on providing EPIC value and 888 aligning its sub-brands under a single Made to Play master-brand proposition

o Focused on customer excellence through our "brilliant basics" programme, with improvements to core customer journeys supporting increased player engagement and satisfaction

o Continued investment in retail store technology and training to provide best in class retail experience, with encouraging early signs from a trial of new gaming cabinets that are planned to roll out over the entire estate over the next 18 months

·    Priority 4: Support sustainable growth through Players People Planet ESG framework

o Appointment of Harinder Gill to newly created Chief Risk Officer role, driving higher standards in compliance and safer gambling

o Significant focus on safer gambling, with over 500,000 third-party financial vulnerability checks carried out in the UK, over 2.7 million safer gambling customer interactions globally (+19% on 2021), and 45% of global customers now having deposit limits in place (up from 37% in 2021)

o Focused on colleague experience through integration with rollout of improved employee engagement tracking Group wide, achieving an initial employee NPS score of +8 across the combined business

o 44% reduction in Scope 1 and 2 emissions from 888 vs 2019 baseline; the UK retail business became certified carbon neutral across Scope 1 and 2 emissions, one of the first large UK retail businesses to achieve this

·    Priority 5: Prioritise debt reduction through focus on capital efficiency

o Strong long-term debt structure put in place, with currency profile better aligned to operating cashflows

o Clear focus on deleveraging, with EBITDA growth the main driver into 2023 given integration costs, and free cash flow generation expected to pick up from 2024 onwards

o The Group continually reviews its asset base, and considers opportunities to monetise assets over time that do not contribute to its long-term strategy, including the potential sale of non-core assets. These activities enable the Group to strengthen its balance sheet and to focus on the Group's strategic growth opportunities. During the first quarter of 2023, the Group has agreed the sale and leaseback of £10 million freehold properties. The Group also owns a 19.5% stake in Sports Information Services (Holdings) Limited ("SIS") and SIS is reviewing strategic options for the business

Q1 2023 TRADING UPDATE

Revenue of £446 million (pro forma revenue for Q1 2022: £469 million), with continued momentum in Spain and Italy and a strong performance in Retail partially offsetting online revenue declines due to the ongoing impact of safer gambling changes in the UK, and refined market focus in International together with the impact of compliance changes in the Middle East.

Pro forma financial highlights

·    UK Online -9% and beginning to stabilise sequentially with growth in low-spending recreational cohorts, offset by reduced revenues from higher-spending players. Strong growth in active players, with a particularly strong Cheltenham Festival where active players were +15% with new all-time-highs for bets per minute

·    International revenue down -11%, reflecting the impact of our refined focus on the most attractive Core and Growth markets, together with the impact of lower revenues from the Middle East

·    Retail performing strongly, with revenue up +8% with both sports and gaming growing

Operational and strategic highlights

·    Customer activity remains strong with average monthly actives +6% YoY in Q1-23

·    Launch of Mr Green in Germany on the 888 platform in March, following receipt of new German gaming licence

·    SI Casino went live in Michigan in February 2023, with an encouraging early performance, validating our refined strategic focus on gaming-driven US market opportunities

OUTLOOK

·    The Board expects 2023 revenues to be lower than 2022 by a low to mid single digit percentage, but Adjusted EBITDA to be significantly higher as we focus on building sustainable revenues, with an Adjusted EBITDA margin of at least 20%

·    With strong progress in the realisation of synergies and effective implementation of the new market focus plan post acquisition of William Hill, the Board remains confident in its 2025 targets of at least £2 billion of revenue, an Adjusted EBITDA margin of at least 23% and more than 35p of Adjusted EPS, with adjusted net debt to EBITDA of below 3.5x

Notes

¹ William Hill financials were previously reported on a 52 week basis opposed to calendar year. For the year ended 31 December 2022 and to align to calendar year reporting an adjustment has been made to include the additional four days from 28 to 31 December 2022. This increases Q4 and FY 2022 revenue by approximately £9m and Adjusted EBITDA by £nil. No adjustment has been made in respect of the prior periods.

² Adjusted EBITDA is defined as earnings before interest, tax, depreciation and amortisation, and excluding share based payment charges, foreign exchange losses and exceptional items and other defined adjustments. Adjusted measures, including Adjusted EBITDA, are alternative performance measures ("APMs"). These APMs should be considered in addition to, and are not intended to be a substitute for, IFRS measurements. As they are not defined by International Financial Reporting Standards, they may not be directly comparable with other companies' APMs. The Directors believe these APMs provide additional useful information for understanding performance of the Group. They are used to enhance the comparability of information between reporting periods and are used by management for performance analysis and planning. An explanation of our adjusted results, including a reconciliation to the statutory results is provided in note 3 to the financial statements.

³ Pro forma information, which is unaudited, reflects the results as if the Group had owned William Hill for all periods, and excludes the Bingo business in all periods.

⁴ Subtotals, totals, and percentage changes shown throughout this document have been calculated based on the underlying numbers and therefore may not sum directly when using the rounded numbers presented.

Enquiries and further information:

About 888 Holdings Plc:

888 Holdings plc (and together with its subsidiaries, "888" or the "Group") is one of the world's leading betting and gaming companies. The Group owns and operates internationally renowned brands including William Hill, 888, and Mr Green. In addition, the Group operates the SI Sportsbook and SI Casino brands in the US in partnership with Authentic Brands Group.

Incorporated in Gibraltar, and headquartered and listed in London, the Group operates from offices around the world and employs over 11,000 people globally.

The Group's mission is to lead the gambling world in creating the best betting and gaming experiences, bringing unrivalled moments of excitement to people's day-to-day lives. It achieves this by developing state-of-the-art technology and content-rich products that provide fun, fair, and safe betting and gaming entertainment to customers worldwide.

Find out more at:

http://corporate.888.com/

Important Notices

This announcement may contain certain forward-looking statements, beliefs or opinions, with respect to the financial condition, results of operations and business of 888. These statements, which contain the words "anticipate", "believe", "intend", "estimate", "expect", "may", "will", "seek", "continue", "aim", "target", "projected", "plan", "goal", "achieve", words of similar meaning or other forward looking statements, reflect 888's beliefs and expectations and are based on numerous assumptions regarding 888's present and future business strategies and the environment 888 will operate in and are subject to risks and uncertainties that may cause actual results to differ materially. No representation is made that any of these statements or forecasts will come to pass or that any forecast results will be achieved. Forward-looking statements involve inherent known and unknown risks, uncertainties and contingencies because they relate to events and depend on circumstances that may or may not occur in the future and may cause the actual results, performance or achievements of 888 to be materially different from those expressed or implied by such forward looking statements. Many of these risks and uncertainties relate to factors that are beyond 888's ability to control or estimate precisely, such as future market conditions, currency fluctuations, the behaviour of other market participants, the actions of regulators and other factors such as 888's ability to continue to obtain financing to meet its liquidity needs, changes in the political, social and regulatory framework in which 888 operates or in economic or technological trends or conditions. Past performance of 888 cannot be relied on as a guide to future performance. As a result, you are cautioned not to place undue reliance on such forward-looking statements. The list above is not exhaustive and there are other factors that may cause 888's actual results to differ materially from the forward-looking statements contained in this announcement. Forward-looking statements speak only as of their date and 888, its respective parent and subsidiary undertakings, the subsidiary undertakings of such parent undertakings, and any of such person's respective directors, officers, employees, agents, affiliates or advisers expressly disclaim any obligation to supplement, amend, update or revise any of the forward-looking statements made herein, except where it would be required to do so under applicable law. No statement in this announcement is intended as a profit forecast or a profit estimate and no statement in this announcement should be interpreted to mean that the financial performance of 888 for the current or future financial years would necessarily match or exceed the historical published for 888.

EXECUTIVE CHAIR'S STATEMENT

INTRODUCTION

2022 was a landmark year for the Group. The transformational acquisition of William Hill, which completed in July for a revised total consideration of £1.95bn, was a bold step that sets the Group on a clear course to becoming a global leader in our industry. The enlarged Group will benefit from significantly increased scale, greater revenue diversification, and an increased proportion of regulated and taxed revenues underpinned by stronger positions across our core markets of the UK, Italy, and Spain.

For more than 25 years, 888 has grown and developed as a technology-led gaming business. It has built a world-class and scalable global technology platform alongside outstanding digital marketing and data capabilities. Additionally, 888 is one of the leading online casino brands in the world. On the other hand, William Hill is a bookmaker by DNA, with an iconic brand that is instantly recognised across the UK, supported by a top-class retail estate. The highly complementary nature of these two businesses was reinforced by the materially increased synergy target of £150m we disclosed towards the end of the year. Throughout our Annual Report we outline in detail the significant benefits and value creation opportunities that will be delivered through the combination of these two highly complementary businesses, as well as update on the positive early progress made in the integration process.

As well as completing the acquisition of William Hill, we also completed the sale of our bingo business in July 2022. The bingo business operated on a separate platform and added operational and technical complexity to the Group, so the strategic disposal came at the right time for us to renew our focus on our core B2C betting and gaming products, and direct investment toward our goal of a building a scalable single global platform. We thank our valued bingo colleagues for their contributions to the 888 business over several years, and wish them well for the future.

Whilst 2022 was a year of significant strategic progress, the trading backdrop undoubtedly presented several challenges for the Group and indeed our wider industry. Global macroeconomic conditions - in particular following Russia's invasion of Ukraine in February 2022 - shifted considerably. As a result, both the Group and its customers faced high rates of inflation and higher interest rates. As an entertainment business, we are mindful of the potential impact of these cost-of-living pressures on our players.

Notably, since the acquisition of William Hill, the Group is now more exposed to the effect of higher interest rates due to its current high levels of debt. The ultimate structure of the William Hill acquisition resulted in the Group's net debt being higher than had been anticipated when the acquisition was initially announced in 2021. As a result, the Group was more exposed to material changes in interest rates in the year, which in turn impacted its ability to reinvest excess cash flow into accelerating growth in the short term.

Meanwhile, overall market growth rates across the Group's key online markets moderated during the year. At the outset of the global COVID-19 pandemic in 2020, consumers around the world pivoted quickly towards e-commerce and digital forms of entertainment. This in turn drove significantly higher growth rates for the Group over the course of 2020 and 2021 compared to what had been previously achieved. As pandemic- related social restrictions have eased, growth rates in our online business have moderated, albeit with customer activity remaining higher than pre- pandemic levels.

Against this dynamic and testing backdrop, I would like to thank everyone across the enlarged business for their continued commitment during the year. The Group has made very positive early progress with the integration process, including raising its synergy targets materially and setting out a clear strategic roadmap towards ambitious financial targets for 2025. The Group has a clear plan to maximise the value creation opportunity from combining these two world-class businesses and the Board remains highly confident that this will underpin sustained growth and shareholder value creation over the medium and long term.

BOARD FOCUS AREAS

As a Board, our role is to represent our shareholders and broader stakeholders, and to ensure that we are holding management to account to deliver long-term, sustainable, shareholder value creation. To this end, the Board has three key priorities. The first is to ensure that the Group executes a successful integration, and the Board is confident that the Group is taking the right actions to create a more streamlined, more profitable, and more nimble business going forward.

The Board's second key focus is on building and reinforcing the teams across the Group. We significantly strengthened the operational management team during the year with a broad and diverse range of talent from the William Hill team, as well as several important external hires.

The Board's third focus is to ensure that management is always thinking about the long-term direction of the business. As part of this, the Board builds ESG and sustainability into all its planning, whether that is by ensuring that the Group does the right thing by its players by maintaining strong safer gambling standards, or by providing a great workplace for its people, or by doing its bit to support the environment and fight the climate emergency. Led by the Board's ESG Committee, the Board has full oversight of the Group's ESG strategy, targets, and progress.

BOARD CHANGES

Following the completion of the acquisition of William Hill, in July 2022 we were pleased to strengthen the Board of Directors with the appointments of Andrea Gisle Joosen and Andria Vidler as Independent Non-Executive Directors, and Ori Shaked as a Non-Executive Director. Each new Board member has brought extensive and highly relevant skills and experience to the business that I know will continue to be of significant benefit to the Group as it delivers its long-term strategic objectives.

Following the year end the Group announced further directorate changes with regard to executive directors, which are discussed in more detail in the post year end developments later in this statement.

CLEAR STRATEGIC ROADMAP: POSITION-PLAN-POTENTIAL

The Group's strategic roadmap over the coming years is firmly focused on unlocking the significant potential from the combination of 888 and William Hill. However, to do this we must first acknowledge and address the key challenges that come with our current position as a newly combined Group.

Firstly, we recognise that our debt levels are high, and furthermore the cost of our debt is higher than we had anticipated due to material changes in interest rates and debt market conditions since the initial announcement of the deal in 2021. As a result, we are currently restricted when it comes to reinvesting excess cash flow into accelerating near term growth. Accordingly, we know that deleveraging must be a key priority for the Group, and we have set ourselves a clear target of reducing our net debt to EBITDA ratio from 5.6x at the end of the Period to below 3.5x by the end of 2025.

We also have a combination of three main platforms across 888, William Hill and Mr Green and in some markets, our brands are directly competing against each other. This fragmented approach and duplicate operating and technology structure means our margins are lower than peers and that's something that we must change.

We have a clear plan to address these challenges and to achieve our potential as a more profitable business that is sustainably positioned for the next decade of growth. Central to this plan is our refined strategic framework with two clear strategic priorities: integration and market focus.

These priorities are underpinned by our focus on continually developing our three key strategic enablers: product and content leadership, world-class brands, and customer excellence.

Strategic priority 1: Integration

The first of our strategic priorities is to deliver a successful integration programme.

During the second half of the year, following completion of the acquisition, we immediately began working hard on our technology migration programme. We analysed every aspect of the enlarged Group's different product platforms and took the swift decision to use 888's technology as the Group's core platform going forward. We also identified certain market-leading components from William Hill's technology that we will incorporate into the core platform. These include William Hill's global trading and retail technology platforms.

I am pleased to report that we are making good progress with our technology integration, with Mr Green launched in Germany on our core platform. The next stage is migrating Mr Green in Sweden onto the 888 platform in the coming months, which will be the first major milestone for the technology integration program as we aim to deliver our platform of the future over the next few years.

Not only will our platform of the future deliver a significant cost advantage to the Group, but we also believe there is an important revenue upside opportunity as we bring together our best-in-class product and content from across betting and gaming. One example of this is within our sports offering, where William Hill currently provides over 50,000 more in-play football markets each year than 888sport. We are confident that by expanding the range of betting options at 888sport and SI Sportsbook we will drive higher customer engagement and revenue. Similarly, 888 has a world-class games development studio, Section8, which creates some of the most successful 888casino content. We are on track to be able to offer this content to both William Hill and Mr Green customers across various markets in 2023.

Strategic priority 2: Market focus

The second of our strategic priorities is ensuring that we have a very clear focus on the key market opportunities for the Group that will deliver superior returns on investment.

This process categorises each of the Group's geographic markets into one of four market archetypes. Firstly, our core markets of the UK, Italy, and Spain. Cumulatively these countries represented around 70% of the Group's online revenue in 2022 and offer a total addressable market of more than £10 billion. These are all markets with tightening regulations and rising barriers to entry, and where we believe the Group can further build market share by strengthening our key competitive advantages. During the year the Group made significant investments in proactive safer gambling measures in the UK, which we believe positions us well ahead of the anticipated white paper on UK gambling regulation. Coupled with the tough comparative period that was aided by COVID related digital migration, these factors led to a 20% year-over-year decline in UK online revenues across the Group. We look forward to the white paper and subsequent level playing field that it should bring to the UK market, and are confident that our leading brands and sustainable recreational customer base will see us succeed in this market.

Our second market archetype is our growth markets, which includes Denmark, Germany, Ireland, Ontario in Canada, and the USA. These are regulated but less mature markets for the Group where we believe we can grow significantly through disrupting and building on the strong initial positions we have developed, or by taking advantage of our unique customer propositions. Across this group of markets our focus is on rapid growth, which will be achieved by reinvesting all underlying profitability generated across this cohort of markets back into the most attractive growth opportunities. Over time, as we grow our share in these markets, our intention is that some of these will become additional core markets for the Group where we will then aim to consolidate market-leading positions and drive profitability. During the year we launched the SI Sportsbook brand in Virginia and Michigan in the US and launched 888 under a local licence in Ontario, Canada, further successfully bolstering the Group's growth market portfolio. Early in 2023 we launched newly licensed offerings with SI casino in Michigan and Mr Green in Germany as we further support our growth markets.

Thirdly, we have our optimise markets. The Group currently offers its products across a huge range of global markets and, as we have a global and scalable platform, we can do this profitably and successfully in both regulated and offshore markets. Our optimise markets are ones where either the market opportunity is not compelling, or where we do not currently see an opportunity to be one of the dominant players in that market. As a result, our focus is on providing our products to customers in the most cost-efficient, profitable manner.

Finally, we have our pipeline markets. These are regions or countries where there is an attractive growth opportunity, but where we need a different model to unlock the potential opportunity. A great example of this is in Africa, where during the year we launched a joint venture, 888AFRICA, to operate 888 brands in online betting and gaming markets across selected regulated markets in Africa. We were pleased to report that Tanzania, Zambia, Mozambique and Kenya all successfully launched during the second half of the year, in time for the FIFA World Cup, and we have seen some very positive early momentum. The Group has a minority stake in 888AFRICA, with the option to increase this to take control and ultimately own up to 100% of the venture in the future.

KEY STRATEGIC ENABLERS

The Group's market share gains will be underpinned by our sources of sustainable competitive advantage, which act as strategic enablers. These are product and content leadership, world-class brands and customer excellence.

Product and content leadership

888's proprietary technology across all products provides a clear strategic advantage against our competitors and enables complete flexibility over the user experience. Our focus on clear product development principles allows us to offer best-in-class products, differentiated content and AI-powered personalisation.

World-class brands

The Group owns and operates some of the most recognised betting and gaming brands in our core and growth markets, including William Hill, 888, and Mr Green. We harness the power of our world-renowned brands, together with our highly effective, automated, and flexible data-driven marketing machine, to acquire, retain and engage customers in a unique way.

Customer excellence

Understanding customer needs and building our product, marketing, and offers to create the best experiences possible is critical to our growth plans. A key part of our relentless focus on customer experience is delivering quick and effective customer service. We are investing in this area all the time and through integration will be able to improve customer experience even more.

CRITICAL STRATEGIC FOUNDATIONS

We know that without getting the following three critical strategic foundations right, we will not be able to succeed in executing on our vision for the combined Group.

People and culture

Nurturing the right corporate culture and building the right team will be central to our future success. This starts with our strong executive team, which comprises the best leadership talent from across 888 and William Hill as well as some important new hires who joined the business during the Period. These include Harinder Gill, the Group's new Chief Risk Officer, and Anna Barsby, our new Chief Product and Technology Officer.

As we progress further through the integration process, we are focused on building a strong team culture that brings together the best attributes of both businesses and ensures that the sum of these great, historic businesses creates a combination that is stronger together. A powerful, agile, engaged, and unified team culture is critical to this.

Player safety

The second of our critical strategic foundations is player safety. We strive to build seamless customer journeys that enable players to easily track and limit their spending, while also enabling us as the operator to intervene when there is a risk of harm. By doing this, we will create an even more trusted relationship with our players, who in turn know that they can enjoy their betting and gaming with us in a safe and sustainable manner.

Over recent years, we have made important progress in the critical area of safer gambling. This includes making significant investments in our team and technology, which are central to our plans to continue to reduce the risks related to player safety. The Group's risk and compliance team, led by Harinder Gill, has more than doubled in size in the last three years to almost 400 employees and is now one of our largest departments.

One of our key goals is to make safer gambling a normal part of the customer experience. This is why we are pleased to report an 8.5 percentage point year on year increase in the number of the Group's players with safer gambling limits in place, with over 45% of our global customers now utilising limits to help ensure both a safer and more entertaining betting and gaming environment.

When it comes to safer gambling, we know that we are on a journey of continual improvement, and we acknowledge that the Group has not always got this right. We know that we must strive to do better and, in the year ahead, we are focused on enhancing the Group's overall approach to risk management, improving core processes, integrating teams, and aligning the slightly different safer gambling approaches that exist across our different platforms.

Planet

The Group acknowledges that the urgency and importance of the climate crisis requires everyone to play their part, and we continue to build on the progress we have made in this area. 2022 has been a year of transition for the group, as we work to combine the 888 and William Hill businesses. Our carbon footprint has expanded following the William Hill acquisition, but we have continued to evolve both in understanding our climate impact and working to address our carbon footprint. We have continued to make progress in delivering on our climate goals and have been rewarded with improved ratings from various key ESG ratings bodies. In 2022 we retained membership of the FTSE4Good Index as well as achieved much improved scores in the CDP rating, achieving a B- rating up from a previous rating of F. In early 2023 we achieved a CSA rating of 34, up from our prior year score of 26, an above average score for our sector. I am pleased with progress in this area but there is more to do in order for us to continue to ensure we are supporting the global fight against climate change.

POST YEAR-END DEVELOPMENTS

Directorate Changes

After the year-end the Group announced that Itai Pazner, Chief Executive Officer and Executive Director, was leaving office as CEO and as a Director with immediate effect on 30th January 2023. On behalf of the Board, I would like to thank Itai for his significant contributions to the business over more than 20 years, including the last four as CEO. Itai has played a very important role in building a business with powerful proprietary technology and has overseen successful early stages to the William Hill integration process. We wish him well in his future endeavours.

Since that date, I have assumed the role of Interim Executive Chairman while the Board searches for a permanent CEO. In this role I have assumed the responsibilities of the CEO and am fully focused on actively driving the business forward and leading our team to deliver our clear strategic plans. Across the leadership team we have completely clear focus across on what we must deliver in terms of our integration, deleveraging, and ensuring we are relentless in our pursuit of driving market share gains in our key markets.

Also in January 2023 we announced that Yariv Dafna, the Group's CFO would leave the business at the end of 2023. On behalf of the Board, I would like to thank Yariv for his significant input to 888's progress in recent years and we look forward to his continued contributions to the Board during the remainder of the year.

We have a very strong operational management team in place, and a Board priority right now is the appointment of a permanent CEO. We have been pleased with the depth and calibre of the candidates that we are engaging with and are making good progress with our search.

We are absolutely committed to appointing a CEO that will lead the team to deliver the potential of this business. The focus of the Board is therefore on making the right selection, rather than just making a quick selection.

Compliance and safer gambling

Over recent periods we have invested significantly in our compliance team, with the drive for higher standards headed by our new Chief Risk Officer, Harinder Gill, who joined the Group last summer. Harinder's team is on a mission to drive higher standards across all areas of risk and safer gambling and, as a Board and leadership team, we are all fully committed to this.

In late January, our internal team identified failures where our safer gambling policies were not being effectively applied. Further investigations identified similar accounts which were later confirmed to be a broader issue within a specific cohort of players, namely our VIPs in the Middle East. The Board once fully briefed took the prudent decision to suspend all of these accounts while the compliance team investigated the situation further.

Whilst this was a very disappointing development, I am pleased with how the business responded and that we have been able to quickly remedy the failings. Furthermore, I am highly confident that our policies and procedures are robust, and this failure was isolated to a very specific cohort of players. We have found no further issues and do not anticipate any further actions here. I am also pleased to say that we have successfully started reopening accounts and revenues in the region are beginning to recover.

On the 28th March 2023 the GB Gambling Commission ("GBGC") announced that a £19m regulatory settlement in lieu of a financial penalty had been reached with William Hill in relation to historic player safety failings.

The failings occurred before we owned William Hill, so we could have had no bearing on the areas that were investigated. However, the team had already taken significant remedial action, and we have further reinforced this following the acquisition. As a result, the business is now in a far stronger position from a compliance perspective, and with the improvement actions having already been taken, the announcement of the settlement has no further impact on our operations or revenue expectations in the UK.

These historic failings are not acceptable to me or the Board, and the entire Group shares the GBGC's commitment to improve compliance standards across the industry. We will continue to work collaboratively with the regulator and other stakeholders to achieve this.

UK Gambling Act Review

We continue to await the outcome of a review of the Gambling Act, which could potentially lead to major changes in UK regulation, albeit the extent and timing of any potential changes remains unclear. We have continued to take proactive steps during 2022 to increase the level of safer gambling interventions, including lowering thresholds for intervention and stepping up affordability checks, as well as lowering the max stake limits on our slots. We believe all of this positions the business well for any future changes through the white paper and any associated consultations that will likely follow.

OUTLOOK

Whilst - as outlined above - the Group faces some near-term challenges with our debt position and cost of debt,

I am confident in our clear strategic plan to create shareholder value and achieve our exciting potential. Over the coming years the Group's absolute focus will be on delivering our synergy targets, deleveraging, and delivering a successful integration process that creates a highly efficient, unified business model.

At our Capital Markets Day towards the end of 2022, the Group outlined four key financial targets for FY25 which the Board is confident will underpin strong shareholder returns. These are as follows:

•   Revenue of more than £2bn reflecting our refined strategic focus on a smaller number of key markets;

•   Adjusted EBITDA margin of more than 23%, up from 17% in the Period, which will be driven by a successful integration programme;

•   Leverage of less than 3.5x, down from 5.6x at the end of the Period, which will be driven by an extremely disciplined approach to capital allocation, with a focus on deleveraging; and

•   Adjusted earnings per share of more than 35p, reflecting the strength and benefits of the combined Group.

The management team continues to make very good progress with the integration and synergy programme. Whilst there is still much work to be done, we are pleased with what has been achieved so far, from critical early decisions taken around the technology platform and migration plan, to defining our market focus and bringing the teams together to execute on this. Our new operating model has been rolled out and the Board is pleased with how all our colleagues are now working together to achieve our common goals. The Board is confident that this progress will support a superior EBITDA margin for the Group in 2023 compared to 2022.

Whilst there remain several well-known macroeconomic and industry challenges as outlined above, the Board is confident that the combination with William Hill will unlock significant potential for the enlarged Group and all its stakeholders. This will be underpinned by its superior technology, talent, brands, scale, and more diversified revenue streams. Your Board and executive leadership team will continue to ensure that the Group remains resolutely focused on enhancing long-term value creation for shareholders and we look forward making further progress in the year ahead.

CHIEF FINANCIAL OFFICER'S REPORT - BUSINESS & FINANCIAL REVIEW

FINANCIAL SUMMARY

Reconciliation of Statutory EBITDA to Adjusted EBITDA, Adjusted profit before tax and Adjusted net profit

* EBITDA is defined as earnings before interest, tax, depreciation and amortisation

Adjusted EBITDA is defined as EBITDA excluding share based payment charges, foreign exchange losses and exceptional items and other defined adjustments. Foreign exchange losses and share benefit charges were excluded to allow for further understanding of the underlying financial performance of the Group. Further detail on exceptional items and adjusted measures is provided in note 3 to financial statements.

In the reporting of financial information, the Directors use various APMs. These APMs should be considered in addition to, and are not intended to be a substitute for, IFRS measurements. As they are not defined by International Financial Reporting Standards, they may not be directly comparable with other companies' APMs. The Directors believe these APMs provide additional useful information for understanding performance of the Group. They are used to enhance the comparability of information between reporting periods and are used by management for performance analysis and planning. An explanation of our adjusted results, including a reconciliation to the statutory results is provided in note 3 to the financial statements.

* Pro forma information presented in the financial summary (including the associated narrative) is not part of the audit of financial information performed by the Independent Auditor. These are defined on page 2 and 3.

SUMMARY

Reported revenue for the year was £1,239m (+74%) with the main driver being the completion of the acquisition of William Hill on 1 July 2022. On a pro forma basis revenue of £1,850m and Adjusted EBITDA of £311m were both in line with the guidance given at our capital markets day in November 2022.

Alongside the transformation in our revenue and earnings, our balance sheet has significantly changed following the acquisition, with the predominantly debt-funded deal leading to a highly leveraged balance sheet with debt of £1.7bn and a net debt to Adjusted EBITDA ratio of 5.6x at 31 December 2022. Given the deterioration in debt capital market conditions between signing and completing the acquisition, the ultimate structure of the William Hill acquisition left the Group more exposed to changes in interest rates, which continued to increase through the second half of 2022 following completion. We were pleased to successfully issue £347m equivalent of new debt in December 2022 to repay some of the initial deal financing, and increase the level of hedging we have in place such that approximately 70% of interest is fixed for at least the next three years.

Increased interest costs, the current macroeconomic climate and the impact of high inflation on the cost base, is putting pressure on the profit margins and cash generation of the Group. This restricts our ability to reinvest excess cash flow to accelerate near term growth and means our focus in the short term is on improving profitability through synergies and other cost savings generated from the transformation and integration programme. This will allow us to enhance cash generation and deleverage which is the key priority of the Group.

The integration and transformation programmes encompass both the programme to integrate the William Hill business into the 888 Group, unlocking approximately £150m cash synergies per annum, and wider transformation initiatives across the combined Group to drive efficiencies in operations. The programme is expected to continue until 2025, albeit many of the initiatives are expected to complete in 2023. There is an expected £100m of cash costs to achieve synergies expected to be incurred across the integration programme; with the expense expected to be greater than this due to non-cash items, such as impairments of software assets not required as the technology stack of the two businesses are integrated, and costs associated with the wider transformation programme.

As the Group executes these plans to improve profitability margins and deleverage, this will enable further investment in the growth opportunities available to the Group, in order to achieve the key financial targets for FY 2025 as outlined within the Capital Markets Day in November 2022 and which the Board remain confident in achieving:

·      Revenue of more than £2bn

·      Adjusted EBITDA margin above 23%

·      Leverage of less than 3.5x

·      Adjusted earnings per share of more than 35p

In FY23 specifically, we currently expect revenue to decline by low to mid single digits but EBITDA margin, on an adjusted basis, to improve to greater than 20%. This is a significant increase compared to the pro forma adjusted EBITDA margin of 16.8% in FY 2022, reflecting the realisation of a large proportion of the synergies from the acquisition.

In the UK market, we look forward to the Gambling Act white paper and subsequent level playing field that it should bring, and are confident that our leading brands and sustainable recreational customer base will see us succeed in this market. The acquisition of William Hill has also meant the Group is more diversified with a Retail business and an improved position internationally, in particular in our core markets of Italy and Spain. This creates a more sustainable business in a changing regulatory environment.

Revenue for the first quarter of 2023 was £446m, representing an increase of 168% on a reported basis and decrease of 5% on a pro forma basis. The reduction on a pro forma basis reflects strong growth in retail of +8%, more than offset by UK&I Online being down 9% with the continued impact of safer gambling changes, and International Online being down 11% as a result of our refined market focus and compliance changes in the Middle East.

Pro-forma results

Given the significance of the acquisition of William Hill midway through the year, the statutory results do not provide a clear comparison of performance to the previous period as they consolidate results of the William Hill business for the second half of the year in FY 2022. As such, in the analysis below, focus is given to the pro forma results showing a clearer performance of the Group in FY 2022 compared to FY 2021.

Within these pro forma unaudited results which do not form part of the audited financial statements, the FY 2021 financials cover the 52 week period from the 30 December 2020 to the 28 December 2021 for William Hill. Since the acquisition, the William Hill business has aligned to the monthly financial calendar of the Group and, therefore, the FY 2022 financials cover the period from 29 December 2021 to 31 December 2022.

Change in presentation currency

The Group has changed the currency in which it presents its financial results from US Dollar to UK pound sterling (GBP) with effect from 1 January 2022, in consideration of the William Hill acquisition and current business mix which has now significantly higher GBP exposure and with 888 US Dollar denominated earnings a relatively lower proportion of overall earnings.

The opening balance sheet and comparatives have all been translated and re-presented to GBP following this change in presentational currency.

Segmental change

The Group has changed its operating segments within the year to reflect geographic divisions as opposed to segments by product as disclosed in previous years. This reflects the way in which results are monitored and reported in the enlarged Group.

Following the acquisition of William Hill, the business has been restructured to be managed as a UK business, comprising UK Retail and UK&I Online segments, and an International business with both supported by a Corporate centre. The US business is disclosed within the International segment and the Irish business is managed within the UK&I Online segment.

The results of the Bingo business that was sold during the year are presented within 'Other'.

The comparatives have been re-presented to display the results in these new reportable segments.

CONSOLIDATED INCOME STATEMENT

Revenue

Revenue for the Group was £1,238.8m for FY 2022 on a statutory basis; an increase of 74% to FY 2021 of £712.3m with the consolidation of William Hill revenues across H2 2022.

On a pro forma basis, revenue was £1,850.1m; a decrease of 3% compared to £1,907.0m in FY 2021.

The decline in revenue primarily reflects the additional player safety checks implemented in the UK&I Online business across both brands over the previous two years with a 20% reduction in UK&I Online revenue in FY 2022 compared to FY 2021.

On a pro forma basis, the International business declined by 9%, mainly due to regulatory changes across a range of markets, most notably the impact of the Netherlands business closing at the end of Q3 2021.

This is partly offset by a 54% increase in Retail revenues driven by a full year with a full Retail estate trading compared to lockdowns and other restrictions particularly across H1 2021.

Online sports betting revenue of £363.1m reflected a decline of 24%, and online gaming revenue of £968.0m reflected a decline of 11%. Performance across both products was principally driven by the same factors as above, with the decline larger in sports due to country mix, with more of the sports business being in the UK. Alongside this FY 2022 had a tough comparator from a sporting fixture perspective, with 2021 containing additional fixtures as major football leagues caught up post COVID-19 disruption.

Cost of sales

Cost of sales mainly comprise gaming taxes and levies, commissions and royalties payable to third parties, chargebacks, payment service provider ("PSP") commissions and costs related to operational risk management and customer due diligence services. Cost of sales has increased on a statutory basis to £440.5m from £253.2m due to the acquisition of William Hill. On a pro forma basis, cost of sales has decreased by 7.3% to £599.2m reflecting the reduction in revenue, with cost of sales representing 32.4% of revenues (FY 2021: 33.9%).

Gross profit

On a statutory basis, gross profit has increased to £798.3m from £459.1m with the consolidation of the results of William Hill for the second half of FY 2022.

On a pro forma basis, gross profit has decreased by 0.8% from £1,260.6m to £1,250.9m but with an increase in the gross margin from 66.1% to 67.6%.

Marketing expenses

Marketing is a significant investment for our Group to drive growth through investing in our leading brands, as well as customer acquisition and retention activities. On a statutory basis marketing increased to £257.8m compared to £222.6m in FY 2021 with a marketing ratio of 20.8%, which decreased from 31.3%, driven by the inclusion of the retail business, which has significantly lower marketing ratio.

On a pro forma basis, marketing decreased by 23.4% from £433.0m to £331.8m. Certain marketing is demand driven and flexible so part of the reduction is as a result of the reduced revenue noted above, with further marketing savings being achieved following the acquisition with a refined brand marketing strategy to focus marketing on specific brands in specific countries. The marketing to revenue ratio has decreased from 22.7% in FY 2021 to 17.9% in FY 2022. This partly reflects the mix of revenue with more generated from the Retail business where the marketing investment is lower. Excluding the Retail segment, the marketing ratio decreased from 27.1% to 24.4% reflecting the refined brand marketing strategy.

Operating expenses

Operating expenses mainly comprise employment costs, property costs, technology services and maintenance and legal and professional fees. On a statutory level, operating expenses increased to £448.5m from £160.2m in FY 2021. This increase is due to the acquisition of William Hill with the Retail business having a much higher proportion of operating expenses to revenue given the employment and property costs required to operate.

On a pro forma basis, operating expenses excluding depreciation and amortisation have increased by 9.0% from £558.5m in FY 2021 to £608.7m in FY 2022. The main reason for this increase is due to inflationary pressures, in particular the impact of utility cost inflation in the Retail business.

Adjusted EBITDA

Reported EBITDA increased by 28.9% from £89.6m to £115.5m. On an adjusted basis, the increase was 82.0% to £217.9m from £119.7m, with an increased margin of 17.6% compared to 16.8% in FY 2021.

On a pro forma basis, adjusted EBITDA increased by 15.1% to £310.6m in FY 2022 compared to £269.9m in FY 2021. The adjusted EBITDA margin increased from 14.2% in FY 2021 to 16.8% in FY 2022 driven by the focus on cost efficiency alongside the early benefits of synergy delivery, particularly marketing savings from the optimised brand marketing strategy across different markets.

INCOME STATEMENT BY SEGMENT

The below table shows the Group's performance by segment:

For the commentary on divisional performance below, the focus is given to the pro forma financials in order to give a clearer comparative of performance compared to the previous period. Furthermore, it reflects adjusted results, since that is the basis on which these are reported internally and in our segmental analysis. An explanation of our adjusted
results, including a reconciliation to the statutory results, is provided in note 3 to the financial statements.

UK

UK&I Online

On a statutory basis, revenue increased by 78.5% to £455.5m and Adjusted EBITDA increased by £53.9m compared to the previous period.

On a pro forma basis, revenue declined by 20.2% to £717.4m mainly due to the additional player safety measures implemented across 888 and William Hill brands across the previous two years. In addition to this there was a positive substitution impact from Retail in the UK&I Online business in the first months of 2021 during the lockdown in the UK. Pro forma adjusted EBITDA has declined by £53.3m or 32.2% with the Adjusted EBITDA margin declining as a result of a high fixed cost base, which is being addressed through the integration programme.

Retail

On a statutory basis, Retail generated revenue of £255.5m and Adjusted EBITDA of £41.2m as the Retail business continued to deliver robust financial performance and strong cash generation following its re-opening.

On a pro forma basis, revenue increased by 54.1% to £519.0m as 2022 was a return to a full year of trading with a lockdown until April 2021 in the prior year.

Pro forma adjusted EBITDA increased by £90.4m to £90.7m in FY 2022, again reflecting the increased profitability from a full year of an open trading Retail estate. At the same time the Retail estate had a particularly large impact from the inflationary pressures and specifically rising utilities costs in FY 2022.

There were 1,386 shops open at the end of FY 2022 compared to 1,407 at the end of FY 2021. The small reduction to the already well optimised estate largely reflects the impact of inflationary cost increases making certain shops no longer commercially viable.

International

On a statutory basis, the International business revenue increased by 23.9% to £508.3m and Adjusted EBITDA increased by £4.2m compared to the previous period.

On a pro forma basis revenue declined by 8.6% to £613.7m, in part due to the closure of the Netherlands market in September 2021, as well as additional regulatory impacts and other smaller market closures. The two core markets, Italy and Spain, within the International business both were flat compared to 2021.

Pro forma adjusted EBITDA declined by £11.5m to £136.0m with the Adjusted EBITDA margin declining as a result of a high fixed cost base, which is being addressed through the integration programme.

Within the International business, the US business revenue was £20.4m, an increase of 27% compared to the previous period. Adjusted EBITDA was a loss of £12.3m in the period compared to a loss of £12.1m in the previous period with the continued investment in marketing and other costs to grow the business.

Corporate costs

On a statutory basis, corporate costs were £4.9m in FY 2022 compared to £9.4m expense in FY 2021. This is due to the timing of the release of staff incentive accruals across the Group including those accrued prior to acquisition within William Hill.

On a pro forma basis, there was a reduction in corporate costs of £14.9m to £28.1m due to the removal of staff incentive accruals for FY 2022 compared to FY 2021 and certain synergies being generated through the integration programme.

EXCEPTIONAL ITEMS AND ADJUSTMENTS

Total exceptional items in the year were £103.0m in FY 2022 compared to £19.8m in FY 2021.

Exceptional items are defined as those items which are considered to be one-off or material in nature to be brought to attention to better understand the Group's financial performance. Refer to note 3 to the financial statements for further detail.

There were £24.5m of costs incurred to complete the acquisition of the William Hill business, predominantly comprising advisor fees.

Furthermore, £14.4m of costs were incurred relating to the on-going transformation and integration of the William Hill business. This includes £12.5m of cash costs incurred to achieve synergies, which is still expected to total £100m across the integration. There were also £1.9m of additional transformation costs relating to a restructure of the Retail operating model to drive further efficiencies, albeit these efficiencies are not classified as synergies.

The transformation and integration programme is expected to take three years until 2025 and is currently expected to generate synergies of approximately £150m, an increase of £50m over our initial target.

During the year, as part of the annual impairment review, the Group has impaired the goodwill of its US business. As such, the goodwill of the US business has been impaired in full, totalling £25.7m. In addition to this there were non-cash impairment costs of £30.0m relating predominantly to the write off of software acquired with the William Hill business that is not planned to be used by the Group following the decision to use the existing 888 platform as the Group's platform going forward.

We completed the sale of the Bingo business to Saphalata Holdings Ltd., a member of the Broadway Gaming Group, for a total cash consideration of £37.4m with the loss on disposal of £11.7m recognised as an exceptional item.

As a part of the transaction agreement with Caesars for the purchase of William Hill, an amount of up to £100m consideration was deferred subject to the enlarged group hitting specific EBITDA metrics. This was fair valued on acquisition at £9.6m and revalued at the year-end date to £0.4m, leading to a release in this contingent consideration of £9.2m.

The final operating exceptional item was a credit of £3.9m relating to the reversal of previous regulatory provisions after a settlement of a specific liability relating to Spain; with the credit recognised as an exceptional item to ensure a consistent accounting treatment to the recognition of the original provision.

There were also £7.0m of non-operating exceptional items within finance costs. £14.1m of costs associated with the early settlement of the William Hill Senior Unsecured Notes representing early redemption fees and the accelerated write off of unamortised finance fees. This is offset by a credit of £7.1m representing the reduction in value on settlement of the William Hill Senior Unsecured Notes compared to the fair value recognised on acquisition.

Adjustments were those items that are recurring items that are excluded from internal measures of underlying performance in order to provide clear visibility of the underlying performance across the Group. They are items that are therefore excluded from Adjusted EBITDA, Adjusted PAT and Adjusted EPS.

The amortisation of the specific intangibles assets recognised on acquisitions has been presented as an adjusted item, totalling £56.7m relating to the William Hill acquisition. This amortisation is a recurring item that will be recognised over its useful life.

The other items that have been presented as adjusted items are foreign exchange losses of £26.7m (£6.7m in FY 2021), share based payment charges of £5.2m (£6.1m in FY 2021), and amortisation of finance fees of £7.4m (£nil in FY 2021).

Finance income and expenses

Net finance expenses of £110.9m (2021: £4.2m) related predominantly on the interest expense from the debt on acquisition of William Hill (£75.0m). There were also exceptional net finance charges of £7.0m related to the bond early redemption fee and gain on settlement of bonds as explained within Exceptional items and Adjustments section above. The finance expense resulting from operating leases was £3.0m (2021: £0.9m) with the increase due to the acquired Retail business within William Hill and the finance expense from hedging activities was £3.3m.

Profit before tax

The net loss before tax for 2022 was £115.7m (2021: net profit before tax of £59.0m). On an adjusted basis, profits decreased by 10% to £80.5m (2021: net profit before tax of £89.1m) with the increased financing costs from the debt on acquisition of William Hill offsetting the increased earnings from the enlarged Group.

Taxation

On a statutory basis, the Group recognised a tax charge of £4.9m on a loss before tax of £115.7m, giving an effective tax rate of 4.2% (2021: tax charge of £9.0m and an effective tax rate of 15%). The tax charge and therefore the tax rate is higher than the expected tax credit arising on the loss of 19% primarily due to lack of tax relief on exceptional costs associated with the acquisition of William Hill and which is offset by prior years credits in respect of additional tax relief obtained on interest costs.

On an adjusted basis, the Group recognised a tax charge of £16.3m on a profit before tax of £80.5m, giving an effective tax rate of 20.2%. (2021: tax charge of £6.5m and an effective tax rate of 7%). The tax charge and therefore the tax rate is broadly in line with the expected tax rate of 19%.

The Group's adjusted effective tax rate for 2023 is now expected to be c8%.

Net (Loss)/Profit and adjusted net profit

The net loss for 2022 was £120.6m (2021: net profit of £50.0m). On an adjusted basis, profits decreased to £64.2m from £82.6m in 2021.

Earnings per share

Basic earnings per share decreased to a loss of 28.3p (2021: profit of 13.4p) as a result of the reduction in net profits in 2022 predominantly due to the exceptional items surrounding transaction and transformation related costs.

On an adjusted basis, basic earnings per share decreased by 32% to 15.1p (2021: 22.2p). Further information on the reconciliation of earnings per share is given in note 10 to 2022 financial statements.

Dividend

The Board of Directors is not recommending a dividend to be paid in respect of the year ended 31 December 2022 (2021: 3.2p per share), in light of the Board's decision to suspend payments of dividends until leverage is at or below 3x, as previously announced following the acquisition.

Accounting for the acquisition of the William Hill business

As part of the accounting for the £1.95bn acquisition of the William Hill business, it is necessary to allocate the acquisition value between acquired assets and liabilities. As such the Group have valued the acquired assets and liabilities of William Hill to fair value as at the 1 July 2022 acquisition date.

This has led to the recognition of certain separately identifiable intangible assets on the consolidated statement of financial position of the Group in addition to other fair value adjustments on other recognised assets and liabilities.

The separately identifiable intangible assets include the value of the William Hill brand of £574.4m, the value of customer relationships of £595.1m and £8.5m in respect of licences. These assets are amortised, with the amortisation recognised as an Adjusting item within Exceptional items and Adjustments to aid further understanding of the underlying financial performance of the Group.

The remaining value of the transaction after recognising the fair value of all identifiable assets and liabilities has been allocated to goodwill, with the value of £785.6m recognised. This goodwill value represents a number of factors such as the future growth of the William Hill business, potential to achieve buyer specific synergies and the value of the workforce.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION   

The consolidated statement of financial position consolidated the acquired William Hill business from 1 July 2022 and as such there are significant differences in the 31 December 2022 position compared to the 31 December 2021. Note 16 to the financial statements shows the assets and liabilities acquired which explain a majority of the differences.

Non-current assets increased by £2,297.2m to £2,457.1m compared to £159.9m at FY 2021, predominantly due to assets recognised on the acquisition of the William Hill business of £2,614.8m including goodwill (£785.6m); brand (£574.4m); customer relationships (£595.1m); licences (£8.5m); software and technology (£226.2m); property, plant and equipment (£109.5m); right of use lease assets (£72.3m) and investments and associates (£40.0m).

Within the period there were material impairments relating to the US B2C business of £25.7m, due to changing market and economic conditions leading to a revised strategy in the US business and an increased discount rate driving an impairment. In addition to this there were non-cash impairment costs of £30.0m relating predominantly to the write off of software acquired with the William Hill business that is not planned to be used by the Group following the decision to use the existing 888 platform as the Group's platform going forward. Within this £28.1m specifically related to the impairment of the Unity platform that had been under development within William Hill.

Current assets are £494.4m, an increase of £254.2m compared to £240.2m at FY 2021. Within this cash and cash equivalents has increased to £317.6m from £189.4m, although this includes £141.3m of client funds held compared to £60.1m at FY 21 due to the additional client liabilities in the William Hill business. Excluding client funds, cash and cash equivalents have increased by £47.0m from £129.3m in FY 21 to £176.3m in FY 2022.             

Total current liabilities have increased by £451.5m from £251.9m at FY 2021 to £703.4m at FY 2022. This includes the increase of client funds held and the trade and other payables acquired on acquisition of the William Hill business of £382.3m. Provisions have increased to £111.5m from £19.0m. This includes the current portion of the provision for customer claims, as well as a provision of £19.2m for the regulatory settlement agreed between William Hill and the GB Gambling Commission. There are then additional provisions of £61.7m for gaming tax in Austria; £2.0m of provisions relating to shop closure costs and £3.7m of restructuring costs.

Non-current liabilities are £2,088.9m, an increase of £2,065.2m to the balance of £23.7m in FY 2021. This increase is predominantly due to funding the acquisition of William Hill of £1,697.5m. In addition, the deferred tax liability has increased by £218.5m mainly driven from the acquisition accounting and the lease liabilities have increased by £46.9m with the acquisition of the Retail estate in William Hill. This includes the non-current portion of the provision for customer claims of £86.2m, predominantly in Austria and predominantly recognised on acquisition of William Hill as part of acquisition accounting where previously held contingent liabilities were recognised on the statement of financial position in line with the business combinations accounting standards.

Net assets of £159.2m is an increase of £34.7m compared to £124.5m at FY 2021. The equity includes the net proceeds of £158.5m from the share issue in April 2022 to partly fund the acquisition of the William Hill business.

Cash flows

Overall the Group had a cash inflow of £128.2m in the year, compared to an inflow of £26.4m in FY 2021. This resulted in a cash balance of £317.6m as at 31 December 2022 (£189.4m at 31 December 2021) although this included client funds and other restricted cash of £141.3m such that unrestricted cash available to the Group was £176.3m compared to £129.3m in FY 2021.

The cash inflow in the year predominantly reflected the financing for and acquisition of the William Hill business. The inflows from the net borrowings after payment of loan transaction fees and the refinancing of the debt within the William Hill business was £527.6m coupled with the proceeds from the equity issue in April 2022 of £163m, before fees with net proceeds of £158.5m. The acquisition of William Hill was for a cash equity value of £386.8m, net of cash acquired, which nets to an inflow of £299.3m. Cash interest payments on the borrowings were £75.6m.

The disposal of the Bingo business to Saphalata Holdings Ltd., a member of the Broadway Gaming Group, generated cash of £37.4m with £0.5m generated from the sale of property, plant and equipment in the Retail business.

Cash flow from operations was a £30.2m outflow compared to an inflow of £96.6m in FY 2021. This reduction was partly due to significant working capital outflows in the period coming from the acquired balance sheet from William Hill and the exceptional items in the year causing a statutory loss before tax as well as a reduction of staff incentive accruals and reduced marketing spend driven from the brand marketing synergies.

Debt

The gross borrowings balance as at 31 December 2022 was £1,815.0m. The earliest maturity of this debt is in 2026, which is £11m, with the vast majority of the debt maturing across 2027 and 2028. In addition to this, the Group has access to a £150m Revolving Credit Facility maturing in January 2028, which is currently undrawn.

The debt is across GBP sterling; Euro and US Dollar with 50% of the debt in Euro; 43% in GBP and 7% in USD. The Group have undertaken hedging activities such that 70% of the interest costs is at fixed costs and 30% at floating rates with the hedging relationships in place for three years.

The net debt balance at 31 December 2022 was £1,727.7m with a net debt to EBITDA ratio of 5.6x. The Group has the target to bring this down to less than 3.5x by FY 2025.

PRINCIPAL RISKS AND UNCERTAINTIES

The principal risks and uncertainties that are considered to have a potentially material impact on the Group's future performance, sustainability and strategic objectives are set out below. This list is not exhaustive but encompasses management's assessment of those risks which require considered response at this time.

Reputational

The Group relies on its world class brands across its key markets, with brand reputation being a key driver of customer choice. As such, maintaining a strong reputation is critical to the ongoing success of the Group.

There continues to be a trend in a number of jurisdictions where the business operates to strengthen regulations over safer gambling and customer protection, particularly in regard to those underage and players who are vulnerable or at an increased risk of harm. There is also an emphasis on enhancing controls over anti money laundering and anti-terrorist funding activities across the industry.

Media reporting on the industry as a whole has seen continuing and indeed increased criticism of how individual customers have been treated. This has led to further calls for additional regulation, particularly around responsible gambling, affordability, and advertising, Any failure to ensure the business is fully compliant would result in significant reputational damage, in addition to any sanctions imposed by its regulators.

ESG

The Group is committed to the policies, procedures, and controls over the delivery of its Environmental, Social and Governance (ESG) objectives.

ESG issues include risks such as climate change, player protection, diversity & inclusion, cybersecurity concerns and social responsibility not just to employees and customers but also to the communities where the business bases its operations and retail outlets. Unlike most other risk types, certain aspects of ESG risks are often emerging with unique characteristics. Climate-related risks for example tend to have little relevant historical data associated with them and tend to be non-linear in nature.

Nevertheless, The Group has identified several ESG objectives and has developed sustainability metrics and targets to monitor progress against these. The ESG framework is called 'Players, People, Planet,' and the Group's strategic focus is on protecting our players from gambling related harm, creating an engaging and inclusive environment where colleagues can thrive and protecting the environment by achieving net zero carbon emissions by 2030.

Market risk

The acquisition of William Hill was financed using a combination of sources, including significant debt facilities. The Group has entered into a range of hedging arrangements such that approximately 70% of interest costs are fixed for the next three years, and the currency profile of the debt was more closely aligned to the currency profile of the Group. However, the Group is still exposed to risks related to interest rate changes and currency fluctuations, which could increase the cost of the Group's borrowings, and this could divert resources from investing in growth, marketing and delivery of new products and projects.

The Group is also exposed to foreign exchange rate fluctuations and risks in its financial reporting. A substantial part of the Group's deposits and revenues are generated in GBP, EUR and other currencies, whilst the Group's operating expenses are largely incurred in local currencies, primarily GBP, EUR, ILS, and USD, with incremental operating cost exposure across our offices in Philippines, Romania, Bulgaria and Poland. The Group also has debt servicing costs which are denominated in USD and EUR, partially hedged in GBP.

Taxation

The Group is subject to a range of taxes, duties, and levies in many of the countries where we have operations or in which our customers are located. These taxes have changed over time and continue to be subject to change. In addition to tax rate changes, the Group's international footprint brings added complexity to its tax and duty positions, which requires careful management to ensure the business fulfils its obligations. 

The nature of tax affairs can be complicated with differing legal interpretation regarding the scope and scale of taxation, which alongside potential rate changes mean the levels of taxation to which the Group is exposed may change in the future, creating a risk of additional costs. There is also a risk of audits of the Group's tax filings and/or challenges to the filing/non-filing positions the Group is taking in certain locations. Any adjustments made by tax authorities to the Group's filed positions may also lead to opportunities for governments to apply financial penalties and interest - this action may impact the company's reputation with customers, the capital markets, and key stakeholders such as compliance and regulatory bodies who issue and monitor its operating licences.

People

Our colleagues across all our business functions are vital to ensuring our day-to-day operations are undertaken efficiently and effectively and to the successful delivery of our strategic business objectives.

Competition for highly qualified personnel is intense in many of the locations in which the Group is based. Ensuring our colleagues are well remunerated, managed and supported is fundamental to the success of the business.

The integration activities following the acquisition of William Hill have introduced some uncertainty for our colleagues across the business, which does carry a risk with regard to staff retention in particular, but also recruitment in the short term.

Integration

The Group is in the process of integrating the William Hill business into its corporate structure, with the strategy to integrate operations and technology and deliver cost synergies whilst retaining its customer base and experienced and qualified personnel.

The integration is supported by strong governance, oversight and dedicated management teams. However, risks inherently remain to the delivery and timing of all or substantially all the expected benefits and to the timely delivery of these benefits. The delivery of these synergies involves complexity, and associated costs to revising current systems and organisational structures. As such there is a risk that these costs could exceed our current cost estimates, impacting on anticipated integration benefits.

Consolidating multiple technology systems can be complex and challenging, and may lead to potential disruptions in our operations and require us to take on higher levels of risk in the short term.

Integration risks also include the unexpected loss of key personnel, the erosion of our existing customer base and issues in integrating financial and operational policies, processes, procedures and controls. There are challenges in managing the increased scope, geographic diversity and complexity of the Group's operations. Third-party partners and suppliers may look to terminate or alter their existing contracts with the Group.

There are also risks associated with the management of conflicting interests within the Group and failure to mitigate contingent or assumed liabilities, as well as diversion of management and resources from the Group's core business activity due to personnel being required to assist in the integration process.

Cyber and technology

There is a continual risk that our technology systems and as a result our operations may be impacted by cyber-attacks such as Distributed Denial of Service (DDoS) by malicious third parties, the theft or misuse of customer and business data by internal or external agents or natural or manmade disasters affecting our offices and operational locations or those of our key suppliers. 

Cyber-attacks leading to data theft could expose the Group to "ransom" demands or regulatory sanctions including fines and reputational damage, which could lead to loss of customer confidence in the business.

The loss of availability of our technology and communication systems, or those in our key suppliers' infrastructure could cause significant disruption and cost to the business, and lead to revenue loss both during the incident and in the aftermath if customers move their business to our competitors. Lengthy down-time could also cause us to breach regulatory obligations.

Partnership

To effectively deliver our products and services to customers the Group has reliance upon certain critical suppliers of technology, payment services, marketing, gaming products, sports content, and media. The effective management of critical third-party relationships and performance is key to delivering our strategic objectives. Any failure of our suppliers to provide services to us may have a significant adverse impact our own operations.

The Group also has certain strategic partnerships where we supply third party operators with business to business (B2B) gambling services in the United States which have strategic importance for the longer-term growth in our US business. Any risks to our B2B partnerships or meeting our contractual obligations with them have to be managed to ensure the long-term viability of our operations linked to these relationships, and to ensure we are able to meet our strategic growth targets. 

Data protection and e-privacy

The integrity of the Group's data protection framework including the holding, processing, and protection of customer's, third party and sensitive business data is crucial to the supply of its services to customers and the Group's compliance with regulatory and legal obligations.

The Group is exposed to the risk that data breaches could result in financial loss, reputational damage, and potential regulatory enforcement including financial penalties.

The betting and gaming sector is under increased scrutiny from data protection regulators globally and particularly in the UK where the ICO specifically called out the betting and gaming industry's use of adtech, social media and general use of personal data as an area of focus for the next three-years in the ICO25 strategy document.

Regulatory and compliance

Compliance with regulatory requirements is critical to maintaining the Group's licences, protecting our customers, and driving growth. With most of our revenue generated from licensed jurisdictions and more countries looking to regulate, the importance of such licenses to the business is constantly increasing.

Regulatory requirements in key markets are subject to change, sometimes at short notice, which could benefit or have an adverse impact on the Group and additional costs may be incurred in order to comply with any new laws or regulations. During the year the Group was subject to additional regulatory requirements across a number of its markets, including newly regulated markets in which it launched its products for the first time such as Ontario in Canada and certain US states.

Consolidated Income Statement

For the year ended 31 December 2022

¹ Adjusted EBITDA and adjusted profit after tax are Alternative Performance Measures ("APMs") which do not have an IFRS standardised meaning. The Group presents these two measures since they are the main measures the analyst community uses to evaluate the Company and compare it to its peers. The Group presents adjusted measures because it allows for a further understanding of the underlying financial performance of the Group.

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2022