Good morning, everyone, and thanks for joining us today for our H1 2024 results. I am Per Widerström, and have now been the CEO of evoke for 10 months. We already gave you the key headlines of our first half in our trading update a month ago, and the actual numbers for H1 are exactly in line with the guidance we gave, so we are going to keep today fairly brief. I will start with a short summary, including the actions we are taking to address performance, including details of our recurring trading, before Sean walks through the financials. Then I cover our strategic progress before taking your questions. The first half financial results are exactly in line with our trading update announcement a few weeks ago. But let me start by reiterating what I said before, that these results are disappointing and are not acceptable.
We understand exactly what went wrong, and we have taken corrective actions to address the problems. This is what I will take you through in more detail shortly. We are seeing good traction from our decisive actions, and I'm pleased to say that Q3 to date is in line with our 5%-9% growth targets. We are laser focused on delivering our commitments for H2, and we have implemented a number of tactical actions focused on short-term performance turnaround to ensure we deliver these targets in the second half. But be in no doubt that the actions we are taking are much more significant than this and are much more strategically positive, focused on our value creation plan and setting up the business for the longer term.
We are seeing steady improvements in our run rates, but I am really excited about our growing capabilities and what this means for our future profitability. Turning to Slide Three, and to cover current trading and what we are seeing and expect to see in the second half. There is a short summary on the page on what we covered in our trading update around why the H1 performance was behind the plan and actions we have taken to address it. You can also see some of the wide range of initiatives and improvements that will be landing across the second half, in particular, the improvements in our products, the way we do customer life cycle management, and our overall customer value propositions.
These are fundamental shifts that will drive significant longer-term benefits, but we also expect to see some immediate uplifts as things land during the course of the second half. We have already made several changes in the past few months to address short-term performance and drive improvements. It's fair to say that a lot of the really exciting initiatives are still to come in Q3 and Q4. In terms of what we are seeing in the business right now, both the end of Q2 and start of Q3 have seen strong underlying progress in our year-on-year growth rate, and revenue growth in Q3, up to the tenth of August, is consistent with our 5%-9% growth target range.
The period benefits slightly from the timing of the Euros, but the main driver of growth has been strong trends in our core customer cohort of mid-value customers, and also strong ongoing growth in online gaming in our core markets. This is really the heart engine of the business, so it's pleasing to see this is where the growth is coming from. With that, I'm going to hand over to our CFO, Sean Wilkins, to run through our financials and wider outlook first, and then I will come back to expand on some of these strategic changes we have been making.
Thanks, Per, and good morning, everyone. I'm Sean Wilkins, the CFO, and I've now been with the business for six months. This is a hugely exciting time for the group as we are undertaking a total transformation of the business. This will deliver stronger revenues, stronger growth, higher margins, and more sustainable market-leading positions. As with any transformation of this scale, the route to success is never a straight line. We had some successes and some challenges in the first half, and the results you can see on Slide Five for the first half are not where we wanted them to be. We already provided the main financial headlines last month, with revenues down 2% and an Adjusted EBITDA margin of 13%-14%, so there are no surprises here.
As we discussed in the trading update, we didn't see the returns we expected from our increased marketing investment, and with the operational gearing in our retail business, this meant that the Adjusted EBITDA of GBP 116 million was about GBP 35 million-GBP 40 million lower than we had expected. This is what we explained in our post-close trading update in July. In the appendix to this presentation, there are some more slides on the reported results, including details of the exceptional items and adjustments, being mainly the purchase price allocation, amortization, integration costs, and the U.S. termination fees already disclosed. What we will cover in more detail today is that the first half is not reflective of all the actions we've taken to secure our performance in H2, and beyond is much stronger. I'll talk a bit more about this after covering our cash flow.
Turning to Slide Six and our cash flow. Net cash, excluding customer balances, dropped by GBP 12 million in the half, resulting in net debt of GBP 1.73 billion. Given the phasing of our marketing investments and cost savings, our Adjusted EBITDA on an LTM basis reduced from GBP 308 million at the end of December to GBP 268 million at the end of June 2024. This means that the leverage increased from 5.6x to 6.4x. Alongside this drop in Adjusted EBITDA, you can see we paid out over GBP 50 million for exceptional costs in the first half, which is driving us the small cash outflow. This includes significant items like costs to exit our U.S. B2C business, which will deliver clear and high returns in future periods.
We expect this increase in leverage to be temporary and expect leverage at the end of 2024 to be much closer to where we began the year. Looking forward, we plan for rapid deleveraging to our 2026 target of below 3.5x . It is important to note that despite profits being below our plan, the business remains highly cash generative, with almost GBP 79 million of underlying business free cash flow in the period. We also have really strong liquidity, with nearly GBP 300 million of total liquidity at the end of June. Turning to Slide Seven, I'd like to provide some more details on the improvement in profitability that we expect in the second half. As Per already said, the actions we have taken have driven an improvement in our trading. We are pleased with the improving momentum in our revenue run rate.
This chart walks through the main bridging items from half one Adjusted EBITDA of GBP 116 million, to our half two guidance of GBP 185 million-GBP 195 million. Marketing phasing will add GBP 35 million-GBP 40 million. We significantly increased our marketing in the first half and are seeing some of the benefits of this in our improved run rates into half two. The lower marketing spend in H2 will be a marketing ratio of around 18%-19% of online revenues, which we see as a more normal rate than the elevated 25% in half one. The phasing of employment costs will add GBP 5 million-GBP 10 million in H2, given the full half impact of actions taken during the first half to improve our operating model. Revenue initiatives will add around GBP 15 million to EBITDA.
We have a deep pipeline of initiatives here, some of which Per talked through. We have completely changed the way the finance function supports the business in tracking and driving business. Each of these initiatives is tracked individually, enabling the business to take corrective actions to ensure we're hitting our financial plans. An example of a new initiative which is driving improved revenue and profitability is our recently launched upgraded Bet Builder. This has made it much easier for our customers to place combination Bet Builder bets. With a high-quality product in place, we then skewed the marketing and promotions towards this in the Euros and into the start of the new football season.
This new product drives both a revenue and profit uplift on its own, as more players can place the bets they like, and also increases the efficiency of our marketing and bonuses, as we are able to promote a really attractive product. As you know, we are in the process of selling and closing our US B2C business, and this will add a further GBP 4 million to EBITDA in the second half. Finally, we have taken a range of additional cost initiatives, which will save a further GBP 10 million in H2. One of the key learnings in my first six months in the role is that we have loads to go for on the cost side. We continue to see a wide range of manual processes, duplication, and inefficiency in our cost base.
This ongoing work will lead to a structurally lower cost base, with further annualization impact into 2025, giving us confidence in our 2025 plans. Finally, on Slide Eight, a quick update on my financial priorities that I outlined at our full-year results. Firstly, we are driving and embedding a cultural shift in the business. This is all about a shift in mindset to deliver value creation. I have quickly restructured the finance team to set a structure that will support greater rigor of our plans and provide greater support to our decision makers and drive higher returns. We built rigorous daily, weekly, and monthly tracking and increased our reforecasting cycle to monthly, to ensure that we can be more accurate and confident with our forecasts. Each element of our plan is tracked and monitored to ensure we are delivering.
This enables the business to take corrective actions if we are off course, and to quickly scale up investments where we are over-delivering. Secondly, resource allocation is fundamental to creating value. We are in the process of exiting the U.S. B2C business and have made structural changes in our approach to marketing and product investments to drive higher returns through pursuing our strategy. Thirdly, we are making strong progress with our efficiency and operating leverage. We continue to take cost out of the business following our strategy to deliver a more targeted business, investing in the right products and brands in the right countries. We are building a more scalable, more efficient business powered by intelligent automation and AI. I'll now hand back to Per to provide some more details on how we have set up the business for success in H2 of this year and beyond.
Thanks, Sean. Turning to Slide 10, this is a reminder of our commitment to shareholders to create value. As we outlined today in our trading update last month, we are not happy with the financial performance in the first half. The scale of transformation is significant, and it is needed for us to deliver a short-term trading turnaround, as well as ensuring long-term profitable growth and value creation. Our value creation plan does not change, and with the structural improvements we have made in the business, I'm even more confident about our plan to create shareholder value. Turning to Slide 11, with a reminder of our strategy. This is a complete reset of the business, built around a clear and compelling strategy. We know where to invest in our core markets, and we know how to invest and how to win customers in these markets.
During the first half, we have made strong progress with our strategy, building an almost completely new team, new modus operandi ways of working, and our clear strategic framework to guide the success and value creation of the business. There is, of course, lots still to do, and I will not rest until this business is performing the way it should and can do. But I'm really pleased with the progress we have made here to set us up for profitable growth in H2 2024 and beyond. Turning to Slide 12, and just to reiterate and expand on some of the changes we have been making to transform the business. Our first competitive advantage we are investing behind is operational excellence, driven by data and automation. We have hired a world-class team for data, intelligent automation, and artificial intelligence, who are already driving a step change in our capabilities.
We have become much more sophisticated in our player segmentation, enabling us to provide better products and promotion to our core customers who value them the most, driving retention, loyalty, and also higher player values. These improvements are enabling us to do more with less, delivering GBP 30 million of cost savings while providing better outcomes for our customers. We are already seeing tangible short-term benefits here to our run rates with an improvement in, for example, our bonus ratios. Our second competitive advantage being invested into is our winning culture. We rebranded the group as evoke, a critical step to bring together our business into one company focused on execution of our strategy. We have an almost entirely new executive team, bringing in leading talent and experience from inside the sector and outside, as well as strengthening the wider leadership community.
We have radically restructured operating model, removing layers and broadening spans of controls, getting our people across the business closer to the customer and speeding up decision-making. Our third competitive advantage we are investing behind is our leading distinct brands. We have relaunched Mr Green as the most distinctive casino brand in the market, and we are repositioning William Hill, with successful campaigns now being based around, for example, top price guaranteed racing and top prices on acca and football, and gradually shifting our marketing focus from pure promotions towards highlighting our product excellence. Our investment in our competitive advantages and value creation is underpinned by our six strategic initiatives. These initiatives are fundamental to creating a leaner, more profitable business, with investments in capabilities that are enabling us to win customer and win in our target markets.
Put simply, we have taken decisive actions to ensure we hit our plans for the second half, and we are making significant structural improvements in our business to ensure we create a better, more profitable business for the future. Turning to Slide 13, and how our actions and priorities are both delivering short-term trading improvements, while at the same time building significantly enhanced capabilities for the future. We will deliver 5%-9% revenue growth in H2 2024. We are already seeing the benefits of our short-term changes, which include the benefit of new product launches like the Bet Builder, with further new product launches and UX enhancements coming in the next few weeks. This is enabling us to be much more laser-focused with our personalized promotions and more effective with our marketing as we highlight the benefit of our leading products rather than just giving free bets.
These capabilities will grow substantially in the long term as we roll out our automated customer lifecycle management model, which is already being well under development, and will lead to a step change in retention and monetization as we deliver our strategy to give customers a personalized experience delivered by our clear premium brands. Stronger revenues will be magnified for profitability with our more efficient cost base. The second half of this year will benefit from the full GBP 30 million cost savings plan that we announced at the start of this year. The benefits of reducing losses from our U.S. B2C exit and lower marketing ratio with our more targeted marketing. Over the long term, there is substantial upside potential for our profitability as we capture the benefits of our strategic initiatives.
evoke is becoming a business with leading scalable technology, powered by AI and intelligent automation, with a winning organization operating with pace, decisiveness, and urgency to deliver improved profit margins. And finally, deleveraging will enhance our return on equity, as Sean mentioned, while leverage is temporarily elevated in the first half, we see a clear route to rapid deleveraging, which will deliver high shareholder returns. Thank you for your continued support, and we are now ready to take your questions.
Thank you very much, Per and Sean. We have our first question on the webcast from Ciaran O'Flynn from Davy. He asks: Can you provide more detail on the impact of Euro 2024 on current trading?
Yeah, thanks. I'll take that one. It's Sean Wilkins, CFO. On the Euros, we had very strong margin bookie-friendly results. To a certain extent, that suppressed staking, but overall it was very successful for us. Bet Builder, which we relaunched shortly before the Euros, was extremely successful during the tournament, with taking over 20% of staking. And that means that we're well set up for the new football season as it's launched over the last 10 days or so, and with the launch of the Premier League this Friday. Just one point to note on that, the bookie-friendly results were very much in June, so in the first half.
In the second half, i.e., in July, in the second half of the tournament, you know, I would say that that was fairly neutral to growth in the second half. So when we talk about being in line with our targets of 5%-9%, for the second half to date, that doesn't really benefit very much at all from the Euros.
Thank you. The next question comes from Eleni from Sona AM. Could you clarify what percentage of growth came from the Euros in H1? And what are the key events in H2 that can help you achieve the 5%-9% growth target?
So let me take the first half. I mean, we haven't disaggregated the growth into Euros and other, and it's not something that we're disclosing. I did just say that we got good bookie-friendly results. And obviously, you know, England doing well helped. But yeah, so and I think Per's gonna take the second half of that question.
Yeah, if you look at H2, we are very much looking forward to obviously come back later on in terms of how we deliver. But if you look at H2 and the revenue initiatives we do have, I would like to distinguish between two dimension. First one is the short term turnaround that we are absolutely all over, and that is about making sure we are focused on our core markets. We are all over when it comes to the bonus efficiency, the improved price positioning, as well as how we are upgrading, and I would say when it comes to customer segmentation, much more sophisticated than this company have ever been before. So that, I would say, is the short-term drivers when it comes to the H2.
But when it comes to the more structural improvements that will also have an impact for the H2, revenue impact, that will be customer life cycle management, which is a big driver. And that is going to enable us, through the introduction of new customer engagement platform, Bloomreach, to introduce further personalization. And on top of that, we are optimizing now the customer journeys in order to, for example, improve the deposit UX. A very important part of the structure change as well is what we do in a customer value proposition, CVP. We are seeing a step change now when it comes to the consistency. If we take now William Hill in U.K., we are consistent in our messaging in terms of the proposition, from pricing perspective, as well as from a product perspective.
Here we are absolutely focused on the mid and high-value players. Third dimension when it comes to more the structure change that we see, that will also have an impact in the short term, are the product improvements. You know, it has been mentioned before, but, you know, very encouraged to see the impact we have from Bet Builder, also the impact we have when it comes to improved deposit UX. Going forward now for the H2, there are some real exciting launches to come. Looking at the further improvements for the Bet Builder. We're looking at the Impact Sub, to be introduced. I mentioned the deposit UX, we will continue, but absolutely focused on ensuring a further seamless experience from a customer journey perspective.
From a retail perspective, we are continuing our effort when it comes to improving the experience when it comes to SSBTs. And as has been previously mentioned, starting Q4 this year and into Q1 next year, is the retail gaming machines upgrade that is going to have a material impact when it comes to our opportunity here and commitment to close the gap with competition. I think we have mentioned that before as well. If you look at the current gaming machines that we do have, that has a gross win per machine a week, about GBP 750. When we look at where market is and also where we expect to be, it's about GBP 1,000 per week. So we are very much looking forward to these launches and also to see the revenue uptick being materialized as well.
Our next question comes from Ruchi, from Western Asset Management. Can you please update if you have had conversations with rating agencies, post-revision of earnings outlook for this year? It will be useful if you can share any feedback you've received. And then the second question is, can you also guide on working capital and CapEx development in H2?
Yeah, thanks. Let me take that. We've got a very positive, ongoing relationship with the ratings agencies, and, it would be inappropriate for me to share any of the content of that relationship here. Just looking at cash flow, first half net working capital, we saw a GBP 23 million improvement in cash, an improvement in net working capital. Guidance for the second half is that that will be neutral. On CapEx, the first half was GBP 33 million. The full year, we're expecting to see GBP 75 million-GBP 80 million, which was exactly in line with the guidance that I gave earlier in the year. Just let me give you an update on overall on cash flow. In the first half, we saw a cash burn of GBP 37 million.
That's ignoring the RCF. In the second half, I'm expecting cash to be neutral, which means that for the full year, I expect that cash burn to be largely what it was in the first half, you know, roughly GBP 40 million out. You know, it is important to remember our liquidity. I think liquidity is at roughly GBP 300 million, so no concerns at all on liquidity.
Great. The next question comes from Richard Stuber, from Deutsche Numis. Could you please elaborate on strategic progress making on the 40% of international online you define as optimized? And what percentage of international revenue do you expect to come from these optimized markets in the next 12-24 months? Then the second question is, which of your core international markets were the key drivers of international growth, and do you expect these trends to continue?
If I take the first one kind of the strategic progress, we are absolutely focused on the core markets, and those are the four that were previously communicated. And when it comes to them, there we do aim for, obviously, podium positions or local strong scale. The optimized markets is, as we say, optimized, and that's a clear focus to drive underlying cash flow, maximizing the underlying cash flow. Where we'll obviously see that where we have opportunity to scale up resources, we will do that, but with a very strict and disciplined approach when it comes to return on investment. So in terms of the short-term trading turnaround, we are absolutely adamant to be very disciplined when it comes to the return on investment in those optimized markets.
The investment we do behind our competitive advantages when it comes to, for example, now customized cycle management, much more insights-driven, automated, customized cycle management. The way we do, the way we focus in product improvements, that will also benefit the optimized market. So from a strategic perspective, daily trading is very much now in line with the strategy. When it comes to the capabilities that we're investing into, into short and also mid and long-term future growth, it will also benefit these optimized markets. So very encouraged with what I see now when it comes to a new team that we have, managing and optimizing these markets, at the same time, capitalizing on the improvements we see now in terms of capability.
And then also, you know, where we do see, as I mentioned, opportunity to scale up, where we do see some really interesting and encouraging markets, there's nothing to say here that some of those markets actually be upgraded to core markets going forward.
Thanks, Per. Richard, just in terms of the percent that we... I think the question was, what percentage of our international revenue comes from our core markets? That's not something which we give out specific guidance on. Like, it would be a sensible sort of rough figure for you to think about is over 50% comes from core. And obviously core is growing significantly faster than optimized.
The next question is from Ed Young from Morgan Stanley. He asks, "Could you give some color on current trading? Should we understand that you are already in the range for H2, or that incremental improvement from Q2 puts you in place to deliver it?
So, I think what we said in the presentation was that we've seen trading to date consistent with 5%-9%. And just to be clear, that's not us trying to be smart with our words. We have seen in the first part of half two growth of between 5%-9%. So, you know, it's entirely consistent, and it is within that range.
Great. And then our next question is from Nicholas, from CIFC. "You mentioned revenue growth in Q3 up to the tenth of August is in line with your 5%-9% target. How is profitability during this period looking compared to 21% margin guidance?
So that's not something that we would disclose at this point, but it does give me an opportunity just to go back to Slide Seven. Now Slide Seven talks about our bridge from half one to half two. And, you know, I think one important thing to bring out on that is that 4/ 5 of those blocks are things which are entirely under our control or that have been delivered already. So you look at marketing phasing, that is the marketing phasing and that we plan, and it is the cost that I expect in the second half. On the OpEx phasing, they are cost savings that have been made already and will flow through in the second half. Look at reduced U.S. losses, we've taken the action on reduced U.S. losses.
If you look at the cost initiatives, they are things that we will be delivering in the second half. Now, the one that has a wider range around it is the revenue initiatives, which are, you know. And I think it would be fair to say the thing that we have very good line of sight to is which of the things that Per mentioned earlier are going to land. The more speculative question is, what effect and impact are they gonna have once they land? So, you know, good visibility of that bridge between half one and half two is the point I wanted to make.
We have another question from James Wheatcroft from Jefferies. He asks, "Please, can you give us an update on 888 Africa?
So, thanks for that question. So let me take that one. I mean, 888 Africa, I mean, it's fantastic story to date. We see the business going from strength to strength. The first half revenues is up nearly 3x , and we do continue to see really strong lead indicators when it comes to the future growth. So here, I and my team, you know, are absolutely confident that this is going to be a very strong value generator for evoke going forward. And I do look forward to expand on this further in our upcoming sessions.
Thank you. There are no further questions from the webcast, so I'd like to hand back to Per for any closing remarks.
Thank you so much for that. So first and foremost, I'd like to thank everyone for joining the call. And as we have outlined and presented today, we are undertaking a total transformation, a total reset of the business. And, while the first half financial results are not where we want them to be, I've been really pleased with the improvements we are seeing now, both in the short term and building up for the long term when it comes to overall strength of the business. So we have started Q3 well, with 5%-9% growth, and I can't wait to tell you more about this quarter, back in October. So I would like to thank you again for your ongoing support, and we are always available to answer any further questions.
But, let's be absolutely clear that we are 110% focused now to make sure that this turnaround is indeed going to be the success we expect it to be, in order for us to deliver, once again, the value creation plan and ultimately shareholder, shareholder value. So thank you so much to everyone joining the call today.