ii view: Evoke makes it five in a row for quarterly growth

Third-quarter trading update to 30 September

• Revenue up 5% to £435 million 

Chief executive Per Widerström said:

"During Q3 we continued to execute against our strategy which is transforming our long-term competitive capabilities and building a more efficient and profitable business.

“We continue to execute our turnaround with vigour and are making good progress against our plans to position evoke for long-term success and significant value creation."

• Invest with ii: What is a Managed ISA? | Open a Managed ISA | Transfer an ISA

ii round-up:

Gaming and sports betting group Evoke (LSE:EVOK) today flagged hopes for annual adjusted profit (EBITDA) to exceed current City forecasts, potentially buoyed by the recent launch of its new William Hill Vegas app.

Revenue growth of 5% to £435 million in the third quarter made it a fifth consecutive quarter of year-on-year growth, driven by gains across all three of its divisions. The City currently predicts full-year adjusted profit of £362 million compared with £312.5 million in 2024. 

Shares in the former 888 Holdings rose 2% in UK trading having come into this latest news down by close to a third year-to-date. Fellow betting shop owner Flutter Entertainment (LSE:FLTR) is down by just over a tenth year-to-date. 

Incorporated in Gibraltar and headquartered in London, Evoke owns and operates UK and overseas brands including William Hill, 888, and Mr Green. 

Sales at the high street retail shop business rose 6% year-over-year, aided by the rollout of new gaming cabinets earlier this year. That’s improved from a fall of 2% during the first half. 

Revenue at the UK and Irish Online division rose 1%, helped by an 8% improvement in sports betting,  overcoming a 2% fall in gaming related sales.

International sales climbed 6% on a currency adjusted basis, pushed by double-digit growth in core markets Italy, Denmark and Romania and hindered by a slowdown in Spain. 

Following a successful bond sale and leaving no further debt maturities until 2028, annualised interest cost savings of £5 million were made during the quarter. 

Medium-term financial targets still include annual revenue growth of 5-9% and reducing group debt-to-adjusted profit to 3.5 times by the end of 2027. That would be down from 5 times as of late June. 

A full-year trading update is likely mid-to-late January.   

ii view:

Started in 1997, Evoke strategy now includes driving profitable and sustainable revenue growth, improving profitability and efficiency, and reducing debt. The international division generated most adjusted profit during this first half to late June at 49%. That was followed by the UK and Irish online business at 34% and the retail high street business the balance of 17%.  

For investors, group net debt of £1.82 billion as of late June compares to a current stock market value of under £200 million. Although improved from H1 2024 (-£143 million), a reported loss of £65 million was made over the first half of this year. The potential for increased government regulation and taxes, including the pending UK Budget, warrants consideration. Unexpected sports results squeezing margins remain an ever-present threat, while the lack of a dividend payment contrasts with a forecast yield of just over 2% at Ladbrokes owner Entain (LSE:ENT).  

• 10 hottest ISA shares, funds and trusts
• Where to invest in Q4 2025? Four experts have their say
• The Autumn Budget 2025: just how painful could it be?

More favourably, the prior purchase of William Hill operations has given Evoke a famous brand name as well as expanded its exposure to sports betting. A diversity of brands and geographical operations exists. A recovery/growth strategy continues to be pursued, while cost savings of up to £25 million continue to be targeted this financial year. 

In all, known brand names and established UK and overseas market positions offer appeal. That said, elevated net debt and losses cannot be ignored, with Evoke still an investment for higher risk investors only.

Positives: 

• A diversity of products and geographical locations
• Possible industry consolidation 

Negatives:

• Potential for increased taxes
• Uncertain economic outlook 

The average rating of stock market analysts:

Buy