888 warns of profit hit from AI and marketing costs

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Gambling group 888 has warned that increased investment in artificial intelligence and marketing will reduce the gambling group’s profitability next year.

888 said on Wednesday that it expected its adjusted earnings before interest, tax, depreciation and amortisation for 2024 to come in at the “low end” of the consensus range of between £340mn and £397mn.

The profit warning — 888’s second since September last year — is driven by rising investment in automation, AI-powered data and research, and marketing, offsetting a hoped-for £30mn boost from a cost-saving programme that began in December.

Shares in the London-listed group fell by 6.7 per cent in morning trading to 75p, cutting its market capitalisation to £340mn.

Despite the warning, Per Widerström, 888’s chief executive since October, said the business had “enhanced its foundations for sustainable and profitable growth including significantly strengthening compliance . . . and increasing its focus on recreational customers”.

Full-year revenues for 2023 dropped by 8 per cent to £1.7bn, 888 said, blaming the fall on a shift away from less regulated markets, a changing customer mix resulting from stricter gambling rules in the UK and changes to the group’s marketing strategy.

Widerström has installed a new executive team, including a finance chief, chief technology officer and product head. “The financial performance of the group must improve, and the actions we are taking will build a leaner, more agile, and more effective organisation structure,” he said on Wednesday.

Widerström will outline new medium-term financial and strategic targets for the group at its full-year results in March. The group has previously been the subject of takeover speculation. The Financial Times reported last year that Boston-based sports betting operator DraftKings discussed a bid for 888.

“With a suite of new management and £30mn additional cost savings announced today, we sense a step change in urgency,” said Jefferies analyst James Wheatcroft. He added that he “[continued] to see material upside from the successful execution of the William Hill integration”. 888 bought William Hill’s non-US business from Caesars Entertainment in a £1.95bn deal in 2022.