ii view: why Evoke shares just rallied to six-month high

Fourth quarter and full year trading update

Chief executive Per Widerström said:

“I am pleased to report that the improving trends we announced in Q3 further strengthened into Q4 with the business delivering double-digit revenue growth. Alongside the stronger trading performance, we continue to progress with transforming the Group's capabilities for the mid- and long-term as we strengthen our competitive advantages, in particular better aligning our leading brands and products to a clearer customer value proposition. 

“We go into 2025 with improving momentum as we continue to execute against our value creation plan. I look forward to outlining our progress and plans in more detail in March."

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ii round-up:

William Hill owner Evoke (LSE:EVOK) today raised its profit hopes given a combination of management’s ongoing recovery strategy and favourable sporting results. 

Second-half revenue growth to the end of December of 8% and a continued strong focus on costs is now expected to see full-year adjusted profits (EBITDA) come in at the upper end of management’s prior £300-310 million estimate. That’s ahead of current City forecasts of around £294 million. 

Shares in the former 888 Holdings rose 8% in UK trading having come into this latest news down by just over a third during 2024. That’s similar to Ladbrokes owner Entain (LSE:ENT) and in contrast to a 5.7% gain for the FTSE All Share index over 2024. 

Other Evoke brands owned by the sports betting and gaming provider are 888 and Mr Green. Fourth-quarter currency adjusted revenue growth of up to 14% had been pushed a near one fifth increase in online revenues.   

Evoke operates across the three divisions of UK and Ireland online, UK retail, covering its 1,331 William Hill betting shops, and International, offering products online in countries including Italy, Spain and Denmark.

Full-year 2024 results are likely to be announced in March. 

ii view:

Began in 1997, Evoke is today Incorporated in Gibraltar although headquartered and listed in London. The group’s UK and Irish online division generated its biggest slug of adjusted profit during the first half 2024 at close to two-fifths, with the balance split relatively evenly between UK and Irish retail and international online. Evoke's strategy is now focused on driving profitable and sustainable revenue growth, improving profitability and efficiency, and being disciplined with its use of capital.  

For investors, unexpected sports results squeezing margins remain a threat. Potentially increased government regulation and taxes across any of its geographical regions warrants consideration. Group net debt of £1.72 billion compares to a current stock market value of under £400 million, while a forecast one-year price/earnings (PE) ratio comfortably above the three- and 10-year averages suggests the shares may not be obviously cheap. 

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More favourably, the group’s previous purchase of the William Hill operations gave Evoke a famous brand name as well as expanding its exposure to sports betting. A diversity of brands and geographical operations exists, costs remain a high management focus, while a recovery/growth strategy continues to be pursued. 

For now, trading momentum is offering encouragement, but with a net debt to adjusted profit (EBITDA) ratio of 6.4 times as of late June 2024, Evoke remains an investment that might appeal to higher risk investors.   

Positives: 

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

Negatives:

• Potential for increased regulation
• Uncertain economic outlook 

The average rating of stock market analysts:

Buy