EIHDF (EIHDF) Q2 2026 Earnings Report, Transcript and Summary

Good morning, everyone, and thanks for joining us today for our first half 2026 results. I am Per Widerstrom, and I'm joined today by Sean Wilkins, our CFO. Starting with the agenda on Slide 2. The format today is deliberately short. I will begin with a brief overview of the context for today's presentation and the first half performance. Sean will then take you through the financial results and cash flow in a bit more detail before we open the line for questions. Starting with Slide 3 and before getting into the performance, I want to briefly discuss the recommended acquisition by Bally's Intralot, which we announced a little over 2 months ago. The announcement followed a comprehensive strategic review initiated by the Board after the significant U.K. duty changes announced in November 2025. Having evaluated a broad range of alternatives, the Board concluded that the recommended acquisition represented the most attractive and deliverable proposal available to evoke and its shareholders. The acquisition remains subject to the relevant shareholder, regulatory and other approvals, including our own shareholder vote next Monday, the 17th of August. I am pleased to tell you that progress with the relevant filings is going to plan, and we still expect to complete in the fourth quarter of 2026 or the first quarter of 2027. As a result, we are keeping today's presentation focus on the reported financial and operational performance. We are not providing a forward-looking financial guidance. And during the Q&A, we won't be able to add anything on the transaction beyond the information contained in the published announcement and other formal documentation. Operationally, our priorities are unchanged. We remain focused on maintaining momentum, serving our customers, supporting our colleagues, meeting our regulatory obligations and managing the business with discipline through the completion of the transaction. Turning to Slide 4 and the first half performance. This was a period that really demonstrated the resilience of the underlying business in what was materially more challenging external environment in terms of increased duties in several of our core markets and most notably in the U.K. Group revenue was stable at GBP 888 million and increased by 2% on a like-for-like basis, accounting for the 270 store closures versus the prior year. In terms of profitability, the first half had GBP 46 million year-on-year headwind from increased gaming duties. Against that backdrop, adjusted EBITDA of GBP 150 million was down 10%. While down GBP 16 million year-on-year, the result also shows that the mitigating actions we set out early in the year are working and are offsetting a meaningful part of the duty impact. The second quarter saw a continuation of the Q1 trends we outlined at our full year results and Q1 update with the strongest performance coming from U.K. and Ireland online. Revenue grew 4% and adjusted EBIT increased 28%. This despite the additional duties kicking in from April. Willam Hill Vegas continues to perform very well, supported by the change we have made to marketing, promotion investment and customer value to produce better returns. Retail are also making good progress. Like-for-like revenue grew 4% and adjusted EBITDA increased 5% despite smaller estate and continued inflationary cost pressure. The closure of structural loss-making shops has improved the economics of the remaining estate, while trading following the machine rollout and improvements to self-service betting terminals has been encouraging. International was more mixed. Italy and Denmark continued to grow strongly, but that was offset by weaker revenue in Spain, Romania and the rest of the world. Profitability was also affected by duty increase in Romania and Italy and by a greater proportion of revenue coming from higher duty markets. We have plans in place to address several of these areas. And in Spain, for example, we have made significant product improvements recently, although these had only limited impact on the first half results. Overall, the business has responded decisively to a substantial increase in our cost base. Our focus remains on the areas we control, commercial efficiency, cost discipline, cash generation and consistent operational execution. I will now hand over to Sean to go through the financials.

Thanks, Per. Turning to Slide 6, I'll now take you through the financial performance for the first half in a bit more detail. Firstly, I'd say performance overall has been in line with our expectations. So it's been a decent start to the year, all things considered. That said, the story continues to be mixed across markets and brands, driven by the actions we've been taking to drive growth and improve profitability. Total online revenue increased 1%. Within that, UK&I online grew 4% with gaming up 7% William Hill remained the key driver, particularly gaming, where William Hill Vegas continues to grow double digits and go from strength to strength. 888 revenue continued to decline as we maintained a deliberate focus on profitability and customer economics rather than pursuing low-return volume. International revenue declined 2%, but the picture varied significantly by market. Italy delivered another strong period with revenue up 21% and Denmark grew 13%. These performances were offset by declines in Spain, Romania and the rest of the world. In Spain, the improvements made to product and marketing are taking time to translate into the level of performance we want. Romania continues to be affected by the combination of a weaker economy, higher taxes and the growth of the unregulated market. We have responded by managing marketing and promotional investment carefully to protect returns. Retail revenue declined 3% on a reported basis, reflecting the smaller estate with 270 fewer shops than the prior year. On a like-for-like basis, revenue increased 4%, supported by the continued strength of the gaming machines and improvements to self-service betting terminals, including 2,000 new ones being installed, leading to good underlying market share trends. Turning to adjusted EBITDA. The group delivered GBP 150 million, down GBP 16 million year-on-year and broadly flat across the operating segments, excluding the increase in corporate costs, most of which is bonus accrual and balance sheet timing. This is despite the significant headwind of an additional GBP 46 million in gaming duty costs year-on-year. Our original guidance was that we would offset around half of that gross headwind. In the first half, we've actually offset more than half of the headwind, albeit the U.K. changes were only effective from the 1st of April. We've achieved this through lower but more productive marketing investment, improved promotional efficiency and operational cost savings. You really see the impact of our mitigation efforts in the UK&I online adjusted EBITDA, which increased 28% despite the gaming duty headwind. The full detail is in the appendix, but we have seen good savings across both marketing and operating costs, driving a much more efficient operation. International is where we are more disappointed with the start to the year with adjusted EBITDA down 20%. The reduction was driven primarily by the higher duty rates in Romania and Italy, the shift in revenue mix towards higher duty markets and weaker revenue in several markets. While these external factors have compressed gross margin, it nevertheless remains the highest margin of the group segments, supported by leading positions in several attractive regulated markets. Retail adjusted EBITDA increased 5% despite the reported revenue decline and ongoing wage and cost inflation. The decision to close shops is never taken lightly. However, in the current external environment, it was necessary to address structurally loss-making locations. The performance of the remaining estate demonstrates the benefits of concentrating resources on a more productive shop portfolio. Corporate costs increased to GBP 26 million, with the largest drivers being staff bonus accruals compared with no accrual in the prior year period, together with the timing of certain balance sheet movements in both the prior year and current year. The bonus accrual will ultimately reflect the relevant full year performance outcome. We're not commenting on current trading post period end other than to say we continue to trade in line with our expectations. Clearly, one call out worth making is on the World Cup, which was really successful from an operational point of view in terms of product delivery, commercial plans and driving customer engagement. It also exceeded our revenue expectations and provided a good springboard as we go into the upcoming football season. Turning to Slide 7 and our cash flow. This is our usual bridge, taking you from opening to closing cash, excluding customer balances. The business generated GBP 85 million of underlying free cash flow in the period, but with exceptionals and other one-off outflows, net debt increased by approximately GBP 37 million. Together with the lower LTM EBITDA, this meant leverage was up to 5.6x. Touching on a few of the key moving items. Working capital was a GBP 14 million inflow, primarily reflecting higher gaming duty accruals with U.K. duty paid quarterly in arrears. CapEx of GBP 51 million was slightly front-loaded given the retail closure program and some of our product investment, and we'll continue to be disciplined in terms of capital allocation as we go through the year, ensuring we see sufficient ROI on our plans. Exceptional costs of GBP 27 million include GBP 5 million for retail closure program and GBP 7 million for the strategic review as well as the ongoing integration and transformation program we've discussed before. Within other, this includes the repayment at par of the remaining GBP 11 million outstanding on the 2026 William Hill bonds, together with the ongoing TLB amortization of around GBP 2 million. We also paid GBP 11 million in relation to the historic Austrian gaming tax liability, where the final assessments have now been made and the remaining balance is currently being paid at approximately GBP 2 million per month. At the period end, cash was GBP 106 million, and the group had GBP 43 million of undrawn RCF capacity, giving total liquidity of approximately GBP 150 million. As Per said, we'll be disciplined with our capital allocation and focused on cash generation and balance sheet strength as we move through to completion. Finally, just to say, I think this slide and the increase in leverage really illustrates the constraints created by the group's existing capital structure, particularly following the significant increase in gaming duties. The Board considered these constraints carefully as part of the strategic review, alongside the investment required to continue improving the operating performance of the business. The recommended acquisition provides a clearer path to a more sustainable capital structure, which is an important factor in the Board's unanimous recommendation. With that, we'll move to Q&A.

[Operator Instructions] Our first question from today is from Ricardo Chinchilla at Deutsche Bank. U.K. and Ireland online EBITDA increased 28% despite materially higher gaming duties. Could you quantify the contribution from revenue growth, marketing optimization and operational efficiencies within that bridge? And secondly, international EBITDA declined 20%, while revenue was only down 2%, which specific geographies contributed most significantly to the margin compression beyond Italy and Romania due to the increases?

Thanks for that question. U.K. online EBITDA, obviously, we were very pleased with the performance there, adding GBP 17 million year-on-year. The main places that came from in spite of the headwinds of U.K. duty. We saw 4% revenue growth, and we saw a good operational gearing on that. But we also, I think, did a very good job in the first half of mitigating the duty increases. And the areas that we've really focused on to achieve those mitigations include significantly more effective marketing. Now our marketing year-on-year has dropped, but we've still managed to get that 4% growth. And that demonstrates, I think that we've been much more efficient. This hasn't just been a cost-cutting exercise. So we're very pleased with that as an outcome. The second thing place we focused on is retail closure. We've shut 70 stores in Q4 last year, 200 stores in Q1 (sic) [ Q2 ] this year. They were all loss-making stores. And so you can see in the results that retail has improved. We've improved the customer proposition, and we've also reduced our overhead. So all of those things have added to -- or allowed us to mitigate the impact of the U.K. duty and allowed us to achieve a good result in U.K. online. In international, I think the question is about margin compression, where have we seen margin compression. I think there's been probably 3 key elements to this. The first is Italy duty, which we saw increase in November last year. And then the second is Romania duty, which took a step up from 21% to 30%. And I think the third thing that's driving margin compression is that we've seen a change in mix of revenue to the higher duty and therefore, lower gross profit areas, particularly with the extremely strong growth in Denmark and Italy. Our volumes have moved over to the higher duty markets. And those 3 things are the things that are driving margin compression across the international business. I think Ricardo has some more questions, didn't he, Josh?

Yes. So next, William Hill Gaming remains a standout performer. What proportion of U.K. and Ireland growth is being driven by existing customer monetization versus new customer acquisition? And how are cohort economics trending? And group AMAs declined 6% year-on-year, yet revenue remained broadly stable. To what extent are you consciously trading customer volumes for higher value and more profitable players?

So first question, William Hill Vegas, is it coming from existing or new customers? The honest truth is both. which is good news, obviously. It's been a good opportunity. I know that the World Cup is a sports event, not a gaming event, but clearly, it's new customers to us, and that proved successful to us in terms of us recruiting new customers and those customers certainly get cross-sold onto the gaming. So we've seen both improvements in existing cohorts and new customers. In terms of actives, yes, we have seen that decline across the group. I think a couple of things driving that. One is we saw some difficult performance across a couple of our markets. particularly Romania and Spain. Romania has been impacted by significant external events, the increase in duty leakage to the black market plus economic negative growth. And Spain continued to struggle with product there, although the product has improved significantly over the last quarter. So 2 reasons there why active users has gone down. But I think the third thing, and you alluded to it in the question is we are working extremely hard, and we have been -- actually, it's been a key part of our strategy to make sure that we're getting significant value from our players and that we're driving ARPU and that we're also driving margin within driving ARPU. And those things have been effective. We've had this strategy in place now for 3 years, and it's definitely paying dividends. And it is -- the inference in the question is are we focused on driving higher value from existing players? And absolutely, of course, we are. Number one on our strategic pillars was always customer life cycle management, and this is at the heart of customer life cycle management. Is there a fifth there?

Yes. Sportsbook stakes declined 9%, but Sportsbook margin increased 60 basis points to 13.3% (sic) [ 13.2% ]. How much of the margin expansion reflects favorable sporting outcomes versus structural improvements in pricing, product and risk management?

Look, I don't -- my view is there wasn't any particular sporting luck factor in this. We have intentionally been focused on the higher-margin products, particularly Accas and Bet Builders. We've very significantly improved the product that we've got, particularly in the U.K., but also international around Accas and Bet Builder and higher-margin products. And so it's no surprise to us at all that the margin on Sportsbook has increased.

The next question is from David Brohan from Goodbody. Could you quantify the impact of the increased duties in Italy? And what is your view on potential future regulatory tax pressures in the U.K., specifically the impact of FRAs and the proposal of increased MGD in retail?

Why don't I take the first part of that? And then I think Per is probably going to take the second part on the outlook for FRAs. We're not really -- Dave, we're not really talking about second half and guidance, but I can tell you what the impact in the first half was, and it was nearly a GBP 10 million impact on EBITDA to us. We've been public about GBP 46 million impact of duty changes. We think GBP 10 million of that came through the Italy duty change. Per, do you want to comment on the FRAs?

Yes, I can comment on that. So the Gambling Commission has announced the implementation of FRAs, and it has recently made that announcement. It's going to be implemented through a stage process, which we do expect to be kicked off in the immediate short term. What the commission has initiated, which we very much are welcoming is that it's creating implementation groups in order to engage operators like ourselves. And we will obviously take an active part in working together with the Gambling Commission to make sure that whatever is coming out of the FRAs, it is proportionate. And also it is fit for purpose and future-proofing operational performance. And likewise, it's not going to have a detrimental impact from a customer experience and likewise, the regulated market. So we are actively taking part and will take part in the development of FRAs in the U.K. market. But it will happen and we are getting ready to introduce that.

Our next question is from [ Raman Narula ] from Principal Asset. Several, please. First, run rate savings from store closures completed. How many more store closures are anticipated? Second, last year saw WC outflow of circa GBP 51 million. Expect this to fully reverse this year and FY WC to be positive? And third, what percent of LTM revenue is Spain and Romania, respectively?

Okay. I mean, look, the place to look for run rate savings on store closures is you can see that much as our revenue has dropped, our EBITDA in retail has improved by 5% that's the way that we think about it. So what we've done is we've cut out loss-making stores, and that's meant that we're more profitable in spite of having lower revenue. The other point here is we have seen very strong like-for-like. So if you forget the stores or ring-fence out the stores that we've shut, the like-for-like in the more profitable stores has been really strong. We've seen 4% like-for-like in retail, and that's significantly above the market. So we're pleased with that. Working capital, yes, so positive working capital for the first half, which, again, we're pleased with compared to last year. We're not giving forward guidance on cash flow. So the one thing I would say though, of course, is that your quarterly duty payments are paid quarterly in arrears. And so that increase in the quarterly payment in Q4 is going to be paid in Q1 following year. So I would absolutely expect to see a good positive working capital number. LTM in Spain and LTM revenue in Spain and Romania is not really a level of detail I want to get into today. The next one was adjusted EBITDA. We covered that one, Josh, you're about to read that one out? You go for it. I think you asked the next question.

The next question is from [ Joe Mox ] from Chepstone Lane. On the international side, can you talk about the path to improving performance in some of the geographies, Spain and Rest of World perhaps? Romania perhaps a bit more obvious given the duties?

Let me start with that one, Sean, and then you can chip in. But as we called out before, we do see mixed performance when it comes to international markets, but very, very satisfied what we see in the core markets of Italy and Denmark. And as we called out, there is some weakness in Spain and Romania, and we do have plans to address that. When it comes to Spain, in particular, and Sean called that out as part of the presentation is that we have some product issues related to the sports side. That said, since the beginning of the year, we have scaled up the investment behind our products, both sports and gaming in Spain, and we have seen a good response from a customer's perspective when it comes to the new Willam Hill that we have launched. And there is further improvements to come on the product proposition when it comes to Spain for years to go. We have, in fact, moved some resources from the U.K. in order to further scale up and accelerate the product and tech road map for Spain. We also have implemented in H1 related to Spain in terms of market improvements, including also customer cycle management improvements, which is yet to be seen coming into effect. We expect that to happen in H2. In terms of Romania, I mean, we do see that this is an overall weak market and in particular, hit by the increased taxation. We are absolutely focused on making sure that we are preserving the cash and liquidity in all the markets, including Romania. So that is what we continue to do by, of course, continued focus on the product and the customer proposition to the customer. In terms of Rest of the World, I think the key message here is that we are absolutely focused on when it comes to profitable growth and when it comes to cash flow preservation. So rather than invest in the markets where we have a higher return on investment.

Our next question is from [ Monica Richa ] at JPMAM. Can you give us a sense of the impact of the World Cup on top line? How has Q3 trading been so far?

I can -- so we are not giving any specific financial figures related to the World Cup, but Sean called it out and we called out in the presentation that we are really pleased with the operational and the commercial execution of what we delivered to the customer during the World Cup. by the way, fantastic tournament, I must say. And we have seen a customer engagement that was overperforming versus the expectations we set out before the tournament started. And that also follows an overperformance when it comes to revenue projections. What we did see also was that when it comes to the group stage results, which is, of course, part of the H1 results we call out today, the results were a bit more customer-friendly in June, while we saw that in the knockout stages, it was a bit more operator-friendly, obviously, less games. But overall, very, very happy with the performance by the team, delivering great customer experience to the customers during the World Cup. And when we -- as we said, we are not giving any financial forward-looking outline, but what we can say, we are performing according to expectations when it comes to where we stand today.

[Operator Instructions] Our next question is from Cor Porter from SBC. Adjusted EBITDA was impacted by GBP 46 million year-on-year increase in gaming duties, predominantly in the U.K. How much or what percentage of the GBP 46 million figure was from the U.K. exactly? How close is this to initial estimates?

So well, 2/3 of it was from the U.K. U.K. was GBP 30 million of that GBP 46 million. I've already told you that Italy was circa GBP 10 million, which means the rest is really from Romania. In terms of it being close to estimates, I mean I think we're pretty well spot on. It's not an enormously difficult thing to work out. So our estimates are pretty well bang on there. The other thing that's just worth saying when you're thinking about how -- when you're thinking about this, clearly, the U.K. only had one additional quarter within the half of increased duty.

Thank you. At this moment, we have no further questions. So I'll hand back to the management team for closing remarks.

Thank you so much. To close then, the first half demonstrated the resilience of evoke in a materially more challenging operating environment. Despite significant increases in gaming duties, particularly in the U.K., we acted decisively, maintain operational momentum and delivered a like-for-like revenue growth and protect the profitability and cash generation. Following the Board's strategic review, we believe the recommended acquisition by Bally's Intralot represents the most attractive and deliverable outcome for shareholders, this while providing the business with a stronger long-term capital structure. Until completion, let's be clear, our focus remains unchanged, serving our customers, supporting our colleagues and executing with discipline and continue to generate strong cash flow. I would like to thank you all for your time today and for your questions today. Have a good day.