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Investing.com -- Moody’s (NYSE:MCO) Ratings has downgraded the long-term corporate family rating (CFR) and Probability of Default Rating (PDR) of Evoke PLC. The downgrade, announced today, takes the CFR and PDR from B1 to B2, and B1-PD to B2-PD respectively. The ratings of all instruments issued by 888 Acquisitions Limited and 888 Acquisitions LLC were also downgraded to B2 from B1. The instrument rating of William Hill Limited (WHL) was downgraded to B3 from B2.
This rating action comes in response to Evoke’s continuous weak cash flow generation and high leverage since its acquisition of William Hill International in 2022. The company’s 2024 post-close trading update indicates that the EBITDA for the year will likely fall below the previously anticipated £364 million. The company is also estimated to have generated negative Moody’s adjusted free cash flow (FCF).
Despite revenue growth in the second half of 2024, FCF is expected to remain under pressure in 2025 due to ongoing restructuring charges and investments to revamp its retail presence in the UK. Evoke’s target leverage ratio of less than 3.5x by the end of 2026 is viewed as increasingly difficult to achieve given the revised EBITDA growth expectations.
Evoke’s B2 ratings are supported by the group’s established brands, competitive advantage from its proprietary technology platform, and the progress made by new management. However, the ratings are constrained by the company’s high Moody’s-adjusted debt to EBITDA, projected to be about 5.6x as of the end of December 2024, the lack of FCF generation, and the ongoing risk of regulatory changes and gaming tax increases.
Evoke’s liquidity position has deteriorated in the past 12 months but is still considered to be adequate. As of 30 June 2024, the company had about £116 million of unrestricted cash on its balance sheet. This includes £25 million of drawings from the revolving credit facility. The company has a £150 million revolving credit facility due in January 2028 and an additional £50 million RCF that expires at the end of 2025.
The stable outlook reflects expectations that Evoke’s revenues will remain on a positive trajectory and EBITDA margins will continue to improve. Moody’s adjusted leverage is expected to decline below 5.0x only towards the end of 2026. The stable outlook also assumes no changes to the regulatory environment in the jurisdictions where Evoke operates and that the company’s liquidity will start to improve.
The ratings could be upgraded following a sustained period of revenue growth combined with no regulatory findings/fines. The ratings could be downgraded if Moody’s adjusted FCF continue to remain negative in 2026 or Moody’s-adjusted Debt to EBITDA were to remain well above 5.5x by the end of 2026.
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