Moody's Downgrades Evoke to B3 on UK Gaming Tax Hike

Moody's Cuts Evoke's Rating

Moody's Ratings has downgraded Evoke PLC’s long-term corporate family rating to B3 from B2. This action reflects the anticipated negative impact of significant UK gaming tax increases scheduled for 2026 and 2027.

Overview of the Tax Impact

The United Kingdom represents a substantial portion of Evoke's business, accounting for approximately 40% of its net gaming revenue and 45% of adjusted EBITDA. The upcoming tax hikes are expected to significantly erode profitability and weaken the company's financial metrics.

Financial and Market Consequences

Moody's projects Evoke’s gross leverage will surpass 5.5x in 2026-27, alongside mildly negative free cash flow. The downgrade also considers refinancing risk for a £750 million debt due in 2028 and a revised Credit Impact Score to CIS-4, citing material ESG concerns related to regulatory and governance pressures.

Summary and Outlook

Despite the downgrade, the outlook for Evoke remains stable. The company aims to mitigate about 40% of the profit impact through cost-saving measures. Liquidity is considered adequate for the next 12-18 months, supported by cash reserves and a refinanced revolving credit facility.

FAQ

Q: Why did Moody's downgrade Evoke's rating?
A: The downgrade was driven by expected financial deterioration due to substantial increases in UK gaming taxes, which will directly impact Evoke's profitability and cash flow.

Q: What is Evoke's financial outlook?
A: Moody's projects Evoke's gross leverage will exceed 5.5x with negative free cash flow in 2026-27. However, the company's rating outlook is stable, supported by planned cost savings and adequate short-term liquidity.

Source: Investing.com