Entain online revenue fails to meet expectations in Q3

In a trading update, Entain says online net gaming revenue (NGR) has been mixed across the group in recent weeks. While it still expects to achieve growth during Q3, Entain says that, on aggregate, this will be softer than anticipated.

Third quarter online NGR growth is now expected to rise by a high single-digit percent. However, Entain also says it will likely decline by a high single digit percent on a pro forma basis.  

Reasons for this, Entain says, include adverse sports results impacting sports margins during September and slower growth than expected in Australia and Italy. It also noted the impact of safer gambling measures across the group and ongoing regulatory headwinds persisting longer than expected, particularly in the UK.

However, Entain also noted drivers of growth within its online business. These include strong pro forma growth in active customers, a robust performance by retail and ongoing positive performance by BetMGM in the US.

In addition, Entain says it is benefitting from the impact of recent acquisitions. Among these is the purchase of SuperSport in Croatia, acquired by Entain at the back-end of 2022. Entain also recently acquired Polish sportsbook operator STS Holding.

While softer growth in online will almost certainly impact full-year revenue performance, Entain says this is not the case with EBITDA. For the 2023 full year, EBITDA is still set to amount to between £1.00bn (€1.15bn/$1.22bn) and £1.05bn.

“We continue to see good underlying growth in our online business and are reiterating our EBITDA guidance for the year despite softer than expected revenue growth in Q3 and the ongoing roll-out of industry-leading safer gambling measures,” Entain CEO Jette Nygaard-Andersen said.

“We continue to attract more customers than ever before to enjoy our products and services. BetMGM remains on track to deliver positive EBITDA in H2 and a full year NGR performance at the top end of our expectations. We are particularly excited about the product improvements that we are rolling out over the NFL season.”

Entain upbeat over long-term growth goals

In the same update, Entain also referenced a “significant strategic transformation” the group has undergone over the past three years. This, it says, has been aimed at improving quality of earnings and aligning operations to deliver long-term shareholder value.

Entain will provide further information on this strategy during a longer trading update on 2 November. This will include details about a comprehensive market review focusing on long-term sustainable organic growth.

The group will also simplify its structures and operations. The November trading update will outline plans for the migration of acquired businesses, optimising capital allocation priorities, and progress on its aim to achieve an online EBITDA margin of 30%.

“We have made significant changes to the group over the last three years,” Nygaard-Andersen said. “Our focus now is on accelerating the actions we are taking to drive sustainable organic growth, expand our margins, capitalise on the US opportunity and deliver long-term returns for our shareholders.  

“We remain confident in our ability to deliver on the vast opportunities ahead of us. We look forward to sharing more detail about the changes that we are making alongside our Q3 trading update in November.”

Records tumble in H1

The update comes in the wake of a record first half for Entain. Net gaming revenue was 14% year-on-year higher at £2.40bn, helped by a record number of active online players in Q2.

Online led the way in H1 with £1.68bn in revenue, 145% more than $1.47bn in the same period last year. Entain said strong underlying trading and NGR from acquisitions more than offset continued regulatory headwinds. This was primarily in the UK and Germany. It also highlighted the success of its focus on recreational customers.

Retail revenue was 11% higher year-on-year at £709.3m. Entain pointed to the end of Covid restrictions as one of the main reasons for this rise. The last measures having been removed in the early part of H1 2022.

In the US BetMGM posted $944.0m, up 65% on last year. Entain also said this segment is on track to report full-year revenue of between $1.80bn and $2.00bn.

Entain takes £585m provision amid HMRC Turkey investigation

Alongside the H1 results, Entain also revealed it has taken a £585m provision in respect of deferred prosecution agreement (DPA) negotiations with the Crown Prosecution Service (CPS). This is in relation to its historic activities in Turkey. 

The operator warned it faces a “substantial” penalty from the case in May, after entering a deferred prosecution agreement (DPA) with the CPS.

DPA negotiations are at a point where it can reach a resolution on the HMRC investigation, Entain said. It feels confident enough to calculate the £585m settlement sum that the operator expects to pay over a four year period. 

Any settlement hinges on judicial approval. HMRC will seek this in Q4 2023, Entain predicted.