HMRC settlement leads to £936.5m net loss at Entain in 2023

Net gaming revenue for 2023 reached £4.83bn, while group revenue also climbed 11.0% to £4.77bn. Entain noted that revenue was higher across all core business segments.

However, higher spending more than off set this growth, leaving the group with a net loss for the year. This increase was primarily due to the settlement with the UK’s HMRC and Crown Prosecution Service (CPS). This related to its historical activities in Turkey.

Announced in November and finalised in December, the settlement set out that Entain must pay £585.0m. It will also make a charitable donation of £20.0m and contribute £10.0m to CPS and HMRC costs. All these costs were noted in its 2023 results, as were other, additional costs from across the business.

Other expenses impacting Entain in 2023 included increased impairment costs, amortisation of acquired intangible assets and restructuring spending. Grouped together, these expenses pushed Entain to a net loss of close to £1.00bn.

Entain chair: 2023 period of necessary transition

While the net loss makes for grim reading, chairman Barry Gibson is upbeat about long-term growth prospects. Gibson said 2023 was a year of “necessary, but ultimately positive, transition” for Entain.

“We have significantly strengthened the quality of our revenue base, enhanced our board and delivered a resolution to a critical, historic, regulatory issue,” Gibson said. 

“As our transformation continues the newly formed capital allocation committee has commenced a review of Entain’s markets, brands and verticals. The objectives of the review are to help focus the organisation, improve competitive positions and maximise shareholder value.”

This view is shared by interim CEO Stella David, who stepped into the role in December after Jette Nygaard-Andersen resigned. David had been serving as a non-executive director at Entain. She has now been charged with steadying the ship until a permanent replacement is found.

“2023 presented a number of challenges for the group, both industry-wide and Entain-specific,” David said. “I am extremely proud of how our people around the world came together to navigate the business through an eventful and at times difficult year.

“We have started the new financial year with a clear plan to accelerate our operational strategy and are making pleasing progress across a range of initiatives to re-focus our market portfolio, prioritise organic growth, drive our share in the US and expand our margins.”

Gibson also offered a brief update on the new CEO search. He said: “We are making positive progress in our search for a new permanent CEO. In the meantime, Stella is driving the business as it continues to take appropriate actions to deliver changes to drive a better long-term performance.”

Record customers drive online growth

Breaking down the 2023 figures and Entain says that, overall, the group performed in line with expectations. 

The UK remains its core market with £1.95bn of all revenue. Italy revenue hit £517.4m and Australia and New Zealand £515.1m. A further £1.44bn came from the rest of Europe and £339.9m the rest of world.

Segment-wise and starting with its online business, net gaming revenue was 12.3% higher at £3.43bn. Gaming revenue was 16.6% higher at £1.84bn and sports betting revenue climbed 6.0% to £1.53bn. In addition, B2B net gaming revenue almost doubled to £57.9m.

Entain reported underlying momentum in several key markets but regulatory headwinds in the UK and Germany, coupled with weaker trading in Australia and Brazil, slowed revenue growth for the online segment.

As for growth areas for the online business, Entain highlighted success with the CrystalBet brand in Georgia and expansion in the Baltics. It also noted the impact of new acquisition on its Central and Eastern Europe (CEE) business, including STS in Poland and Croatia’s SuperSport.

Entain was also helped by is newly acquired New Zealand business and the impact of its new partnership with Tab NZ in the country. 

Such was growth in the online business that total customers for the segment jumped 23.0% year-on-year to a record high.

Retail recovery continues after pandemic impact

Turning to retail and there was more good news for Entain, with net gaming revenue rising 8.5% to £1.39bn. Sports betting revenue in this segment was up 15.3% to £813.0m, while machines revenue edged up 0.2% to £573.7m.

Entain noted growth across several key markets for retail. UK revenue was up 2.0% UK, with strong performance across both sports and gaming, while there was also growth in Italy, Croatia, Belgium and Ireland. 

Newly acquired retail businesses in both Poland and New Zealand also added £40.4m in net gaming revenue to the total for 2023.

“Our retail businesses continue to show the strength of their offer and customer appeal,” Entain said.

No stopping the BetMGM train

Entain also referenced the performance of BetMGM, its joint venture with MGM Resorts International. 

BetMGM published its 2023 results last month, with these revealing that revenue in 2023 fell just short of $2.00bn. Entain holds a 50% share in the BetMGM business, with this contributing to the overall revenue figure for 2023.

As noted in BetMGM’s results last month, key highlights from 2023 include securing a 14.0% share in sports betting and igaming markets where BetMGM operates. The business also posted positive EBITDA for the first time in H2 of 2023.

However, there was something of a blip for Entain, with MGM choosing to roll out BetMGM in the UK without Entain. MGM instead partnered with LeoVegas for the launch, with the brand going live in August.

Counting the cost of regulatory settlement 

Looking to spending in 2023, operating and marketing costs were 12.0% higher at £1.27bn in total. Depreciation and amortisation was also higher at £301.5m, but it was the section entitled “Separately disclosed items” that hit Entain the most.

Included here was the £585.0m HMRC settlement fee along with £289.0m in impairment costs and £254.6m for the amortisation of acquired intangibles. Restructuring costs hit £49.7m and there was also £71.8m in movement in fair value of contingent consideration.

After also accounting for £197.9m in net finance costs, Entain was left with a pre-tax loss of £842.6m, compared to a £102.9m profit in 2022. Entain paid £36.1m in tax and included a £57.8m loss from discontinued operations.

As such, net loss for the year after discontinued operations stood at £936.5m, in contrast to the previous year’s £19.5m profit. However, there was some relief for Entain, with group EBITDA edging up 1.5% to £1.01bn.

“We are entirely focused on operational excellence and outstanding execution and, as a result, are confident that we are on a pathway to delivering future growth,” interim CEO David said.

“We remain confident that our continued focused execution will drive organic growth into 2025 and beyond.”