Taxing Times Across Europe
With all eyes on developments elsewhere in the world of betting and gaming in recent months, from the headline-grabbing rise of prediction markets in the US to the local difficulties encountered in Brazil, the European market can be seen as being almost a backwater as a consequence.
But its strategic importance to companies as diverse as Flutter Entertainment, Lottomatica, FDJ United and Entain mean to remains as central as ever to their prospects. That remains the case even if, as was evident from the third quarter earnings, they are all confronting the reality of rising tax burdens and dealing with its effect on their businesses.
The updates covered a quarter in which customer-friendly football results weighed on sportsbook revenue across Europe. Online gaming continued to grow for several operators, while the various management teams described different approaches to absorbing tax increases and financing further investment.
Flutter had two choices, says CEO
New Flutter CEO Dan Taylor, taking his first earnings call in the post, said the company had chosen to protect customer spending while reducing fixed costs. Its UK&I restructuring included approximately 1,400 announced departures.
“We really had two choices with the taxes going up. One was to cut marketing and to cut generosity,” Taylor told analysts. “The other was to leverage our scale to allow us to protect the investment in the customer, and we’ve picked the second.”
Flutter’s UK&I revenue increased 4% to $889m. iGaming revenue rose 12% to $540m (£404m, €484m), supported by a 20% increase in average monthly players, cross-selling during the World Cup and new product releases. Sportsbook revenue fell 6% to $309m despite handle growth of 5%, with the company reporting an adverse year-on-year swing in sports results of 210 basis points.
Expecting further advances in market
Taylor said cutting fixed costs while protecting marketing and generosity was “underpinning the share gains we’ve seen”, adding that Flutter expected the approach to support further advances in market share.
Flutter also announced a further $500m of gross operating cost and capital expenditure savings by 2029, additional to its existing international transformation and UK tax mitigation programs. The group said simplifying technology, removing duplication and using AI would release resources for customer investment. International adjusted EBITDA fell 14% in the period, primarily because of higher UK gaming taxes.
Turbulence
Entain reported UK&I online net gaming revenue growth of 14% at constant currency, with gaming up 17% and sports up 3%. Volume growth, which removes the effect of sports margin fluctuations, reached 15%.
CFO Michael Snape attributed the performance to product improvements, execution and “increased disciplined investment as we’ve leant into market turbulence driven by the high gaming taxes, whilst many others have pulled back”.
CEO Stella David, meanwhile, pointed to a refreshed Ladbrokes app, improvements at Coral and Ladbrokes, and changes to Foxy and Gala’s coin economies. However, she cautioned against drawing early conclusions about the full competitive effects of taxation.
“I do not think we have seen a huge change in the UK right now,” she said. The gaming tax increase had started in April, while the sports betting increase will not be fully implemented until April 2027.
Entain’s UK&I retail NGR increased 1%, or 3% like-for-like excluding shop closures. David nevertheless warned that further taxation could threaten the viability of shops.
The subsequent UK Budget on 28 October raised the relevant Machine Games Duty rate from 20% to 25%, effective April 2027. Goldman Sachs noted that the Budget made no further changes to online gambling taxes and left retail sports betting taxes unchanged.
Unprofitable at the new rate
Morgan Stanley estimated an unmitigated annual profit impact of approximately £25m for Entain, equivalent to around 12% of UK retail EBITDA and 2% of group EBITDA. The team’s modelling suggested up to half could be mitigated, largely through closures of weaker shops, depending partly on competitors’ actions.
The bank estimated that approximately 10% of Entain shops would become unprofitable at the new rate. The analysts nevertheless considered Entain best placed to manage the increase because of its estate’s scale and relatively high investment.
Goldman Sachs, using an illustrative 30% mitigation assumption, estimated a roughly 1.5% impact on Entain’s 2028 group EBITDA estimates, the first year of full annualization. The analysts described the group-level impact on Flutter as negligible because of its smaller relative exposure to UK retail gaming.
Evoke’s trading update, published before the Budget, described the consequences of earlier tax increases. Group revenue fell 7% to £406m, or 2% on a like-for-like constant currency basis excluding approximately 270 fewer shops than a year earlier. “The closure of 270 shops over the past year shows the real impact on jobs and livelihoods from higher industry taxation,” CEO Per Widerström said in the statement.
He said Evoke remained focused on profitability and cash generation. Customer-friendly sports results represented a one-to-two-percentage-point headwind to group growth, leaving revenue broadly stable on the company’s normalized basis. Evoke did not disclose separate country results in the update.
Voulez-vous
FDJ United also reported a widening gap between gaming activity and revenue after taxes. Nine-month GGR fell 2.8% to €6.26bn, while revenue declined 5.6% to €2.58bn, including €62m of additional gaming taxes.
Its Q3 revenue fell 8.1% to €794m. Online betting and gaming revenue declined 10.2%, while French lottery and retail sports betting revenue dropped 6.8%.
CFO Dan Lévy cited higher sports payouts, fewer large EuroMillions jackpots and difficult French consumer conditions. Point-of-sale traffic had fallen roughly 10% in both Q2 and Q3, although the number of FDJ players remained stable.
Online performance differed substantially between markets. Over nine months, GGR declined 24.4% in the UK and 8.6% in the Netherlands. Excluding those markets, online GGR grew 5.7%, supported by France and Scandinavia. Premier Lotteries Ireland’s revenue increased 2.1%.
Known reasons for consolidation
FDJ’s recovery work includes more disciplined marketing and generosity, customer experience improvements and a proprietary sportsbook platform intended to cover most markets by the end of 2027. In France, it merged platforms and migrated players to a single account, with Unibet becoming the sole online sports betting and poker brand.
Lévy also linked consolidation to regulatory and fiscal pressure. “It is consolidating for reasons that were already well known, which is that it is a sector where scale matters,” he said. Tighter regulation and tax increases have put further pressure on operators to consolidate.
FDJ’s immediate priority is improving online performance, he added, although bolt-on acquisitions could be considered in countries where it lacked a top-three position.
‘You need tech’
In Italy, Lottomatica reported third quarter revenue growth of 5% to €537m, including online growth of 13% to €256m. Adjusted EBITDA rose 3% to €200m; on management’s normalized sports payout assumptions, EBITDA would have risen 17% to €234m.
Its quarterly online GGR share reached 31.7%, up 0.9 percentage points year-on-year, with sports share of 34.8% and iGaming share of 31.2%.
In a 15 October pre-results preview, Jefferies said Italian online market GGR had increased 8% in Q3, comprising 13% iGaming growth and a 4% decline in online sports betting. The analysts attributed the sports weakness to adverse results rather than weaker volumes and cut their full-year Lottomatica EBITDA estimate by 3% to €941m.
Lottomatica CEO Guglielmo Angelozzi said pressure on smaller competitors predated the new concession system, although the changes had intensified it. “You need tech, you need products, you need processes, you need a proper cost position in order to compete,” he said.
Lottomatica’s retail businesses were less buoyant: sports franchise revenue declined 1% and gaming franchise revenue fell 2%. Asked about machine capacity and proposed concession cost increases, Angelozzi said: “Yes, there is oversupply.” He declined to discuss potential changes to its footprint, citing competitive sensitivity.
Back to the pre-migration levels
Flutter separately reported Italian online market share of 32%, up two percentage points, following improvements at Sisal and Snai’s migration onto its Southern Europe and Africa platform.
“We bounced back to the pre-migration levels faster than any migration we have ever done in Flutter’s history,” Taylor said.
Entain’s Italian NGR, by contrast, fell 6% despite volume growth of 9%, with sports margin down 3.1 percentage points. Snape said a new team was reviewing Eurobet’s retail execution, online platform and marketing. Spain delivered double-digit online growth, while Entain’s separately disclosed CEE operations recorded online growth of 4% but a retail decline of 22%.
New geographies
Lottomatica expects its CIRSA transaction to close in Q2 2027. Angelozzi said the integration’s online development work would initially prioritise Spain, drawing on capabilities in pricing, risk management, casino content and personalised marketing.
“We will put a lot of focus on the new geographies, starting from Spain, but not only,” he said.
CIRSA generated 62% of nine-month net revenue in Europe, where revenue increased 5.6%. Its Spanish slots business delivered Q3 net operating revenue growth of 6.9% and EBITDA growth of 11.8%, with a 53.6% EBITDA margin.
The company attributed the performance to higher revenue per machine, its replacement program and operating efficiencies. Italian slots revenue grew just 0.2%, with EBITDA up 4.5%, in what CIRSA described as a stagnant retail market.
CEO Antonio Hostench said retail profitability and cash generation allowed CIRSA to self-fund growth. Its online casino development was also intended to deepen cross-selling and reduce exposure to sports betting volatility.
Companies are picking their own path
The company completed its acquisition of Portugal’s Casino Figueira in July and identified further opportunities for its omnichannel model in Spain. Hostench said the high profitability and cash generation of the retail platform would provide “a clear competitive advantage” for CIRSA and the proposed combined group.
At heart, all the companies are picking their own path in the fight for customer share of wallet. “We’ve picked the second,” was how Flutter’s Taylor described the choice between cutting marketing and generosity and protecting its investment in the customer.
All Europe’s operators face the same dilemma and are choosing different ways to fund that spending whether that is reducing fixed costs, closing shops, or combining businesses and deploying proprietary technology. One thing is certain: increased taxes weigh heavily right now.