Home > Finance > Entain analysis: Brazil and NZ on the up, trouble ahead in NL

Entain analysis: Brazil and NZ on the up, trouble ahead in NL

| By Marese O'Hagan
During Entain's Q1 trading update earnings call CFO and deputy CEO Rob Wood and interim CEO Stella David praised Entain's performance in New Zealand and Brazil, but highlighted regulatory headwinds in the Netherlands.
Entain Q1

Entain reported a 3% rise in revenue for the first quarter of the year. This was mostly attributed to a positive performance in Entain’s Central and Eastern Europe business, where revenue grew 124%. Performance in Entain’s international business also grew, rising 4%. However, reported revenue in the UK and Ireland fell 7% yearly.

On the Q1 trading update call, David and Wood paid particularly close attention to Entain’s performance across its operating markets. 

Referring to Brazil and New Zealand, Wood, expects “an acceleration” in these markets. David said that Brazil “remains a highly competitive market” for Entain. Wood however added that Entain is “encouraged by progress so far as we look forward to licensing later this year”. 

Wood also said that Entain expects a degree of “regulatory tightening” in the Netherlands, with David voicing her agreement. 

“Clearly the Netherlands is a challenging market,” she said. “How it all pans out is somewhat in flux.  It’s something we watch – I think we feel very strongly that we covered the Netherlands well.” 

Against the background of the Netherlands, Entain is currently facing a legal challenge against the former owners of BetCity. Entain had claimed that undeclared regulatory investigations were under way when it acquired BetCity for €450m in January 2023. The investigations devalued BetCity by up to €156m. In March, BetCity’s former owners claimed that Entain had been aware of regulator Kansspelautoriteit’s (KSA) investigation. They then hit Entain with a €104m counterclaim

BetCity was also fined €3.0m by the KSA in November last year, with the KSA claiming anti-money laundering and counter-terrorist financing offences. 

Opportunity abounds in Nevada 

The Q&A section of the earnings call saw analysts inquire about BetMGM’s performance and its speculated Nevada launch. 

“No one else is able to do what we’re going to do in Nevada,” said David. “This is a year of investment.” 

She continued to point to the opportunity Nevada will offer – one that will be more accessible to Entain due to its existing relationship with MGM

“MGM I think controls something like 50% of the Strip, they have 13m customer nights of the year in their resorts,” David explained. “The opportunity, as we get our product and app sorted, is very fundamental, that no one else can replicate.” 

David added that this will help to form a seamless journey for customers and eventually work in the benefit of creating a loyalty programme. 

“The idea that we have these seamless journeys, where a customer can go to Nevada, they play, they use our app, they go back to wherever they live, we generate a loyalty programme with them, whether its using tools like X or the Mariott programme – that is just starting to get under way,” David continued. “It’s almost impossible for anyone else to replicate.” 

In terms of BetMGM’s performance, Wood noted that March had been BetMGM’s “best ever” month for igaming. 

Three-prong problem for Entain 

Despite Entain’s performance in recent years constituting a “special situation”, “a globally spread digital-first gambling business should not be delivering basically flat revenue regardless of customer friendly results,” said a Regulus analyst looking at the first quarter results.

Regulus presented Entain’s main problems in three points. First, “Entain has tended to consolidate betting-led brands which position to older male customers”, despite the younger demographic now driving growth post-Covid. 

Next, Regulus points to Entain’s reliance on operating efficiencies and VIP management. It said that operating efficiencies must now be “replaced with tech capability” and VIP management is now seen as a “negative in the UK”. 

Regulus’ final point focused on the shift of growth to brands with a clearer customer proposition. 

“On a global scale, Kaizen Gaming (Betano), Stake and 1xBet are shifting the competitive landscape in complex and contradictory ways. On a regional level, Local Heroes are now often now sophisticated mid-sized businesses rather than one-trick-ponies waiting to be bought,” the analyst posited. 

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