Online gains offset retail pain for Entain in 2020

Revenue for the whole year is expected to fall in line with the prior year figures, or rise 1% on a constant currency basis.

“In an exceptionally challenging year, our strong performance has been driven by a business model that is highly diversified across a wide range of products, brands, territories and channels,” outgoing Entain chief executive Shay Segev commented.

The Q4 and full-year trading update will be Segev’s last as CEO, with Entain director Jette Nygaard-Andersen (pictured below) today (21 January) named as his replacement.

The stable full-year revenue was down to a strong performance from its online betting and gaming operations, for which net gaming revenue was up 27% year-on-year, or 28% on a constant currency basis.

Though its sports betting offerings were impacted by suspensions from March to May as a result of the Covid-19 pandemic, amounts wagered rose 5% over the year, with revenue up 24%. Gaming, meanwhile, saw revenue grow 29%.

This largely offset retail’s struggles, with much of Entain’s British and European estate shuttered during 2020. The British Ladbrokes and Coral shops saw customer stakes decline 39%, with net gaming revenue falling 36% on a like-for-like basis (removing all closed shops from prior year figures). European retail stakes, meanwhile, fell 44% with revenue declining 38% year-on-year.

Despite this disruption, the operator noted that retail trade rapidly returned “within single digits of pre-pandemic levels”. This, it said, clearly demonstrated that customers enjoy the in-store betting experience.

With the exception of Germany where regulatory changes led to lower revenue, all Entain’s major markets reported double-digit growth for the full year, with online benefitting from retail customer migrations as a result of shop closures. 

“While we expect online volumes to ease back when shops in our core online territories re-open, the lasting effect of the pandemic is expected to be positive for the global online gaming market, and particularly for Entain’s brands, which we anticipate will more than cover any permanent channel loss from our retail estates in the UK and Europe,” the operator explained.

Growth across Entain’s core online business in 2020 was supported by a strong performance from the US, through its BetMGM joint venture with MGM Resorts. It expanded to 11 states during the year, following Q4’s launch of online casino in Pennsylvania and launch mobile betting in Tennessee. 

This followed rollouts of sports betting in Colorado and Indiana, as well as igaming in West Virginia earlier in 2020.

Across the states where it is active, BetMGM’s market share has grown to approximately 18%, with online revenue up 130% year-over-year for 2020. The joint venture is on course to surpass the full-year revenue guidance of between $150m and $160m the operator made following Q3, with 2020 revenue now expected to fall between $175m and $180m.

This was aided by the rollout of a single, nationwide app in October. The new product allows customers to access their account in any regulated state. Since September 2020, downloads have soared 70%. Efforts to refine customer acquisition and retention have also been stepped up, through a deep integration with its media partner Yahoo Sports. 

“Q4 has been another successful period for us, and we are particularly pleased with the momentum that we are seeing in the US,” Segev said. “BetMGM continues to go from strength to strength and is now live in 11 states, plus Michigan will be launching online tomorrow.”

Looking just at the fourth quarter, the group saw a 7% increase in NGR. Over the three months to 31 December 2020, online revenue was up 41%, marking the twentieth consecutive quarter of double-digit online growth for Entain.

This was driven by sports, where handle was up 25% and revenue jumped 59%, while gaming’s contribution was up 28%.  

Retail continued to struggle, however. With many countries back in lockdown in Q4, revenue from British shops declined 38%, and European retail revenue fell 57%. 

The fourth quarter also saw Entain receive sports betting licences for its Bwin, Gamebookers, Ladbrokes and Sportingbet brands in Germany, ahead of a transition period in which it may offer online casino beginning. 

This, it said, brought legal certainty in a key market, though the new framework would reduce sportsbook earnings by around €40m, as a result of strict regulations. Online casino EBITDA is expected to fall by around €70m as a result of measures such as the €1 slot stake cap in 2021.

Efforts to expand into new markets was once again stepped up in Q4, with a deal to acquire Portuguese operator Bet.pt. The Portuguese igaming market is expected to double in value to around €450m by 2023, and Bet.pt’s strengths in sports betting, coupled with Entain’s extensive gaming assets, left it well-placed to capitalise on this growth. 

Following the year-end, Entain also had an SEK40 per share offer for Baltic-facing operator Enlabs backed by the Optibet operator’s board. 

Coupled with the launch of Bwin in Colombia, this furthered its goal of moving towards generating 100% of revenue from regulated markets by 2023. By the end of 2020, 99% of revenue came from nationally regulated or regulating territories. 

The operator’s Advanced Responsibility and Care (ARC) strategy was also stepped up in Q4, with Dr Mark Griffiths brought in to audit its responsible gambling processes and policies. He will also assess data from its 160m customers in his new role, to develop new player protection controls.

“As ever, we remain deeply aware of our responsibility to provide our customers with the safest possible experience while using our products, and to that end our new technology-based Advanced Responsibility and Care programme is heralding a new era in player protection,” Segev said.

Looking ahead to 2021, Entain said it begins the year with strong momentum from Q4 carrying over, particularly in the US and core markets. 

“While the short-term outlook remains uncertain as a result of the ongoing impacts of COVID-19, we have entered 2021 with good momentum and remain as confident as ever in Entain’s longer term prospects,” Segev said in conclusion.