Final judicial approval was reached today for Entain and its historic activities in Turkey, with Dame Victoria Sharp, president of the King’s Bench Division at the Royal Courts of Justice sitting at the Crown Court at Southwark.
The DPA relates to alleged offences under Section 7 of the Bribery Act 2010, in particular, failure by the company to have adequate procedures in place to prevent bribery. This was in relation to Turkey and its legacy Turkish-facing business.
The DPA, which comes into effect today (5 December), fully resolves His Majesty’s Revenue and Customs (HMRC)’s investigation into the company’s activities in Turkey. The activities took place under Entain’s legacy name, GVC Holdings.
Entain’s DPA terms
Terms of the DPA are in line with the preliminary approval confirmed on 24 November. Entain has agreed to pay a financial penalty plus disgorgement of profits totalling £585.0m (€674.0m/$736.1m). It will also make a charitable donation of £20.0m and contribute £10.0m to CPS and HMRC costs.
These will be paid in instalments and will run for a period of four years. The commencement date will follow from today’s final court approval.
In a statement issued by Entain to the London Stock Exchange group’s Regulatory News Service (RNS), Entain highlights that the group has undertaken a comprehensive review of its anti-bribery policies and procedures.
“This is the final step in a process that has hung over our business since HMRC launched its investigation into a business that was sold by a former management team six years ago,” said Barry Gibson, chairman of Entain.
“We have cooperated extensively and proactively at every stage of the process which, I am pleased to say, has been recognised by the court. Entain has now fundamentally and profoundly changed. We can now concentrate on the future.”
The group has also taken action to strengthen its wider compliance programme and related controls.
Where does this leave Entain?
At the time of writing, Entain’s share price was down 0.13% on market opening at 795.80p per share.
Over the the last 30 days however, the company’s share price has decreased by 137.80p. In percentage terms, this totals a decrease of 14.75 %, leaving Entain’s prospects unclear.
Last week, investment bank and financial services giant Goldman Sachs downgraded Entain to sell from buy. This was amid concerns over business growth, particularly within its online division.
The downgrade saw Entain’s price target slashed from 1,450p to 820p. Following recent market movements, this is already more optimistic than Entain’s current share price of 795.80p per share (5 December).
While quoting “regulatory headwinds” in its report, the wider focus is on Entain’s present issues of growth.
In highlighting “increased competition and market dynamics”, Goldman Sachs forecasts Entain’s pro-forma online growth to be negative in Q4 of 2023 and H1 of 2024.
The group, it added, is not expected to return to growth until the second half of next year.
Such is this level of concern that Goldman Sachs is also cutting earnings per share estimates for 2024 and 2025. The bank says this will be approximately 30% lower than previously stated, adding that free cash flow has also deteriorated.
There is also mixed news from the US front, with BetMGM, a joint venture between Entain and MGM Resorts. While BetMGM’s CEO, Adam Greenblatt, was upbeat on this week’s investor’s presentation, Goldman Sachs picks out the ongoing issue of stagnation.
In its Q3 update, Entain said BetMGM held an 18% market share in US states. This was level with Q2 and only slightly ahead of 17% during the first quarter.
In this week’s call, BetMGM has highlighted its aim to reach 25% market share in the US by 2026, as well as delivering $500.0m (£396.1m/€462.2m) in positive EBITDA.
The business sees next year as an investment period, having already proved profitability in 2023. While it expects to achieve a profitable H2 2023, BetMGM expects negative EBITDA for 2024 in what it bills as an “investment year”.
Back in August, it was also revealed that MGM was launching BetMGM in the UK without Entain. Instead, MGM is working with LeoVegas, with the international platform utilising LeoVegas’ technology and platform. LeoVegas was acquired by MGM Resorts last year for $604m.
While Entain reported a record H1 2023, its Q3 update showed online net gaming revenue growth had slowed to single figures.
Not long after this, Entain chairman Barry Gibson and CEO Nygaard-Andersen significantly increased their shareholdings. The chair’s spouse, Brenda Gibson, also increased her holding in Entain from 41,902 shares to 57,434.
In addition, senior independent non-executive director Stella David secured a further 95,025 shares and non-executive director Rahul Welde purchased 21,644 more shares.
Also in its Q3 trading update, Entain unveiled Project Romer. This set out a goal of reaching an online EBITDA margin of 28% by 2026 and 30% by 2028.
To achieve this, Entain plans to simplify the group to improve operational leverage and drive cost efficiencies. This will include making cross cost savings of £100.0m by 2025.