Entain expects “softer than anticipated” Q3 revenue due to slow international growth

Entain has confirmed its expectations that Q3 online net gaming revenue (NGR) will be “softer than anticipated” due to UK regulatory pressures and slow growth in other markets.

Releasing a trading update for the period, the FTSE 100 operator revealed that group-wide implementation of safer gambling measures as well as regulatory headwinds, which are “persisting longer than expected”, are affecting market performance in geographies including the UK.

Entain confirmed its NGR has also been impacted by adverse sporting results impacting sports margins during September, as well as slower growth than expected in Australia and Italy.

However, the firm said that, excluding regulatory impacts, there had been good underlying growth in the online market, evidenced by “strong proforma growth” in active customers across Q3.

The operator reported “robust performance” across its retail portfolio, as well as strong performance in the businesses it has recently acquired, most notably Croatian sports betting company SuperSport.

As a result, Entain has said Q3 online NGR growth is expected to rise by “high single-digit percent” on a non-proforma basis, but down on a proforma basis.

Entain also noted that its joint venture business BetMGM, which it operates on a 50/50 basis with MGM Resorts in the US, has been performing well and is still on track to reach the previously iterated target of having a positive EBITDA in the second half of 2023.

BetMGM’s full-year 2023 NGR is expected to be at the upper end of its $1.8bn to $2bn guidance figure, with the firm making a “strong start” to the NFL season, propped up by the rollout of its enhanced sports betting app and single account, single wallet enhancements.

“We now expect group online NGR for FY2023 to be up low double-digit percent with proforma NGR down low single-digit percent. We reiterate our expectations for FY2023 EBITDA to be in the range of £1bn-£1.05bn supported by robust operational controls,” the trading update read.

Despite the UK pressures and slower performance in some markets, Entain CEO Jette Nygaard-Andersen sounded an upbeat note in a statement accompanying the update.

“We continue to see good underlying growth in our online business and are reiterating our EBITDA guidance for the year despite softer-than-expected revenue growth in Q3 and the ongoing roll-out of industry-leading safer gambling measures,” Nygaard-Andersen said.

“We continue to attract more customers than ever before to enjoy our products and services. BetMGM remains on track to deliver positive EBITDA in H2 and a full-year NGR performance at the top end of our expectations, and we are particularly excited about the product improvements that we are rolling out over the NFL season,” she added.

In addition to releasing a trading update, Entain’s board of directors has said it will provide more detail on its long-term plans to “accelerate performance and delivery” alongside the Q3 trading update on 2 November.

This includes detailing simplifying group structures and operations to improve operational leverage while at the same time reducing costs, as well as releasing a plan to migrate its recent acquisitions onto the Entain technology platform.

The methods the firm will use to optimise its so-called “capital allocation priorities” and an update on the progress towards its group online EBITDA margin target of 30% will also be disclosed by Entain at its Q3 update.

“We have made significant changes to the group over the last three years. Our focus now is on accelerating the actions we are taking to drive sustainable organic growth, expand our margins, capitalise on the US opportunity and deliver long-term returns for our shareholders,” Nygaard-Andersen explained.

“We remain confident in our ability to deliver on the vast opportunities ahead of us and look forward to sharing more detail about the changes that we are making alongside our Q3 trading update in November,” the Entain CEO concluded.

Entain’s share price crashed by 12% in early trading on the London Stock Exchange before recovering to a price of 935.60p with the firm’s market capitalisation at £5.98bn.