UK-based gambling group Entain, the owner of Ladbrokes, has issued a warning about a drop in its online gaming revenues, citing recent industry reforms and unfavorable sports results as contributing factors. This announcement had a significant impact on Entain’s share price, causing it to plummet more than 11 percent during early Monday trading. As a result, the company’s shares reached their lowest level since 2020, making it the biggest loser on the FTSE 100 index.

CEO’s comment

Entain’s CEO, Jette Nygaard-Andersen, stated that the company continues to experience positive growth in its online business. She noted that despite softer-than-expected revenue growth in Q3 and the ongoing implementation of industry-leading safer gambling measures, Entain anticipates strong full-year earnings.

 “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.” She added “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.”

Slower growth in Australia

Several factors contributed to this underperformance, including adverse sporting results in September, the ongoing implementation of safer gambling measures, regulatory challenges, and slower-than-expected growth in key markets like Australia and Italy. This unexpected setback led to an over 8 percent drop in Entain’s share price during early trading.

Despite these challenges, the company highlighted strong performance from recent acquisitions, particularly SuperSport in Croatia. The retail segment also demonstrated resilience, with BetMGM in the US on track to achieve positive EBITDA in H2 2023.

Online revenue forecase for Q3

THE decline in online net gaming revenue (NGR) growth during the third quarter projected a decrease of a “high single digit per cent” on a pro forma basis. This decline is expected to contribute to a “low single digit per cent” reduction in pro forma online gaming revenues for the entire year.

The company attributes this downgraded outlook to several factors, including “adverse sporting results” that impacted profit margins in September, “ongoing regulatory headwinds” stemming from government reforms in key markets like the UK, which are persisting longer than anticipated, and slower-than-expected growth in its Australian and Italian businesses. In the UK, Entain’s largest market, the government introduced various reforms aimed at reducing problem gambling, including affordability checks and stake limits on online slots.

Analysis and outlook

Despite the revised revenue outlook, Entain, which also owns Coral and Bwin, maintains its projected earnings before interest, tax, depreciation, and amortization (EBITDA) within the range of ￡1 billion to ￡1.05 billion for the full year. Analysts suggest that Entain may have compensated for weak online revenues with robust growth in its retail operations and cost control measures.

It is projected that we will see a 1percent decline in full-year earnings based on Entain’s trading update. They highlighted disappointing online trends in key markets but took some encouragement from the strong performance of Entain’s US joint venture, BetMGM, and suggested that much of the weakness could be attributed to sporting results, which they expect to normalize over time.

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