Entain has cited that trading in the third quarter of 2023 has fallen in line with previously stated guidance, as the FTSE100 gambling group outlines new initiatives “to improve the quality of its earnings”.
EBITDA margins have been impacted by customer-friendly sports results and responsible gambling initiatives during the quarter, but CEO Jette Nygaard-Andersen has stated that the firm has a “clear plan to focus” its portfolio on “organic growth”.
Leadership has outlined a streamline of operations, as the firm plans to undergo key directives that it hopes will accelerate its operational strategy.
Q3 maintains expectations despite proforma drags
Publishing its Q3 results, Entain declared a total group net gaming revenue increase of seven per cent year-over-year and up 10 per cent on a constant currency basis.
Excluding US operations, group NGR is up seven per cent on the previous year, up nine per cent cc, but down five per cent on a proforma basis.
A breakdown of online activities, sees NGR up nine per cent YoY, up 11 per cent cc, but down six per cent proforma context, which Entain says is ‘in line with updated expectations’.
When known regulatory impacts are excluded, online NGR is up 17 per cent YoY and flat proforma.
The firm stated that customer-friendly sports result results in September have impacted figures by “two to three percentage points”, yet active customers KPIs remain strong, rising by 26 per cent YoY and 10 per cent proforma.
“Entain has undergone a profound transformation over the last few years, and now has strong foundations from which to move into its next phase of growth.”Entain CEO Jette Nygaard-Andersen
Entain described its Q3 retail performance as ‘robust’ as NGR for the segment improved by four per cent YoY and cc, but it is down the same percentage on a proforma basis.
BetMGM operations are doing well too, as the US joint-venture’s NGR is up 15 per cent in comparison to the previous year to approximately $458m. Entain noted that customers have enjoyed the ‘benefits of significant investment enhancing the customer experience’ at the beginning of the NFL season.
The JV maintains an 18 per cent market share in online gaming and sports betting markets where it operates (excluding New York). For igaming, the market share stands at 26 per cent.
Ahead to Q4, Entain believes it is ‘on track’ to deliver the upper end of its $1.8bn to $2bn NGR guidance for FY2023 and it also expects EBITDA to be positive in H2 2023.
Commenting on the Q3 results, Nygaard-Andersen said: “Entain has undergone a profound transformation over the last few years, and now has strong foundations from which to move into its next phase of growth.
“We have made significant investments in responsible gambling initiatives. While these steps have impacted EBITDA, they are unquestionably the right thing to do to improve our long-term prospects.”
Entain streamline begins
Entain will hold a presentation later today outlining key initiatives to accelerate its operational strategy and improve long-term EBITDA results.
Initiatives include focusing and optimising its market portfolio for organic growth and ROI; prioritising high growth, high return markets such as the US, Brazil CEE and New Zealand.
Within established markets, Entain will focus on enhancing profitable growth in the UK, Australia, Italy, Germany and the Baltics – requiring an exit of smaller non-core operations.
“We have a clear plan to focus our portfolio for organic growth, drive our market share in the US, improve our operational leverage, and increase our EBITDA margins.”Entain CEO Jette Nygaard-Andersen
Leadership aims to return to organic growth at least in line with markets (seven per cent CAGR) from 2025. Targets outlined see US market share increase to 20 per cent to 25 per cent via investment in product & pricing capabilities, customer acquisition and maximising the omnichannel opportunity.
Entain has further initiated ‘Project Romer’ to support the expansion of online EBITDA margin to 28 per cent by 2026 and 30 per cent by 2028. The firm will undergo a simplification to improve operational leverage and drive cost efficiencies; have gross cost savings of £100m (net cost savings of £70m) by 2025.
Nygaard-Andersen continued: “From here, we have a clear plan to focus our portfolio for organic growth, drive our market share in the US, improve our operational leverage, and increase our EBITDA margins.
“The wide range of initiatives that are underway will cement our position as a customer-focused industry leader, enable us to achieve our strategic ambitions, and deliver enhanced returns for all our stakeholders.”
2023 closing outlook…
Looking ahead, Entain noted that Q3 performance tracked to EBITDA guidance of £1bn to £1.05bn. However, while volumes have been in line with expectations, continued customer-friendly results in October have seen sports margins impact EBITDA by approximately £45m.
For FY2024, pro forma online NGR growth is expected to be low single digit, supported by a return to growth during H2 2024, and online EBITDA margin is expected to be between 24 per cent and 25 per cent.