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Entain gears up for make-or-break finale to 2022

Entain’s leadership is adamant that it can deliver on the fronts of M&A integrations, UK regulatory adjustment and US market profitability to maintain the FTSE100 gambling group’s growth momentum and valuation.

Following publication of the group’s Q3 trading results this morning in which Entain reported a 2% GGR increase, CEO Jette Nygaard-Andersen and CFO and Deputy Rob Wood answered questions on the FTSE100’s firm’s corporate development and growth ambitions.

Areas of discussion included the group’s acquisitions and the potential impact of these on finances, regulatory and operational developments in the UK and Europe and the rollout of betting and igaming in the US.

The European roadmap

Looking at the UK, Nygaard-Andersen stated that the FTSE100 company expects to ‘hear back’ from the government on the 2005 Gambling Act review ‘in the coming weeks’, despite the White Paper publication’s repeated delay.

“Aside from the recent turmoil around the new government – they have a lot of pressing issues and are just back from the annual party conference – we expect to hear more in the coming weeks,” she said.

“It might be slipping down the list of priorities, but we want to get the whtie paper out and get it into publication.

“The new government’s approach has very much been pro industry, they are advocates of freedom of choice and of not having a ‘nanny state’ regulation in place. From our perspective it is sensible sounding, and hopefully will lead to a balanced and proportionate regulation.”

Wood added that the firm expects to see continued strong results from the UK, where its Ladbrokes and Coral outlets have been performing well, with total group-wide retail revenue increasing by 12%.

The CFO was also quizzed about developments in Germany, however, where conditions imposed by the Fourth Interstate Gambling Treaty (GlüNeuRStv) framework, launched last year, have been difficult for market participants to adjust to.

“The big picture here is, going back two years there has been major regulatory reform in Germany which has seen our revenues come off quite significantly,” Wood continued.

“It’s only upside from here – the big catalyst is getting gaming licences issued, so we can distinguish between the licenced and unlicenced operators and see a clampdown on unregulated operators.”

M&A timetables and US progress

In the neighbouring Dutch market, also re-regulated last year under the KOA Act, which forced Entain to temporarily cease operating in the country pending a new licence application – the group is on track to complete its purchase of Bet

New horizons open in Croatia, where Entain has expanded its CEE portfolio adding local betting operator SuperSport, with both acquisitions expected to finalise in the fourth quarter.

Wood informed investors that, despite Entain’s confidence in its forward moving momentum, the takeovers are unlikely to have a bearing on full year revenues.

He said: “We wouldn’t assume a material contribution to the current calendar year. Once they arrive, from a revenue perspective they should and high single digits over coming months.”

One of Entain’s key predictions in its trading update earlier today was that the FIFA World Cup, commencing next month, will have a positive effect on year-end trading, in tandem with NFL-related trading in the US.

Wood asserted that ‘we’ll get a bigger number than expected’ from the tournament due to it falling entirely in one quarter, and despite concerns about the truanment not being ‘as fully incremental’ as previous World Cups, the group remains ‘excited about prospects’.

The whole tournament falls within one quarter this year, I think we’ll get a bigger number than expected. Timing-wise it won’t be as fully incremental as a usual tournament, but there are reasons we’re positive about that.

“In Brazil it’s more incremental, and we like that there will be less Europeans on holiday, and the lower leagues will carry on so there will still be packed fixture lists across Europe,” he continued.

“The time of day is favourable, past world cups have been unhelpful on that. We have a more congested fixture list on either side of the tournament, typically there’s a lag between the final and start of the new season and you lose momentum.”

Unsurprisingly, investors and stock watchers were also keen to hear the Entain executives’ views on US market news, with Nygaard-Andersen sharing her opinions on eagerly anticipated California betting regulation – which does not appear to be coming anytime soon.

“While that is disappointing in itself, we can have another go at it in two years time,” she said, observing that recent polling suggests that neither proposition in favour of legalisation will succeed.

“On the wider outlook, over time we expect legislation in sports betting in California, it’s difficult to imagine that a state like California with 21 professional sports franchises and a population that loves their teams will not legislate sports betting.”

Lastly, Wood addressed Entian’s long-term strategy for debt reduction, with the company having taken out a €700 bridge loan underwritten by several leading banks to support the SuperSport acquisition.

He explained: “We’ll continue to look at a mix of bonds and term loans, we’ll get SuperSport financing done first and then assess the market and monitor it, and when we feel the time is right we’ll move forward with a mix of bonds and loans.”


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