Operator News

UK – Entain records £842.6m loss and predicts £40m regulatory hit in 2024

By William - 7 March 2024

Entain has recorded a pre-tax loss of £842.6m in 2023 – significantly down from profits of £102.9m in 2022 – after paying £585m to resolve a probe into alleged bribery at a former Turkish subsidiary, as well as impairment charges related to Australia operations.

Shares in Entain have taken a hit this morning following the announcement – down six per cent at the time of writing. This follows the recent disruption of Jette Nygaard-Andersen’s sudden departure after the legal settlement back in December.

Looking forward, Entain warned that earnings over the year ahead will be affected by around £40m due to regulatory changes in the UK and the Netherlands, and said it will provide a new profit forecast for the year in August.

Entain added that it is pressing ahead with plans to simplify the business and make annual savings of £70m by 2025 following the findings of its recently formed ‘Capital Allocation Committee’.

“2023 was a period of necessary, but ultimately positive, transition for Entain. We have significantly strengthened the quality of our revenue base, enhanced our Board, and delivered a resolution to a critical, historic, regulatory issue,” commented Barry Gibson, Chairman of Entain.

“We are making positive progress in our search for a new permanent CEO, and in the meantime Stella is driving the business as it continues to take appropriate actions to deliver changes to drive a better long term performance.

“We are also making good progress in adding to our Board strength – Ricky Sandler and Amanda Brown joined the Board in recent months and we expect to announce a further appointment shortly.

“As our transformation continues the newly formed capital allocation committee has commenced a review of Entain’s markets, brands and verticals. The objectives of the review are to help focus the organisation, improve competitive positions and maximise shareholder value.”

In line with the Group’s announcement on 2 November, the recently formed Capital Allocation Committee has commenced a review of Entain’s markets, brands and verticals. The objectives of the review are to ‘help focus the organisation, improve competitive positions in core markets and maximise shareholder value.’

In line with the Group’s progressive dividend policy, the Board proposed a total dividend for 2023 of £113m to be paid to shareholders in equal instalments with H1 and FY results.

In the year to date, the Group is trading in line with expectations. In Brazil, Entain says it is seeing early signs of benefits from the improvements initiated through 2023. In the US, BetMGM’s nationwide app is now live in Nevada with the future introduction of Single Account Single Wallet (SASW) functionality in the state later this year as well as delivering further product improvements.

On future regulatory changes in the UK, Entain says it is ‘delighted’ to see long-awaited regulatory review draw closer to conclusion, anticipating the implementation of stake caps on online slot games and a potential agreement on uniform safer gambling measures across the market. However, despite the delight, the Group expects continued player disruption over the short term as a result.

In the Netherlands, the KSA has recently proposed tighter deposit limits from Q2 2024 which Entain says has the potential to impact 2024 EBITDA.

As a result of these regulatory changes, Entain expects that, in aggregate, these dynamics could reduce FY24 EBITDA by approximately £40m.

Entain reported that it is making ‘clear strides’ in identifying and executing product and technology developments to improve customer acquisition and retention. The so-called ‘Project Romer’ remains on track to simplify operations, improve efficiency and deliver £70m of net run rate cost savings by 2025.

Stella David, Interim CEO of Entain, added: “2023 presented a number of challenges for the Group, both industry-wide and Entain-specific. I am extremely proud of how our people around the world came together to navigate the business through an eventful and at times difficult year.

“Against that backdrop, Entain was still able to deliver overall revenue growth of 14 per cent including our US joint venture achieving revenue at the top end of expectations.

“We have started the new financial year with a clear plan to accelerate our operational strategy, and are making pleasing progress across a range of initiatives to re-focus our market portfolio, prioritise organic growth, drive our share in the US, and expand our margins.

“We are entirely focused on operational excellence and outstanding execution and, as a result, are confident that we are on a pathway to delivering future growth. We remain confident that our continued focused execution will drive organic growth into 2025 and beyond.”