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UK – Soaring online and in US, Entain is grounded by retail

By - 5 March 2021

Entain announced the company had returned to profit in 2020 thanks to strong performance in the US and online, despite significant declines in the company’s retail business as a result of Covid-19 restrictions.

Group profit after tax in 2020 was £113.8m compared with a loss of £131.2m in 2019. The results indicate an 11 per cent rise in 2020 core earnings, with EBITDA rising to £843m, while net gaming revenue was flat at £3.6bn.

Online Ebitda rose by 50 per cent to £803.5m, while full-year revenues of US$178m were ahead of expectations, Entain added. However, Entain’s retail division was “significantly impacted by Covid-19, with Ebitda for the year at £98.3m.

“The UK retail estate was a drag on results, declining 36 per cent year-on-year due to forced closures associated with COVID,” explains Harry Barnick, Senior Analyst for leisure sector companies at Third Bridge. “Entain closed over 300 stores in the UK in 2020 and more progress is needed in 2021 to continue to restructure the estate. These declines were offset by strong growth in the online channel, with total online NGR up 27 per cent vs 2019. Whilst this result will be a relief to investors, the ongoing review of the 2005 Gambling Act in the UK poses a significant risk to online revenues and profits.

Entain’s retail division was “significantly impacted” by Covid-19, but there remains the belief within the business that betting shops will “recover pretty well”.

Entain Chief Financial Officer, Rob Wood commented: “Last summer, we did fear that revenue would suffer and ultimately we would lose people from shops, but actually we got back to over 90 per cent of where we ordinarily would be in the UK. What that told us is that even if customers are using an app for the first time they still crave that social side.”

BetMGM, Entain’s joint venture in the US with MGM Resorts International, enjoys 18 per cent market share across the 12 states and Entain said it was the No.1 digital operator in January this year.

“Growth in the US is fundamental to Entain’s long-term future,” said Mr. Barnick. “This increasingly competitive market has outperformed expectations and is the key growth pillar for the group. Having recently increased its bid for Enlabs to SEK 3.7B ($440M), Entain is betting on its ability to lead its own future independent of a large US casino operator. MGM walked away from talks to acquire the company after Entain rejected the offer based it significantly undervaluing the business.”

“Entain’s new CEO, Jette Nygaard-Andersen, has the complex job of navigating an increasingly regulated domestic market, whilst simultaneously juggling expansion in the US and acquisitions to fuel growth,” said Mr. Barnick.

In January, Entain rejected a takeover bid from MGM, but Mr. Wood maintains that it’s “business as usual” between the two sides. He added: “BetMGM is really important to Entain and our share price, but it is equally important to MGM Resorts and their share price. Both sides are completely aligned in needing and wanting to do the very best job we possibly can with this business.

Entain has since sought to acquire the wagering arm of Australia’s Tabcorp and is clearly a credible buyer, but the deal is currently in Tabcorp’s hands at this moment.

CEO Jette Nygaard-Andersen (pictured) concluded: “The strong underlying momentum within our business, the rapid growth of our US joint-venture, and our continuing international expansion mean we are as confident as ever in the long-term prospects for Entain.”

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