Entain’s Weak Performance Blamed On Focusing Too Much On BetMGM

March 8, 2024
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Entain was distracted by focus on its fast-growing U.S. joint venture, BetMGM, at the expense of other key markets, its interim chief executive has said.
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Entain was distracted by focus on its fast-growing U.S. joint venture, BetMGM, at the expense of other key markets, its interim chief executive has said.

BetMGM annual revenue grew 36 percent to £1.96bn in 2023, gains at the top of expectations, but Entain's other key markets like the UK, Brazil, Australia and the Netherlands all showed declines last year, as the company reported 2023 results yesterday (March 7).

Interim CEO Stella David started an analyst conference call saying she wanted to address “elephants in the room”.

“Delivering product and tech solutions for BetMGM at the pace that we have had to do it has meant there has been some considerable cost in our other markets,” she said.

Net gaming revenue rose 14 percent to £5.6bn, but only 2 percent on a pro forma basis, while earnings before interest, taxes, depreciation, and amortisation (EBITDA) rose only 1 percent to just over £1bn, the company said.

Entain reported a post-tax £879m net loss, mostly due to its settlement with UK tax collectors and the Crown Prosecution Service over its past activities in Turkey.

UK and Ireland revenue fell 6 percent, as did Australia, while Brazil dropped 14 percent, and the Netherlands, 12 percent.

Germany declined 26 percent, as online gambling restrictions tightened.

Gains came in Italy at 3 percent; Georgia at 7 percent; and Croatia at 29 percent.

David, former chair of Vue International and CEO of William Grant and Sons distiller, called herself, “not a caretaker CEO… not here to tread water”.

The complexity that has accumulated over time was “hampering our agility, our ability to get things done”, she said.

She backed away from a focus of previous CEO Jette Nygaard-Andersen, to become a “broader interactive entertainment” company, saying, “quite frankly, that was a distraction”.

Late last year, Entain scaled back the consumer-facing operations of Unikrn, an esports betting company it had paid £50m for in 2021.

Also, regulatory issues such as UK caps on online slot stakes, tightened deposit limits in the Netherlands and the return of former market leader Unibet, plus continued regulatory restrictions in Germany could cost the company £40m in EBITDA in 2024, Entain said.

Restrictions in Germany have grown so stringent the company now generates only 3 percent of revenue there, down from 15 percent just a few years ago, said chief financial officer Rob Wood.

Jefferies analyst James Wheatcroft said Entain, under pressure from activist investors, may consider selling its share of the BetMGM joint venture or it may get an offer for the whole company from MGM itself.

Shares declined 4.9 percent yesterday to 790 pence, and have dropped nearly 44 percent over the past 12 months.

Entain said it wants to focus on the key markets of the UK, U.S. and Brazil.

In Brazil, the company blamed intense competition for revenue declines.

It has replaced local management and it plans to revamp its brands, with Sportingbet having lost market share in recent years, and focus more on digital marketing and Brazilian football, the company said.

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