Entain reported a 3% year-on-year (YoY) uptick in Q1 NGR on Thursday, 15 April, giving way to a strong 8% increase in the Ladbrokes, Coral and bwin parent’s shares in London. Growth in the UK and Australia were pointed out as key highlights, while customer-friendly betting results hampered the International and CEE arms. While UK growth points to a business taking market share, remote gaming duty almost doubling to 40% as of 1 April is a major negative, but management say they have more optimisation levers to pull. Here, EGR looks at comments made by CEO Stella David and new CFO Michael Snape to dig into the earnings.
UK going OK
David slammed the UK tax hikes as “draconian” in her comments on the call, as she forewarned of continued growth of the black market. But the UK and Ireland were a shining light in Q1 for the operator. Online NGR was up 13% YoY and volume increased 8%. A 12% jump in igaming and an 8% rise in sports betting were also positives, and indicative of a business taking market share.
The CEO pointed to “dramatically” improved customer journeys and new bet builders as drivers of engagement. A new Ladbrokes app has been released, and there are plans to focus on the brand ahead of the World Cup.
David said: “What impact have we seen in the UK since the taxes went up at the beginning of April? It’s really too early to say. I think the more important point is that we have definitely been increasing our share in the UK in advance of those tax increases, and part of our strategy is to continue to increase share.
“Certainly in gaming, if you look at the market, there is a long-tail of tier-two and tier-three operators all having very small percentage shares of the market. Within the regulated sector, we definitely see there’s an opportunity to continue to build on that share gain.
“We will see over time just how much of an impact the black market has on the overall growth of the regulated sector. It’s very important we continue to lobby government to encourage them and others to stop the inroads into the UK of the black market.”
Optimise prime
Appearing on an Entain earnings call for the first time, new CFO heaped praise on the business. Snape officially took up the job on 6 March, having shadowed former finance chief and deputy CEO Rob Wood since February. Snape, a former Boots and UK supermarket exec, said Entain was “clearly a strong business with a model that’s performing well”.
Following on from the UK discussion, Snape said there was “far more for us to do to unlock value” in the company. David had previously noted Entain was committed to “driving greater efficiency [and] effective capital allocation”. Mitigation plans had already been laid out when the tax hikes were announced in the Autumn Budget, including cuts to marketing and promos.
Looking ahead, the CFO added: “We have significant potential to optimise our cost base, both to improve operational leverage as we continue to grow volumes, and also importantly, to accelerate investment in driving the top line. [We want to take] advantage of all the opportunities available across the portfolio, particularly in markets like the UK where the tax increase has changed the competitive landscape.
“It’s not time-bound with an end date or a target. It’s putting in place the right model to support the business through the continuous improvement and driving growth. Today, from what I’ve seen, we’re only in the foothills. We also need to ensure this growth converts to cash. Alongside driving volume and revenue, cash, deleveraging and balance sheet flexibility are our top priorities.
“You can expect our approach to capital investment and other actions going forward to reflect this. This is an area where we see a lot to go for and will be a consistent theme going forward.”
No big deal
With the World Cup kicking off on 11 June, analyst focus turned to how the tournament will benefit Entain. The new expanded 48-team format will see 104 games played, compared to 64 at the 2022 version in Qatar. While that means more opportunities, it also means potentially more risk for volatile margins. David downplayed the impact of the tournament somewhat, especially in regard to Entain’s full-year 2026 guidance of online NGR growing between 5% and 7% YoY.
The CEO noted: “It’s not as big a thing as you might think. It’s probably worth about 1% or something like that across the year. It’s bigger than the Euros, but it’s not as dramatic as you would think. It’s important [that we don’t] over-commit to what it’s going to give because I think there will be some volatile sports margins, particularly in the early half of the [tournament].
“It’ll be great for volumes, but it’s going to be a bit of a rollercoaster ride because in the early days there are many more teams playing and margins could be wildly fluctuating because there’ll be high-scoring, lopsided games.”
On disciplined marketing spend, given the quadrennial tournament provides is a customer acquisition opportunity, Snape insisted the Ladbrokes and Coral parent would remain cautious.
He said: “We’re very careful to make sure we don’t waste money. Lots of people, obviously, in tournaments like the World Cup will bet and then never bet again until the next World Cup. We have a very good model to try and identify and weed out that type of thing so that we don’t waste marketing money on it.
“That’s reflected in the level of marketing we do around the World Cup. We’re absolutely in it and we’re absolutely open for business, but you won’t see us plastered all over ITV and Sky because we just don’t waste money in trying to lean in too heavily.”
Jogo feio
Another quarter, another set of customer-friendly results in Brazil for Entain. The market, which regulated on 1 January 2025, remains a must-win for FTSE 100 firm, alongside the UK and Ireland and the US. Volume continues to grow, but the bookmaker has been left bloody-nosed. It was pointed out during the call this was the third consecutive quarter in which punter-friendly results were highlighted by the leadership team. The Brasileiro Série A started at the end of January and is only 11 game-weeks young. Bosses expect Brazilians to be “very engaged” in the World Cup. The Seleção have Morocco, Scotland and Haiti in their group.
David added: “Sports margins have been very poor in Q1. Volume’s been up, so that’s a positive. I think it’s something everybody needs to watch out [for]. It is probably one of the worst-performing sports margins we have seen in the short term and let’s see how that goes. Underlying volumes have been positive, which is good news.”
CEE the shift
Poland received somewhat of a rare shoutout on the earnings call, with STS having recently completed its sportsbook migration to the SuperSport platform used in Croatia. Entain snapped up market leader STS in August 2023 in a deal worth around £750m. SuperSport in Croatia was acquired in November 2022, which led to the creation of Entain CEE, a JV with EMMA Capital. Q1 NGR was down 6% YoY, primarily driven by customer-friendly sports betting results, with Croatia sports margin tumbling 7.1 percentage points. Entain had also been losing market share in Poland as challenger brands dipped into their pockets, something David said was beginning to subside.
She remarked: “In Poland, we’ve always had a process of making sure we have maintained a profitable business. There have been a lot of new entrants to the market that have gained share, but at a very high cost. The vast majority of all profit made in Poland is based on our common-sense approach to the numbers.
“It’s true, we did lose share. I think what we’re seeing now is some encouraging signs of starting to regain share off the back of continuing to support the brand, which is very strong. Also, the migration onto the Croatian sportsbook is bearing fruit. We’re optimistic for the future in Poland.”
Poland remains an igaming monopoly via Totalizator Sportowy, and David noted that any shift to a commercial model is some way off.
She added: “In terms of igaming legislation, I think it is significantly in the future. The current regime there is not open to igaming at the moment. I think, in the medium term, we would suggest that, yes, legislation for igaming will come through, but I wouldn’t be putting it into any forecasts right now.”
The post Five things we learned from Entain’s Q1 trading update first appeared on EGR Intel.
News editor Joe Levy looks at the FTSE 100 firm’s report and analyst call, with CEO Stella David slamming UK tax hikes as “draconian” and Michael Snape making his debut as CFO
The post Five things we learned from Entain’s Q1 trading update first appeared on EGR Intel.