17th Apr 2024 10:58
(Alliance News) - Entain PLC's first quarter trading update was "encouraging," albeit given "pretty low" expectations, boosted by an improved online performance, analysts on Wednesday said.
Entain said its first-quarter performance was in line with expectations, the betting operator having had "successful" Super Bowl and 'March Madness' events in the US.
The Isle of Man-based bookmaker, which owns Ladbrokes and Coral, noted however that its UK & Ireland net gaming revenue was lower on-year, and "customer-friendly win margins" kept a lid on the success at its BetMGM joint-venture in the US.
Total net gaming revenue, including Entain's 50% share of BetMGM, rose 3% on-year, or 6% at constant currency.
UK & Ireland net gaming revenue fell 7% on both a reported and constant currency basis.
"We continue to experience the effects of our regulatory implementation," Entain explained.
It added: "Our actions that are driving operational improvements together with the levelling of the UK regulatory landscape will position our brands well for growth into 2025."
In the US, BetMGM's first-quarter net gaming revenue rose 2% at constant currency, but fell 2% on a reported basis.
Interim Chief Executive Stella David said: "Our Q1 performance was in line with our expectations, with growth reflecting both strong performances in many of our markets as well as known challenges in others."
"There is still more to do, but the team is fully engaged in delivering operational improvements, product enhancements, as well as greater organisational agility and efficiency," she added.
Matt Britzman, equity analyst, Hargreaves Lansdown noted expectations for Entain are "pretty low."
First-quarter trading was slightly better than markets were expecting, but still showed a dip in gaming revenue assuming recent acquisitions had been in place since the start of last year, he explained.
Performance close to home in the UK & Ireland is "struggling," and there’s also "weakness creeping in across the pond too."
"Bet MGM, the US joint venture and shining light in the portfolio, is coming under some pressure. Revenue growth is slowing and there are signs the competitive landscape is heating up – investors will have to keep waiting for growth to reaccelerate here," he remarked.
He noted markets are expecting little to no underlying growth until 2025.
"There’s rightly some negative sentiment in the air with regulatory headwinds expected to hit profits in the coming year, no permanent CEO and increased US competition impacting the BetMGM joint venture," Britzman commented.
"But there are growth levers to pull, and from a low base it won’t take much to reignite the flame," he suggested.
Greg Johnson at Shore Capital viewed the online NGR trends as "encouraging, given the challenges over the last couple of years, with signs that underlying trends are improving."
However, the BetMGM outturn was more modest than maybe anticipated, he noted.
He felt the growth rate at BetMGM appeared modest against historic trends, although with the long-term attractions for the US market compelling, the key will be market share development.
Johnson hopes to see this nudge up as the year progresses.
Russ Mould investment director at AJ Bell concentrated on the regulatory pressures which "are a fact of life" for the gambling sector.
He sees the direction of travel as "only going one way," particularly domestically.
Mould also highlighted the easing of growth at BetMGM.
"While the US has been seen as the golden goose, there are signs of slowing growth in its Bet MGM joint venture as competitive pressures ramp up."
"The company needs to demonstrate it can hold on to and build market share across the pond and return its UK business to growth in 2025 to reassure investors," Mould thinks.
Shares in Entain rose 3.6% to 835.00 pence in London on Wednesday morning.
By Jeremy Cutler, Alliance News reporter
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