25th Sep 2023 11:12
(Alliance News) - "Robust" cost control was a saving grace in an otherwise discouraging update from Ladbrokes owner Entain PLC.
Shares in the FTSE 100 constituent slumped 7.8% to 972.00 pence each in London on Monday morning, the worst blue-chip performer.
Entain bemoaned net gaming revenue has been weaker than expected, explained that unfavourable sporting results hurt margins and added that regulatory matters in the UK and elsewhere have been "headwinds".
"Post the summer, online net gaming revenue has been mixed across the group, but in aggregate, softer than anticipated," Entain explained.
It lowered its net gaming revenue outlook, predicting low double-digit growth, its guidance cut from a low- to mid-single-digit rise.
Nonetheless, the Ladbrokes owner reiterated its expectation for full-year earnings before interest, tax, depreciation and amortisation to be within the range of GBP1.0 billion and GBP1.05 billion. This would be up from GBP993.2 million in 2022. Entain said its bottom line outcome will be supported by "robust operational controls".
"Entain deserves some credit for maintaining its earnings guidance for the full year despite the disappointing third quarter showing as it keeps a tight rein on costs," AJ Bell analyst Russ Mould commented.
But Mould added that regulatory affairs remain a "big threat" to bookmakers.
"The social harm from gambling is such that governments are stepping up their efforts to curtail the impact both in betting shops and on the internet. This means companies have to spend more on measures to mitigate problem gambling and that can lead to slower customer acquisition. The weak growth flagged in Australia and Italy also suggests people are not gambling as much or as frequently because cost-of-living pressures mean they have less in their pocket to fund a flutter," the analyst added.
Mould added that Entain backing its annual bottom line guidance could be "optimistic", and it risks dishing out a profit warning further down the line.
Key to Entain will be its fortunes in the US, where it is in joint-venture with one time suitor MGM Resorts International. Entain said its 50%-owned BetMGM arm is "continuing to perform well". It is on track for a "positive" second half Ebitda.
"Much rests on its 50-50 BetMGM venture with MGM Resorts in the US – the latter’s historic bid interest in Entain could have the potential to be revived if the company’s share price and performance remain depressed," Mould added.
By Eric Cunha, Alliance News news editor
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