10th Aug 2023 14:19
(Alliance News) - Entain PLC set aside GBP585 million for a possible settlement of an ongoing UK probe concerning its legacy business in Turkey, a sum that will put "boardrooms up and down the country" on alert.
The provision was the "elephant in the room", as Hargreaves Lansdown Matt Britzman put it, while the Ladbrokes Coral owner reported half-year results.
Back in May, Entain said it was in talks with the UK Crown Prosecution Service regarding an ongoing investigation by HM Revenue & Customs into a potential breach of the bribery act at its former Turkey-facing business, which was sold in 2017.
"The [deferred prosecution agreement] negotiations have now progressed to the point where the company believes that it is likely to be able to agree on a resolution of the HMRC investigation insofar as it relates to the company and the group," Entain explained on Thursday.
The full terms of the agreement are yet to be confirmed and are subject to judicial approval.
However, it has booked the GBP585 million provision for a potential settlement, which would be paid over a four-year period.
Hargreaves Lansdown analyst Britzman commented: "This is eye-watering stuff. The Turkish business was sold for EUR150 million, so the provision, which likely closely matches an impending fine, is roughly 4 times the value received in the sale. As Entain themselves point out, this is a transaction made a long time ago, by a different management team and much has changed since. But boardrooms up and down the country will be looking anxiously at the scale of punishment and wondering whether they have any skeletons in their own closets."
Turning to the results, Swiss bank UBS noted they topped consensus. Entain's revenue in the six months ended June 30 climbed 11% on-year to GBP2.38 billion from GBP2.09 billion.
Net gaming revenue, which excludes value-added tax and goods and services tax, rose 14% to GBP2.40 billion from GBP2.12 billion, ahead of consensus GBP2.34 billion, UBS noted.
Entain swung to a pretax loss of GBP502.5 million, from profit of GBP28.1 million, reflecting the HMRC provision.
Underlying earnings before interest, tax, depreciation, and amortisation, however, rose 6.0% to GBP499.4 million from GBP471.0 million. The bottom-line measure, which excludes the US, topped consensus of GBP495 million, according to UBS.
Entain shares dropped after markets opened on Thursday, but they recovered as the day progressed, sitting 1.4% higher at 1,377.00 pence each in London during afternoon dealings.
By Eric Cunha, Alliance News news editor
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