7th Mar 2024 10:57
(Alliance News) - Entain PLC on Thursday warned of a hit from regulatory measures this year, a reminder that while the US has turned into the land of opportunity for gambling firms, the situation elsewhere is now less favourable.
In the UK, the Ladbrokes and Coral owner said it is "delighted to see the long-awaited regulatory review draw closer to conclusion".
"We look forward to the implementation of stake caps on online slot games and a potential agreement on uniform safer gambling measures across the market. While we expect these changes to be a positive for Entain in the long run, we may see continued player disruption over the short term, and with leading brands we may see opportunities for us to invest in marketing to grow market share," it said.
In the Netherlands, meanwhile, the watchdog has "proposed tighter deposit limits" to take effect in the second quarter of 2024.
Entain warned: "As a result, we expect that, in aggregate, these dynamics could reduce FY24 earnings before interest, tax, depreciation and amortisation by approximately GBP40 million."
Entain's 2023 results showed it swung to a pretax loss of GBP842.6 million in 2023 from a pretax profit of GBP102.9 million the year before, as administrative costs grew 60% to GBP3.51 billion from GBP2.19 billion the previous year.
Entain saw its revenue increase by 11% to GBP4.78 billion from GBP4.30 billion in 2022, crediting "good growth" in BetMGM, which saw its net gaming revenue jump by 36% to USD1.96 billion. This is at the upper-end of its USD1.8 to USD2.0 billion guidance range.
BetMGM is its US joint-venture, operated alongside one-time suitor MGM Resorts International.
Paul Ruddy and Ciaran O'Flynn, analysts at Irish broker Davy, said: "2023 was a challenging year for Entain, losing share in a number of markets and seeing underlying declines in its online business. Although the headline valuation for the group is relatively low, further regulatory headwinds suggest that 2024 will be another year without meaningful profit growth."
Entain said it is trading in line with expectations so far this year, despite the GBP40 million warning which Shore Capital Markets analyst Greg Johnson labelled a "sting in the tail".
Shore has a 'buy' rating on the stock, and notes it trades at a "depressed" valuation against peers.
"Progress against the targets to return Digital growth to market rates and market share gains at BetMGM would be expected to see the shares re-rate materially. Although we concede this leaves it a bit jam tomorrow as an investment case, today's update does offer some encouragement against these targets," Johnson added.
Nonetheless, Entain shares slumped 8.6% to 758.90 pence each in London on Thursday morning, extended a miserable share price run for the stock. It has fallen some 45% over the past 12 months.
In contrast, Flutter Entertainment PLC, the owner of Paddy Power and Sky Bet, is up around 20% over the past year.
By Eric Cunha, Alliance News news editor
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