Entain tightens full-year guidance despite tougher regulation

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Entain, owner of Ladbrokes and Bwin, has raised the lower end of its earnings guidance even as the betting company faces tighter regulation and difficulty maintaining growth driven by a surge in online gaming during 2020 lockdowns.

The company on Thursday narrowed its guidance for full-year earnings before interest, tax, depreciation and amortisation from between £850m to £900m to a range of £875m to £885m.

The betting group benefited from “strong growth” in all its markets online during 2021, except Germany where new gambling laws require players to adhere to limits on how much they deposit and stake in online slots.

Entain’s latest forecast comes a day after it announced a sharp improvement in prospects for BetMGM, its US joint venture with the casino group MGM, which it said would turn profitable in 2023 despite hefty marketing costs incurred by US operators as they fight for customers in newly regulated states.

BetMGM was “a particular highlight”, chief executive Jette Nygaard-Andersen said.

The company continued “to see significant growth opportunities” with “a total addressable market of around $160bn across our new and existing markets, as well as in emerging areas of interactive entertainment”, she added.

Bill Hornbuckle, MGM’s chief executive, said on Wednesday that he was “beyond excited” to integrate BetMGM further into MGM’s loyalty program and land-based casinos. Analysts suggested that this could signal MGM’s intention to buy out Entain’s half of the joint venture or attempt a second takeover of Entain.

MGM offered £8bn for Entain in January last year but was rebuffed by the Entain board, which said that it undervalued the company.

Betting companies have increasingly turned their attention to the fast growing US market where a federal ban on sports betting and online gaming was overturned in 2018. There are now around 30 states that offer sports betting and 18 that allow bets online.

By contrast, more mature European markets including Germany, the Netherlands and the UK have begun to tighten regulations in an effort to counter gambling addiction.

Entain’s rival Flutter said in November that unfavourable sports results and stricter gambling laws meant that its full-year earnings would be at the lower end of its expectations.

Entain has focused on diversifying its business model and said that it plans to invest an extra £25m into “new opportunities” including its first esports betting business during 2022.

Digital growth had been driven by a 25 per cent increase in active players across its brands, it said.

Although online net gaming revenue for the full year was up 12 per cent compared to 2020, the company said that it had faced tough comparative figures in the quarter to the end of December due to lockdowns and restrictions across its major markets in 2020, which encouraged bored punters at home to gamble online. Online NGR was down 9 per cent in the period but Entain said this was still “ahead of expectations”.

Greg Johnson, an analyst at Shore Capital, said that the reopening of retail betting shops, where revenues surged 60 per cent year-on-year in the fourth quarter, would be “a significant delta” to Entain’s full year performance.

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