: As gambling PLCs continue to push out H1 results, Entain has posted improved financial results despite the well-known inbound headwinds. New CEO Stella David has underlined her confidence that Entain will hit its £1 billion EBITDA target this year, returning the company to its earnings status following consecutive years of multi-million pound losses. But analysts remain cautious about Entain's recovery, pointing towards compliance penalties in Australia, tax rate hikes in the UK and the Netherlands, and changing dynamics in the US, impacting the growth of BetMGM. Once more, Entain states that it can overcome all volatilities, but some question whether, yet again, we've been here before. Welcome back to iGaming Daily, brought to you by OptiMove, the number one CRM marketing solution for the iGaming market. I'm Charlie Horner, and today, to dig into all things Entain, I'm joined by SBC Media editor-at-large, Ted Menemur. and SBC News editor, Ted Almclay. We've got the two Ted's back again. So Ted Menmure will come to you first, how's things? Very well. Glad to be back with my tango partner, Ked-O-C. Well, felt rather strange last week going through our flutter results without Ted. Yeah, indeed it was. Ted, we missed you on the flutter one. though there's no slight on Tom Nightingale who did a splendid job. But Ted, how are you? Yeah, I'm good. Thank you, mate. Good to be back. It's nice to know that I'm missed and that I'm wanted. Your thoughts are appreciated. Yeah, it also just kind of feels weird that all these interim results get in the way of our usual political punditry podcast as well. Hopefully it'll be over soon and we can all get to get back to the Jeremy Paxman impersonations and so on. Yeah. But Entain's results are quite interesting to look at, I'll admit. Yeah, yeah, indeed they are. know, Entain struggled over the last few years. One of the major storylines has been, you know, their big penalties that they've had to face in recent years and hits to profitability and UK market share. But as they published H1 results, there was a lot of positivity from Stella David and Rob Wood, the chief financial officer. Is this the positive start that Stella David wanted as she takes up this permanent position as CEO? Ted Menmure, we'll come to you first. Do want to provide your brief overview of your analysis of this? Yes. Look, and things kind of put them forward like these very kind of positive vibes as it's presented kind of back to back quarters of growth. And it's the leadership team is kind of telling kind of new narratives to investors and pointing out kind of themes that they really want to kind of focus on. What we saw in the presentation was a big focus on upcoming upgrades and the launch of a kind of a new global platform that will help kind of its localized brands deliver kind of new kind of co synergies, cost controls, And. ring kind of new kind of differentiations to markets. That is a project led by Sati Barnes, the chief technology officer. And again, I think they are trying to tell kind of these positive vibes ahead of kind of what is a kind of a down view by investors, right? who probing whether Intend is again stretched too far to tackle its upcoming challenges that are impacting all gaming euro, PLCs. They are completely following in age two. Ted, we mentioned there that its diversification can be a point of contention, something that some investors have knocked in the past, but it's something that leadership was said that was a massive positive for the company in H1. In fact, if they have a poor quarter or a poor period in one jurisdiction, then other markets can help to cover those. So Ted, what's your analysis on this? Yeah, it's hard not to agree with Ted. think obviously from the outset, these are some pretty positive results. It looks like it's a good start for Stella David and her leadership team. Just obviously from purely like a financial and business standpoint, they've done very well. They've had their NGR growth up, very good results from the UK. I think they've got over, what it, was over a billion pounds there during the quarter. Ladbrokes and Coral are still performing quite well, clearly on the online front particularly. I think there was a bit of slowdown in retail, which is something we've kind of seen from across the board. We saw that in the Evoque results yesterday as well, which would chiefly relate to William Hill. Like retail in the UK is obviously been having a bit of a shaky time of it over the past few years anyway so there wasn't anything particularly new there but on the online side that more than complimented it. think what you've said about diversification is a very very important point not just for Entain but for a lot of the big multinational gaming companies, the ones that have interests across a lot of different markets. I think with a lot of, as you noted in the introduction Charlie, tax changes in places like the UK and the Netherlands both which are core markets for Entain. Having other markets where you've not got these tax hikes and not got regulatory overhauls getting in the way of things will provide almost like a financial buffer zone against some of the more challenging headwinds they're going to get in these other markets, which they do still need to be in. Regardless of whether the UK tax goes up, the report shows that the UK is in a UK and Ireland, I should say, are very important for Entain. a huge segment of his business, they need to be there, but they will be impacted by the taxation. And as a result of that, having some other markets around there to kind of make up for the losses that will be coming as a result of that, it's very important for them. Obviously, I know the taxation is not confirmed. it's not a hundred, it's not like, I guess, you know, it's not a hundred guaranteed to happen, but it's looking increasingly likely with every week and with every political update we get. never know. Yeah, absolutely. There's plenty of growth in the UK. They said that they've caught back up on market share that they previously lost. I think there was 39 % online growth year on year in Spain as well as they sort of try and position B winners as a podium position brand once again. So there's plenty of positivity. where else do we, know, did leadership site where the turnaround is coming for Entain? Ted Menmer, do want to give us a bit of a... of a whistle-stop tour of the markets and where this turnaround is coming from. So as Telus, he said, I mean, number one is the UK improvements. Rob Wood, when he was speaking to investors, that, look, they are serious about taking on a market share, the turnaround there for Ladbrokes and Coral, and that not only are they winning the battle on the revenue front, but they're also improving kind of cost controls there, especially on customer compliance and sign up. And they believe that they got actually better, better kind of margins than their competitors in their primary market. The other factor here is that there's that pledge for MGM to deliver $500 million in a beta by the end of the year. That's really going to be held to the cross by analysts. was a point that was really questioned. by, um, by, by investors and, know, why, why they've been kind of such a, such kind of big, upbeat number to, to their end of year. And also it's one of the things that he's kind of driving that a meter target of 1 billion that, uh, leadership wants to, that leadership has projected. Um, again, going back, um, one of the things that they referenced is that This is a leadership team that can take hard decisions. One of the reasons for the turnaround in Spain was the implementation of a new management and kind of new brand structure for Spain to turn around B when there, which was seriously lagging behind competitors in Spain. And in that kind of views kind of that podium place there. think that what this new entain team, entain leadership team are trying to say is that look, we're a more sustainable outfit now. Another thing that caught the eye here is that there was no mention of very little mention of the joint venture structure of MGM with MGM Resorts, which kind of, it's very strange compared to other quarters. It kind of makes me think is that now kind of just a stable element for Forentane, its relationship with MGM Resorts and has it kind of crossed that hurdle? Yeah, that's something that I picked up on as well, Ted. Usually we... tune into these investor calls with Entain and MGM. One of the main questions is, what does the exit strategy look like for this joint venture? But those questions were absent and I think that might come down to the fact that it seems like the MGM is turning the page a little bit in terms of the parents don't have to fund that anymore and they're actually taking cash out of that business and it's providing to the EBITDA. So maybe there's just a happy period where they can just maintain this until it's far more profitable. As we said, Stella David has raised EBITDA guidance to over £1 billion, which is a bit of a landmark. So Ted O'See, why is this so big for Entain and its long-term outlook? I guess this relates to what Ted was talking about with the cost-cutting efforts and more of a focus on efficiency that I think is becoming This is something that, you know, it's not just Entain who are focusing on this. I think this has become quite a area, quite a big focal area for a lot of gaming companies. We've seen Evoke talk about it yesterday with, we're not focused on getting growth for all cars. We're focused on making sure that our bottom line is good, that profits are good. We saw, I think, Bettson have mentioned this before, Supergroup, obviously. I put an interview out with their CEO this morning where he talks about this and about repositioning in the markets where going to get the most efficiency out of it. I think a lot of the gaming PLCs are really placing efficiency very high on the agenda. They want to look at what markets can get them the best returns for the lowest cost really and really look at those cost efficiencies. I think the fact that Entain have raised that a bit dark guidance and are very confident of achieving it shows that they've got lot of confidence in their cost cutting initiatives as well as in the sort of product enhancements that they've made. I know we mentioned this already, like Rob Wood said in that call as Ted referenced at the UK, the UK and Ireland have been a really big growth driver for the company. I think part of that has come down to a lot of their product upgrades that they've seen there, like with the Ladbrokes app and so on, as well as with marketing. We've seen that the company, particularly around the Ladbrokes brand in the UK, they've put a lot of effort into marketing over the years. They have a lot of creative partnerships, their campaigns are very extensive. mean, they often try and appeal to that kind of like casual betta, the guy who likes to go and put an accumulator on at the weekend and have a bet on a few horses sort of thing as part of like the weekend sort of experience. I think they're really going to be doubling down on that and while also making sure the costs are low to reach as wide a customer demographic as possible whilst maintaining that efficiency. And Ted, did you want to just add something there briefly before we go to a quick ad break? Yeah, just to check out. Look, I mean, to me, the one bit in Ibiza Mark is really like a statement of intent. And I think it's trying to say, look, it's been two rough years for our group on the FTSE, 900 million pound losses followed by 400 million pound losses, right? You know, we are turning this business around. This is, you the Ibiza is the benchmark this year. Brilliant. Well, we'll just go for a quick break and then we'll return and talk about the investor call. Welcome back to iGaming Daily, it's happy vibes and talk of a ship turned around for Entain. And let's dig into this a bit more and see if we can find any holes in this narrative. So the investor call, there was lots of probing by analysts. Ted Menmure, are investors buying this positive vibes or is there a different story to tell? I think it's too soon to tell. And okay, look, Entain's leadership team are setting it. And there is lots of probing, but that's not to be unexpected, especially for this period for European gambling PLCs. You know, questions on market challenges, tax, expenditure, and you know, how much profit you can generate off of your operational base. Again, I'm going to return back to the first part. I think this really bears down to can they hit target this year and can Entain, you know, really go kind of in the key to deliver that target and not shoot itself in the foot as it's done in previous years. Are they going to repeat the same story? I think this is going be one of the big, big narratives coming into the final period of the year. Will And we risk becoming the Taxation Daily podcast at this rate. We mentioned it that often, but we have to come back to these stories of UK tax liabilities. Ted Osee, how is Entain going to navigate these tax burdens that are obviously not confirmed as we've said, are highly expected and we have seen similar in the Netherlands. like you say, we've talked about this topic so much on the podcast lately. It's going to be a tricky one, I think, because like we said, the UK has clearly been a really core market for Entain. It has been for a while, obviously, because of Ladbrokes and Coral being two of its biggest brands and two of the two of the most popular betting brands in the UK, both retail and online. This is obviously going to create that problem for them because they rely heavily on these brands to drive a lot of their growth and the UK is increasingly likely to see some higher tax exposures. think firstly, there's a couple of ways they can mitigate it guess. Firstly is like we've already talked about, the cost cutting efforts and a focus on efficiency. If taxation is going up, you need to find other ways to cut your expenditure down. Part of that could then be of course marketing, but the issue they're going to have here is that we might end up in a situation in the UK where every customer counts. If you want to beat your rivals in mitigating this tax, part of that is going to be acquiring customers off them and marketing will be crucial to that. We've seen them launch the new campaign, another one in their long series of different advertising campaigns, the Ladis Faction one, they mentioned this on the call. They seem to be quite confident that this will win over customers as the Premier League starts going again with football obviously being the most better-pwned sport in the UK. As I guess is that, they're also very confident in their product enhancements and I think ultimately that is probably the one that's more significant in things like marketing. Customers want to go for what they think is the best product on the market. They've also been doing this like these coins bonus rewards things, which Stella David said has proven quite successful. So I think a lot of it is going to be, they're going to be doubling down on making sure that the customer experience, the overall product is of a very high appealing quality. We're going to try and make it better than a lot of other things on the market and really focus more on that than they will have done in previous quarters and previous years. Yeah, to try and win out market share and and make sure that revenue remains better than the tax. I'm getting this bit confused. I think you see where I'm going for. were asked, David and Wood were asked about tax in the investor meeting and they used the well-trodden black market lines. Those are well-known arguments against tax rises, but the messaging seems to be it doesn't seem to have much favour within government. I think there was a little editorial in The Sun last week which labelled tax arises in gambling as woke lefty nonsense. I don't think that's the correct messaging to frame this as either. But what Stella, David and Rob would did point out too was that diversification. they have exposure across so many markets that if there is headwinds, they can navigate those through that diversification and plurality of markets. So Ted Menmure, where else can we be looking as they try and offset this UK headwind? reflecting back on the analyst calls, there was so much probing of the UK and the UK going into kind an unexpected territory and what would the tax impact be? And how long would that adjustment be for not only in time, but all other European, all other kind of active PLCs to mean it's too simple to just say like diversification, like, okay, if we're growing in Spain, if we're growing in Croatia and Poland, that can kind of overcome, you know, downturns in your primary market. think that for entain it's if how big the decline is going to be across the board in the UK. Who's going to be fastest to adjust and who can take quickest market share from the decline once the, once the adjustments start to take place. Also, which PLCs are going to be hurt by the, the, the adjustment. Rob Wood was pretty clear that he believes that they'd be in, I mean, they've got the best kind of customer onboarding and customer compliance and they made the fastest adjustments for the current restrictions on online slots. And he feels that, okay, if the downturn happens, Entain will be fastest to react to it and grow. But again, it really comes down to how big and how long that adjustment takes and whether investors are willing to tolerate that with Entain. Yeah. I mean, it's an interesting message to go to market with that diversification is the answer to all your woes when investors were heavily scrutinizing that less than 12 months ago. But one other market that I think is really important is the US and we've kind of touched on it. know, BetMGME is expected to deliver for Entain's bottom line this year and even further, I think, know, half a billion dollars US by 2028 on the bottom line. So significant improvements there. We've kind of touched about on that relationship between Entain and MGM, but how do we see the long term or the mid to long term strategy on BetMGM? Ted Osea, do you have any sort of analysis on where that venture's going, maybe in comparison with, you know, we talked about Fanjul the other day. That's clear, almost undisputed market leader, but BetMGM is still a big player in the US, particularly on online casino. Yeah, mean, like I Fangil is the market leader. I think it's then followed by DraftKings, isn't it? In some states, they've almost got a duopoly, really. But BetMGM is comfortably third place, I think. It might be behind Fangil and DraftKings, but it's still way ahead of a lot of the other smaller sports books. And as you said, certainly on the iGaming front, Online Casino is doing quite well as well. It had obviously been struggling for quite a while to reach profitability, but now this is something that is clearly, like, is going better, much better. I think we kind of touched on this earlier. I reckon Entain will now be looking at that joint venture as just a way to maintain a solid foothold in the US at almost like a revenue anchor sort of thing. Something that's going to continue bringing some cash in. Fine, not to the same level as Fanjul and DraftKings, but a bit of a solid anchor in the US with a good commercial lifeline there, which allows them to have that source of revenue while then focusing on a lot of their product enhancement and marketing and market launches and battling out for market share in a lot of markets like the UK, Ireland, Spain, the Netherlands, Italy, and so on, where there are a lot of challenges coming in. Ted, do you have a difference of opinion on that? No, no, I think you hit the spot. think the I think there are more positive dynamics now with MGM and the route that it's taking. And also its position and status in the market. Yes, they've kind of accepted that third place, but if we can maintain that against kind of growing opposition coming in in fifth or fourth place, it's a good position to be in. Yeah. think sometimes we confuse market share with profitability. your profitability is high while still having a lower market share, sometimes that's not the worst position to be in. Right, I'm going to put you both on the spot just before we wrap up. What's the one thing that we should be looking at as Entain attacks this H2? Ted Menmure will come to you first. TREVOR I think, you know, how they close out the year. you know, it's whether those kind of results carry favor for them in terms of the Premier League and especially the NFL for the MGM. So everyone's monitoring that. And then finally, can it actually begin to prove kind of its technical capacity and bring these big integration projects in-house, deliver them on time, please that investor base? I always think going to maintain having this, it's got one relationship with its markets and then another relationship with investors. Can it kind of start to kind of tame those and create kind of a better vibes? Yes. That's our follow-in time. Brilliant. And Ted, I'll see very briefly, where are you looking? I've kind of got two things with this. Firstly, how it's going to respond to these increasingly likely UK tax increases and the ongoing regulatory reviews. How is it going to make sure that its product and its brand stands out to customers when a lot of other companies are going to be doing the exact same thing? And I don't know, think the other thing to keep an eye on a bit more of a curve ball in here, but things that might be going on in Australia, like there's murmurings of some regulatory problems over there, some quite significant ones. And we've also got just a general regulatory review going on in Australia of the betting industry as well that was shelved for a bit, but now seems like it's making its way back onto the agenda and could impact potentially a lot of companies there. Brilliant. Sharp analysis as always. Ted Menmure, Ted Osee, thanks very much for your analysis here. If readers do want to go a little bit deeper into the numbers and see a little bit more about the Australia story that Ted O'See just mentioned, we'll have the links to both of those stories in the show notes in the description. But for now, thank you very much for listening to this episode of iGaming Daily and we will catch you on the next one.