Man winning a sports bet
Entain shares drop after softer than expected trading / Image source: Adobe
  • Soft trading amid regulatory headwinds
  • US joint venture BetMGM sales seen top of guidance
  • Full-year profit guidance reiterated

Global sports betting group Entain (ENT) gave a veiled warning on Monday after saying current trading was softer than anticipated, but maintained its full-year profit guidance.

Investors got the message, with the shares rooted to the bottom of the FTSE 100 dropping 7% to 990p. Shares in fellow betting company Flutter Entertainment (FLTR) were caught up the negative sentiment, falling 3% to £135.90.  

Flutter has been one of the best large-cap performers over the past year driven by excitement at its planned dual US listing. In contrast, Entain shares have lost 37% of their value since the end of January.

WHAT DID THE COMPANY SAY?

Third quarter net gaming revenue is now expected to be up by high single-digit percent but down high single-digit on a like-for-like basis.

Leisure analyst Gregg Johnson at Shore Capital had expected a ‘broadly flat to modest growth’ outlook before today’s trading update.

‘We see a better-than-anticipated performance from Retail and acquisitions, although we question at this stage the assumed Q4 performance and whether profit performance is also being supported by reduced marketing and investment, which would impact growth further out,’ said Johnson.

Chief executive Jette Nygaard-Andersen commented: ‘We are reiterating our EBITDA (earnings before interest, tax, depreciation, and amortisation) guidance for the year despite softer-than-expected revenue growth in Q3 and the ongoing roll-out of industry-leading safer gambling measures.’

The company identified adverse sporting results, persistently high ongoing regulatory headwinds in the UK and slower-than-anticipated trading in Australia and Italy as key factors driving underperformance.

US CONTINUES TO PERFORM WELL

On a brighter note, the US BetMGM joint venture was said to be on track to deliver positive EBITDA in the second half of 2023.

Rank shares rally as first half profit rises eight-fold

 

Full-year US net gaming revenue is expected to be at the upper-end of $1.8 billion to $2 billion guidance, partly driven by online sportsbook enhancements supporting a ‘strong’ start to the NFL season.

EXPERT VIEW

Russ Mould, investment director at AJ Bell, commented: ‘The big threat bookmakers face across the global markets in which they operate is greater regulation and that’s reflected in today’s warning of softer online revenue growth from Coral and Ladbrokes owner Entain.

‘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.

‘However, it may be making some optimistic assumptions about performance in the fourth quarter in sticking with forecasts which could fail to materialise, resulting in a damaging profit warning down the line.

‘If the company opts to dial back on marketing spend it could also lead to a loss of market share and store up problems for the future.’

Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The author of the article (Martin Gamble) and the editor of the article (Ian Conway) own shares in AJ Bell.

LEARN MORE ABOUT ENTAIN

 

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Issue Date: 25 Sep 2023