iGaming Daily

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iGaming Daily closes the week by dissecting the interim results of one of Global Gambling's most speculated firms, Entain. Headline performance from Entain saw the firm upgrade its year -end EBITDA guidance, excluding US activities, to above the 1 billion mark. Yet, under the bonnet, interim results detailed scars of no financial growth across their UK business.

Whilst underlying profits continue to be hampered by legal costs concerning its legacy business affairs. H2 Trading also saw the firm enter a make or break period as deal breaker Gavin Isaacs takes the reins of a business facing a mirage of challenges across all markets with its investors. I'm joined by Ted Menmure, the editor of SBC and Conor Porter of Casino Beats to

Yeah, to dissect Entain further and before we get into Entain and before we get into the meat and drink of today's podcast, it is the final week of the Olympics or the final weekend of the Olympics, I should say. So I didn't want to check in with you both and see if you've been enjoying any of the unique sporting activities that are on show and yeah, what you've enjoyed. Have you watched any of the Olympics? Connor, start with yourself. Yeah, I've been watching it every now and then when it's been on TV.

A couple of the events I've kept an eye on are the track and field events. I've also enjoyed the football and kept an eye on the Water Rapids canoeing, which was the first week as well. So yeah, I've been enjoying the Olympics every now and then, when I've seen it on TV. Yeah, nice. It's like you mentioned with the Water Rapids, it's such an opportunity to watch so many different sports. And I think the

photo finish in the men's 100 could be wrong there, but there was a really iconic photo finish that was just unbelievable really. And Ted, I know you've been dialed into the Olympics surely, right? I've been dialed into the means of the Olympics, blown away by that Turkish shooter. Yes. And definitely kind of replicating his work ethic at SBC. So yeah.

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No, I love the Olympics. It's been a good one. And watched an awesome basketball match yesterday, Serbia versus Team USA. And if you can watch it, one of the best basketball matches you'll ever witness. Yeah, they were so close, Serbia. They were so close. Nikola Jokic nearly dragged home one of the biggest upsets, but the star power on that US team is crazy.

Indeed, Yeah. It continues this weekend, so let's enjoy. let's get into the nitty gritty of today's podcast and reflecting on Entain's corporate developments and results, I guess just a little bit of oversight. Connor, why do you think Entain is such a difficult company to report on as a journalist and when you're trying to provide analysis over this industry?

I'm not sure if it's a... I'm curious as to Ted's perspective on this because I'm not sure if it's a difficult company to report on, but more of just sometimes we have to delve really deep into the financial report in order to try and find trends and potential trajectories of the company itself. It's quite ambiguous at times as to...

what the actual overall story is Ted, I don't know if you feel that kind of direction. Okay, I kind of agree with the purpose of what Joe's saying. As you mentioned in your intro, Entain is without a doubt gaming's most speculated company for a number of reasons that I'm sure we're to cover in this podcast. But I'm going to offer kind of the editorial perspective of Entain. It's hard to cover because in essence,

We're now reviewing a business that has four distinct units. It's got its us joint venture with the MGM, its heritage UK business and Ladbrokes Coral, its international unit. And now it's even added onto that with EntainCC, which is a business formed out of Super Sports and STSS Poland for Croatia and Polish markets, right? And as many have pointed out, Entain has kind of this

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its legacy, it's a company that's formed of successive &A's taking on a very aggressive PLC strategy that its investors have bought into. From my perspective as such, I think that you're talking about a business with four units that have very distinct growth profiles, but Entain has never managed to find kind of a binding narrative for its business overall. And I think that's what's being asked of it at the moment.

It's a company that likes its drama. Let's just say that.

It's interesting that you mentioned, bet MGM there. know we're kind of going to focus on a different aspect of entertainment today, but, there is always a lot of attention on what the future holds for the bet MGM side of business. What can we expect? What developments can we expect from, the bet MGM joint venture? Yeah. So with the bet MGM joint venture with of course, MGM results international in the U S, not too long ago.

We actually covered their first half of 2024 report here on iGaming Daily. So go back and check out that episode for more in detail on BetMGM. But overall, BetMGM had a net revenue offer operations reaching about a billion dollars. And they also mentioned that they were laying down the groundwork for their future. And a lot of their focus on investment throughout the rest of the year would be into iGaming in hopes that they can

create higher year on year revenue growth into the second half of this year and into 2020 -25. So Entei of course has a 50 % share in that. And they said within their own report that they are, BetMGM's delivering, accelerating that revenue momentum through the first half of the year with a stabilizing 30 % market share, up 9 % year over year in consistent currency in NGR, 4 % on Q1, driven by.

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strong acquisitions and retention metrics with improving product as well and product capabilities and engagement campaigns which includes their Super Bowl campaign that they had with Tom Brady and Wayne Gretzky and Vince Vaughan. They had the angstrom for their sports book as well and their single wallet as well across their operations. BMGM is doing

good for Entain, they're pretty happy with it. And yeah, they're marching on for the rest of the year with the continuation of the iGame investment. But when it comes to Entain itself, it's like Ted said at the beginning, it's only a slice of the pie now of the overall Entain portfolio. And a lot of it that we're gonna focus on here today.

is going to be their performance in the UK market, which Ted knows plenty of, given his years of covering and paying for SBC. Yeah, and a nice roundup on BetMGM there. Thank you. A good way to start. And all eyes of the industry were very much low on Entain this week, I guess they're more European operations. And leadership raised guidance to £1 billion, a positive.

I guess Ted signs that performance is back on track and yeah, there's a positive outlook for the firm. It's a sign indeed. Look, think here let's strip out US activities and then and 10 reported a 6 % increase in net gaming revenues, which stood out 2 .5 billion. That's alongside gross profits of 1 .5 billion. Yes.

you know, it's an improved performance and 10 has upgraded to beta above the one billion mark. And it says that it's now kind of on that road to kind of operational efficiencies, following a better than expected Q2. And it's an improving its overall kind of product to margin performance. Now that is the leadership's take, right? However, when you start to match overall group performance on a pro forma basis,

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including US activities, and contains growth, and contains kind of financial metrics, just remain stagnant. Now, if you look kind of further down the bonnet to the analysis of kind of the MGM joint venture, it's like, yes, a lot of money is going into that venture, it is growing, right, but it still has no clear pathway to profitability, right, in a better or a better churn.

Now, if we're being even more critical here is that Entain had an awful 2023, in which at the end of year, it then had to strap or book £900 million worth of losses. And on its accounts, it still continues to be dragged by higher operating costs, impairments, and legal items related to legacy assets.

So the profitability, right? Or the revenue, the profits generated by Entain as a group continue to be wiped out on a quarter by quarter basis, right? It actually makes it very hard to provide kind of a guidance as to, yes, can talk to them about a beta, but overall, what profits is it making from its operations?

when they're being kind of dragged out to legacy legal costs as such. So that is another problem for Entain and its investors. Entain can make money, but it will get wiped out. Interesting. to kind of keep up with the metaphor of looking under the bonnet, I'm actually from a family of mechanics and my dad always says we should get the opinion of a second mechanic. And Connor, I know you also...

took a look under the bonnet of Entain this, you also took a look under the bonnet of Entain this week and yeah, had a deeper look at those numbers. Is there a cause for optimism? I think when it comes to optimism for Entain, is partially the US, which we already mentioned about, MGM, but also the international segment for them. They said that NGR was up 10 % year over year in constant currency.

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and 3 % in constant currency on a pro forma basis, with Brazil delivering strong double -jit revenue growth ahead of schedule, which when we keep in mind that Brazil is on its way to regulating its market at the start of next year. And I think Ted correct me if I'm wrong here, but Sportingbet has applied for its license in Brazil. It's just waiting for feedback as to whether or not it's been accepted.

Is that correct, Ted? you think? I think the applications are in process at the moment. think this week there's 12 companies that have submitted. I'm pretty sure it's one of them. Yeah. So the licensing procedure as yet has not started out and out. Right. But with the Brazil NGR, they said it's up 28 % year over year in custom currency. So when the market does regulate and if Entains brand is accepted,

It looks like it could be one of the stronger brands in the Brazil market. But Australia was flat despite softness in underlying market. Italy fell by 3 % in constant currency with online and retail both down in those markets due to customer friendly skew on sports margins. it's peaks and valleys, I should say.

for Entain overall. They've got a good position as well in Croatia with their Super Sport brand and of course STES in Poland, too, recently acquired as well. international growth looks good, US growth looks good as well, but it's those UK market headwinds that they are battling against at the moment. But they've got optimism that they can

turn around the growth into the new year. And Ted, when we talk about, you know, declines it for Entain across the UK, why is this such a key area of concern? And is it just indicative of a kind of challenging UK market? If you're an Entain investor, this is the major point of concern. Entain's core business area in the UK

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has declined by 18 % below the 200 million pound mark. And it's reflected to declines across its online units and retail. The company or company leadership continues to state that it's addressing compliance challenges and player journeys across its UK brand portfolio. However, if we look back, we're now kind of entering year two of corporate adjustments in the UK for Intain.

And the other thing here is that Entain will be compared against its competitors, especially its PLC competitors in the UK. So if you compare them to the Flutter, Flutter chose to kind of front load compliance costs in 2022 and take on these challenges head on. Entain on the other hand, it's now 2024. And if you reflect back to kind of 2022, it was saying that it expected that.

following its adjustment, this would be a year in which it would return to growth back in the UK and begin to take market share. This is really, the UK headwinds really are a weak point for the company at the moment and where they stand. And it's going to be an area where investors and analysts are going to want to see significant progress in. But is it just kind of,

consequence of the UK market at the moment? Is this really an unwinnable challenge in the UK? Yes, mean look, Entainer Pop committed to the UK and to see kind of double digit growth go down. So yes, you could say that, okay, the retail adjustments are across the industry, right? But in online to have a consecutive decrease in NGR is bad.

And also, if you look at the balance statement, is every financial, every financial metrics for its UK business is trading below expectations. I think investors and for the amount of money that you're talking about a company that has spent on compliance, special items costs, right? Integration projects, right? Not to be achieving even, you know, an on par performance in the UK would be of concern. And you've got to take account that

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UK will drag any kind of growth within its new markets, be it the CC unit or the international. So it's an area that it desperately has to fix. obviously leadership is open on 2024 really being a turnaround year. Where do you think they are going to focus? Which disciplines are they really prioritizing as they look to have this

turnaround and bounce back ability this year? Well, when it comes to focus for Entaid, they have outlined three strategic areas of driving organic growth, expanding online margins and empowering growth in the US. And it just goes into what Ted said about the UK market, because that is the key one that they need to try and find the organic growth. And, you know, they're hopeful that in terms of

retail with these cabinets that they got planned out for the next generation cabinets that they're rolling out in Q3 that it will help rebound retail operations across UK and Ireland. online, and Ted can go a bit more into this, I guess, it may be a bit more difficult with how much more competitive it is becoming in the UK, especially when

their brands of coral and land brooks have at times not been up to the same standard. Cause I know in the past they've mentioned about their apps and things like that. So. Yeah. I mean, look, I'll add to that. Look at the start of the year and saying, said it was going to have a reorganisation led by the capital allocation committee employed by the board.

And after a six month review, comes back and it says, we reviewed the portfolio and we're only going to put one sale, one brand up for sale from, from a unit of 36 brands. there is a lot to fix internally in that company. And I think that, you know, the priorities of like, yes, every company wants improved margins. Every company wants to drive up shareholder value, but I still think that one of the things

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primary difficulties is that it's a company that has got to change kind of its internal nature and go from, we've grown ourselves solely through &A to now being a company that has to integrate, that has to show kind of deeper proficiencies beyond just paying that check to require a company. And that's what's being asked for by shareholders. That's what the markets want now.

in comparison to its competitors. Can it achieve that? We're yet to see it.

Yeah, obviously big challenges. And as I mentioned at the top of the show, new CEO Gavin Isaac's taste charge, I think on 2nd of September.

a big task for him. What expectations can they realistically set Isaac Santain, I guess, as a company moving forward? And where will he his key focuses be? What will be on his agenda as he sits down in the the the throne at Entain's head office? Conor, kick us off there. So, the number one thing will be

as we've constantly mentioned throughout this podcast is, given a pathway for growth to return in the UK. That's got to be the number one target for Gavin Isaacs when he steps into the CEO role on September 2nd. But beyond that, it will be going on to meeting the guidance that they set out for the remainder of the year, which is low single digit NGR growth and the Group EBITDA between 1 .04 billion and 1 .09 billion.

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Within the results, Sentain mentioned that the guidance reflects, quote, uplift from stronger than expected Q2 and GR performance, revised timing of regulatory information in Brazil and the Netherlands, which is another market that we didn't really touch on given their regulatory changes offset by FX headwinds. But Stella Davis is looking forward to welcoming Gavin Isaacs.

into the CEO role and continuing the operational momentum. But as we've discussed Ted, throughout this podcast, it's going to be an uphill battle in the UK. You know, we started off with the podcast by saying, look, Inten are the most speculated gambling PLC. And I think all eyes are going to be on Gavin Isaacs, and especially with regards to the future of the MGM.

and the pressure they face to actually get a deal from the only company that can acquire it, MGM Resorts. Now, I think that Isaacs comes in to the boardroom knowing that both parties are entrenched in their position and their valuation of the Bet MGM business. And in this sense, that's kind of paralyzing. Entains other divisions and entains strategically of where it can go.

Short term, think that Isaacs has to land or has to get a deal on paper by the end of the year. And this would be to the benefit of the other kind of entertainment segments, be it the international unit or the CC. I think that we're looking at a transformative 18 month period for entertainment. I don't think that the company can operate as it stands. Too many brands, not enough integration.

And it's got a look for a kind of its easiest route to form a cohesive business within a year time period. It's a difficult job. It certainly is. And all eyes will most definitely be on Entain moving forward and on what Gavin Isaacs does. And you can be sure to catch the latest developments on SBC News on Casino Beats.

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course on the iGaming Daily. But it is Friday. There's two days of no iGaming Dailys coming up. But in the absence of iGaming Daily, there is a glut of sport. And to sign us off really quickly, I'm going to get some recommendations from you. Connor, obviously the EFL returns this weekend. Where should people be watching? that's a big question. Lots of games going on.

in the EFL, but I'm actually myself going to Birmingham versus Reading for the hospital radio that I do. But obviously there's big games in the championship with Leeds and Burnley and those likes of teams competing. So yeah, I would keep an eye on all three divisions because it's always good to eat EFL football. Love EFL football.

Lots of football to watch. All three divisions. I'm not sure if that's a recommendation to keep your eye on League One, League Two and the championship. But yeah, you've got it, go for it. And Ted, I won't ask you about the EFL, but I will ask you about the Olympics. Yeah, what's going on this weekend? Where should people be watching? I think it's all down to France versus Team USA final, the big send off. And I'll certainly be tuning in. So that's basketball, right?

Yes, the basketball, yes. Any chance of an upset? I think so. I think any price against the US team, I'll take it. Yeah. Nice, nice. So even a hint of a underdog tip there. So thanks ever so much. Enjoy your weekend, whatever you're watching, whatever you're getting up to. And thank you for your time.