Entain warns of decline in online gaming revenues

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UK gambling group Entain has warned of a fall in online gaming revenues, blaming the drop on reforms designed to make the industry safer and on recent unfavourable sports results.

The warning sent Entain shares down more than 11 per cent in early trading on Monday, leaving them at their lowest level since 2020 and making them the biggest faller on the FTSE 100 index.

The Ladbrokes owner said it expected online net gaming revenue growth in the third quarter to be down by a “high single digit per cent” on a pro forma basis, contributing to a “low single digit per cent” fall in pro forma online gaming revenues for the full year.

Entain blamed the gloomier outlook on a combination of “adverse sporting results” hurting margins in September, “ongoing regulatory headwinds” from government reforms in key markets such as the UK “persisting longer than expected” and “slower growth than expected” in its Australian and Italian businesses.

In the UK, Entain’s biggest market, ministers this year announced a suite of reforms to reduce problem gambling, including financial affordability checks on certain bettors and stake limits on online slots. The UK government is overseeing a round of consultations on how to implement the changes.

When the group released half-year results in August, Entain had forecast “low to mid single digit pro forma” full-year online revenue growth.

Despite the downgrade, Entain, which also owns Coral and Bwin, said its projected earnings before interest, tax, depreciation and amortisation remained in line with expectations of £1bn-£1.05bn for the full year, “supported by robust operational controls”.

Ivor Jones, an analyst at Peel Hunt, said Entain had warned over revenues but maintained its earnings guidance, showing the gambling group must have “compensated” for weak online revenues with strong growth from its retail operation and discipline on costs.

Jette Nygaard-Andersen, Entain’s chief executive, stressed that the gambling operator “[continued] to see good underlying growth in our online business” as well as strong full-year earnings “despite softer than expected revenue growth in Q3 and the ongoing roll-out of industry-leading safer gambling measures”.

Analysts at Goodbody forecast a 1 per cent decline in full-year earnings off the back of Entain’s trading update.

“Online trends in several key markets are disappointing,” they noted, adding that they took “some encouragement” from the strong performance of Entain’s US joint venture BetMGM. “It appears a lot of the weakness is driven by sporting results, which should normalise over time.”