ii view: bookie Entain puts markets and brands under review

Full-year results to 31 December

• Revenues up 11% to £4.77 billion
• A post-tax loss of £879 million and following a legal settlement
• Adjusted profit up 1% to £1 billion
• Second interim dividend of 8.9p per share 
• Total 2023 dividend up 4.7% to 17.8p per share

Chairman Barry Gibson said: 

“2023 was a period of necessary, but ultimately positive, transition for Entain. We have significantly strengthened the quality of our revenue base, enhanced our Board, and delivered a resolution to a critical, historic, regulatory issue.

“We are making positive progress in our search for a new permanent CEO, and in the meantime (interim CEO) Stella David is driving the business as it continues to take appropriate actions to deliver changes to drive a better long term performance. 

“As our transformation continues the newly formed capital allocation committee has commenced a review of Entain’s markets, brands and verticals. The objectives of the review are to help focus the organisation, improve competitive positions and maximize shareholder value.”

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ii round-up:

Sports-betting and gaming company Entain (LSE:ENT) operates online, generating most of its adjusted profit at around three-quarters, as well as on the High Street. 

Its sporting related betting brands include Ladbrokes, Coral, bwin and Sportingbet, with gaming brands taking in CasinoClub, Foxy Bingo, Gala and PartyCasino. 

A constituent of the FTSE 100 index and a tax resident in the UK, it has licenses in over 40 regulated or regulating markets. It also operates in the USA via a 50/50 joint venture with MGM Resorts under the BetMGM brand. 

For a round-up of these latest results announced on 7 March, please click here. 

ii view:

Previously known as GVC Holdings, Entain employs around 29,000 people. Competing against rivals such as Paddy Power owner Flutter Entertainment (LSE:FLTR) and William Hill owner 888 Holdings (LSE:888), the UK is its biggest revenue generator at 41%, followed by the rest of Europe at 30%, Italy and Oceania 11% each and the rest of the world the balance of 7%. 

For investors, problem gambling, a pending UK regulatory review, heightened hurdles to betting in the Netherlands, and potential government crackdowns elsewhere in the world all warrant consideration. Adverse sports results hindering margins remain an ever-present threat, competition in its targeted US market is not to be dismissed, while group net debt of £3.29 billion compares to a stock market value of £5.2 billion.  

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On the upside, there has been speculation about private equity interest in Entain, and management itself is reviewing its markets, brands, and verticals with the pending appointment of a new chief executive potentially revitalising its strategy. A focus on squeezing cost savings persists, while a forecast dividend yield of around 2.2% compares well to rivals.  

For now, more cautious investors are likely to await the conclusion of the UK’s regulatory review and perhaps the appointment of a full-time CEO. More speculative investors on the other hand may concentrate on its 30 plus brands and a consensus analyst estimate of fair value sat at over £10 per share.  

Positives: 

• Diversity of business type and geographical locations
• Management review of operations

Negatives:

• Uncertain consumer outlook
• Potential for increased regulation

The average rating of stock market analysts:

Buy