ii view: Ladbrokes owner Entain breaks records

Shares for this FTSE 100 company are down by more than a quarter year-to-date. We assess prospects. 

First-half results to 30 June

• Total group Net Gaming Revenue (NGR) up 18% to £2.12 billion
• Adjusted profit (EBITDA) up 17% to £471 million
• Underlying pre-tax profit down 38% to £152 million
• Interim dividend of 8.5p per share (H1 2021: Nil)
• Net Debt of £2.21 billion, up from £2.09 billion in late December

Guidance:

• Continues to expect full-year EBITDA between £925 million and £975 million

Chief executive Jette Nygaard-Andersen said:

"I am delighted that more customers are choosing to play with us as we focus on providing them with even better products, engaging content and exciting experiences. This has resulted in our highest ever level of actives in H1, up 57% versus the same period two years ago.  Not only is this approach great for our customers, but it also provides us with a broader, more recreational customer base that will support more sustainable long-term revenues.”

ii round-up:

Sports-betting and gaming company Entain (LSE:ENT) operates both online and on the high street. 

Its sports brands include Ladbrokes, Coral, bwin and Sportingbet. Gaming brands include CasinoClub, Foxy Bingo, Gala and PartyCasino. 

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The FTSE 100 index constituent is tax resident in the UK with licenses in over 30 regulated or regulating markets. It also operates in the USA via a joint venture with MGM Resorts International (NYSE:MGM) under the BetMGM brand. 

For a round-up of latest results, announced on 11 August, please click here. 

ii view:

Founded in 2004 and formerly known as GVC Holdings, Entain today employs over 23,000 people. In 2021, the company rejected an $11 billion all-share offer from BetMGM co-partner MGM Resorts on the grounds that it significantly undervalued the company. A bid from US rival DraftKings Inc Ordinary Shares - Class A (NASDAQ:DKNG) was also made but subsequently withdrawn. Other recent sector M&A activity has included rival 888 Holdings (LSE:888) buying the overseas operations of William Hill, including its UK high street outlets.   

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For investors, a cost-of-living crisis is likely to pressure free cash its customers have available to gamble. The issue of problem gambling and addiction has not gone away either, while tighter gaming regulations such as those introduced in Germany also warrant consideration. New rules in the UK are also potentially on the agenda of the new Prime Minister.   

More favourably, enhanced products have helped customer activity levels reach a record in this latest period, up 57% versus the first half of 2019. Entain boasts diversity of brand names, products, and geographical markets, including a joint venture in the US, while it continues to make bolt-on acquisitions, with five made year-to-date including its latest in Croatia.

In all, and with the company making dividend payments again following its suspension because of the pandemic, investors may wish to stay patient. 

Positives: 

• Diversity of business type and geographical locations
• Previously the target of takeover bids

Negatives:

• Uncertain consumer outlook
• Potential for increased regulation

The average rating of stock market analysts:

Strong buy