Entain cedes Australian market share as global wagering challenges mount

Global wagering powerhouse Entain is keen to put a “challenging” 2023 in the rearview mirror after confirming a £842 million ($AU1.6 billion) pre-tax loss, which included a £190 million ($AU368 million) impairment on its Australian business.

Entain released its full-year 2023 results last week, with interim CEO Stella David underlining the difficult circumstances for the company which included the departure of previous CEO Jette Nygaard-Andersen in December.

But besides the headline departure of Nygaard-Andersen, there were a host of other challenges for the owners of the Ladbrokes and Neds brand in Australia, and the new partner in the New Zealand TAB.

The results revealed that net gaming revenue from Entain’s Australian business fell six per cent on 2022, while market share dropped from 18 per cent to 17 per cent.

Entain’s chief financial officer Rob Wood explained that the softer market conditions, which saw a three per cent decline across the entire Australian market, plus Point Of Consumption Tax increases, has prompted the impairment.

“Australia, that was down primarily due to slower market growth, but also from mitigation actions against point-of-consumption tax increases and new entrants increasing competition,” Wood said in the Q and A session at the results announcement.

The CFO attributed the significant impairment to those factors and described it as “the accounting catch-up of the progress in 2023.”

“Australia, as we said in November, we are cautious on the market outlook in 2024, both ourselves, Tabcorp, Flutter, all calling the market down in 2024,” he said.

“Still significantly up when you compare to pre-COVID, but there is a sense of COVID reversion in Australia.

“Across 2023, we were slightly adverse to market. We were minus 6. I think the market was more like minus 3. So we have given up a little bit of share. We’re probably 17 now, previously 18, but after a long run of gaining share in Australia.”

“The point of consumption tax mitigation measures that I referred to earlier, we’ll annualise against that. So that will give us some benefit. But if the market’s down, we do expect Australia to be down.”

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However, Wood sounded notes of optimism with the Entain deal in New Zealand, with the expectation that will help to drive growth for the business.

“We continue to be super optimistic about what we can do in New Zealand. There’s already the best part of £200m of revenue there that has no EBITDA against it. So that’s – once we drive EBITDA margins to normal levels over the years ahead, that’s great growth opportunity for us,” he said.

In a sign of the challenges that increased regulation would pose to the Australian market, Wood pointed to how the share of Entain’s business conducted in Germany had changed since increased regulation around player deposits was implemented in that country.

“It is frightening to think that now only three per cent of our revenue mix. For those following us for a while … it was 15 per cent just a few years ago. So it’s a much smaller piece of the pie. It is still a tough regulatory environment,” Wood said.

David, who stepped into the interim CEO role in December, highlighted that Entain was “laser-focused on being 100 per cent a betting and gaming company” after a prior aspiration to become a broader interactive entertainment company.

She said the company was facing up to the ‘brutal truths’ of the business, while plotting a growth strategy in key markets like the United States, where it is involved as a co-owner of BetMGM.

Much of Entain’s overall net gaming revenue growth of 14 per cent was derived from its American business, which grew its own NGR by 36 per cent through 2023.

 “In the US, we’re very proud of the successes that we’ve had with BetMGM.  And its performance, quite rightly, is a key focus for us.” David said.

“And where I like to think of MGM and ourselves, Entain, that we are the co-parents of BetMGM.  But being fully transparent, it took us, and that is Entain, some time to realise just how quickly we needed to feed BetMGM, with better customer experiences, and better, more focused US tailored products.”

“Australia, as we said in November, we are cautious on the market outlook in 2024, both ourselves, Tabcorp, Flutter, all calling the market down in 2024″ – Entain chief financial officer Rob Wood.     

David said the search for a permanent replacement for Nygaard-Andersen was ‘going very well’ but her own position as interim CEO should not be viewed as a time of uncertainty or complacency for Entain.

“Yes, I am an interim CEO, but I am definitely not a caretaker CEO. I am not here to tread water in any way, shape or form,” she said.

“We need momentum as a business and I’m very much focused on execution. We are moving at pace and my job, as I see it, is to hand this business on to the permanent CEO with great positive operational momentum.”

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