Entain is plotting a return to positive growth in Australia and New Zealand after outperforming the market over the past six months to match its key metrics for the corresponding period 12 months ago.
While flat growth in the Australian market might compare unfavourably to what is happening with Entain internationally, where there has been a 6 per cent growth in net gaming revenue, the more mature Australian landscape has been shrinking slightly over the past 18 months.
The return to neutral on a year-on-year comparative basis in what has more broadly been a softening market, with the likelihood of growth to come, is seen as a major positive.
“Australia is the largest online market in our international division, and during the first half of this year delivered a strong performance, returning to flat year on year,” Entain CEO Stella David said in her half-year results presentation.
“Despite the underlying market experiencing expected softness, our Ladbrokes and Neds brands continue to differentiate themselves in the highly competitive Australian market.”
The resurgent results were described as driven by both margins and volume, with margins in the horse racing space singled out as a positive.
David said that net gaming revenue matched the performance of last year in Australia was significant given additional regulatory measures, including the national self-exclusion register.
“We remain confident in our strategy focussing on brand differentiation, new and innovative products and customer experience and our return to growth in Q2 demonstrates that this continues to resonate with our customer base,” David said.
Entain’s significant 25-year investment in TAB NZ is starting to pay dividends in terms of customer growth, with active punters up 11 per cent on last year.
“In line with plan, the business was successfully migrated onto Entain Australia’s technology platform during Q2, and our New Zealand customers are now enjoying an enhanced sports betting experience,” David said.
“Alongside leveraging our strong Entain Australia offering we are excited by the opportunity ahead in New Zealand including our new online-only brand “Betcha” which launched this week.”
There are two major challenges Entain will face in Australia in the next 12 months. The first is the prospect of significant restrictions on advertising, currently being discussed by Communications Minister Michelle Rowland, who briefed WSPs recently.
Bren O’Brien
“There is a consultation at the moment around advertising, potential advertising restrictions, also potential bonusing restrictions, so we'll wait to see what comes out of that before assessing impact,” chief financial officer Rob Wood told an earnings call.
“The one thing I would just remind you is that we've seen it around the world in other marketplaces when advertising restrictions come in it tends to play into the hands of the larger established brands.”
“In Australia with the Ladbrokes brand in particular but also Neds, we have large established brands and there's likely to be exemptions for racing where we're particularly strong as well, but that's a watch this space.”
The other pending challenge is a possible ruling from AUSTRAC, which initiated an enforcement investigation on Entain in September 2022, surrounding anti-money laundering and anti-counter-terrorism measures.
“Entain Australia continues to co-operate fully with AUSTRAC’s enforcement team, and is liaising regularly with AUSTRAC’s regulatory operations teams as it implements a detailed remediation plan,” a statement within the financial results said.
“As AUSTRAC are still conducting their investigation and reviewing documentation, it is too early to predict the likely timing and potential outcome of the investigation.”
Bren O’Brien
“Whilst the details of the investigation into Entain Australia are different to other AUSTRAC investigations in the bookmaking industry, the director’s note that previous penalties in AUSTRAC civil penalty proceedings have been significant.”
Entain’s new global CEO, Australian-born Gavin Isaacs, will begin his role on September 2, while David will move into the chair role at the end of that month.
