Entain trading update
The top line
Group NGR was up 11% in H1 and up 42% in Q2, excluding Germany Q2 online NGR was up 32%. Online revenues were up 22% for the 22nd quarter of consecutive growth (20% CAGR). Retail was down 42% due to ongoing COVID19 restrictions. The group enjoyed strong performances in Italy (+76%) and Brazil (+153%).
Online gaming NGR was up 47% on constant currency compared with 2019. The acquisitions of Enlabs and Bet.pt contributed 4% to online NGR. In the US BetMGM expects Q2 NGR of around $350m and was number two in sports betting with 24% market share and number one for iGaming with 29% share and 21% share over the two verticals.
Retail estates in Belgium and Italy reopened in early June. In the UK retail volumes were around 10% lower than pre-pandemic levels as restrictions have gradually eased.
FY21 EBITDA to range between £850m-£900m, ahead of consensus. The group agreed a five-year £590m revolving credit facility, replacing its existing £535m RCF due to expire in March 2023. Entain also agreed an additional €300m term loan to fund corporate development and M&A.
It’s coming home (?): Entain’s geographic spread and “being a global brand means we’re not seeing an over-reliance on one region. In the UK if England win (the Euros) it will be painful, but with so many regions active it will balance out for us,” said CFO Rob Wood. CEO Nygaard-Andersen added that excluding Germany, the group was “extremely pleased with all major markets growing double-digit.”
US bonus: In the US, the market is so competitive that BetMGM will continue investing in marketing and bonusing to continue growing its share of market. Wood said the group was comfortable with its “long-term CPA targets of $250”, although these will also depend on seasonality and the timing of new state openings.
Marketing spend will continue “ticking down because NGR is outperforming, rather than any changes in marketing spend”. Wood added that at midpoint FY, “we’ll spend same in H2 but as a percentage of NGR it will be around 20% rather than 21%.”
The 1% reduction is positive but much was still to be determined because of delays to reopenings in Europe and subdued retail trading in the UK up to 17 May.
In-house expertise: Entain CEO Jette Nygaard-Andersen said the doubling of the group’s investment into its in-house games studios was an opportunity to bring “more exciting and exclusive content to our customers”. One of the reasons behind the investment was that when the group rolled out in-house content in the US 30% of BetMGM customers played the products, “so we would rather focus on in-house content production” rather than bringing it in from outside and having to share revenues.
Marginal gains: Wood said Entain’s strong margins of 13% (vs ~11% pre-COVID) came as a result of a change in customer mix during the lockdowns, as “more retail betting patterns moved online and this was helped by favourable sporting results.” “We’ve been on a good run,” he added. However, Wood made the point that he expected margins to move back towards “around 11% and maybe closer to 12%, but 13% is not the new normal for margins”.
Structural changes to the client base were also having an impact, with the group targeting more “recreational players and some unwanted customers no longer with us”. “Our marketing reflects that and is focused on products that produce strong margins: same race multis, ‘5-a-side’ bets, Betbuilder and request-a-bet products.”
The Euro football tournament has led to more bets and higher stakes and “so many knockout games going to extra-time helped a lot,” he added. Overall the tournament will add around 2% to FY21 revenues, but more important will be the customer acquisition numbers and “how valuable they prove over the course of the year,” said Wood.
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