Entain battles Brazilian ban and UK tax fears as Q3 NGR rises 2%
Entain has revised its full-year earnings forecast downwards after a sudden gambling ban in Brazil hit its Q3 performance, while the company also voiced concerns over potential tax hikes on its UK retail estate during its latest earnings call.
- A provisional gambling ban in Brazil contributed to a 36% fall in the group's NGR from the country in Q3.
- UK and Ireland online NGR surged 14%, but the company warned a potential machine games duty increase could close 1,500 shops.
- Full-year EBITDA is now forecast at the lower end of the £910m-£960m range, citing Brazilian headwinds.
Entain has reported a 2% rise in group net gaming revenue (NGR) for the third quarter, with online NGR increasing by 3%. However, the results were overshadowed by significant regulatory disruption in Brazil and concerns over potential tax increases in the United Kingdom.
When the challenging Brazilian market is excluded from results, the company’s online NGR growth for the period was 5%.
Brazilian market disruption
The operator’s performance was heavily impacted by a provisional measure from Brazilian President Luiz Inácio Lula da Silva in late September, which introduced an immediate ban on licensed gambling. The 120-day measure, which has yet to be voted on by the country's Congress, affected Entain’s SportingBet brand.
The ban compounded an already difficult period in the region, with Entain’s group NGR for Brazil falling by 36% in Q3. The company stated this reflected a strategy of “disciplined marketing and player engagement in an increasingly challenging market” prior to the ban. This followed a 25% constant currency NGR decline in H1, which was attributed to a “highly adverse” sports margin in the first quarter.
The Brazilian market is incredibly difficult and unpredictable.
Despite the current turmoil, which has seen pushes for Brazil’s Supreme Federal Court to overturn the ban, interim CEO Stella David expressed optimism about the market's future. During the call, she stated she is confident that Brazil’s regulated market will reopen.
UK delivers growth amid tax fears
In contrast, Entain’s UK and Ireland online operations delivered a strong performance, with NGR surging 14% in Q3. The result was described as being “ahead of expectations”, with volume growth of 15% helping to overcome unfavourable sports results. The company also noted the recent introduction of a refreshed Ladbrokes app.
However, David raised concerns about the future of the UK retail sector, highlighting a recent call from the Social Market Foundation think tank for the government to increase the tax burden on land-based operations. She cited independent analysis which showed a significant increase in machine games duty could force the closure of around 1,500 betting shops across the industry, on top of the 630 that have already shut in the last year. Such a move would result in an estimated 16,000 job losses.
Revised financial outlook
As a result of the headwinds, Entain has adjusted its full-year guidance. It now expects its 2023 EBITDA to be at the lower end of its previously announced £910 million to £960 million range. Looking further ahead, the operator projects that, excluding Brazil, its online NGR for the full year 2026 will grow at the top end of a 5-7% range on a constant currency basis.
