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Entain’s interim CEO believes the operator’s move into the broader entertainment space was a “distraction” that only served to add complexity to the business and negatively impact execution. 

When presenting the group’s FY 2023 results, Stella David stressed she is “definitely not a caretaker CEO” despite holding the job on a temporary basis following the departure of Jette Nygaard-Andersen.

“I am not here to tread water in any way, shape, or form. We need momentum as a business,” David said. 

“We are laser focused on being 100% a betting and gaming company,” she added, stressing that Entain’s diversification into media had even caused confusion among employees.

She suggested the company’s revised strategy, that was presented last year, is sound, but reiterated that execution is far more important than strategy. 

She said that winning in key markets, such as the UK, US, and Brazil, was at the top of her to-do list, with the belief that success in these areas will pave the way for success elsewhere.

Online NGR performance

Analysing Entain’s 2023 performance by geography sheds light on challenges for the year ahead.

In 2023, the group’s UK & Ireland and Australian business segments both experienced a 6% year-on-year decline in online revenue, while Brazil witnessed a 14% decrease. 

In Italy, Entain saw modest growth at 3%, contrasting with declines in the Netherlands (12%), New Zealand (1%), and Germany (26%). 

Georgia and Croatia experienced growth at 7% and 29% respectively, while Poland remained flat. 

The US is the only region that exhibited substantial growth, with a 36% increase in online NGR.

In a note to investors, Paul Leyland from Regulus Partners stated: “Entain needs to focus on central efficiency and deeper localisation to unlock the growth inherent in its reach and resources.” 

He added that “operational fixes are now urgently needed in a number of business areas.”

It’s complicated

Entain stated it has not only identified the issues, but also devised solutions.

David said she was keen to “address all the elephants in the room”, insisting the firm now knows where it went wrong.

A key reason is that complexity “has gradually accumulated over time in this business. And that has been exacerbated by the fact we’ve done numerous acquisitions.

“The problem with complexity is that it’s hampering our agility, and therefore our ability to get things done,” she said.

However, she stressed that 2024 will be a year of transformation, and “progressively day by day, we will demonstrate that the group can get back to structural growth as we exit the year.”

The execution plan

For the first time, chief strategy officer Sameer Deen and CPTO Satty Bhens were present for the earnings call alongside interim CEO David and long-serving CFO Rob Wood.

Deen emphasised his immediate focus on driving organic growth in the UK, Entain’s largest market, and Brazil, the company’s fastest-growing market.

He stressed the importance of revenue retention for organic growth and highlighted Entain’s efforts to enhance both customer acquisition and retention rates through various measures.

In the UK, this involves increased emphasis on key brands, alongside a revamped user experience and faster apps.

In Brazil, strategies include boosting digital marketing, introducing instant withdrawals and deposits, and placing a greater emphasis on Brazilian football.

Though it’s still early, Deen noted positive growth at the firm’s SportingBet brand in Brazil, stating: “From an acquisition perspective, we’ve seen first-time deposits returning to strong year-on-year growth.”

Emulating US success 

Meanwhile, Entain’s CPTO Bhens said the company’s product improvements were starting to yield results.

He highlighted the progress by comparing BetMGM’s app load time, which was 9.15 seconds last year and has been reduced to 2.39 seconds as of February 2024.

“I’m excited about the product improvements we’re making in the US, and we’re aiming for similar success in other markets too,” he said.

“This means delivering fresh, slick, fun, modern experiences – experiences that can compete with Silicon Valley companies, not just other betting firms,” he emphasised

“So, how are we achieving this? First, we’ve rewritten the rulebook on how quickly we can deploy customer-facing product improvements,” he revealed.

For instance, in the sportsbook arena, Entain can now roll out feature improvements every two weeks, compared to updates every six to eight weeks in 2023.

Additionally, the expansion of dedicated customer teams from 10 to over 30, focusing on unique market needs in the US, UK, and Brazil, marks a substantial scaling effort. 

Furthermore, a complete overhaul of the front-end sports book architecture has streamlined changes across various products, facilitating agile adjustments to branding, user experience, and navigation.

“We’re really starting to get some fantastic momentum in 2024. We will go beyond the US. We want to deliver products that our customers will love to use in the UK and Brazil.”

Analysts question Entain’s ability

During the earnings call, analysts raised concerns about Entain’s ability to replicate improvements made in the US, UK, and Brazil across other markets.

Addressing the issue, CFO Wood highlighted that many of the company’s initiatives benefit all markets, not just specific countries. 

For instance, speed enhancements in product development have had positive effects globally. 

Similarly, advancements in cashier functionalities have had a trickle-down effect, benefiting all markets. 

While Entain expressed optimism about certain markets, others posed challenges.

Wood described Germany’s 26% decline as “frightening”. He added that Germany now represents just 3% of Entain’s revenue mix, while it accounted for closer to 15% several years ago. 

Surprise over stake limit impact

Analysts were taken aback by Entain’s announcement that the UK’s stake limit on online slot games and the potential agreement on uniform safer gambling measures across the market, along with tighter deposit limits in the Netherlands, could potentially reduce FY24 EBITDA by approximately £40m.

Joe Thomas from HSBC expressed his surprise, stating that his understanding was that the £5 slot limit was very much expected. He sought clarification on the difference and the reasons behind it. 

Interim CEO David referenced Entain’s customer journey, which she described as more complex than many of Entain’s competitors, which in turn, drives up the cost of implementation. 

“Some of our apps have been a bit unloved in the UK,” she admitted. “So we believe there’s some great opportunity for customer experience, particularly on Ladbrokes and Coral, to get ourselves into a more competitive place.”

She added: “And again, that’s about being honest with ourselves, as our apps don’t get rated as highly as we would like them to do versus the competition.”

Investors, meanwhile, did not immediately appreciate Entain’s honesty, with the share trading nearly 5% lower at the time of writing.

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