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Entain has announced a new strategy involving a renewed focus on high-growth markets, an exit of non-core markets and a new approach to capital allocation.

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The comprehensive new programme follows several quarters of sluggish online growth, with Entain missing revenue guidance since Q2. 

The slimmed down new market portfolio will centre on high-growth, high-return markets such as the US, Brazil, CEE and New Zealand. 

In its core markets, including the UK, Australia, Italy, Germany and the Baltics, the operator said it will aim to create profitable growth. 

Entain stressed this approach would see the business exit smaller non-core operations.  

Another pillar of the new strategy includes a plan to push its US market share to 20-25% through investment in product and pricing capabilities following its acquisition of Angstrom.

The business said it will simplify its organisational structure to make £100m of cost saving by 2025. 

Entain shakes up capital allocation strategy

The operator added it intends to shake-up how it spends money going forward with the creation of a capital allocation committee for the very first time.

This will be a board committee run by non-executive directors to improve the company’s decision-making processes, helping to decide on share buybacks, M&A and other matters related to capital.

Chief executive Jette Nygaard-Andersen said the new priorities for capital will involve “laser focusing” on areas it can get the best ROI, maintaining strong balance sheets and supporting cash flow generation. 

“We’ve heard the markets challenge on our approach to capital allocation,” said Nygaard-Andersen.

In a June open letter, Entain shareholder Eminence Capital sharply criticised Entain for its acquisition of Polish operator STS Holdings.

Eminence blasted the “illogical” deal, arguing that issuing undervalued share capital to fund acquisitions was “an empire building, shareholder value destroying strategy.”

Nygaard-Andersen said subsequently the business would be looking at “a much slower pace of M&A going forward”, with a renewed focus on organics growth.

However, she added the company continues to support a progressive dividend. 

Business expects DPA settlement in Q4

Entain chairman Barry Gibson also gave an update on the deferred prosecution agreement that the business is negotiating with the UK tax authorities over a historic bribery probe.

This relates to Entain’s former Turkish business, which has since been sold. The company admitted in May that misconduct involving third-party suppliers and former employees may have taken place. 

Gibson said the business is set to appear before the court in Q4 2023, when it expects the agreement to get approved. The company has set aside £585m to pay the potential settlement. 

“The deferred prosecution agreement kind of draws a line under it as far as Entain is concerned,” said Gibson. 

“However, we will still be cooperating with the CPS as they’re looking into activities of certain individual suppliers and as we said before, former managers of the company, so there will still be headlines in the press as these things develop and go ahead.”