British gambling giant Entain warned that its core profit margins are expected to decrease in 2023 due to its withdrawal from unregulated markets, regulatory headwinds and the increased expenses of wages and energy in the UK.
Entain reported an 8% decrease in online underlying EBITDA for 2022, amounting to £828 million ($992 million). This drop was attributed to regulatory changes in key markets, primarily in the UK, where financial regulations have become more strict in anticipation of a UK government-launched gambling review.
Entain was also forced to shutter its operations in the Netherlands, while a surge in online gambling demand during the pandemic eased. Online net gaming revenues dropped by 2% at constant currency, although Entain noted that it would have grown by around 3% excluding the impact of the closure of the Netherlands business and UK regulatory changes.
Meanwhile, group-wide adjusted EBITDA climbed by 13% in the 12 months to the end of December to £993.2 million ($1.1 billion), coming in at the top-end of guidance of £976.7 million ($1.1 billion). "As we look to 2023, while we continue to face some regulatory headwinds, we remain excited by the opportunities ahead," Entain said in a statement.
Despite the macroeconomic and industry-wide concerns, CEO Jette Nygaard-Andersen expressed confidence: "We have a business model that is truly diversified across more than 40 territories, a platform that gives us demonstrable competitive advantages, and a total commitment to providing our ever-broadening customer base with a safe environment in which to enjoy our products."
Entain spent millions of pounds making several acquisitions, including five in 2022, when it expanded into Canada, the Netherlands, and other parts of Europe. Chief Financial Officer Rob Wood said in a presentation on Thursday that mergers and acquisitions remained key to the company's growth strategy.
The company has also exited a number of unregulated markets and is now fully focused on nationally regulated or regulating markets.
Analysts at Citi said the results were widely in line with forecasts. However, they added that this was unsurprising after the firm raised its annual profit outlook in February. Shares in Entain dipped by more than 3% on Thursday.
The re-opening of betting shops has seen gambling companies reap the rewards, but their online revenue has decreased. Added to this, the UK and Netherlands have imposed tighter regulations on online gambling.
Britain, in recent years, has introduced rules, including stricter age and identity checks for online gambling and more support for those who become addicted. The British government is expected to publish a white paper in the coming weeks that may pave the way for tougher regulation in the gambling industry.
Entain's smaller British rival 888, whose boss quit and whose Middle Eastern VIP activity was suspended pending an internal probe in January, also flagged weakness in its online business following the tightened online player safety measures in the UK.
https://www.yogonet.com/international/news/2023/03/10/66400-entain-online-income-slips-in-2022-warns-of-lower-margins-amid-regulatory-headwinds