International gaming operator Entain announced that the group's total net gaming revenue (NGR) for the third quarter increased by 6% year-on-year, and by 7% when calculated at constant exchange rates, reaffirming its forecast for online NGR growth of about 7% and an online EBITDA profit margin of 25%-26% for the fiscal year 2025. CEO Stella David warned that the UK government's plan to increase remote gambling tax rates would force operators to take measures such as reducing bonuses, lowering odds, cutting marketing and sponsorship expenditures to cope, with the sports industry becoming the main victim, while black market operators might benefit instead. Entain's UK market NGR grew by 8%, online gaming revenue increased by 15%, but Brazil saw a 10% decline in NGR due to unfavorable event results. The company also updated its litigation progress with Australia's AUSTRAC, indicating that mediation proceedings are underway.
Third Quarter Performance Overview
Entain reported that the group's total net gaming revenue (NGR) for the third quarter increased by 6% year-on-year, and by 7% when calculated at constant exchange rates. The performance data includes a 50% share of its US joint venture BetMGM, but the company has chosen to report US data separately this time.
The company reaffirmed its financial forecast for the fiscal year 2025, expecting online NGR to grow by about 7%, and maintaining the online EBITDA profit margin within the 25%-26% range.
Regional Market Performance Analysis
The UK market NGR grew by 8%, in line with expectations, mainly driven by a 15% increase in online gaming revenue. Entain stated that the growth was due to "strong growth in gaming volume and market share driven by player value growth".
Central and Eastern Europe performed strongly, with NGR increasing by 10%. The Brazilian market saw a 10% year-on-year decline in NGR, despite a 14% increase in betting volume.
UK Tax Increase Impact Warning
Entain CEO Stella David warned that the UK's increase in remote gambling tax rates will affect multiple business areas. To mitigate the impact of the tax increase, operators may take measures such as reducing bonuses, lowering odds, and cutting marketing expenditures.
CFO Rob Wood added that the sports industry would be particularly hit, with operators likely to reduce sponsorship agreements and related advertising investments.
Industry Impact and Market Reaction
Wood stated: "Regardless of the market's tax rate changes, sponsorship is the first area operators adjust, due to its long return cycle and association with brand visibility. In this situation, the only winners are black market operators, as their competitive disadvantages decrease. The losers, of course, are the sports industry."
David emphasized that the company will not passively respond: "We are clearly not going to stand by and watch, we are making plans for these possible situations."
Policy Background and Timeline
The UK government stated in April this year that it is considering establishing a new remote gambling tax framework and has initiated a consultation process. The latest plan is expected to be announced in the autumn budget on November 26.
This topic has become a focus of industry attention, with Rank Group also mentioning the potential impact of the tax increase in its financial report for the same period.
Market Competition and Integration Expectations
When asked whether the tax increase would accelerate industry consolidation, eliminating smaller competitors and benefiting large operators, Wood responded that smaller operators would definitely be squeezed.
Wood pointed out that up to 25% of the UK iGaming market share is held by third-tier or smaller operators, and the tax environment will pose a challenge to their survival.
Brazilian Market Performance and Outlook
Despite a 10% decline in NGR in the Brazilian market, CFO Wood expressed excitement about the potential in Brazil. He attributed the decline to "genuine bad luck brought by sports events."
Wood emphasized: "In terms of transaction volume, the business situation meets expectations," with market performance affected by the results of the European Champions League and local leagues.
AUSTRAC Litigation Progress Update
Regarding the legal litigation with Australia's AUSTRAC, David expressed satisfaction with the existing compliance framework, believing it may be in a "market-leading position". The litigation does not have a clear timetable and may ultimately be resolved through court.
The company is currently undergoing mediation procedures with the regulatory authority, which started in the summer and is expected to take a long time.
Management Changes and Appointments
Entain appointed a permanent CEO for its Australian operations in August. Andrew Vour officially took over after serving as interim CEO for two months, responsible for leading the Australian market business.
The management change aims to strengthen local business leadership, addressing regulatory environments and market challenges.
Strategic Adjustments and Response Measures
Facing tax pressure, Entain stated that it is developing a comprehensive response plan, including optimizing product pricing, adjusting marketing strategies, and reevaluating sponsorship cooperation. The company emphasized balancing compliance requirements with business growth needs.
The long-term strategy remains focused on market share increase and sustainable growth, addressing cost pressures through operational efficiency optimization.
Industry Prospects and Risk Factors
The UK gambling industry faces policy uncertainty, and the tax increase may change the competitive landscape of the market. Black market operators may gain an unfair advantage, posing challenges to compliant operators.
Sports organizations and events may face financial pressures due to reduced sponsorships, affecting the industry's development ecosystem.
