Entain CEO Stella David expressed confidence during the operator's third-quarter earnings call on Thursday regarding the reopening of Brazil's regulated market. This comes in light of a prohibition announced by President Luiz Inácio Lula da Silva that halted licensed gambling within the country about two weeks ago.
Entain, which operates the SportingBet brand, was among the companies immediately impacted by this provisional measure enacted on September 25, which imposed an immediate ban on legal gambling activities in Brazil.
The provisional measure still requires approval from Brazil's Congress to see if the ban will become permanent. In the meantime, Brazil's Supreme Federal Court has been urged to intervene in an effort to lift the ban, which has forced thousands of local staff into unemployment.
One possible outcome could see the return of licensed gambling, but limited strictly to sports betting. David shared her perspective on the potential future of the market, stating, "Clearly, we don't know exactly what's going to happen. At the moment, the provisional measure is for 120 days, at which stage it either gets ratified, changed, or revoked, so we are planning for multiple potential scenarios. But ask me for my best guess. I think the market will reopen in some form or another and we will be back there."
In the third quarter, Entain reported a 36% decline in net gaming revenue (NGR) from Brazil, attributing this decrease to a cautious approach in marketing and player engagement prior to the government's sudden online gambling ban.
Discussing the situation further, David emphasized the group's intention to adopt a careful method if the Brazilian market reopens. She elaborated, "Prior to the market being shut down, we were already taking what we would call a pragmatic approach to make sure that we invested in the right customers and not chasing volume at any cost. And I think that has proven to be the right thing to do because the fact that the market can be closed down with no notice does put you at a degree of risk if one doesn't take a sensible approach to the market opening back up."
In August, prior to the ban, both Stella David and CFO Michael Snape noted that Entain's NGR in Brazil for the first half of the year declined by 25% on a constant currency basis due to an extremely unfavorable sports margin in the first quarter. Snape referred to Brazil as an "incredibly difficult and unpredictable" market.
David today reaffirmed that Entain focuses on achievable and sustainable growth, leveraging the strength of the SportingBet brand as they await regulatory clarity. "I can't predict what's going to happen, but one thing I can say is that our SportingBet brand is a great brand. It's been around a long time in Brazil and it has one of the best equities, predominantly a sports brand at about 70% sports. So if the market came back and it was sports only, then I think we'd be well set for that. If it came back with advertising bans, I think we'd be relatively well set for that as well because we've built long-term brand equity. Our intention is to reopen in Brazil, but we need to see the framework once it eventually happens, ensuring we're investing appropriately."
The ongoing ban on betting in Brazil could adversely impact Entain's profitability. Last month, the company projected that its full-year EBITDA forecast would likely be at the lower end of the range of £910 million to £960 million. However, excluding Brazil, they anticipate online NGR growth for FY26 to reach the upper limit of 5-7% on a constant currency basis.
In contrast, online NGR from the UK and Ireland increased by 14% in the third quarter, exceeding expectations with a volume growth of 15%, despite facing unfavorable sports results. Overall, group NGR rose by 2%, while online NGR grew by 3%, and by 5% when Brazil is excluded from the figures.
David attributed these gains in the UK and Ireland to recent advancements in digital products and brand improvements. "Clearly, we have been doing a lot of initiatives to improve our customer offering," she said. "This drive for improvement started about 18 months ago, and we're beginning to see those enhancements start to translate into market performance. We've introduced a refreshed Ladbrokes app, alongside general improvements that have received positive external feedback. These efforts are nudging us in the right direction for competitive advantage, which we're pleased with."
David also addressed the impending risk of a potential increase in the UK’s machine games duty (MGD), which could double to 40% as suggested by the Social Market Foundation think tank. She cautioned that such a tax hike could lead to increased betting shop closures and job losses, ultimately shrinking Treasury revenues. "Since last year, 630 betting shops have already closed across the sector. If the proposed gaming tax is implemented, independent analysis estimates that approximately 1,500 shops could shut down, resulting in around 16,000 job losses and reduced net revenue for the Treasury. We need to communicate that raising gaming tax in this manner actually undermines a struggling high street."
Despite these challenges, David stated that Entain is well-equipped to handle potential tax increases, claiming, "We are, by far, the best retail operator in this sector, and we’ve consistently increased our market share over time. Our team is motivated, our business model is sound, and we understand the industry dynamics well. So, if taxes were to increase, we would likely emerge as a relative winner as we'd continue to grow our market share in retail."
