During Entain's Q3 earnings call on Thursday, CEO Stella David expressed confidence in the reopening of Brazil's regulated betting market, which has been temporarily suspended by President Luiz Inácio Lula da Silva. This suspension, enacted through a provisional measure at the end of September, imposed an immediate ban on licensed gambling, affecting multiple operators, including Entain's SportingBet brand.
The provisional measure has yet to undergo a vote in Congress, which will decide its long-term fate. In the wake of the ban, Brazil's Supreme Federal Court is being urged to intervene on behalf of local workers who have been left jobless.
One possibility for the future of Brazil's gambling landscape is a restricted return that only permits sports betting. During the earnings call, David remarked, "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, and 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 experienced a 36% decline in Group Net Gaming Revenue (NGR) for Brazil, attributing this to strategic marketing decisions and a challenging market environment leading up to the ban. David elaborated on Entain's cautious approach to potentially re-entering the Brazilian market after the ban lifts. "Prior to the market being shut down, we were already taking what we would call a pragmatic approach to making sure that we were investing in the right sort of customer and not chasing volume at any cost," she noted.
Looking back at previous financial reports, David mentioned that the group's NGR had decreased by 25% in the first half of the year due to a challenging sports margin, indicating the significant volatility in Brazil's gambling market. Snape, Entain’s CFO, called the Brazilian landscape “incredibly difficult and unpredictable,” suggesting the company is being deliberate in avoiding excessive spending in the region.
As the company awaits further clarity on regulatory developments, David emphasized the importance of prioritizing profitable growth and utilizing the established brand strength of SportingBet, which has a long-standing presence in Brazil. "It’s predominantly a sports brand that’s about 70% sports. So if the market came back and it was sports only, then I think we’d be well set for that," she stated.
Despite the ongoing challenges in Brazil, Entain expects its full-year EBITDA to fall near the lower end of the £910 million to £960 million range. However, excluding Brazil, the company forecasts an online NGR growth of 5%-7% for FY'26 on a constant currency basis.
In contrast, the online NGR for the UK and Ireland grew 14% in Q3, surpassing expectations even amid difficult sports results. Overall, the group reported a 2% rise in NGR and a 3% increase in online NGR, which rises to 5% when excluding Brazil.
David attributed these successes to improvements made across Entain's brands and digital products, highlighting enhancements to the Ladbrokes app that have positively affected customer experience and market share.
Moreover, she commented on the potential increase in the UK’s Machine Games Duty (MGD), which could double in the upcoming Autumn Budget. The Social Market Foundation, a think tank, has suggested raising the tax burden on retail operations, a move that David cautioned could lead to more betting shop closures and job losses. She pointed out that over 630 betting shops have already shut down within the last year, warning that a tax hike could worsen this trend considerably.
"If the gaming tax is put up as potentially muted, then independent analysis has shown that circa 1,500 betting shops across the industry would close, leading to roughly 16,000 job losses and ultimately reducing Treasury revenues," she explained.
Despite these challenges, David expressed confidence that Entain is well-prepared to handle such taxing conditions, stating: "We are the best, I believe, by far retail operator in this space, and we’ve continued to increase market share over time. If there were to be an increase in taxes, we would be a relative winner in the fact that we would gain market share in retail."
