Stella David, the CEO of Entain, expressed confidence that Brazil will reopen its regulated gambling market following a recent prohibition enacted by President Luiz Inácio Lula da Silva. During the operator's Q3 earnings call on Thursday, David highlighted that Entain was among the companies impacted by the president's provisional measure, which was implemented on September 25, effectively halting all licensed gambling operations in the country.
This ban, currently temporary and lasting 120 days, awaits a final decision from Brazil’s Congress regarding its permanence. Following the ban, Brazil's Supreme Federal Court has been urged to overturn the measure, which has left numerous local employees without work. There's speculation that if licensed gambling returns, it may be restricted solely to sports betting.
During the earnings call, David stated, "Clearly, we don’t know exactly what’s going to happen… I think the market will reopen in some form or another and we will be back there.”
In the third quarter, Entain's Group Net Gaming Revenue (NGR) in Brazil fell by 36%, which the company attributed to a disciplined approach toward marketing and player engagement prior to the ban.
David emphasized a cautious strategy for any return to the Brazilian market, mentioning that even before the ban, Entain had taken a "pragmatic approach" to ensure that investments were focused on the right customers, avoiding unnecessary costs. This approach is now seen as prudent, given the unpredictability of the market's closure.
Previously reported figures revealed that Entain's Brazil NGR in the first half of the year dropped by 25% on a constant currency basis, attributed to a challenging sports margin. CFO Michael Snape described the Brazilian market as "incredibly difficult and unpredictable" and noted the company's intentional avoidance of excessive spending in that region.
As Entain waits for clarity on Brazil's regulatory situation, David highlighted the importance of leveraging SportingBet’s established brand, asserting, "It’s got one of the best equities, and it’s predominantly a sports brand that’s about 70% sports.” She conveyed optimism that the brand would perform well if the market reopens focusing primarily on sports betting.
However, the Brazilian betting ban poses risks to Entain's profitability. The company recently adjusted its full-year EBITDA forecast to be at the lower range of £910 million to £960 million. Excluding Brazil, Entain anticipates online NGR growth of 5-7% for FY'26 on a constant currency basis.
In other regions, particularly the UK and Ireland, online NGR showed significant growth, increasing by 14% in Q3, outperforming expectations even amid unfavorable sports outcomes. This growth contributed to a 2% rise in overall group NGR and a 3% increase in online NGR, climbing to 5% when excluding Brazil.
David praised efforts to enhance customer offerings through improvements to digital products and branding, noting that customers have responded positively to the refreshed Ladbrokes app.
She also addressed the potential doubling of the machine games duty in the UK, speculated to rise to 40%. This proposed increase, prompted by recommendations from the Social Market Foundation, could lead to a wave of betting shop closures and job losses, further complicating the retail landscape. Already, 630 betting shops closed across the industry within the last year. David cautioned that if the tax hike proceeds as suggested, it could lead to an estimated 1,500 additional closures and 16,000 job losses, ultimately reducing Treasury revenue.
Despite these challenges, David asserted that Entain is well-positioned to manage potential tax increases due to its competitive market presence and strong operational efficiencies.
