During Entain's Q3 earnings call on Thursday, CEO Stella David expressed optimism regarding the reopening of Brazil's regulated gambling market, despite a recent ban imposed by President Luiz Inácio Lula da Silva. The ban was enacted through a provisional measure in late September, which has yet to undergo congressional voting that will ultimately determine its permanence.
This decision has left many operators, including Entain's SportingBet brand, facing immediate repercussions and has resulted in job losses for thousands in the sector. There is, however, a possibility that if the market reopens, it could be limited to sports betting alone.
David shared her perspective with analysts, 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 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's group net gaming revenue (NGR) from Brazil decreased by 36%, reflecting a focus on disciplined marketing and player engagement amid a challenging environment, particularly before the gambling ban enacted on September 25.
Concerning the company's strategy, David emphasized a cautious approach to re-entering the Brazilian market. She noted that even prior to the ban, Entain was focused on targeted investment rather than volume growth 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 in terms of the market opening back up,” she explained.
Previously, in August, both David and Chief Financial Officer Michael Snape reported that Entain's NGR in the first half showed a 25% decline on a constant currency basis, primarily due to a challenging sports margin in the first quarter. Snape described the Brazilian market as “incredibly difficult and unpredictable” and confirmed that Entain was strategically refraining from escalating spending in Brazil, expressing hopes for recovery in the second half of the year.
David also highlighted that Entain aims to prioritize profitable growth and benefit from SportingBet's established brand as it awaits more comprehensive clarity on the regulatory landscape. She stated, “I can’t predict what’s going to happen, but I think one of the things that I can say is our brand SportingBet is a great brand. It’s been around a long time in Brazil.”
She noted that SportingBet’s strong brand equity, which consists predominantly of sports betting, positions them well for a potential market return. Entain's approach is to reassess its investments in Brazil in a manner that aligns with the anticipated framework.
The recent ban could adversely affect Entain's profitability, with expectations set at the lower end of the target EBITDA range of £910 million to £960 million for the year. Without considering Brazil, the company anticipates online NGR growth of 5-7% for FY'26 on a constant currency basis.
On a different note, the company's NGR from the UK and Ireland saw a significant boost of 14% in Q3, exceeding expectations amid a 15% rise in volume despite unfavorable sports outcomes. Overall, group NGR increased by 2%, and online NGR rose by 3%, or 5% when excluding Brazil.
David attributed the growth in the UK and Ireland to improvements in digital products and enhanced brand offerings made over the past 18 months. Enhanced versions of apps for Ladbrokes and Coral have led to these positive shifts.
Regarding potential tax implications, David addressed speculation about a possible doubling of the UK’s machine games duty (MGD) in the upcoming Autumn Budget. The Social Market Foundation has suggested increasing the tax burden on retail operations, which David cautioned could lead to more betting shop closures and job losses, ultimately diminishing Treasury revenues.
She explained that since last year, 630 betting shops have shut down, and if the gaming tax rises, independent analyses predict that around 1,500 shops would close, causing approximately 16,000 job losses.
However, David emphasized that Entain is well-prepared for such challenges, claiming, “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.”
