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Entain wagers on esports after interim profit surge

Unikrn acquisition adds to esports betting portfolio and brings in streaming and ‘bet on yourself’ products after half where traditional sport returning drove profits.
Entain wagers on esports after interim profit surge
  • Euros and other sporting fixtures returning drive bumper profit in H1
  • New acquisition part of esports and ‘innovation lab’ drive for bookie owner
IC TIP: Hold at 1,949p

Entain’s (ENT) strong run of revenue growth has continued right through the harshest lockdowns of winter and the European Cup football tournament, although it faces a Giorgio Chiellini-like stopper to further sales increases in the second half as the world opens up. 

The sportsbetting and gambling giant reported 12 per cent growth in revenue in the first half and an underlying pretax profit of £247m, almost four times the equivalent figure last year and £35m ahead of 2019. 

A separate capital markets day announcement on Thursday saw Entain unveil a plan to embrace esports and funnel users from free-to-play games and sports and betting media to “real money gaming”, like sportsbetting and online casino gaming. As part of this push Entain has bought Unikrn, a hub for esports streaming and betting. The spend on Unikrn and the esport push overall is £50m, on top of a broader £100m innovation plan to rope in more users through virtual and augmented reality technologies. 

The Ladbrokes and Coral owner operates gambling operations across Europe, the US and the UK, and managed to grow its online revenue by 28 per cent despite staggered store re-opening policies across its territories.

This was driven by a “full sporting fixture list”, including the postponed Euro 2020 tournament. The retail division, which covers physical betting shops, saw a steep decline from last year in comparison. 

The online growth will not continue forever, however. “We will see some loss of revenue per day as customers either go back to retail... there’s just more things for them to spend [their] discretionary income on,” said Rob Wood, Entain’s finance chief. 

The company is guiding full-year online revenue growth of 10 per cent, indicating a slowdown in the coming months. 

Despite the earnings growth, Entain will not hand investors a half-year dividend. This will come next year, the company said, “assuming Covid-19 restrictions continue to ease”. 

Wood was at pains to establish the £100m innovation money would not “erode profits”, as Entain would also be making £100m in “recurring annual cost savings” by 2023. 

Entain has two steams for expansion – looking for new users through the esports push while also quickly moving into new markets, like US states that are opening up to sports betting through the partnership with MGM, its former suitor. BetMGM, the joint venture, has already moved from three states at the start of last year to 13 as of 13 June. This is not just a passive move: Entain said “significant progress” being made to legalise sportsbetting and online gambling in Canada. 

Deutsche Bank forecasts full-year cash profits at £874m, a 4 per cent increase on 2020. 

People sitting at home and gambling on the margin-friendly online services has proved a boon for Entain and its competitors. A slower second half as people find better things to do keeps us on the sidelines. Hold. 

ENTAIN (ENT)    
ORD PRICE:1,949pMARKET VALUE:£ 11.4bn
TOUCH:1,948-1,94912-MONTH HIGH:2,000pLOW: 748p
DIVIDEND YIELD:NAPE RATIO:72
NET ASSET VALUE:509p*NET DEBT:64%
Half-year to 30 JunTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20201.5745.12.50nil
20211.7713113.80nil
% change+13+190+452-
Ex-div:na   
Payment:na   
*Includes intangible assets of £5.4bn, or 919p