Entain CEO Stella David said during the operator’s Q3 earnings call on Thursday she is confident that Brazil’s regulated market will reopen after the nation’s president banned the sector a couple of weeks ago.
With its SportingBet brand, Entain was one of the operators affected by a provisional measure from Brazil’s President Luiz Inácio Lula da Silva in late September, which placed an immediate ban on licensed gambling in Brazil.
The provisional measure has yet to be voted on by Brazil’s Congress, which will determine whether the ban comes in permanently.
Since the measure was enforced, Brazil’s Supreme Federal Court has been pushed to overturn the ban, which has seen thousands of local employees left stranded without work
One possibility is that licensed gambling returns, but with only sports betting available to consumers.
David voiced her belief that licensed gambling would return in Brazil, telling analysts on the call “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.”
Group NGR for Brazil was down 36% during the third quarter, reflecting its “disciplined marketing and player engagement in an increasingly challenging market, prior to the immediate pnline gambling ban announced on 25 September”, Entain said.
Entain reiterates pragmatic approach to Brazil
Answering further questions on the market, David said the group would take a cautious approach to returning to Brazil following the preliminary ban.
“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 said.
“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.”
Back in August, Stella and CFO Michael Snape reported that Entain’s Brazil NGR (net gaming revenue) in H1 was down 25% on a constant currency basis, reflecting a “highly adverse” sports margin in Q1.
At the time Snape described the Brazilian market as “incredibly difficult and unpredictable”.
He said Entain was deliberately avoiding a spending race in Brazil, stating: “In Brazil, I’d say we very much hope that we’ll see some recovery in the second half.
Leveraging brand strength
Speaking on Thursday, David said Entain was focused on prioritising profitable growth and leveraging Sportingbet’s established brand strength as it awaits clarity on the regulatory framework.
“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,” she commented. “It’s been around a long time in Brazil.
“It’s got one of the best equities, and 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. If it came back and there’s advertising bans, then I think we’d be relatively well set for that because we’ve got long-term brand equity.
“Our intention is to reopen up Brazil, but seeing what the framework looks like when it eventually happens, and making sure that we’re doing it with the appropriate level of investment to be what I call proportionate and sensible,” she said.
The Brazil betting ban could impact profitability for Entain’s, and it said last month it expected its full year EBITDA forecast will be at the lower end of its £910 million to £960 million range.
Excluding Brazil, it expects FY’26 online NGR growth at the top end of 5-7% on a constant currency basis.
UK&I a standout performer in Entain’s Q3
Elsewhere, online NGR from UK and Ireland surged 14% in Q3, “ahead of expectations” with volume growth of 15% despite unfavourable sports results.
Overall, group NGR rose 2%, while online NGR increased by 3%, and 5% when excluding Brazil.
David said Entain’s UK and Ireland market share gains were driven by improvements to its brands and digital products.
“Clearly, we have been doing a lot of initiatives to improve our customer offering,” she said. “That was also already in play 18 months or so ago, I guess, when we really sort of got started to see some of those improvements starting to get put together and then sequentially hit the market.
“We’ve now introduced a refreshed Ladbrokes app. We’ve got general improvements in the app that have been recognised by external benchmarking on both Coral and Ladbrokes.
“So these are all things which are moving the dial in the right direction, which is basically what we said we would do. So giving a more competitive offering, I think, is driving those market share gains, which clearly we’re very pleased about.”
Potential for MGD hike in the UK
David also commented on the potential for a doubling of the UK’s machine games duty (MGD) which could be forthcoming in the Autumn Budget.
The speculation of a doubling in MGD to 40% arose after the Social Market Foundation, a think tank, urged the government to increase the tax burden on retail operations in the UK.
David warned that an MGD hike could accelerate betting shop closures and job losses, arguing the tax rise could ultimately reduce Treasury revenues.
“Since this time last year, already 630 betting shops have closed across the industry, and that’s before putting the gaming tax up,” she explained.
“If the gaming tax is put up as potentially muted, then independent analysis has shown that circa 1,500 betting shops across the industry were closed, and circa 16,000 jobs would be lost, and the net take by the Treasury would go down because of those direct impacts.
“So the most important point is that we get our message across that putting up gaming tax like that is actually self-competing and hollows out an already very underperforming high street, and so that’s the focus at this moment in time.”
But David also said that Entain was well-placed to deal with the hike, adding: “We are the best, I believe, by far retail operator in this space, and we’ve continued to increase market share over time.
“And when there’s any disruption, we are well versed with how to deal with that. We’ve got the most motivated staff. We’ve got the most compelling footprints, and and we really know how it works. It’s a very well-oiled machine.
“So, 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.”