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Shares in troubled gambling group Entain jumped more than 11 per cent on Monday after the Ladbrokes owner upgraded its annual forecasts, in an early boost for new chief executive Stella David.
Second-quarter trading at its US sports betting business BetMGM, a joint venture with New York-listed MGM Resorts International, has been “broadly consistent” with the 34 per cent growth seen in the first quarter, Entain said on Monday.
The FTSE 100 company now expects to report annual group revenues of at least $2.6bn and earnings before interest, tax, depreciation and amortisation of at least $100mn. It had earlier forecast revenue of between $2.4bn and $2.5bn, and “positive” ebitda.
David, the company’s former chair, was appointed Entain’s permanent chief executive in April after performing the role in an interim capacity since February.
Today’s upgrade showed she had been able to deliver ahead of expectations, said Barclays analyst Pravin Gondhale. “This is a good sign for them . . . the strategy is working,” he said.
David plans to revive the group’s fortunes by growing its share in US online gaming and sports betting — a market which was only legalised in 2018 — as well as tapping into the fast-growing sports betting market in Brazil, another newly legalised market.
In the first three months of the year, BetMGM, which was formed in 2018, reported earnings before interest, tax, depreciation and amortisation of $22mn, its first quarterly profit. Last quarter’s strong performance was driven by growth in sports betting and online gaming, the company said.
Entain provides the technology that sits behind BetMGM, while MGM Resorts International handles the venture’s customer-facing activities.
Shore Capital analyst Greg Johnson said Entain’s valuation was “failing to reflect the improving trends” both at the group level and in the US.
David is striving to rebuild investor confidence in Entain after a turbulent period characterised by corporate governance concerns and a series of executive departures.
The company signed a deferred prosecution agreement in the UK over allegations it failed to prevent bribery in Turkey, while Australia’s financial crimes watchdog launched legal proceedings against Entain, citing breaches of anti-money laundering rules.
Entain said previously that it took the allegations “extremely seriously” and that it was enhancing its compliance arrangements.
The company’s languishing share price frustrated investors and left the UK-headquartered group vulnerable to a takeover. The US’s second-largest gaming company, DraftKings, made a £16.2bn bid for Entain in 2021, before walking away. Activist investors, including US hedge funds Eminence Capital and Sachem Head Capital Management, have also circled the company.
