Entain has announced Gavin Isaacs as its new CEO, effective from 2 September. Isaacs has over 25 years of experience across the global sports betting, gaming and lottery industries.
Stella David, interim CEO and Chair Designate, will work alongside Isaacs before succeeding Barry Gibson as Chair of Entain on 30 September 2024.
The shares rose 3.9% in early trading.
Our view
News that the CEO spot has been filled with Gavin Isaacs, a veteran in the industry, has gone down well with investors. Stability at the helm is key, and with Stella David stepping into the Chair job in September too, there’s a solid new leadership chain in place.
First-quarter results back in April provided investors with a small amount of relief. Organic revenue declines have eased since the final quarter of last year and performance from higher growth areas looks promising.
But regulatory challenges loom overhead, and several headwinds have come at the same time. Affordability checks in the UK and a German market that's seeing new regulations like stricter deposit limits, are expected to continue to weigh on performance. A recent vote in the Netherlands also paves the way for a potential ban on online gambling advertising. All in, regulatory headwinds were expected to be a £40mn drag on cash profit this year.
Retail has been a positive surprise, with performance hanging on despite easier comparable periods now being behind us. But we see Entain's future in the higher-margin online business.
Following a spree of acquisitions, organic growth is back in focus. We're expecting to see Entain exit some non-core markets like Chile and Peru, with investment funnelled into high-growth areas like the US and Brazil, along with the core regions like the UK.
Margin expansion is also on the cards, with 'Project Romer' on track to deliver £70mn of cost savings to the online operation by 2025 (c.6% of 2023 operating costs). These initiatives sound great, but we're not getting too excited until some results start to come through.
In the here and now, BetMGM, Entain's US-based joint venture is a shining light for the group. It's now in profit-making territory, a big milestone for a business that's historically been a drag on the bottom line. With many states still new to online betting, North America in a potential treasure trove. BetMGM’s now live in Nevada, the home of Las Vegas, making it the only top three operator with a licensed app in the state. We see a lot of room to run in this market, but it's starting to run up against tougher competition - so it's an area to follow closely.
Entain’s been under pressure of late the valuation now reflects that reality. We can understand the sentiment, with regulatory headwinds, changes at the helm, and increased US competition. With a longer-term view, we feel the growth prospects are being overlooked and the opportunity in the US will come through over time - though there are no guarantees.
Environmental, social and governance (ESG) risk
Consumer services companies are medium risk in terms of ESG, and very few companies excel at managing them. That leaves plenty of opportunity for forward-thinking firms. Product governance concerns are a primary driver of this risk, along with the environmental and social impact of those products and services. Additional material issues to the industry are resource use and waste, and labour relations.
Entain’s overall management of material ESG issues is strong.
Entain has established a board-level ESG committee overseeing issues like safer betting, regulatory compliance, and anti-bribery. The company has strong policies on responsible gambling, anti-bribery, and whistleblowing, but needs improvement in responsible marketing, data privacy, and political involvement.
Entain key facts
All ratios are sourced from Refinitiv, based on previous day’s closing values. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn’t be looked at on their own – it’s important to understand the big picture.
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