Entain plc

I'm joined here by Rob Wood, who is the CFO and the Deputy CEO. We've got Samir Deen, who's the Chief Commercial Officer. And at the end, we've got Sati Benz, who is the Chief Product and Technical Officer. We've also got quite a few of the management in the audience today. And hopefully at the end of the session, you'll have a chance to talk to some of us informally before you go. So really, let me get down to business, and I'm going to kick off with my reflections and thoughts, having been the interim CEO for nearly three months now. Then I'm going to give you a brief overview of the performance in 2023, but also looking forward to the priorities that we have in 2024. Rob will then take you through the financials, and then Samir and Sati are going to provide detail on what we've been doing. and what concrete actions we have taken with specific examples and what more we're going to be doing as we go forward. And then I'll wrap up and then we'll have an opportunity to do Q&As. So let me start with my reflections. Yes, I am an interim CEO, but I am definitely not a caretaker CEO. I am not here to tread water in any way, shape or form. We need momentum as a business. And I'm very much focused on execution. We are moving at pace. And my job, as I see it, is to hand this business on to the permanent CEO with great, positive operational momentum. And I'm very pleased to say that the recruitment process for the permanent CEO is going very well. I'm also pleased to say that we've added strength to our bench on the board. In the last two or three months, we've added Amanda Brown and we've added Ricky Sandler. And hopefully in the next week or two, we'll be able to announce the addition of yet one more board member. So the strengthening of the bench, along with the initiation of the Capital Allocation Committee, means that the Board's going to be able to look in depth at what other things we need to do to maximise and improve shareholder returns. Now, the Capital Allocation Committee was only set up very recently, so as I'm sure you hopefully will appreciate, it's not the timing for me to update any more on that because it hasn't reached any conclusions yet. If I now look into the business itself, I'm also really encouraged by the enthusiasm, dynamism of the management team that I've been working very closely with. And fundamentally, Entain is a strong business. It's working in an industry with strong growth dynamics. And our absolute focus under my watch is that what we're going to focus in on being who we are, and that is a betting and gaming company. Now, I understand the prior aspiration to move into broader interactive entertainment, but quite frankly, that was a distraction. We are laser focused on being 100% a betting and gaming company. And my style within the organization, which I think is important, is one of making it safe, although I am demanding, but making it safe to share the brutal truths, or what I like to call them, the elephants in the room. Because actually, if we face the elephants in the room, we can really, really get into proper debate, proper real change at real pace. So what are these elephants? Well, firstly, complexity. Complexity has gradually accumulated over time in this business. And that has been exacerbated by the fact we've done numerous acquisitions. And the problem with the complexity, it's hampering our agility and therefore our ability to get things done. So we have a great opportunity, I believe, to unlock the ways of working and drive more effective and more efficient outputs. In the US, we're very proud of the successes that we've had with BetMGM. And its performance, quite rightly, is a key focus for us. And where I like to think of MGM and ourselves, Entain, that we are the co-parents of BetMGM. But being fully transparent, it took us, and that is Entain, some time to realize just how quickly we needed to feed BetMGM with better consumer experiences and better, more focused U.S.-tailored products. Now, the good news, as Sati is going to tell you later on, is that the work that he and his team have done over 2023 have really helped BetMGM be much more competitive. And there is a lot more positive news to come in 2024. However, this all leads to another elephant in the room. Delivering product and tech solutions for BetMGM at the pace that we have had to do it has meant there has been some considerable cost in our other markets. The good news is that now we have the experience curve and the capacity going forward to not only feed BetMGM with what it needs, but also feed better, more exciting products for our customers in other key markets. And we must prioritize getting our products right in the key markets, particularly the UK and Brazil. Now, I believe that the strategy that was presented in November is sound. And I'm going to give you a couple of charts on it in a few. So I've got to talk to you in a couple of charts time. But actually, right now, the key isn't strategy strategy. The key is delivering and executing on brilliant basics. And that's where we are going to really focus our efforts. The devil is absolutely in the detail. It's a case, and this is what I say in the business, is roll our sleeves up, listen to the people in the business, and have an absolute laser focus on delivery. And I believe fundamentally this will deliver superior results. And importantly, on this journey, when a new permanent CEO comes in place, it is a perfect transition. Because why wouldn't we put in place the building blocks to make sure that we're now back ahead in the race? So I believe it is a completely consistent approach that we're taking. And now I'd like to step back and just do a brief overview of 2023. In all honesty, and I think you know it, 2023 was a challenging year for Entane. And without doubt, performance has been mixed. It's absolutely true we faced significant regulatory headwinds in some of our markets. However, our operational performance was also mixed. We delivered strongly in some areas, but in other areas, we had issues. So let me start on the positive side. I would love to call out specifically Supersport in Croatia. They go from strength to strength, strong double-digit growth, and a great management team doing a great job. However, on the other side of the equation, the UK. We have had a very long iterative process of doing multiple affordability measures. And that has generated, along with other things, significant complexity in the customer journeys. And in Brazil, there were some operational decisions that were made back in 2022 that simply did not work. We lost significant market share. However, we have taken action. The leadership has been changed, and we are starting to see strong green shoots of a big recovery taking place in Brazil. And Samir is going to go through how we're optimizing the customer journeys in both the UK and Brazil later on. I want to also call out BetMGM. It had a good year. delivering NGR at top end of range and also supported by a significant improvement in product. And there's a lot more to come in 2024. And then finally on this slide, I have to refer to the DPA. That was successfully concluded and it's a key milestone in getting to draw the line under a significant regulatory overhang for the business. So therefore now we can and we absolutely must focus in on executing our strategy. So just to remind us of our strategy. These are as presented in November. Top of our strategic pillars. It's who and what we are. We are a leading player in the global betting and gaming industry. That's where 99% of our revenues come from. And our goal is is to provide customers with the most entertaining experience with the safety of market-leading player protection. We have three key focuses. One, organic growth. Growing in our existing markets is a key must-win for us. Margin expansion. And Rob's going to talk through the financials and also where we are on Project Roma. And then winning in the US, the largest and fastest-growing market in the world. Clear objectives, and this is all underpinned by our key enablers. People and culture, product and tech, and good governance. And what I want to do just right now is take a pause and highlight and talk to people and culture. This is an incredibly important part of getting Entain back into winning form. We can, and we are doing better here, but there is a huge opportunity to drive performance through unlocking the power of our people. We have numerous initiatives in play in this area, and it's a team that from the top of the company, from the EXCO and to the senior leadership team, absolutely committed to increasing engagement, aligning objectives and breaking down the silos. I have no doubt, based on my many, many years of experience, because I'm quite old now, that these changes will generate improvements, absolutely guaranteed. So there's a lot to do, but we are taking action and we are executing it now. I just want to take a moment just to talk a little bit more about BetMGM. And I want to add a little bit more colour to the performance. You'll have already heard from Adam from BetMGM that it was a good year with the NGR, top end of guidance, H2 was EBITDA positive. But what I think is behind all that is that our team worked with the BetMGM team incredibly hard to start to deliver the type of product solutions and customer experiences that makes us really competitive going forward. And I think the successes that started to come through towards the end of 2023 mean that the alignment between ourselves, Entain, and MGM is better than it's ever been. I have a regular dialogue with Bill Hornbuckle, and I am confident that the relationship between ourselves is as good as it's ever been. And we've already started 2024 on a very good upward track. The Super Bowl went seamlessly, and there are new products and improvements to the apps, which Sati again will go through, which gives us confidence for the future. So with both parents of BetMGM committed to investing into the growth, we are positioned very well for 2024 and look forward to a positive market share progression. So in summary, my last slide before I hand on to Robb. we have a clear priority of winning in our core markets, must-win markets, the UK, the US, and now Brazil. We do that through commercial excellence, simplifying customer journeys, and providing our customers with great products. Another area of simplification is in our structures, enabling the business to be more agile and more efficient, and therefore more effective. Underpinning a successful execution It's the harnessing the power, the true power of our teams. And we have a global set of very talented people in the business. Quite frankly, this is not rocket science. It's really simple. It's difficult to execute, but it's really, really simple. My mantra internally is we focus in on the vital few, not the trivial many. And what do I mean by that? It means that we make sure we're laser-focused on doing the things that move the dial. It's about sticking to the plan, it's about hard work, and it's about delivery. We will not turn this business around overnight. It's going to take time, it's going to take sustained hard work, but we're already making some real progress with tangible outputs. So we are delivering, and we will continue to deliver tangible reasons to believe in Entain's future growth. And on that point, I'm going to hand over to Rob and come back at the end of the session. Thank you.

Thanks, Stella. Morning, everyone. So as usual, I'll take you through the financial highlights of our results this morning. I'll also provide more detail on our regional performance across our businesses, followed by an update on our efficiency program, Project Roma. And finally, I'll share more detail on the outlook statement that we included in our R&S this morning. Let's start with the financial highlights from 2023. And as usual, all revenue growth numbers that I mentioned are in constant currency. As a group, and therefore including our share of BetMGM's revenue, we delivered NGR growth of 14%, or plus 2% on a pro forma basis. Within that, there were some favourable growth numbers. BetMGM delivered NGR growth of 36% at the top end of our guidance. In retail, NGR XUS grew 8% with the benefit of acquisitions, but encouragingly retail also grew 2% on a pro forma basis. And total online NGR XUS was up 12% year on year. However, as we know, our organic online business had a challenging year with pro forma NGR down 3%. Down 3% was in line with our updated guidance at Q3, but adverse to our expectations of low to mid-single digit growth earlier in the year. That online underperformance meant that EBITDA was 2% lower year-on-year at £974 million. That excludes the accounting of TAB New Zealand, which results in reported EBITDA of £1.8 billion. We've discussed the New Zealand accounting treatment before, and there's a breakdown of the impacts in the appendices. The underlying £974 million of EBITDA figure is in line with our revised expectations following those customer-friendly results in October. Further detail on Q4 trading can be found in the appendix. But in short, Group NGR in Q4 improved from 10% in Q3 to 14% in Q4, with continued pleasing performances across retail, recent acquisitions, and BetMGM. However, our pro forma online growth continued to disappoint, with Q4 seeing a similar performance to Q3 at minus 6%. Adjusted EPS for the year was 44 pence. You'll note from our R&S this morning that EPS inclusive of separately disclosed items was materially negative in 2023 after recognising the DPA settlement and taking impairments, in particular to our Australian business, following the point of consumption tax increases and softer market growth in that territory. To the balance sheet now, liquidity is strong and leverage ended the year at 3.3 times. On a pro forma basis, leverage is 3.1 times or 3.6 times if you include the full DPA settlement cost. Finally, on this slide, we've confirmed a second interim dividend of 8.9 pence per share. This brings a total for the 2023 financial year to £113 million, or 17.8 pence per share, which is in line with our progressive dividend policy and represents 5% growth year-on-year in dividend per share. The next slide now outlines our revenue mix and growth rates by market for each of our online and retail channels. All of the data on this page is pro forma, so as if we own the acquisitions for the entire year, and we also include Entain's share of BetMGM NGR within online. Firstly, you'll notice new segmentation, UK, international and CEE, as well as the US. We intend to report our ex-US business using these three segments from 2024 onwards, showing splits for online and retail channels, as well as reflecting our new operational structure under Samir's new role. we will also remove the new opportunities segment, absorbing those remaining costs into online. Removing new opportunities is symbolic of our new absolute focus on sports betting and gaming going forwards. To help you adapt your models to this new structure, we will provide more information with the Q1s and interims. Now moving on to key insights for 2023, and I'll start with retail. The UK and Ireland, it remains our largest retail business and it performed well in 2023, growing 2% on a like-for-like basis. International, which is two-thirds Italy, that grew strongly at 10% and CEE delivered 4% growth in retail. And seeing our retail businesses delivering growth like this is particularly important when also considering the long-term benefits to our online platforms in those markets, particularly markets where there are advertising restrictions like Italy. Moving now to online, where we see a mixed picture. The UK declined 6% in 2023. This was primarily driven by our implementation of new affordability measures, which have led to more complex customer journeys, but also due to limited product development while we prioritized the US. We've identified the issues in the UK and we're addressing them. And Samir and Sati will talk more about this shortly. International, that represents just over half of our online business, and it declined 4%. Whilst we saw growth in many territories like Italy, Georgia, Belgium, Spain, Canada, and the Baltics, we did underperform in some important markets, namely Australia, Brazil, Germany, and the Netherlands. Australia, that was down primarily due to slower market growth, but also from mitigation actions against point of consumption tax increases and new entrants increasing competition. In Brazil, as already mentioned, our performance was behind expectations as a result of past operational missteps and intensifying competition ahead of regulation. The decline in Germany, that primarily represents tightening restrictions on player deposits, but also coupled with a lack of regulatory enforcement. And lastly, Netherlands was also down year on year. Now, a decline was expected following re-entry of the previous market leader. However, the decline in H2 was greater than expected due to further tightening of compliance measures. On the plus side, BetCity remains number three in the Netherlands market. To CEE now, which was 8% of the mix and showed strong growth of 13% year-on-year, particularly in Croatia, where Supersport continues to lead in a growing market. So 2023 was mixed for online, with pro forma growth XUS behind the levels that we believe our portfolio should be delivering. The good news is that we understand where our issues are, both by market and at the product level. If we exclude regulatory impacts, we estimate that sports NGR for pro forma online was still in decline last year. Whereas in contrast, gaming NGR ex-regulatory impacts was in mid to high single digit growth. Therefore, we're rightly focused on those core underperforming markets and also on our sports product. And Sameer and Sati will talk to you about these shortly. Turning now to our usual EBITDA bridge, the impact of lower online growth can clearly be seen here on the left-hand side. Even after stripping out an estimated 121 million of regulatory impacts, our underlying business for online was only broadly flat year on year, despite operating in growth markets all around the world. Acquisitions added a very welcome 118 million of EBITDA to online, but it's clear that improving our online organic performance is key to returning to earnings growth. More positively, we're pleased with our performance in retail. You might remember last year I guided to £30 million of above inflationary costs for retail, reflecting wages and energy. As you can see here, the underlying organic business managed to mitigate around two-thirds of that, whilst also continuing to invest in the future in our estate, but also in new gaming cabinets and in SSBTs across many of our markets. Corporate costs increased by 18 million as we reached full RET contributions and made further investments into governance. After a few years now of above inflation increases, we should see this corporate cost base return to normalised growth going forwards. The next slide outlines cash flow and net debt movements during 2023. Underlying free cash flow was robust at £524 million, a slight improvement year on year, in part as more favourable working capital flows offset increased corporate taxes and increased capex, which largely reflects acquisitions. As always, a more detailed cash flow is provided in the appendix. We close the year with leverage at 3.3 times or 3.1 times on a pro forma basis, excluding the DPA liability. While payments against the DPA over the next four years will slow our pace of deleveraging, we expect to return to deleveraging from 2025, driven by a return to growth in online. Now on to our efficiency program, Project Roma. We continue to make good progress here to simplify our organization, enabling the business and our colleagues to be more agile in their execution and more effective in their delivery, as well as driving efficiencies in the cost space. We've completed the initial phase of the project, giving us increased confidence that we're on track to deliver approximately 70 million of net cost savings in 2025. I plan to update more fully on Project Roma at our interims in the summer. Finally, moving on to thoughts on the outlook for 2024. Firstly, importantly, trading so far this year has been in line with expectations. However, as we look to the balance of 2024, we want to highlight expected regulatory change in two of our key markets. In the Netherlands, the KSA have proposed tighter deposit limits with expected implementation in Q2. In the UK, we've got the overall story is now positive. We're delighted that this long-awaited regulatory review of the Gambling Act is drawing closer to a conclusion. We look forward to the implementation of online slot staking caps, which has been announced now. And we're encouraged by current discussions on a potential agreement for uniform, safer gambling measures across the market. This is revolutionary change for UK online, much like retail back in 2019 when the triennial review came in. And we think it's positive in the long run for Entame. However, for 2024, we may see further player disruption that comes with change. And equally, we may see opportunities to invest incremental marketing to capture market share as the playing fields finally get levelled across the market in the UK. In aggregate, we expect these dynamics across the UK and Netherlands could reduce 2024 EBITDA by approximately 40 million. In conclusion from me, we saw a mixed performance across the group in 2023. There were positives in retail, BetMGM and recent acquisitions, but our organic online business underperformed. However, we started 2024 in line with expectations. And whilst we are cautious on the outlook for online in 2024, we're making great operational strides to improve the business. And we've now increased confidence of a return to NGR growth by the end of this year and into 2025. To hear more about that, let me hand over now to Samir.

Thank you, Rob. Good morning, everybody. By way of introduction, I joined Entain in 2021 as chief financial chief strategy officer. Sorry about that, Rob. Mid-last year, I took responsibility for our LATAM region, where I initiated and led the turnaround of that business. And late last year, I took on commercial responsibility for the whole group, with the exception of our U.S. and CEE joint ventures. I have now been in my current role for just over two months, and I've spent my time deepening my understanding of our various businesses and teams. Today, I would like to share with you my initial areas of focus and key actions. To start off with, as Stella highlighted earlier, we have a globally diversified portfolio with strong underlying market growth. Yet, we have underperformed in certain regions in 23. And my immediate focus is on delivering organic growth in two of them. the UK, our largest region, and Brazil, the fastest growing market. I will use my time today to walk you through how I assess the business and the go-forward plan for both the UK and Brazil. The way I look at our business is through the important lenses of acquisition and retention. Of those two, retention is the key driver to return to organic growth. On average, prior year cohorts drive 80 to 85% of in-year revenues. Businesses that exceed that 80 to 85% net revenue retention threshold are able to sustain growth. The most effective way to bolster retention is by improving our customer experiences through better products. Today, my team and Satis are working more closely than ever to prioritize, develop, and deliver products that are simple, easy, and fun for our customers to use. Let me now come on to what we're doing specifically in the UK and Brazil. The UK is our largest region outside the US, and so it's critical. The online market is growing at about 5% per year. and winning here is essential to Entain's overall performance. On acquisition, we continue to successfully attract customers with our trusted brands. This is reflected in our strong actives, which grew over 30% in the last two years, with attractive payback periods on our marketing spend. On top of that marketing efficiency, we intend to utilize our retail portfolio to further bolster acquisition through omni-channel promotions and products. As a reminder, we have over 2,000 shops, which is the largest retail footprint in the UK with leading market share. This omni-channel approach will be enabled through a new single leadership team across both UK online and retail, which I put in place earlier this year. Now, returning UK online to growth, however, will require a step change in our approach to retention. While we have a very strong active base to build from, net revenue retention has gone backwards since 21, and we know we need to get better. And so we are proactively addressing retention through three levers. Firstly, our consumer-facing apps can be much better by focusing on brilliant basics, such as improved UX on our core customer journeys and site speed. Faster is always better for online customers. Secondly, improving key sports product features such as bet builders and cash-out functionality. And thirdly, simplifying our safer gambling journeys. We have rightly continued to introduce new measures to protect our players, but we have created complexity for both customers and colleagues in the process. For example, certain Safer Gambling Journeys have increased customer service centre contacts, resulting in longer wait time for our customers. Now, we intend to make these experiences simpler, easier, and better, and we'll keep you apprised of our progress. Hopefully, that gives you some flavor for what we are focused on in the UK. Now, turning to Brazil. As a reminder, Brazil is the fastest growing market outside the U.S., with approximately 2.5 billion pounds sterling in 24. As I mentioned, I began leading the business mid-last year and established a new local leadership team shortly thereafter. Although it is still very early days, Sporting Brett is seeing growth and we're beginning to deliver on the commitments we laid out in November. Firstly, from an acquisition perspective, we've seen first-time deposits returning to strong year-on-year growth driven by two key changes. One, shifting away from an over-reliance on pay TV towards both open TV and digital advertising. and two, a refreshed brand and creative strategy that is now in motion. From a retention perspective, we are seeing initial signs of year-on-year actives growth, as well as higher withdrawal and deposit activity per player. This has been driven by three key changes. Firstly, launching instant withdrawals and deposits has been critical. Through a better integration with PIX, Brazil's most popular payments platform. Second, increasing our local sports offerings focused on more Brazilian football. And third, expanding our gaming portfolio to include local favorites such as Aviator, a virtual crash game that everybody loves in Brazil. To wrap up, I am pleased with the changes we are making in Brazil and the positive response from our customers. I hope you can see that we are forensic in understanding the issues and laser-focused on addressing them. Now, we're already bringing this approach to the rest of our business, including the UK, working much more closely together with Sati and the rest of our teams to put ourselves on the right path back to organic growth. With that, I'll hand it over to Sati to talk about our progress in product and tech.