Entain plc

Good morning, everybody, and welcome to NTAIN's 2024 results presentation. Now, I know that neither you or I expected me to be doing this, but anyway, here I am. And the good news is that I am very confident that we are on track, and I'm delighted to be here to give you a strong set of results for 2024 for the group. I'm going to be joined here by Rob Wood. He's our CFO and our Deputy CEO. We've also got members of the IR team in the audience along with other members of our leadership team. So to the agenda for today. I'm going to kick off with a brief overview of 2024 performance and the significant progress that we have achieved during the year. Rob is going to take you through the financials and he's also going to touch on current trading and our outlook. Then it's going to be back to me for more detail about what we have been doing to achieve our strategic goals. And why our business is well set to deliver high quality and sustainable growth in the future. And also capture new exciting opportunities. And then finally, of course, we're going to wrap up so you can ask your questions. So let me start with a quick overview. Last March, I actually spoke very frankly to you about the challenges facing Entain. We had to face the brutal truth. we had to roll up our sleeves, and we had to focus on delivering operationally. Today, exactly one year later, I'm very pleased to report that we are seeing positive results, returning to organic growth both for NGR and EBITDA. We said that we had to deliver in our must-win markets, the UK, Brazil, and the US, each of which has exited Q4 with the KPIs definitely in the green zone. I'm also pleased to say that we have positive momentum across the other parts of our portfolio too. However, this is only the start of the journey. There is so much more to do. And I'm going to talk about that shortly. But before I do that, I'm going to hand over to Rob to go through the financials.

Rob.

I've realized I really need to invest in some new clothes. Morning, everyone. Thank you, Stella. So as usual, I'm going to walk you through the financial highlights of 2024. We're going to look at it by segment. I'm also going to talk about our guidance for 2025. And lastly, I'll spend some time talking through Entain's medium-term outlook and how we grow revenue we expand EBITDA margin, and most importantly, deliver meaningful cash generation. So starting with our financial highlights from 2024, and as always, all revenue growth numbers that I give are in constant currency. As a group, and therefore including our share of BetMGM revenue, we delivered 6.0 billion pounds of net gaming revenue, which is up 9% year on year, or up 4%, on a pro forma basis. EBITDA of 1 billion and 89 million pounds was up 12% year on year. And crucially, that was driven by both the annualization of 2023 acquisitions and a return to organic online EBITDA growth for the first time since 2021. EBITDA finished at the top of our guidance range and in line with our January update. Adjusted EPS was 46.9 pence or 29.9 pence, including BetMGM. Liquidity remained strong with over £1 billion of available cash. Leverage ended the year at 3.1 times or 3.5 times, including the DPA, which is better than expected for a couple of reasons that I'll come to later. Finally, we've confirmed a second interim dividend of 9.3 pence per share, So the total for 2024 is 18.6 pence per share or £119 million, which is in line with our progressive dividend policy. This next slide is a clear illustration of Entane's recovery. Our online business is now firmly back into organic revenue growth. The number one driver of online returning to growth was the lapping of regulatory changes in the UK in 2023. However, pleasingly, we got back to growth sooner than expected. How did we do that? There are many drivers, most of which you'll hear Stella talk through shortly, but two are worth emphasizing now. Firstly, for the first time in a long time, central platform markets such as the UK and Brazil saw meaningful product enhancements. For example, introducing coin economies for UK gaming customers. Secondly, we addressed the friction and complexity in our UK customer journeys, which was of course helped by the Voluntary Code. Those drivers enabled the UK to return to market levels of growth in H2, which in turn helped all of Entain return to market growth. So we're therefore already on track to deliver our targets of market growth in 2025. Moving on to the usual NGR breakdown by segment, and what's really pleasing is the sea of green bars. Excluding known regulatory changes in the Netherlands, you can see we deliver pro forma growth across all of our largest markets. Starting with the UK, online was up 2% for the year, improving significantly from minus 8 in H1 to plus 14 in H2. We expect the UK to continue with strong growth in H1 of this year before reaching a more steady-state growth rate in H2. UK retail was down 1% or up 1% on a light-for-light basis. We saw improving trends through the year, which was in line with expectations as we lapped prior year regulatory changes and also the benefit of the rollout of our new market-leading Cascada gaming cabinets. However, the shape of Q4 was a little different to expectations, as favourable sports margins offset some market softness in gaming volumes, which have continued into 2025. Moving to international now, where online NGR was up 7% year on year, and retail NGR was up 1% on a pro forma basis. Brazil continued to exceed expectations, Following 48% growth in Q2 and Q3, we saw 65% growth in Brazil in Q4. We, of course, expect more moderate growth in 2025 as the comps get harder and the market digests the new regulatory regime. Outside of Brazil, international performed in line with expectations, with Australia a little ahead and Italy a little behind. In Australia, the main focus for growth has actually been New Zealand, where we successfully migrated TabNZ onto the Australia platform and then launched a new online-only brand, Betcha. Growth in New Zealand's been good, up 4% for the year and up 7% in H2, but we're still waiting for the legislative net, which is the catalyst for the licence market to grow materially. We believe that's on track to come this year, but the delay does mean we're a little behind our original forecasts. In Italy, we've lost some share in online, although more recent data show stabilization. Looking by brand, we see that our large omnichannel brand, Eurobet, is performing reasonably well, whereas smaller online-only brands, Bwin and Giocodigitale, have ceded some share. Elsewhere, we saw double-digit growth in Georgia, and double-digit growth in other important markets that you can't see on this page like Spain, Canada and Greece. On the downside, Netherlands was the only large market in decline last year as further revenue passes to the black market following new deposit limits in October. Belgium also declined from Q4 following regulatory changes to the product in September. We therefore expect continued underperformance in these two markets into 2025. But note they only represent around 5% of our group revenue mix. Entane CEE, that continues to perform strongly, up 13% year-on-year in online and up 9% in retail. Supersport in Croatia delivered impressive double-digit NGR growth every quarter. And in Poland... We're seeing increased promotional intensity from peers who are trying to eat into our market leadership ahead of potential gaming regulation. But I'm pleased to say the team has done an excellent job and held share despite the competition, growing NGR by 8%. But it has required some EBITDA investment to get there. And finally, the U.S. As announced on the 4th of February, BetMGM delivered a 2024 revenue growth of 7%, which was up 13% on an adjusted basis. And after a year of investment and strategic refinement, BetMGM exited 2024 a materially stronger business. And I'll let Stella talk more about that later. As a side note, when you study our accounts in more detail, you'll see we've taken some non-cash impairments to reflect the updates I just mentioned on Netherlands, Belgium, Poland, and New Zealand. But we have great positions in all four of those markets with exciting opportunities to come, particularly in Poland and New Zealand. Turning now to the EBITDA bridge, and EBITDA grew 8% year-on-year, or 12% in constant currency. Working from left to right, Firstly, FX was a bad guy to the P&L last year, creating a 38 million negative year-on-year headwind. In contrast, FX was a good guy to the balance sheet, which I'll come on to later, and that demonstrates the FX hedge in our business. Next, our 2023 acquisitions of STS, TAB New Zealand, and 365 Scores contributed an incremental £67 million to EBITDA, And then the most important takeaway from this chart is the next section, which shows that our organic business returned to full-year EBITDA growth at 5% powered by online. That strong online NGR growth that we saw on the previous slides, combined with Project Roma, translated into organic EBITDA growth for online of £70 million for the year. Our organic retail business fared less well. That came down 36 million year on year for two reasons. Firstly, in the gaming market, there's softness that I highlighted earlier. Secondly, higher colleague bonuses in 2024 reflecting a good year for the business, which we can assume will normalize into 2025. Finishing the charts and corporate costs were broadly flat year-on-year as the benefits of Project Roma offset inflation. And we saw an £18 million year-on-year good guy from closing the new opportunity segment late in 2023. The next slide outlines cash flow and net debt movements during 2024. As always, a more detailed cash flow is provided in the appendix. You can see underlying free cash flow was £626 million or £524 million normalizing for working capital timing benefits. Leverage at 31st of December was 3.1 times or 3.5 times including the DPA liability. Now those numbers are materially better than expectations but it's important to note they're flattered by two factors. Firstly, the working capital inflow that I just mentioned, and that will partly reverse in 2025. And secondly, the FX benefit that I referenced earlier. If we back out the working capital benefit, leverage, including the DPA, would have been, say, 3.6 times, which is about the level we expect to stay at in 2025 before we begin deleveraging in 2026. And I'll come back to that in a few slides. Lastly, liquidity remains strong with over £1 billion of available cash, helped by refinancing activity in the first half of last year. So as we look forward, leverage is stable in 2025 and reducing from 2026. Liquidity is strong and we have a clear path to significantly improve cash generation over the medium term, as I'll discuss later. Now moving to our outlook for 2025. We've produced the usual detailed guidance slide in the appendix to help with your modeling. So I'll just hit the key points here. Firstly, current trading. And I'm delighted to say that we've started 2025 strongly. Volumes are bang in line with expectations. And so far, sports margins are ahead of plan. So NGR is ahead, but it's too early in the year to be banking margin upside. Across the full year, we expect online NGR to grow in line with our markets, so mid-single digits growth on a constant currency basis, and that's all volume-driven, assuming normalised margins. As you think about phasing, remember that prior year comps do get tougher as we progress through the year. In Q2, we lapped the Euros and Copper America. And then in Q3, we lap the acceleration in UK online that I referred to earlier. And in Q4, we then lap operator-friendly sports results. So it's important that we start the year well, and that's exactly what we've done. Online EBITDA margin is expected to be approximately 25% in 2025, which is flat year-on-year despite absorbing approximately two percentage points of impact from the first year of Brazil taxation. So on an underlying basis, there's strong margin accretion coming through. Retail EBITDA is expected to be broadly flat year on year, as normalised colleague bonuses are then offset by increased staff costs, which we outlined following the UK autumn budget last October. And finally, as BetMGM already announced, we expect 2025 to deliver $2.4 to $2.5 billion of net revenue and be EBITDA positive for the year. Moving on to the medium-term outlook now. And as this chart shows, Entain has a strong track record of NGR and EBITDA growth. However, in recent years, the lion's share of that growth has come from acquisitions, whilst our organic business absorbed approximately £500 million of regulatory impacts to EBITDA. Looking forward, I'm very happy to say that we're back in a position where our organic business is once again the driver of our growth story. Our online markets are growing at 5% to 8% annually. And although I expect Entain to grow in line with markets this year, we are of course aiming to outperform them in the medium term. In addition to NGR growth, we will also grow our EBITDA margin as the benefits of Project Roma and operating leverage flow through. So what does this mean for cash? Whilst our NGR and EBITDA growth is clear, our cash generation has been challenged. The bars on this chart show a clean representation of adjusted cash flow. It takes bottom line cash flow and then removes only the cost of acquisitions and associated financing, dividends and working capital noises, particularly given working capital flattered 2024. And as you can see, over the past two years, adjusted cash flow has declined by approximately 400 million pounds. This is for three main reasons. One, lost cash flow from UK online, caused in particular by the last of that £500 million of regulatory impacts I referenced earlier. Two, increasing interest rates. So that's just the impact of base rates rising, not the quantum of debt. And three, payments against the DPA settlement. We're confident that this decline is short-term in nature, and we will return to strong cash flow generation in the medium term. In fact, we see a clear path to generating over half a billion pounds of adjusted cash flow each year pre-dividends. Many of you already have this cash generation recovery in your models, given previous outlook commentary. But to say it clearly now, there are three drivers that get us from where we are today to that half a billion pounds. One, organic NGR growth and EBITDA margin expansion, which we're already delivering. Two, dividends from BetMGM as it follows its pathway to $500 million of EBITDA in the coming years. And three, of course, conclusion of the DPA payments in December 2027. So these three building blocks get us to sustainable and growing cash flows of over half a billion pounds in the medium term. And of course, with both cash generation and EBITDA growth, we expect leverage to trend favorably from 2026 onwards. So therefore, our medium-term outlook is clear. Entain has revenue growth, EBITDA growth, a path to significant cash flow generation, and organic deleveraging. With that, I'll hand back to Stella.