Entain plc

Good morning, everybody, and welcome to Entane's 2025 half-year results presentation. I'm delighted to be here to give you a strong set of numbers. And this morning, I'm joined on the stage by Rob Wood, our CFO and Deputy CEO, and also Sati Benz, who is our Chief Product and Technology Officer. So, if I go to the agenda, I'm going to start off by sharing with you some of the highlights of the strong progress that we have made in the first half of this year. Then Rob is going to dig into the financials, looking both at trading and the outlook. Then it's going to be back to me to look at achievements against our strategic priorities and how far we have come on our journey of transformation. And a key part of transformation is technology, which is why Sati is here today. And he's going to talk about where we are on our tech journey what we've achieved so far, and importantly, what our thinking and planning is for the future. And then finally, I will briefly wrap up before I'm going to open up to your questions. So, now to our headline results. And as I said at the beginning, I'm very pleased with our H1 performance. Year-on-year growth was a little ahead of expectations, which is encouraging. as we're lapping the comps from last year when we had both the Euros and Copa America. The UK and BetMGM in particular exceeded expectations. And importantly, we also saw strong growth across many of our other markets. Brazil, Georgia, Spain, New Zealand, Canada, Croatia, all in double-digit growth. Our strategic priorities are clear and our focus on operational execution is now delivering the results. Our online business is now growing at least in line with our markets. And our growth is efficient and profitable because we are seeing EBITDA margin growth too. M10's transformation is well underway and it's gathering pace. The business is getting sharper becoming more agile, more disciplined, and the returns are making sure that we have many improvements to our player journeys and our experiences. Our product and tech teams have made significant strides. Not only is that vital today, but it's critically important as we pave our pathway forward, providing flexibility and optionality in the future. So good progress, but there is still lots more to do. We have upgraded our guidance for financial year 25 for both online growth and online EBITDA margin. And at the same time, we're taking the positive opportunity of increasing our marketing investment in H2, which will set us up really well for 2026 and beyond. And this revenue and earnings growth reinforces our clear pathway to strong cash generation. So on that note, let me now hand over to Rob.

Thanks, Stella, and good morning, everyone. It's a familiar format from me this morning, so let's jump straight in with our financial highlights for the first half. As usual, all revenue growth numbers that I give are in constant currency unless stated otherwise. Let's start with revenue, and I'm really pleased with the growth we delivered in H1, which was ahead of expectations. Total group revenue, so including 50% of SMGM, was £3.1 billion, up 10% year-on-year. And within that, online NGR XUS was up 8%, and that 8% is more like 10% adjusting for football tournaments. So better than expected, in particular thanks to another excellent half from the UK. As well as revenue, EBITDA was particularly strong in H1, both including and excluding the US. Ex-US EBITDA was up 11% year-on-year, despite our last major unregulated market, Brazil, going live with a new regime and new taxes from the beginning of the year. And EBITDA, including the US, was up a very pleasing 32% on the prior year, which also drove very strong growth in our EPS, as you can see in the bottom left. Moving on to adjusted cash flow, which is a metric that deserves increased prominence. Remembering that in March, we outlined our pathway to deliver over half a billion pounds of adjusted cash flow per annum from 2028. This metric was marginally negative last year and this year we're ahead by £80 million at the half. Leverage now and we're making good progress. In March, I spoke about ending this year in the mid-threes, including the DPA, and we're there now, ahead of plan. we have declared an interim dividend of 9.8 pence per share, which is a 5% rise in dividend per share, which is consistent with prior years and our progressive dividend policy. Let's turn now to online revenue and a closer look at growth over recent quarters. Whilst I'm not normally a fan of normalising results, we've added the dotted line here to illustrate clear and consistent underlying growth at approximately 9-10% over the last four quarters. That's particularly pleasing as that's both ahead of our expectations and it's ahead of our markets, which we estimate have grown by approximately 7% over the same period. How have we grown ahead of the market? It's primarily due to the UK. If I look at growth over the last four quarters but stripping out the UK, growth dropped to just over 7%, so almost exactly in line with market. Therefore, now that we're lapping the UK's acceleration from last year, 7% is a good representation of our current underlying growth rate. Above all, the key message from this slide is that we're back growing consistently and we're back growing at least in line with our markets. Now to our usual market breakdown, which again shows an almost entire sea of green. Let's start with the positives. In the UK, we're very pleased with our performance and we're rapidly recovering market share. Growth continues to be driven by player values, reflecting our improved player journeys, improved products and improved marketing. Italy now, and we're comfortable with our position in this market. Our market share has been stable since Q3 of last year, and we therefore expect H2 year-on-year growth to be more in line with market growth. In Brazil, we're happy with our performance so far this year. Adapting to a new regulatory environment always carries risks, so we're pleased that growth has continued into 2025. The market is yet to settle down and it's highly competitive, but we're on track to meet our expectations for the year. New Zealand now, and online growth at plus 18% in H1 is great to see. Whilst the legislative net has arrived later than expected, it is now effective and should therefore catalyse even greater growth in H2. Georgia keeps on growing, with another double-digit performance, despite lapping the Georgia national team's excellent Euros performance last year, which drove strong volumes. Spain was a star performer, up almost 40%, responding well to increased focus. CEE next, where online was up 8% for H1, which is particularly pleasing considering the heavy product weighting towards football in the region, especially in Poland, and both countries' national teams played in the Euros last year. The US, as you know, performed exceptionally well in H1, growing at 37% in online. And this chart only shows our largest markets. We also delivered strong H1 performances across many other markets too, with double-digit growth also coming from Canada, Greece, Austria, and some of our Baltics and Nordics markets as well. The value of our diverse portfolio means that in aggregate we can deliver total online revenue growth despite some of our geographies having an off path, such as Australia, where the market continues to be soft and it was impacted by less favourable horse racing results. Netherlands and Belgium were also down due to regulatory tightening, which we'll analyse in Q4. And lastly, retail quickly, down at the bottom of the slide, retail was flat across the half and broadly in line with our expectations. Before I move on, let me just step back for a moment and make a couple of observations. Firstly, this chart is a good illustration of our structural growth story in action. As I said, not all markets need to be performing perfectly for us to grow. Our diversification is a strength. particularly alongside our podium positions, and this gives us confidence of continued growth for years to come. Secondly, this chart shows that markets on our central Entain platform are performing well. The US, UK, Brazil, Spain, they're all central platform markets, which is great evidence of the progress we have made, and you'll hear more on that from Sati later. Moving on now to our year-on-year EBITDA bridge slide, and this time we show both the ex-US business on the left-hand side, and we've added a view of EBITDA including the US on the right-hand side. Starting on the left, as I flagged in the highlights, ex-US EBITDA was up 11% in the half, or up £60 million. Normalising for the £28 million FX drag, 11% growth improves to 18% in constant currency. And that 18% growth in constant currency is despite absorbing new tax in Brazil, which is the next block along. Note we haven't broken out any BAU tax rate rises. This is just the introduction of the new tax in Brazil. The next purple bar is the Ensen growth engine. Online added £113 million year-on-year of organic EBITDA growth. What's driving that £113 million increase? Three things. Firstly, NGR growth, as we've already seen. Secondly, favourable seasonality in marketing spends, as H1 last year had a higher mix of marketing to support the football tournaments. Thirdly, we're ahead of expectations on Roma initiatives, particularly benefiting online cost of sales. and I'll come back to that later when discussing guidance. So online is up £113 million year-on-year, and then retail and corporate are broadly flat. So, despite FX and absorbing the new tax in Brazil, our EBITDA growth ex-US was ahead of our expectations and up £60 million year-on-year. Let's now include the US in our EBITDA bridge, and in addition to the £60 million uplift we've just discussed, we can add our share of BetMGM's year-on-year improvements. So that's a £90 million year-on-year increase, which is a swing from minus £48 million last year to a positive £42 million this year. All in, therefore, total group EBITDA for H1 was up 32% year-on-year. Now, before we move to cash flow and debt, just a quick word on our efficiency programme, Project Roma. We announced this multi-year simplification and efficiency programme back in November 2023, and we're firmly on track to exceed our upgraded expectation of at least £100 million in annual benefits. We've seen good results across all areas of spend, including most recently, exceeding expectation against online cost of sales, as I mentioned earlier. As with any multi-year programme, over time, Roma activity is merged with BAU activity, and the programme has now been fully in-house and fully integrated into the business. Therefore, going forward, I won't give specific updates on it, aside from when I cover efficiencies as part of our margin guidance. Let's now take a closer look at cash flow, which we have rightly shone a light on recently. As outlined in March, adjusted cash flow is bottom-line cash flow pre-dividend adjusted for working capital noise, and with M&A and debt movement stripped out. In March, I said we expected 2025 to be broadly zero, before then rising towards half a billion pounds per annum from 2028 onwards. And as you can see, this metric was plus 80 million for H1, so we're on track so far. Leverage has also improved year on year from 3.7 times, including the DPA this time 12 months ago, to 3.4 times now, which is roughly where we expect to be at year end, before then significantly deleveraging from 2026. So our cash flow is recovering. Leverage is improving. Liquidity is strong. We have a healthy debt maturity profile, particularly after recent term loan refinancings. And after seven years of injecting capital into building BetMGM, we now expect some level of cash to be returned to parents later this year. Now onto updated guidance. And the good news is, from this slide, all of our updates are favourable. Firstly, online NGR growth. Our March guidance was for mid-single digit growth in constant currency. with H1 expected to be stronger than H2 purely due to prior year comps, so lapping the UK acceleration in H2 and the strong margin in Q4. Now our half on half expectation remains the same, but having banked H1 ahead of expectation at plus 8%, and with H2 starting well, we've nudged up full year guidance to approximately 7% in constant currency, which implies approximately 6% in the second half of the year. Given an expected 2-3 percentage point FX drag year-on-year, that 7% in constant currency for the year equates to mid-single digits on a reported post-FX basis. We've also upgraded online EBITDA margins from approximately 25% previously to now being in a range of 25-26%, which is principally driven by outperformance on Roma cost of sales initiatives. There are some other ups and downs, like geographical mix benefiting, offsetting a few minor tax increases. But what's particularly pleasing is that this margin upgrade has also been achieved while planning to increase marketing spend in H2. Effectively, we plan to reinvest some of the upside from H1 EBITDA to maintain momentum into 2026 and beyond. And we do that while still delivering an upgrade versus March guidance. Moving on, and retail EBITDA guidance is unchanged, and we now expect 2025 EBITDA to be within a range of 1,100 to 1,150 million pounds. Now rather than covering it in Q&A, let me help you with what this EBITDA guidance implies for H2 EBITDA. At the midpoint, guidance implies that H2 EBITDA is down around 40 million on H1 and down around 20 million year on year. So what's happening there? Firstly, H2 is down on H1 principally because online marketing is materially higher in H2 given the planned investments I mentioned earlier, and seasonality. And secondly, why is H2 EBITDA down 20 million year-on-year? Well, we still have the drag-strong FX in Brazil that we saw in the bridge earlier, and we have two marketing impacts to consider. One, we have the planned increase in H2 marketing that I mentioned a few moments ago. And two, we have the seasonality point. So football tournaments are now adverse year on year in H2, reversing the benefit that we saw in H1 that I mentioned earlier. Touching briefly on BetMGM now, and as you heard from the team a couple of weeks ago, we enjoyed an excellent H1. Consequently, we've upgraded twice since March, and we now expect at least $150 million of EBITDA for the year. So, despite FX, Brazil tax and increased marketing, the combined EBITDA guidance of Entain and BetMGM is projecting strong double-digit growth for 2025. To conclude, let me reinforce our medium-term cash guidance. As I said earlier, 2025 adjusted cash flow is on track to be broadly neutral. And then we have three clear drivers to launch us to over half a billion pounds per annum in the medium term. Very pleasingly, H1 has seen significant progress against the top two of those drivers. Entain XUS has grown ahead of expectation. And BetMGM's inflection to profitability is now a certainty, which gives greater conviction in cash generation by BetMGM over the years ahead. So we've made strong progress in the half and we have increased conviction in these cash flow drivers. And that's a positive place to be standing as we look ahead. With that, I'll hand back to Stella.

Thank you, Rob. So, our strategic priorities are clear and unchanged. Consistency being the magic ingredient. However, while they are unchanged at the headline level, we now have increased bandwidth and ambition. That means expanding beyond the urgent priorities that we set ourselves in 2024. And it's very pleasing that the markets we've mentioned, like Canada, like Spain, like New Zealand, are in strong double-digit growth, but more meaningfully, they are generating substantial real value to the business, adding substantial value. incremental profitability. We're focused on the growth drivers. And those growth drivers are revenue growth and margin growth. And we're also dialing up the focus on cash, as Rob mentioned, delivering growth in the right way, being more disciplined in how we invest our capital and how we conduct our operations. And Rob has already outlined our pathways annually generating over half a billion pounds in cash flow And that is a key component of adding long-term value creation. And it is going to be, it is a focus of mine, and it's going to continue to be a focus of mine. I'm also delighted that all three of our must-win markets are performing strongly. So, the UK online and Brazil, both growing at 21%. Best MGM, 34%. So let me run through some of the highlights of what's behind these pleasing numbers. So first of all, the UK. The market having returned to growth sooner than anticipated is continuing to beat expectations and sees us regaining significant market share. And we're seeing growth not only in volume, but in player values. And on top of the huge task of improving customer journeys, we've also been focusing in on product and player experiences. The apps are significantly faster. We've enhanced our bet builder, in-play, cash out, and bet tracker. And players are loving our coins economy reward system, alongside the benefits of having our exclusive games and content. If I move to Brazil, and it's been a very busy year so far, We launched successfully on day one of the new regulatory regime. And to be honest, it's not always been plain sailing. But we have navigated the challenges, including re-registering and certifying all of our customers. And the performance is on track. The recent Club World Cup was particularly strong, with record levels of player activities and turnover. So we do believe that we're well positioned going forward and are excited about the opportunities in H2 and beyond. And now if I move to Beck MGM. Now, we all know that the interims have already been covered by Agan. And I think if you look at the results of the interims, it is quite clear that we are now entering a new and exciting phase for Beck MGM. But I'm equally proud that a key part of Beck MGM's performance is the product improvement and the experience improvements that our players are finding. And Entain's tech team delivered this in combination and partnership with Best MGM. So that is a really good metric looking forward. S25, as Robert mentioned, has been upgraded. And we are confident in Best MGM's pathway to 500 million EBITDA per year and beyond. But it's no longer just about these three must-win markets. It's about increasing our bandwidth and also driving meaningful growth from other parts of the portfolio. So I now move on to marketing and brands. Amongst our iconic brands, we have some sleeping giants that we're just starting to reawait. So, for example, in Spain, we have seen tremendous success in rekindling the love for the Bwin brand. Great emotional advertising combined with performance marketing with excellent payback periods has resulted in that fantastic growth in H1 of 39% of NGR. And now we're increasingly confident that we can return Bwin to where it should be in Spain, which is a podium player. Similarly for Sporting Vec in Brazil, we made sure that the relaunch of the brand took place well before the start of the new regulated market to set ourselves up well. And then if you look at the UK, as we're just warming up for the football season, we're seeing on Lad Groups the launch last weekend of our new campaign, Laddisfaction. And an increasing number of our geographies are now starting to use the benefits of 365 Scores. 70% of our investment in performance marketing is now managed by our 365 Scores team. And you can see from the charts that the benefits are really proving themselves out. We have an 11% improvement in payback since we made that change. And that change, the benefit of 11%, has been done while we've also increased the level of absolute spend. showing that we are getting the returns that we need in this area. So now with growth coming from across our market portfolios, our KPIs of customer retention and acquisition are strong illustrations of the improving underlying momentum across the business. As a reminder, the combination of retention at over 85% and acquisition at over 15% and my maths gets that to over 100, means that we're in sustainable revenue growth. The chart in the middle shows that net revenue retention is holding up well above that 85% level. The small dip that you see in June is just because of the euro lapping. And this high level reflects the hard work to close the product gap and to enhance our customer journeys. And also, after a higher retained base, we're seeing customer acquisition numbers sitting comfortably above the 15% level. So in combination, these two metrics are a great indicator of future growth, which is why we're happy to be investing behind these marketing activities. We're also working hard at strengthening and improving our business. And I know that I've shared this slide with you before, so I am repeating myself, but it is important. It demonstrates that Entane is operating in strong and attractive markets with strong foundations. First of all, we are a global leader in the industry that is in long-term growth. Over 90% of our NGR is locally licensed. And Brazil was our last major market to shift to regulation and new taxes. Over 85% of our NGR is from markets where we have podium positions. 98% of group revenue is from markets which are in growth. And 93% of our online revenue is from markets estimated to grow at at least mid-single digits, CAGR, over the next four years. So these core pillars of strength underpin the sustainability and quality of our earnings growth and sets us up to deliver constant returns and long-term shareholder value for many years ahead. However, to maximise these opportunities, we need to keep delivering significant strides forward in products and technology. This includes mapping out A plan that maximizes the flexibility and optionality that having a central platform and regional platforms offers. And Shafi is going to talk to that shortly. We also need to keep improving our operational execution. This isn't rocket science. It's not about a silver bullet. It's about many, many iterative improvements to the way in which we work. And finally, as we continue to press ahead, my goal... for this business is to become a true learning organization. Have a true learning mindset. Why? Because it is one of the few areas of truly sustainable, competitive advantage that there is. So we must be learning. Customers, continue to listen to them and learn. What are they telling us? What are their behaviors? What do they like? We must embrace learning in the way that we do our business, utilizing our talents to improve our problem solving and foster faster and more effective solutions and innovation. And if you want to know what goes on in my head, you may not want to, but I'm going to tell you. My internal mantra is one where we have the following. We need real people talking to real people in real time, solving real problems. And if we can improve that learning mindset and the associated behaviours, then we will have a sustainable, long-term, winning culture. So now, over to Sati to talk about the excellent progress in product and tech. Sati.