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Entain - CEO stepping down

Entain's CEO, Jette Nygaard-Andersen, will stand down immediately after three years in the position...

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Entain's CEO, Jette Nygaard-Andersen, will stand down immediately after three years in the position. Stella David, currently a non-executive director, will take over the role on an interim basis. The board will begin a search for a permanent replacement.

Earlier in December, Entain agreed to pay £585mn in penalties due to HMRC's investigation into its legacy Turkish business.

The shares rose 3.7% in early trading.

View the latest Entain share price and how to deal

Our view

Markets reacted positively to news that CEO, Jette Nygaard-Andersen, is stepping down. It's been a tough period for management, under pressure from shareholders after a string of poor performance.

Organic growth's been limited of late, with acquisitions picking up the slack back at the half-year mark. Fresh affordability checks in the UK, and a German market that's seeing new regulations like stricter deposit limits, are all weighing on performance.

Retail has been a positive surprise, with relatively robust performance despite some of the easier comparable periods fading into history. But it's the higher margin online business where we see the future of Entain.

Along with third-quarter trading, we also heard more details about the next phase of Entain's strategic evolution. Following a spree of acquisitions, it looks like organic growth is coming back into focus. We're expecting to see Entain exit some non-core markets, 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' expected to deliver £70m of cost savings to the online operation by 2025 (c. 6% of 2022 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 finally started to enter profit-making territory, a big milestone for a business that's been a drag on the bottom line up to now. North America is a potential treasure trove and we see a lot of room to run for this asset, but it's starting to run up against tougher competition - so it's an area to follow closely.

Overall, sentiment is downbeat, and we can understand why - regulation is a key risk and one we're seeing have an increasing impact on performance, and organic growth needs to find its footing once more. The opportunity in the US is huge but we'd like to see some progress in core markets to justify the current valuation, which has moved higher as earnings estimates have been lowered.

Entain key facts

All ratios are sourced from Refinitiv. 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.

This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by Refinitiv. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.

This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research disclosure for more information.

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Written by
Matt Britzman
Equity Analyst

Matt is an Equity Analyst on the share research team, providing up-to-date research and analysis on individual companies and wider sectors.

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Article history
Published: 13th December 2023