City examines vital interims as gambling faces sweeping judgement calls  

From London to Wall Street, the interim results of global gambling’s listed incumbents will be probed as the industry faces systemic changes inbound during the second-half year trading.

Though the finely balanced outcome of the UEFA Euro 2020 Championships will impact incumbents bottom lines – city analysts will be focused on evaluating which companies are best equipped to thrive in global gambling’s ever-changing business environment.

The first FTSE giant to disclose its results on Thursday 8 July, Entain Plc, will carry significant attention as to whether the industry’s pacemaker will continue to pursue its aggressive M&A expansion strategy amid its continued courtship by US partner MGM Resorts.

Buoyed by the firm’s sky-rocketed share price, Entain investors remain confident that MGM will return to the negotiating table, improving the £8 billion takeover bid rejected last January.

Irrespective of MGM’s pursuit, Entain continues to bulk-up, completing the acquisitions of leading Baltics operator EnLabs (£315m) and Portuguese sportsbook Bet.pt.

At the centre of all gambling M&A narratives, Entain has been pitched as the lead suitor of Tabcorp Holdings’ expected sale of its TAB sports betting unit, competing against PE fund Apollo Global and BetMakers all-Australian wagering bid.

Of significance for analysts, Entain’s results will be presented against the backdrop of Scientific Games announcing last week that it would divest its lottery and sports betting units – deleveraging to become ‘a content focused igaming supplier’.

Ripple effects are expected as Scientific Games places its OpenBet unit for sale or public listing, divesting the industry’s leading operating platform provider and changing the industry technology dynamics.  

Scientific Games’ deleveraging holds significance for the US market, where its deep-pocketed players appear to prefer lean M&A over acquiring bulked-on muscle mass to maintain course on a nascent marathon marketplace.

Case-in-point, Caesars Entertainment‘s £2.9 billion acquisition of William Hill (completed this April) which saw the US firm immediately strip the heritage bookmaker’s UK and Euro assets – with offcuts eyed by a raft of European suitors including 888, Betfred, Boylesports, Apollo and Entain.

Elsewhere, the tribulations of maintaining US growth will hold a particular prominence on the interim result of Flutter Entertainment, announced on Tuesday 10 August.

Coming into 2021, Flutter may have expected another year of cruise control for its FanDuel US brand, which during 2020 achieved the headline feat of outmatching its long-established Australian unit growth.

Nevertheless, Flutter now faces imminent challenges in how it will maintain FanDuel’s aggressive US growth strategy, emerging from a legal dispute with US strategic partner FOX Entertainment.

Flutter has maintained that it will pursue a separate US IPO for FanDuel as its preferred outcome, helping the FTSE100 company cash-in on a potential + £8 billion valuation of its fast growth unit.

However, FanDuel’s intended IPO could be derailed by FOX, as the Murdoch Family-owned company pursues its rights to acquire an 18.6% stake at a significantly discounted purchase price.  

Headaches will not be solely reserved to US proceedings, as the gambling industry faces its familiar woe of regulatory infringement burdening European growth.

The sector’s listed operators face a tough acclimatisation to Germany launching its new Fourth State Treaty (GlüNeuRStv) regime which offers no comfort for licensed participants.

Analysts will be evaluating whether incumbents pursue establishing their brands in Germany’s high taxed and highly restrictive market – a growth conundrum disclosed by LeoVegas, Betsson AB, Entain and Kindred Plc.

Despite its US and European upheavals, the long-awaited outcome of the UK government’s generational review of the 2005 Gambling Act will sit at the top of the sector’s Q2 agenda.

Leadership nerves are set to be tested as the government undertakes a ‘generational rewiring’ of the UK’s gambling laws, in which judgements will impact incumbents’ valuations, strategic planning and M&A appetite.