By Geoffrey Smith
Investing.com -- Entain (LON:ENT) shares fell 12% on Thursday to an 18-month low after the owner of the Ladbrokes and Coral betting chains reported a sharp slowdown in online gaming revenue in the first half of the year, suggesting that the boost it had from locked-down customers during the pandemic is fading faster than previously thought.
Entain consequently cut its guidance for the year, saying it no longer expects revenue from online gaming to grow. It had previously forecast an implicit increase of between 5% and 10%. Entain said total online revenue fell by 7%, with sports betting revenue down by 6% and other gaming revenue down 9%.
"A weaker macro-economic environment is reducing customers' rate of spend, moderating overall Online growth versus our previous expectations," the group said.
Its first-half performance was rescued by its U.K. betting shops, which were able to stay open uninterruptedly through the winter after suffering from widespread COVID-19 lockdowns the previous year. Revenue from its retail outlets rose 244% over the first half, with a 79% year-on-year improvement even in the second quarter, which had a tougher comparable baseline.
However, investors tend to focus more on the online business which, through its partnership with MGM Resorts (NYSE:MGM) in the U.S., has the greater growth potential. The company is also growing in Europe and expects to complete its acquisition of Dutch-based BetCity in the second half of this year.
Entain stock is now trading below where it was when its U.S. partner MGM abandoned its offer to buy the company in January 2021.
Entain's forecasts stil can't incorporate the impact of new rules which the U.K. government had hoped to bring in this year, including a possible 1% levy on earnings that is aimed to help deal with the growing problem of gambling addiction across the U.K.
The Department for Digital, Culture, Media and Sport, which is drafting the Gambling Act review, has however repeatedly postponed its publication, and the resignation of Prime Minister Boris Johnson on Thursday makes a further delay likely, inasmuch as it is likely to paralyze government activity through the summer while the Conservative Party chooses a new leader. Before Johnson's resignation, indications had been that the government was prepared to let bookmakers pay the levy on a voluntary basis.
"The macro-economic outlook is uncertain, however, the underlying performance of our business remains strong," Entain Chief Executive Jette Nygaard-Andersen said in a statement.