Entain trading below gaming guidance in Germany as operators await appeal results

Entain is feeling the financial squeeze of gambling regulation in Germany as the country prepares to clarify its final market conditions. The operator’s German revenue shrank by as much as 45% year-on-year in Q1 2021, according to Deutsche Bank analyst Simon Davies as the business complies with toleration policy restrictions before the official licensed regime comes into force on 1 July. In Q1, Entain reported an online sports betting NGR rise of 44% in all key markets excluding Germany, where online gaming revenue has been hit even harder, according to CFO Rob Wood. “We put out our guidance last autumn and we are trading adverse to that guidance on gaming but favourable to that guidance on sports,” he said. Wood told analysts it was hard to measure Entain’s performance against the rest of the competition as some operators have failed to comply with the country’s temporary restrictions. “The gaming measures have not been so well adopted, so until we enter a phase of enforcement or operators withdraw from the market, we think we’re going to be on the wrong side of guidance on gaming until that happens,” said Wood. Switching focus to sports, Wood said Entain was comfortably ahead of prior guidance as the €1,000 per month wagering limit has not yet come into force, while margins have also been favourable. “One of the main reasons for that is that while many of the sports restrictions are already in play like reduced in-play markets, no live streams and more KYC measures, the restriction around monthly wagering limits is not yet in play as that is still subject to challenge,” he added. Licensed operators are now waiting patiently to discover the result of legal challenges against both the monthly wagering limit on sport and the recommended 5% turnover tax on gaming. Both are scheduled to go live on 1 July and Entain is still working to that deadline. “Hopefully we’ll get a resolution on each of those in the coming months but we are readying our operation to be fully compliant with those measures,” said Wood.