The price of black market activity: £615m
Entain settlement, UK taxes, earnings in brief, Startup focus – The Racing App +More
Entain sets out the terms of its deferred prosecution agreement.
UK government tax rationalization could herald online tax rise.
Our startup focus is “modernized racing newspaper” The Racing App.
Settlement highlights “stark differences” between the company of today versus old GVC, says chair.
Not me guv: Spinning an explanation for the £585m cost of the deferred prosecution agreement (DPA), Entain chair Barry Gibson was keen to stress the “legacy” nature of the wrongdoing, which the company said involved the failure of the old GVC to have “adequate procedures in place to prevent bribery”.
Entain said on Friday the DPA received preliminary judicial approval. Final approval will come on Dec. 5.
On top of the £585m “disgorgement of profits”, Entain will make a £20m charitable donation and contribute £10m to the HMRC and the Crown Prosecution Service’s costs.
The money will be paid over the four-year term of the DPA.
The company said it had “cooperated extensively” with HMRC and the CPS and would “continue to cooperate with the authorities into the future” pursuant to the DPA’s terms.
Wild Turkey: The DPA relates to Entain’s previous activities in the Turkish black market when the company was known as GVC and had a different management team under the leadership of chair Lee Feldman and CEO Kenny Alexander.
The offenses it has admitted to fall under section 7 of the Bribery Act 2010 and, in particular, “the failure of the company to have adequate procedures in place to prevent bribery”.
Once final approval is reached, Entain said it would “fully resolve” the HMRC investigation insofar as they concern the group.
Clearing the path: The settlement removes one obstacle to any potential bid for Entain. As reported on Friday, activist investors are lining up to express disappointment with the company’s progress, with suggestions the company’s own bolt-on acquisition strategy has run out of road.
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GiG: The company has announced it is meeting with fixed income investors this week with regard to a new €75m floating rate bond. If agreed, it would replace its existing €45m bond due to expire in June next year.
A better offer: ESPN Bet’s new sign-up offer of up to $250 in bonus bets is ahead of promos from the rest of the market, according to Jefferies. The analysts say FanDuel and DraftKings are currently pegged at $150 and pointed out the offer expires at the end of December.
The week ahead
Kindred finally gets round to releasing its Q3 results on Wednesday. Meanwhile, esports-focused operator Rivalry lays out its latest figures after a week during which its share price was on a tear, up over 34%.
🔥 Rivalry sets the pace
On Tuesday and Wednesday the Jefferies Sports Betting & iGaming Summit takes place in New York, with contributions from Flutter, DraftKings, Entain and many other leading sector lights.
Marina Andersson and Patrick Jonker have been appointed to the board at Raketech. Andersson is an expert in corporate development and M&A, working previously at Stillfront and Deloitte. Jonker was previously managing director at Betsson and international MD at William Hill.
Continent 8 has appointed Carl Bonner as its new regional sales executive.
A rising tide: An innocuous enough comment in the UK Treasury’s Autumn Statement document regarding a rationalization of the tax rates applicable for gambling could signal an imminent rise in the online gambling tax rate.
Buried on page 95 of the report accompanying Chancellor Jeremy Hunt’s speech last week was a reference to the “tax treatment of remote gambling”.
“The government will consult shortly on proposals to bring remote gambling (meaning gambling offered over the internet, telephone, TV and radio) into a single tax, rather than taxing it through a three-tax structure.”
Stealth check: As it stands, remote gambling is covered by remote gaming duty, general betting duty and pool betting duty switch rates running between 15% and 21%. Analysts from Regulus suggested the likelihood is that any move to combine the taxes is almost certain to result in the new tax being set at the higher rate of 21%.
“The choice of where to start the ‘rationalization’ process is likely key to the government’s real motives: an opportunistic hike for online betting tax rates,” the team said.
Earnings in brief
Intralot: Improvements in trading for the Turkish and lottery business and the new contract in Taiwan helped push Q3 revenues up by 8.1% to €105m, only partially offset by declines in the top-line growth in Argentina. EBITDA was up 16% to €38.2m.
Genting Malaysia: Revenues rose 19% YoY to $579m while adj. EBITDA was up 23% to $159m, with the company saying the UK and US businesses both saw higher volumes over the period. The operator continues to pursue the potential for gaining one of the downstate casino IR licenses in New York.
MGM Resorts: The stable or declining rate environment will provide a favorable backdrop for MGM given it has a debt maturity next year, suggested the team at JMP. They added that companies, particularly with online exposure, “will look for opportunistic M&A after several quarters of shareholder returns and internal growth projects”.
Light & Wonder: Despite the $485m acquisition of the 17% of SciPlay it didn’t already own adding to its debt total, the analysts at Fitch Ratings suggested the added half turn in the leverage ratio is still manageable. The team expects leverage of 3.7x EBITDA by the end of this year, falling to 3.3x in 2024.
Startup focus – The Racing App
Racing ahead: Disruption comes in many forms and sometimes it simply represents a return to an old forgotten model. “The app is a modernized version of the racing newspapers of old,” says Mark Fellows, commercial director at Quantum Leap Solutions, which has developed the app in conjunction with Fitzdares.
“The existence of a paywall online preventing users watching racing unless they had had a bet has always been to the detriment of horseracing in my opinion,” he says.
“Betting shops offered punters pictures of racing free of charge whether they had had a bet or not and increased the likelihood of them engaging with the sport and betting on it,” he adds.
But the Bet & Watch model employed by online operators is the equivalent of betting shops only showing the race to punters in the shop who had placed a bet.
“It would have been considered absurd,” he says.
Modernist: Fellows says the word ‘modern’ is important in the context of the app, which he believes breaks new ground in the way it distills data into a visually accessible way, but he adds the current version of the app is only on its first go around the track.
For the many: “Just being noticed represents success at this stage,” Fellows says. But he adds that the company is working on three “significant and unique pieces of development to enhance the user experience on the app”.
These include enhancing the live viewing experience.
Delivering a groundbreaking sectional time visualization tool that will “finally make that data useful to the many and not just the few”.
And an in-running predictor using a unique mathematical model based on the exercise physiology of thoroughbreds.
Growth company news
Sports-betting and iCasino development company The Unit has unveiled a designed and developed front-end system for data odds provider TXOdds.
Sports-betting tool provider Tallysight has launched a partnership with Soccerbetusa.io to provide innovative tools and real-time odds to enhance visitation to the Super-Soccer-Saturday.com offering.
Next-generation fantasy sports platform GameOn has reached a software development and support agreement with Sportsology to develop a fantasy sports infrastructure called $GAME.
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Nov 28-29: Jefferies Sports Betting & iGaming Summit, New York
Nov 29: Kindred, Rivalry
Dec 4: BetMGM investor meeting
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