Rough times ahead for UK gambling; US counterparts standing strong
August 8, 2022
Entain and Flutter, two of the UK's leading gambling firms, have recorded dismal growth over the first half of 2022 as they experience a notable drop in online gaming revenue and stock value.
There are three main reasons why the UK market is currently problematic for these companies: the ongoing cautious bettors' spending, huge restrain from the economy and the government's plan to unveil a gambling white paper.
On the other hand, Entain and Flutter's businesses in the US are undergoing positive growth, owing to the fact that most US states are gambling-friendly. In addition, more are loosening their betting laws, allowing the sector to thrive despite the hard-hitting effects of the pandemic.
Gambling companies face rough traction in UK
Gambling and betting activities in the UK recorded a 4.2 percent decline per year from 2017 to 2022, and the market size is also underperforming as it "declined faster than the economy overall", according to a report by IBISWorld.
The report also projected that gambling and betting activities in the UK would decline from 2021 to 2026, and the government's regulation remains its "largest challenge" in the future.
"Consolidation activity is expected to continue to occur, with the number of betting shops operating across the United Kingdom projected to decline in the coming years. ... Regulation is anticipated to remain the industry's largest challenge in the coming years," the report reads.
Case in point, one of Entain's businesses, Coral, reported a drop in online gaming revenue earlier this year, despite retail revenues having bounced back and COVID-19 restrictions being lifted in the country.
It all comes down to the market update next week to see how these companies would further react to sustain the shaky market of the UK. Hargreaves Lansdown equity research assistant Charlie Williams said these companies would focus on how their businesses have profited in the upcoming market update on Thursday, August 11.
"The impact on profit should come to light next week, and attention will be focused on whether management believe the previous spending habits will remain intact. If not, online revenue could continue to decline into the future," Williams said.
US subsidiaries safe, more growth expected
As discussed earlier, while gambling companies are trying to survive the harsh UK market, their US counterparts are enjoying steady growth. BetMGM, for instance, was projected to have more than 50 percent growth this year. Similarly, Flutter may take comfort that its American subsidiary, the FanDuel group, is also doing remarkably. The gambling firm has spearheaded quite a few major investments globally. Reports hold the firm invested about $1 billion for promotions, sales and marketing of its businesses across the US.
Earlier on Friday last week, Flutter also announced that it had secured regulatory approval for taking over its Italian group, Sisal, in a deal worth a little over $1.9 billion. Following the firm's taking over the business, Sisal has recorded noteworthy growth in the first half of 2022, including 58 percent growth in sales and 51 percent growth in earnings — a glaring contrast to the gloomy general outlook for the industry in the UK.
It should be noted, however, that despite the bleak status quo, more growth can still be expected from the UK sports betting market as the World Cup in Qatar approaches — at least in the short term. Many hold that the event could leverage and boost the sector, although to what extent remains unknown.