Entain, the parent company of Ladbrokes and Coral, reported a significant £56 million hit to its H1 EBITDA due to increased remote gaming taxes, with the full effect expected to materialize in H2.
The firm noted that the increased online gambling taxes in the U.K. are creating openings for gaining market share as competitors adapt to the new tax landscape, even though these changes are exerting pressure on Entain's own profitability.
Despite the challenges, Entain ended H1 on a strong note across several key markets, including the U.K., Australia, and Spain, where it continued to gain market share. The company also managed to hold its ground in Brazil, despite facing a tough regulatory and competitive climate.
Management chose not to adjust its full-year forecast, even as H1 results surpassed expectations. They cited the anticipated full impact of the higher U.K. tax rate in H2, planned marketing expenditures, and uncertainties in certain markets as reasons for this cautious approach.
“The tax will significantly increase in the second half of the year, causing considerable disruption in the U.K. market, which we are leveraging,” stated CFO Michael Snape during Entain’s H1 earnings call. “We are successfully gaining market share and experiencing solid growth.”
In H1, Entain’s U.K. online net gaming revenue (NGR) rose by 13%, with gaming and sports segments increasing by 13% and 11%, respectively. The retail sector also performed well, achieving its eighth consecutive quarter of growth.
Australia showed robust results, with online NGR also climbing by 13%. In Brazil, the company maintained its market position, which executives view positively.
Management advised caution regarding the competitive landscape in H2, emphasizing that the robust growth rates seen in H1 may not continue. “Predicting the competitive environment for the second half is challenging,” Snape remarked, explaining the need for a more measured outlook.
The U.K. remote gaming tax rose from 21% to 40% on April 1, meaning Entain only faced the higher rate for three months in H1. Snape pointed out that the company will be subject to the full six-month impact in H2, which contributed to the £56 million decline in H1 EBITDA.
Entain has previously outlined strategies to mitigate about 25% of the tax increase by 2026, and management claims these plans remain on track. The company is now aiming for a broader £100 million in annualized savings by the end of 2027 to counter at least 50% of the EBITDA impact from the U.K. tax hike, as indicated in their FY 2025 earnings report.
The anticipated savings will come from reductions in sales costs, marketing, and operating expenses.
Entain sees the greatest potential for savings in operating expenses. The company has already implemented measures such as cutting 500 jobs and enhancing product and technology efficiencies, which are expected to lower capital expenditures as well.
“This isn’t about defensive cost-cutting or reducing investment; it’s about reallocating capital,” Snape explained. “We are freeing up cash to invest exclusively in high-return growth opportunities.”
Moreover, Entain does not plan to simply cut costs in response to the higher tax environment. Snape indicated that overall marketing spending is projected to rise this year, despite the company spending less than initially planned during H1, as it aims to sustain momentum into 2027.
This strategic combination positions Entain uniquely, as it navigates a substantial increase in its tax obligations while simultaneously identifying opportunities for growth in a shifting U.K. market.