Good morning, everyone, and thank you for joining us for our interim results presentation today. We have our investor event later today, this morning we'll focus on our performance in the first half of our financial year. I'll talk through a brief overview, then Rob will talk through the numbers in more detail, then we'll have some time for questions on these results. Entain is a business with a unique leading platform and great momentum. We have a business with a diversified revenue base and with almost all of our revenue now in regulated or regulating markets. We deliver the highest quality of earnings in the sector. Those factors have all contributed to a strong performance in our first half results, with NGR across the group up 11%, in spite of the fluid COVID-19 backdrop.
Online revenues continue to be strong, helped by extended lockdowns, but also reflecting the strength of our position in our markets. If we strip out Germany as it goes through regulatory changes, online NGR was up 38% in constant currency. Double-digit growth in online every quarter for the last five and a half year is a performance to be extremely proud of. That is 20% CAGR quarterly over three years. I know we say a lot but there aren't many businesses of our scale that have such a strong track record. As you will hear this afternoon, we have plenty of runway within our existing markets, as well as new opportunities for further growth. Our shops in the U.K. started to open during the latter part of the first half of our financial year. The early trends are encouraging.
Our shops and outlets in Europe saw longer closures, only opening right at the end of the first half. BetMGM continues to grow from strength to strength, now firmly established as the number two operator in the exciting and growing U.S. sports betting and iGaming market. The Group's EBITDA in the first half of the year was GBP 401 million, contributing to the upgraded full-year EBITDA range of GBP 850 million-GBP 900 million, which we gave with our Q2 trading update. The middle of that range represented around a GBP 50 million upgrade to prior consensus. The acquisitions of Enlabs and Bet.pt completed at the start of the second quarter and have been performing extremely well. With the strong performance in Q2 online, in addition to these acquisitions, we are currently expecting around 10% of online NGR growth in the full year, an upgrade to our expectations early in the year.
Rob will run through our financial performance in more detail as well as our investment in innovation and growth, alongside our new efficiency program, which will reduce underlying costs by GBP 100 million by 2023. Sustainability remains one of our core strategic pillars, and we continue to lead the industry on player protection and sustainability. Trials of our innovative player protection program continue and promise to bring in a new area of proactive protection. During this half, we committed to be carbon net zero by 2035 based on science-based targets, well ahead of the target date of 2050 set by the UN. Our Pitching In program continues to support grassroots sports and the next generation of athletes.
A new cohort of young aspiring athletes have been welcomed into the SportsAid program. It has been exciting to see some of the alumni of this initiative perform so well at the Olympics. With so much more going on, our sustainability efforts are being recognized by our MSCI rating recently achieving a double A rating. As most recent testament of the progress we have made in this important area, we are delighted to have been included in Bloomberg's 50 global leaders in ESG. Let's now have a look at some of our key businesses in a little more detail. As demonstrated at the Capital Markets Day BetMGM held in April, we have an extremely talented team in the United States. Combined with the assets from Entain and MGM Resorts, we have built a powerful model for success.
We are now firmly established as the number two operator in the market and remain the clear leader in iGaming across the U.S. Our market share in the States in which we are active across both sports betting and iGaming is 24% for the three months to June. In the states where we are currently offering iGaming, our share is 30% for the three months to June. NGR in the first half of the year was $357 million, and we can see that more than doubling for the year. This reinforces the targets we laid out in April to deliver over $1 billion of NGR next year, along with our long-term market share expectations of 20%-25% in a market worth $32 billion. Turning to the performance in some of our larger markets. In the U.K., online NGR was up 31% across the first half.
All our brands performed strongly. Our sports brands saw strong growth in FTDs, and actives were 39% higher than last year. These reflect the repositioning of our brands to create wider appeal. Dom Grounsell, our MD of U.K. Digital, will talk more about that this afternoon. Our gaming brands are also reaping the benefits of last year's migration to the Entain technology platform, with FTDs up 42% and actives 35% higher versus 2019. Retail in the U.K. opened in a phased program across the second quarter. For the majority of our shops, restrictions were only materially relaxed at the last few weeks of the first half of our financial year. However, while there is some elements of pent-up demand, it's clear customers want to come back to our shops. Volumes are around 90% of where they were pre-COVID-19.
Dean Shannon and his team are doing a great job with Ladbrokes and Neds in Australia. Across the first half of the year, revenues were up 11% in constant currency. The patterns across the two quarters reflect the eased restrictions, but also the lapping of last year's comparative, which included broad lockdowns. Horse racing, Entain's Australia's core market, was pretty much the only sport running. The reinvigoration of the business there continues at pace, with strong margins enabling marketing to be done from a much stronger position. This has been reflected in their growth in actives, which are up around 24%, and customer acquisitions up 16% year-on-year, supported by the new advertisement campaign for Ladbrokes with Mark Wahlberg. In Italy, we continue to perform strongly. With the retail estate closed, the strength of the omnichannel approach was reinforced with the omnichannel operators being favored by customers.
Our brands in Italy are seeing higher deposits and higher spend per active. In both Italy and Belgium, retail restrictions are only just lifting, so it's too early to call any clear trends. Assuming reopenings continue, we are confident that we'll get volumes back to around 90% of pre-COVID-19 level by the end of the year. In Germany, the much-awaited introduction of regulation has, as we've said before, been impacting the market. We have seen the biggest impact on gaming with the lack of policing of the market creating an uneven playing field. However, indications are that this will improve and settle down over time, particularly with the introduction of the turnover tax on 1st of July. The more impactful sports betting conditions still have yet to come into effect, but we expect them to do so later this year.
We remain positive on the long-term prospects of the German market and expect to strengthen our position there even further while the new regulations bed in. Elsewhere across the group, we are encouraged to see the government in the Brazil is steadily progressing towards regulation. Our Sportingbet brand is the clear leader in the market, as evidenced by the very strong NGR growth of 153% in constant currency seen during the first half and with actives more than doubling year-on-year. This puts us in a great position for when the market regulates, which we currently expect to come into effect mid-2022. With operations in Colombia and opportunities elsewhere in the region, we see LATAM as an exciting market. Crystalbet grew by 52% in constant currency across the first half of the year, and again confirmed its position as the leading operator in Georgia.
Crystalbet clearly demonstrates how Entain buys well, integrates well, and creates real value for shareholders through M&A. This is being repeated with Enlabs and Bet.pt. Enlabs goes from strength to strength in its key markets of Latvia, Estonia, and Lithuania, as well as providing the platform to grow our presence across the Baltics, Nordics, and Eastern Europe. Bet.pt has had a good first half, and we expect to migrate its operations onto the Entain tech platform later this year. The strength of our performance across the first half of our financial year reflects our diversified earning base and our high-quality revenue streams. We're winning in all major markets. We're winning in the United States, and our acquisitions are performing strongly. We have delivered a stellar track record of growth, and we have built a platform that provides a unique engine for further growth.
I'll talk more about that this afternoon, but it's clear the Entain platform is built to deliver significant growth for our shareholders. We go into the second half with confidence. We are encouraged by the outlook for our core business and are well-positioned for future opportunities. With that, I'll hand over to Rob.
Thanks, Jette, good morning, everyone. I have the pleasure of presenting another set of strong results from Entain this morning. I'll be taking you through the highlights using summary slides, and as usual, I'll include some comments on full-year guidance, and you'll find more detailed financials in the appendix, which you can review at your leisure. Let's start with slide nine, which sets out the key highlights of the half. Group NGR was up 11% versus the prior year, and not surprisingly, this was driven by our strong online performance. Online NGR was up by 27% on a constant currency basis. As Jette just said, if we strip out Germany, our online NGR growth was up 38% in constant currency. That growth clearly reflects the effects of COVID lockdowns around the world and an elevated sports margin.
That growth also reflects the very healthy underlying strength of our business. The momentum from 22 consecutive quarters of double-digit online growth continues, with strong numbers in all our markets, bar Germany. Customer KPIs are strong too. Our growth was actives driven, not spend per head. We saw good retention and excellent new customer acquisition, with FTDs up around 40% year-on-year in the half. We achieved that whilst improving marketing ROIs as well. These results are all testament to the power and robustness of our platform, you'll be hearing more about that this afternoon. When you combine the power of our platform with the most diversified and regulated revenues in our sector, you can see how we deliver both high growth and highest quality of earnings. Moving across the page, group EBITDA came in at GBP 401 million, up 12% on last year.
As we mentioned with our trading update in July, this was better than we expected at the start of the period, principally due to extended lockdowns helping our online performance in Q2. As you know, our retail estate was closed or under restrictions for much of H1, but our shops are pretty much all open now, and so far, returning customer trends are encouraging with the U.K. currently ahead of Europe, having reopened earlier. In the U.S., BetMGM continues to go from strength to strength, firmly establishing us as the number two operator. Our market share gains have come from both iGaming and sports betting, and Q2 NGR was ahead of Q1 despite the seasonality in the quieter quarter. In total, H1 NGR for BetMGM was $357 million, more than 5 times bigger than H1 last year.
As a reminder, we said in April that together with MGM Resorts, we expect to invest around $450 million between us this year, which will take our combined total investment to $660 million by year-end. Those estimates continue to look about right. Given how well the business is performing, I'll repeat what I've said before, investing in BetMGM will probably be the best investment we ever make. As the business grows and invests in the future, our share of losses for the half expanded to $78 million, and we've excluded that loss from both the operating profit and adjusted EPS figures here to give a clean number for comparatives. Just on operating profit, that came in at GBP 284 million, excluding the U.S., which was up 17% year-on-year.
Our headline EPS figure is GBP 0.317 per share, which is in line year-on-year due to phasing of the tax charge impacting this half, which should normalize to the guided 16% effective tax rate for the full year. We continue to have a strong balance sheet to support our growth, with leverage now at 2.2 times, and we have great demand for our recent refinancing, which I'll come onto shortly. To finish this slide, I'll also introduce our new cost savings program, which we call Evolve. This is the efficiency program we've hinted about on past calls, and in total, we're targeting GBP 100 million of annualized cash savings by 2023. Importantly, these savings will support our new innovation plans, which I'll come onto in a few moments.
Turning now to EBITDA and slide 10, which shows the usual bridge walking from EBITDA in H1 last year on the left-hand side to H1 EBITDA this year on the right. As I've mentioned, group EBITDA was up 12%, and online EBITDA grew by 35%, or by GBP 127 million to just shy of GBP 500 million, reflecting our strong organic results and also contributions from our acquisitions of Enlabs and Bet.pt, which completed at the beginning of the second quarter. Retail was of course impacted by enforced closures, and we talked about the impacts with our trading update in July. That left retail EBITDA for the half significantly down year-on-year and loss-making at negative GBP 63 million. Corporate costs were GBP 13 million higher than last year, partly reflecting our increased commitment to responsible gambling.
Overall, 12% growth for the group as excellent online growth of 35% was pulled back by retail closures, hopefully for the last time. Coming back to cash now, and like at our full year results, I've set out a simplified cash flow on slide 11, which reiterates our strong underlying cash flow conversion before BetMGM investment. I highlighted in March that 2021 would be a year of investment as we completed Bet.pt, Enlabs, and the Crystalbet earn-outs, as well as continuing to invest in BetMGM. With strong EBITDA and free cash flow conversion at 49%, leverage ended the half at a pleasing 2.2 times, which is down from 2.9 times 12 months ago. Liquidity is strong too, with accessible cash of just under GBP 400 million.
If you add the undrawn RCF and additional funds raised later in July, available cash is now well over GBP 1 billion. That all means the group still retains the flexibility to pursue our growth strategy while also reaching our medium-term leverage target of 1-2 times and, when appropriate, resume returning capital to shareholders. Just on dividends, the board are not proposing an interim dividend with these results, recognizing that risks still remain, particularly around further lockdowns of our retail estates. However, we understand and appreciate the importance of dividends to our shareholders, and in our statement this morning, we said that assuming the world continues to open up, we expect to be in a position to recommence a dividend with our full-year results in March next year. Alongside our Q2 trading statement, we also announced updates to our debt arrangements.
The new five-year revolving credit facility of GBP 590 million replaced a GBP 535 million RCF agreement which was due to expire in March 2023. We announced a new US dollar term loan which pleasingly attracted strong global demand. The new $1.125 billion term loan B matures three years later in 2027. It delivers a 25 basis point saving on the interest rate and after refinancing the previous loan, it leaves us with an additional $351 million to support corporate development and future growth opportunities. Together with this larger RCF, this refinancing has provided us with extended maturities, increased liquidity, and a lower rate of interest. Moving on now, this morning, we are announcing our plans for investment in innovation. Innovation is important to ensure we remain ahead of consumer trends, deliver fresh and engaging products for our customers, and stay in front of the competition.
Over the next three years, we will invest around an incremental GBP 100 million. Investment will go towards setting up an innovation lab, hiring innovation teams, and funding research and development into new products, consumer trends, new technologies, and so on. You'll hear a little more on this from our COO, Sandeep Tiku, this afternoon, and you'll also hear from Jette and Dom Grounsell on how important innovation is for our customer offer, and in particular, as we grow into new interactive entertainment categories. We'll talk more about innovation spend with future results, but for now, I expect it to be split over both CapEx and EBITDA. Starting with our full-year results in March, I expect we'll report this activity under a New Opportunities segment.
The key thing to note for now is that this investment will be more than funded by our new efficiency program, Evolve, which I'll move on to now. We've mentioned a couple of times before that we've been working on a program of cost-saving initiatives across the business. Some of these initiatives are built out of learnings from previous integrations, particularly the Ladbrokes Coral merger, and some come from efficiencies as we leverage our increasing global scale and look to harness the many and varied advantages of our technology. We expect to deliver sustainable and recurring annual cash cost savings totaling around GBP 100 million by the end of 2023.
The chart on this slide illustrates three things, the phasing of these savings as we build up to GBP 100 million, the split between CapEx and EBITDA, which is broadly 25% CapEx, 75% EBITDA, and also how EBITDA breaks down between online and retail. There's also an appendix slide with the numbers, so you don't have to get your rulers out on this chart. It breaks down EBITDA between OpEx and cost of sales too. To give you some flavor of where these cost savings are coming from, let me share a couple of examples. We're developing our own in-house self-service betting terminals, and we expect to roll them out across the U.K. by 2023. We're in-housing more content, we're leveraging our global scale to reduce third-party costs and drive out efficiencies in our operating model.
Importantly, this program of efficiencies will pay for the innovation plan I outlined on the previous slide. If we assume our ongoing innovation investment settles at, say, GBP 25 million per annum from 2023, we could have net savings of as much as GBP 75 million per annum flowing through to the bottom line. However, before banking that number, it's worth checking what levels of underlying OpEx inflation for online you currently reflect in your models. As we flag on this slide, we expect underlying online OpEx inflation of mid to high single digits, given the level of growth we're seeing in the business, and now that Ladbrokes Coral synergies have flushed through. If in your models you're currently growing our online cost base by a lower number than that, you'll probably find that some of the GBP 75 million is offset by BAU cost growth.
2021 costs also step up as we absorb Enlabs and Bet.pt into our numbers. I'll guide on that clearly on the next slide. The key message to leave you with here is that whilst the first two or three years of savings will be consumed by initial investment in innovation and the usual one-time cost of delivering savings, we do expect ongoing sustainable cash savings, potentially as high as GBP 75 million per annum. The usual slide from me now on guidance before I sum up. Perhaps most importantly, in the top left of this slide, the uplift to EBITDA in Q2 from lockdown-assisted online revenues meant that we were able, last month, to upgrade EBITDA expectations for the year to a range of GBP 850 million-GBP 900 million, which at the midpoint was around an increase of GBP 50 million versus consensus.
Looking at online, I said last month that our revised NGR growth target for 2021 is now 10%, including acquisitions, which is a few percentage points stronger than our March guidance, and that uplift is entirely driven by the Q2 outperformance. As a reminder, our expectations for H2 are unchanged from earlier this year, and inevitably, our run of consecutive quarters of double-digit growth will pause as we lap very tough comparatives, but our two-year growth will continue to be strong. I also said on the last call that I expect our absolute marketing costs to be broadly unchanged from expectations earlier this year, but the increase in NGR expectation delivers a reduction in marketing rate to around 20% before it then goes back up next year to more like 21% again.
Online contribution margin will benefit from both the lower marketing rate and Evolve, which should mean we end the year with an excellent contribution margin of around 42%, which is 1- 2 percentage points higher than our guidance in March. Online operating cost growth has now risen from March guidance of low to mid-single digits inflation to low teens as we absorb Enlabs and Bet.pt into the group and reflect increased investment in growth, particularly around in-house product development. As a result of all that, Online EBITDA margin expectations, really pleasingly, have nudged up to 29%-30% for 2021, which is up from 28% in March. That means we're now not far from achieving our long-term target of 30%. On to cash flow guidance on the right-hand side, the items here should all be familiar with no surprises in there.
I haven't yet included a placeholder for new acquisitions because we'll talk more about that this afternoon. Just on net debt quickly, it's worth noting that our lease liabilities renew at a similar rate to lease payments, so effectively, IFRS 16 debt remains broadly static rather than reducing in line with payments. Dividends, I've already covered those. By way of summary, we've delivered another strong performance during the first half, with excellent momentum in all major geographies bar Germany, BetMGM firmly number two in the U.S., and recent acquisitions trading ahead of expectations. The Entain platform continues to deliver resilience and high-quality earnings growth. We upgraded EBITDA expectations last month. We've announced today Project Evolve, which delivers savings net of reinvestment from 2023 onwards. We remain as confident and as excited over Entain's longer-term strategic opportunities, which you'll hear more about this afternoon.
With that, I will hand over now to Q&A, and I would ask that you please focus your questions on our H1 results this morning. We will have plenty of time for questions on strategy and growth opportunities with our investor event this afternoon.
Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, that's star one to ask a question. We'll take our first question. It comes from Ed Young of Morgan Stanley. Please go ahead.
Good morning. I've got two, please. First of all, on retail, you spoke about the U.K. getting back to pretty similar levels of footfall. Obviously, Europe a bit further behind because of the reopening later. Excluding Evolve, which I understand some of the savings will land there, how should we think about profitability of that business? It's obviously managed tight for cost. What should we think in terms of revenue recovery and margin for H2? I.e., what can that deliver for the full year number? The second one is on Germany. Obviously, it was down 34%, but within that, sports was more than 50% up, which means, I guess the casino revenues have been very severely impacted. Can you just let us know exactly what the gaming decline was in Germany?
More broadly, you spoke about the market becoming a bit more benign once the turnover tax comes in. I guess that's to do with enforcement. Can you just give it a bit of thought about how you see that changing, and then more broadly, what kind of access you expect to market? There was positive news from a few of the states recently, but there's been some negative news before that. What kind of proportion of the population do you think you can address? If you can just give us the sort of thought process over the next couple of years in Germany, that would be very helpful. Thank you.
Thank you and good morning, Ed. On retail, before I hand you over to Rob with a little bit more detail on profitability, let me just reinforce what we have said before around our long-term view on retail, because I think it's important. It remains an important market for our customers, and we really do see it as part of the overall customer experience, an important part of the omnichannel journey for our customers. Also remember, it generates significant EBITDA and cash for the group. For us, this is long term and we see it as part of our overall proposal and proposition for our customers. We are being encouraged by what we see after the opening from lockdown. I think I'll hand you over to Rob on the details on profitability on retail for that.
Rob, you can start on Germany and I can take over from there.
Yep, okay. Morning, Ed. Retail, if we think about the continental Europe retail separately to the U.K. for a moment. Italy, Belgium, they were in growth pre-COVID. Once we get through this period where, as we've guided, we do expect a step down of, say, around 10% versus pre-COVID levels. We expect to resume growth. A one-time step backwards, but then back onto the path of growth. Remembering that in Italy, for example, even if you just look at our online activity, around 50% of the deposits and withdrawals for online take place through the shop. There's lots of reasons to continue engaging with retail, and we do expect a return to growth. In the U.K., the growth environment is better now that we have a real focus on slots through the terminals and also SSBTs.
We're still quietly confident of a return to like for like growth in U.K. Also worth remembering that you have, from an EBITDA perspective, you have this nice model whereby as shops close, revenue gets redistributed on the high street, but all the cost comes out. What that means is whilst like for like revenues could tick down over time, actually, we expect to maintain EBITDA broadly at consistent levels over the next period of time, which means that the cash coming out of the business is still healthy. Of course, it means we're still supporting the online growth as well through omnichannel propositions. On Germany, I'll make a couple of points and then hand back to you, Jette. Casino has been severely impacted, as we all know, somewhere around 70%-80% down.
That is all the while that there's no enforcement of non-compliant operators and things like gaming content suppliers and PSP suppliers are not differentiating yet between the compliant and the non-compliant. We do hope that there will be some recovery once more enforcement happens. You also touch on another potential route to recovery around things like table games potentially coming back. It's too early to say what percentage of the population that might look like, but I have seen some suggestions that somewhere around 50% of the population could be viable to return. If it gives you a feel for it, I would go with 50% for now. Jette, back to you.
Yeah. Maybe just comment on Germany. We remain positive, of course, on Germany for the long term. Typically, regulation and impacts are negative short term and longer term will be positive winners and new conditions and taxes, while they might result in a smaller market and one that's more concentrated, we also expect it to be better policed. That is also what we talked about in the introduction. We expect the strongest brands and the best operators like bwin to, in the longer term, be beneficiary and gain market share. Does that answer your question, Ed?
Perfect. Thanks very much.
Thanks.
It does. Thank you.
We'll now take our next question. It comes from Michael Mitchell of Davy. Please go ahead.
Yes, good morning. Yes, good morning, Rob. Thanks for taking my questions. Three, if I could. First of all, I was interested in your comments in terms of how actives growth in the U.K. at 39% outpaced your revenue growth at 31%. Clearly, the shift towards recreational in the market is something that you and your peers have discussed for a while. I wonder if you could just comment on how you expect U.K. online ARPU to trend going forward. Secondly, I wonder, could you shed some color on your growth in actives in Brazil? I think you said they were up more than 2x, obviously very encouraging, given the outlook there for regulation. Could you just comment again in terms of what's driving that and how that compares to your understanding of the underlying market?
Thirdly, just in terms of back to online, the EBITDA margin, as you said, Rob, very much now approaching, if not already at your 30% EBITDA margin target before the net benefits of Evolve are considered. I wonder what you now view to be achievable medium-term margin target for that division. Thank you.
Thanks, good morning, Michael. Why don't we start off with Rob on actives and EBITDA margin, and then if you hand back to me, I will talk a little bit about Brazil and what we are seeing there.
Sure, okay. I think that the first question was focused on the U.K. Firstly on U.K. growth, 31% combined, but sports brands ahead of that, near a 40%, and gaming brands slower because, of course, gaming brands are lapping the Q2 spike that we saw. When I say gaming brands, I mean Gala and Foxy in the main. In terms of actives versus ARPU, the trend very much is a focus on actives. That is the driver of growth at the moment. As we become ever more recreational, which is the big picture strategy here, we do expect actives growth to be the driver of growth going forwards. That's logical as we become ever more mass market, you'll see with all the brand positioning of Ladbrokes, for instance, we're very much targeting the mass market.
Growth to be actives driven going forward, I think is the short answer there. In terms of EBITDA margin, when we set that target, I think it was our Capital Markets Day in 2019, I didn't envisage us getting to 30% as soon as 2021. Could we go beyond there? There is potential. I think the one thing that I would encourage folks to do is when they're looking at their models, I wouldn't play with contribution margin too much. I think contribution margin will benefit from our marketing rate ticking down over time, which I'm very confident we'll deliver. I've talked previously about something like half a turn per annum. We're very much seeing that and expect that to continue. Inevitably, there'll be some cost of sales increases, whether it's taxes, duties somewhere. Keeping contribution margin broadly flat would make sense to me.
Can we deliver ever more EBITDA margin? Yes, we can because I would expect contribution to growth to outstrip OpEx growth. We talked earlier in the presentation about OpEx underlying growth of somewhere between mid to high single digits. If we're targeting double digits at the NGR and the contribution level, then mathematically that leads to further EBITDA growth as well. Too early to put a number on what that might look like. I'm sure we'll look at our medium to long-term targets again once we've hit that number. Back to you, Jette, on Brazil.
You are absolutely right. The performance in Brazil is just outstanding. We saw for the first half NGR growth of 153%, and actually, if you look at Q2, it was 245%. Really picked up during Q2. Actives were doubling during H1. Really, really strong results in Brazil. I think we've said before that this is a market that we are really excited about. It's a market that could be worth around $1 billion-$2 billion within the next two or three years. We still believe that the Brazilian federal authorities will regulate sports betting probably around mid next year. Really excited about Brazil. The underlying trends remain strong. We continue to invest in TV, both open TV, or free TV versus paid TV. We are looking forward to regulation there and extremely encouraged by the trends that we are seeing.
Thank you. Very helpful. Thanks a lot.
Thanks.
We'll now take our next question. It comes from Ivor Jones of Peel Hunt.
Good morning. Could I ask three things? On Germany and casino, since the start of this month, is it possible to offer slots? I can't work out the economics of the permitted margin and the duty unless you charge, I don't know, some sort of fee to players. That was the first thing. Are there slots at the moment? Secondly, again, I may have misunderstood, why borrow in USD when you're some time away from having U.S. inflow? You just swapped the USD because they were cheap and it's part of normal treasury operations? Thirdly, the way I have read this morning's announcement is, I'm sure you don't intend this, the innovation doesn't pay off because there's GBP 100 million of cost savings, of which we're taking GBP 25 million of ongoing innovation costs.
Which, if I carried on with that assumption, would mean that the innovation is not an investment, it's just a cost. Is it that the innovation is expected to pay off much later? Could you just talk about the expected payback on that to square that circle? Thank you.
Thanks, good morning, Ivor. Let me start by the innovation and what we're doing there, then hand over to Rob for Germany and casino and what's going on on slots, as well as borrowing in US dollars. You should see our innovation as us investing into future growth. We are investing both in terms of new technology, new products. We're also investing into R&D. We are allocating GBP 100 million over the next three years, really into future growth. What we are saying is that the Evolve program is supporting that. You shouldn't see it as a direct that we're leveraging off our scale and efficiency program, only to invest into innovation. Innovation is really something we do to drive future growth going forward. Rob, over to you on Germany casino slots and US dollar borrowing.
Yeah, sure. Perhaps if I could just touch on the residual innovation costs as well. We'll talk more about it this afternoon, but part of what we're doing here, opening a new lab, hiring teams, forming new partnerships, that cost doesn't just disappear after three years. We are assuming an ongoing cost. We really don't know yet what that ongoing cost will look like, but as I said in the presentation, let's assume it's somewhere around GBP 25 million, and therefore, out of the GBP 100 million of annualized benefits, GBP 75 million should drop to the bottom line. Of that GBP 75 million, if you work the maths through, you'll find around GBP 60 million, just over GBP 1 million of that is EBITDA, and the balance is CapEx. Material savings dropping through to the bottom line from 2023 onwards. On your other questions, Ivor, firstly, the US dollar loan, that's entirely swapped to Euros, so it's economically beneficial to do that.
As you say, our sort of hedging strategy, our focus is to match the revenues and the cash generated by the business with our liability, and hence, that's why that swap took place. On Germany, yes, we are still able to offer slots games. Because of the new tax, what it means is that high RTP games, so games that pay out at a higher ratio, have become unviable and hence, we have a lot of our own in-house games. We've been redeveloping those and selecting a portfolio of games which are a lower RTP. To some degree, that will impact customer performance and NGR. Nonetheless, we think that that's the best strategy, and that's what we're doing.
We do still offer slots, but the mix or the blended RTP, if you like, is now lower than it was previously to make sure that they are profitable to the bottom line.
Thank you very much. Can I just come back on the innovation?
Please.
I think what you're saying is that it is a necessary ongoing cost of the business within the general platform to continue to grow. Not going to deliver additional growth beyond what you were expecting.
No, I wouldn't say that. I think what I'd really encourage you to do, Ivor, is tune into this afternoon's presentation. Perhaps the answer to the question will become a little clearer there. What we'll essentially be saying is that yes, we target growth in our existing markets, but we also target growth in new markets and new and interesting forms of interactive entertainment. Some of this innovation targets new opportunities. The market size is going up, and therefore, this innovation, it's not just about continuing with the trajectory that we have now. It's about accelerating the top line. You'll hear more about that this afternoon.
Yeah.
Thank you very much.
A number of the things that we'll be talking about this afternoon is how we are going to drive growth from, let's say, our fourth growth pillar, which is all about interactive entertainment. To do that, we are investing into some of the underlying technologies there. For example, VR and AR, we're looking more into 5G and immersive experiences and so forth. A number of the things that we'll be doing through these further investments into innovation is really to drive new products going forward.
That's very helpful.
Good.
Thank you.
Thanks.
Our next question comes from Kiranjot Grewal of Bank of America.
Good morning, guys. Couple of questions from me. Brazil, you've got an amazing performance. I'm just wondering what's happening with the competition in Brazil. Wondering if that could step up. Secondly, we saw DraftKings buy Golden Nugget a few days ago. You guys already have several brands active in the U.S. Just wondering how you're thinking about investing in some of the non-BetMGM brands as well in the U.S. In terms of the products you're looking to invest into in terms of your innovation plans, is that more slot games, live casino, or really is it focused on brand new products, like maybe aimed at the esports market, et cetera? Thank you.
Thank you. Let me see if I can remember all of them when I get to the third one. On Brazil, we've been in Brazil for some time. We have two brands there, including our bwin brand. As you know, currently we cannot advertise real money betting and gaming, so we advertise free-to-play and the brand there. Post-regulation, then we and everyone will be paying taxes there. We do expect that our marketing costs will be much more efficient going forward after the market growth, and as it's regulated. In terms of competition, we see ourself in a very strong position, and we are really looking forward to the market regulating because it gives us more opportunities, and we believe that we can be more efficient on our marketing costs going forward. To U.S. and investments and competitions.
There is a lot of investments going on in the U.S. markets, both in terms of some consolidation and so forth. We are looking at a number of different partnerships there. Whether we partner or whether we acquire, that's really something that we discuss ongoingly. When it comes specifically to our iGaming product, we are very confident in the product we have in the market. We are number one with a 30% share. In terms of investing into a casino and iGaming specifically, we're doing that all the time with our product innovation and don't feel there's anything specifically there that we need to add. In general, we are looking at different partnerships. We are constantly investing into our products and into our features there.
The last thing, I'm just about to say you need to tune in this afternoon because that's exactly what we are going to talk about this afternoon. Really what we are going to talk about is types of interactive entertainment that align well with our core strategy. You should think about it as us looking at our current business, our core business, which is betting and iGaming, and thinking about what are the potential adjacent games areas that sit well with that business and how that will enable us to drive further engagement, both from our existing customers, but also attract new customers. I hope you'll tune in this afternoon and then we'll talk a little bit more about that.
No question for you. Thank you much.
If perhaps I could just-
Rob.
I just had a few more thoughts on the U.S. question, if that's okay. What we're seeing is operators trying to make sure that they have the brands to attack both the sports betting and gaming side of the market. Clearly, Jette's talked about we're already number one in iGaming, and we have the PartyPoker brand to support the MGM heritage. I also wanted to say on the sports side, we're really pleased with our performance on sports betting, online sports betting as well. I know our market share, our headline market share of 17% in Q2 on sports is lower than iGaming at 30%. Firstly, that's massive progress. Secondly, it's also interesting if you get under the skin of the 17% and you look at market share on states where we were there at the starting line versus states where we were late.
Actually, if you allow yourself to just take out New Jersey, where we were late, of course, and Pennsylvania, where we only launched around the turn of the year, that 17 goes up to 22. We're really pleased with where we are and the strength of the BetMGM brand as both a gaming proposition, but really also as a sports proposition. Therefore, we're comfortable with the complement of brands that we have at our disposal.
Perfect. Thank you very much, both.
Our next question comes from Simon Davies of Deutsche Bank.
Yeah, morning. Three from me, if I may. Firstly, with the refi, you've now got, as you said, GBP 1.2 billion of available cash. Can you talk a bit about the M&A pipeline in terms of what you're seeing out there, and what are you seeing in terms of pricing, given that we seem to be seeing increased interest from private equity in the industry? Second, can you talk a bit about your aspirations for Africa? In the statement, you talk about investment in a discrete platform for the African markets. What do you think in terms of the scale of the opportunity and where you might push there? Finally, on retail, can you give us a feel for the timing in terms of the phasing in of your in-house SSBTs? Is this all about cost savings, or do you see this as a revenue opportunity as well?
Okay. Good morning, Simon. I don't know if that was actually four questions.
Yeah.
Let me touch upon Africa and maybe I'll say a few words around M&A and M&A pipeline, then hand over to Rob for refi and/M&A and also retail and the self-service betting machines and your question there. Yes, you're right. On Africa, we've acquired a technology and product platform which really allows us now to build out our product in Africa. Africa is a little bit different because it's very mobile driven. It's based on 2G and 3G. We're acquiring technology and platform that will enable us to fast build products that's relevant for that market. Then we are applying for licensing there and we're building the organization. We'll look at the different countries as we go forward.
We do expect to be entering at least one market by the end of this year. It's still early days for us, but now we have the technology and we have the platform there. As we've said before, I think back in November, Africa is a market that we are interested in and see some very strong trends there. That's on Africa. On M&A in general, we have a very strong pipeline and in terms of countries, we're looking at the usual suspects, which you mentioned also during Q2. We're looking at building out in Central Eastern Europe, potentially on the back of our acquisition there with Enlabs, which gives us a strong position also into Russian-speaking markets. We're looking, as I said, at Africa. We're certainly also looking at opportunities in LATAM.
This afternoon, you'll also be hearing us talking about potential opportunities in adjacent areas, which really gives us access to new audiences. I would say, though, that every time that we consider M&A, and to your questions on price pressures, we are really disciplined, and we are good at M&A. We buy really smart. I think that the key thing for us here is looking at the market opportunity and then really looking at whether we find a good team or a good platform and technology. When we can tick those two boxes, we then apply our financial discipline here. Our pipeline is not impacted on any pressures that we're seeing in the markets. With that, I will hand over to you, Rob, on refi and retail and the self-service betting terminals.
Thank you. I think on the refi question was really around, so we've got this GBP 1.2 billion, what are we going to do with it? I think you've touched on that. Retail, so I guess, and SSBTs, the golden rule that we have as a group, whether online or retail, is that the priority is always customers and revenue over cost. The priority is revenue, not cost. We wouldn't deploy new betting terminals just because it was cheaper and we were saving third-party costs. We do it because we think we can enhance both the top line as well as the cost base. We are in trials at the moment, so it's still early days. We've got, I think, around 100 shops are trialing at the moment. That's moving to 200 soon.
The intent on phasing is that rollout would start most likely second half of next year. Therefore, 2023 is the first year of full benefit. To be clear, the numbers are really predicated on the cost saving, but that's not the going-in intent. The going-in intent is to give a better customer experience, as well as, of course, the cost savings. Just also on retail costs, it's worth mentioning when you look at Evolve, there's the material amount of benefit coming through in 2021. A lot of that's because we've been going through a rightsizing of the central office base following the triennial review. All those actions are actually complete now, and the benefits are flowing through in the numbers, which is terrific. That's another big driver of the Evolve savings into retail.
Great. Thanks.
Once again, if you would like to ask a question, please signal by pressing star one on your telephone keypad. Our next question comes from Gavin Kelleher of Goodbody Capital Markets.
Hi. Morning, Jette. Morning, Rob. Just to follow on on retail from me. Obviously, you've given a lot of guidance and insight there to the cost savings. I've just seen the slide 21, that the cost of sales savings are GBP 17.5 million. Is that all SSBTs? Are you doing anything else on content in shops that you're reducing around maybe pictures or anything like that?
It is SSBTs.
Yeah. Rob, sorry, I interrupted you. Over to you.
Yeah. No, no. It is almost all that. It is certainly the big number.
Perfect. Thanks. Just on marketing, you've talked about a 50 basis point saving or reduction in marketing as a percent of net revenue every year. Is that all efficiencies driving that, Rob, and just the scaling of the model? Or is there any assumption there around regulatory changes making it more difficult to TV advertise or anything like that? Or is it all efficiencies?
It's both. We have seen a tightening in regulation. We've seen it in Italy, Spain, and it is a general trend. We'll all wait and see how the U.K. government's review of the Gambling Act comes out. It wouldn't surprise if there's more tightening on marketing in the U.K. as well. Partly enforced, partly efficiency in the sense of scale, but partly also efficiency in the sense of just getting better and better returns on investment as we become ever stronger at performance marketing, digital marketing, and therefore the mix sort of evolves more towards higher ROI marketing. My view is that we become ever more potent at it, and we can leverage our scale as we have a lot of centralized MarTech teams and marketing technology teams, performance marketing teams, and then add in the regulatory aspect as well.
All that points towards a trend downwards. We have seen that. If you look at our actuals and our guidance now compared to our guidance a couple of years ago, you'll see that that sort of half a point per annum is broadly consistent with the run rate that we're on.
Perfect. Thanks a million, Rob. Very clear.
Okay.
Our next question comes from James Rowland Clark of Barclays. Please go ahead.
Hi. Morning, everyone. I've got three questions, please. Two on the U.S. and one on retail. Firstly on the U.S., one of your key competitors in the sports betting U.S. market was talking earlier about the strength of their product offering and the volume of parlay bets that they offer driving the gross win essentially well ahead of the market. Could you just talk about your product offering in the U.S. on sports and whether you think that gross margin deficit is something you can essentially catch up on and ultimately grow market share? Secondly on the U.S., could you comment a little bit about the advertising and bonusing environment that you're seeing at the moment ahead of the NFL season launch? There's lots of your peers that are looking to launch new products and platforms.
Finally on retail, I think at your Q2 trading update, you mentioned that volumes were 10% of pre-COVID-19 levels at that point, and you're saying the same again today. I just wondered what's missing in the last five weeks and whether you're essentially concerned that those volumes might never get back to pre-COVID-19 levels, and how that makes you feel about the retail estate from here. Thank you.
Thank you, James. Let me start with the two U.S. questions on sports product advertising bonusing, Rob, then I'll hand over to you for retail. I'm not going to speculate which competitor you're referring to, but as Rob mentioned earlier on, we are seeing our sports product, and that's actually since Q3, Q4 last year performing very strongly. In terms of the different in-play bet products that we have, we have a number of them in the markets that we're offering to our customers. Some of them are different and commercially and so far, we're seeing a lot of uptakes around them. We certainly believe that our products, including the in-play bet products, are competitive in the market and we're seeing strong demand for them.
Also if you look at the numbers on our market share in sports betting only states, and especially the sports betting states that we launched in recently, there are really some outstanding performances, for example, in Tennessee and Colorado. We remain very confident on our overall sports product there and we see that reflected into our market shares. When it comes to the NFL, you are right that we are like anyone else, looking forward to the NFL season starting here next month. Overall, if you look at Q1 and look at, sorry, H1 and you look at the development from Q1 to Q2 in terms of bonusing, that was broadly flat on bonusing from our side. We saw a quite healthy promotion environment there as it was a quieter sports season there.
We're looking at a number of things going into the NFL season there and have some interesting plans going forward. We will remain, as we always been, super smart on how we spend our marketing money. NFL is of course a big season for us. Excuse me. That's certainly something where we are investing into taking market share there. Rob, I'll hand over to you on retail.
Thank you, Jette. If I could just add one more point, I think that the same competitor made this point as well. You have to look at CPAs in respect to player values, inevitably CPAs will go up during the NFL launch period as it becomes highly competitive and of course, we're going to defend our patch as firmly as we can. Player values also go up. If you look at the seasonality of value of new recruits, that period is when the highest player values come through as well. It's all profitable investment, which is a key point to make. Right, onto retail. If I think about U.K. separately to Europe, in the U.K. Q2, we said that we'd already reached our target, as you referred to, of being within 10%, that's still the case today. Great from a U.K. perspective.
We're there and we expect to stay there. European retail, we're not there yet. It did open later, sort of progressively through June. The key thing to appreciate in European retail, and particularly Italy, football is a much higher portion of the mix than in the U.K. In the U.K., you have things like horse racing and the FOBTs, whereas Italy is very heavily football dominated. We're in the off-season right now and everyone's on holiday. The key message for European retail is we need to see how September trades and therefore when we update our Q3s in early October, that will be a really good time to see how European retail is doing. No reason for us to think that we won't still hit that target of getting to within 10% of pre-COVID levels.
Okay. My question was really in reference to U.K. retail. I just wondered what it is that's missing to that 10% and how that makes you think about the U.K. retail estate specifically? Sorry.
Given that 10% was our target and therefore, when we reevaluate strategy and look at all aspects of what we want to do with the retail business, none of that changes because we've hit the target. Of course, we're hopeful that we can push on a little bit from where we are. I think the key point for your question is that there's no change to strategy. Inevitably, as we talked about it earlier, if you look at the whole U.K. market then shop numbers will, you'd expect, tick down over time, but then revenue redistributes, and costs come out. It's quite a healthy structure for the market. I'm not sure if that still hits your question or not, but I think the key message is we are where we thought we would be, potentially with an opportunity to improve a bit.
That therefore means that our strategy is fully still in place.
That's great. Thank you very much.
Okay.
It appears we have no further questions at this time. I'd like to pass the call back to Jette for any additional comments or closing remarks.
Okay. Thank you, operator. Thank you everyone for dialing and listening in this morning. We will look forward to speaking to you all again at 2:00 P.M. U.K. time for our investor event. As I've said during some of the questions here, we will share more about our exciting growth opportunities for Entain going forward. In the meanwhile, if you have any other questions, do get in touch with David and the IR team. Thank you for today.