Welcome to Entain's Q3 call. I am delighted to be speaking to you again and sharing another pleasing update on Entain's performance. Joining me today are CFO, Michael Snape, and our investor relations team. On our call this morning, I am going to begin with the headlines of our Q3 performance. Mike will then provide more details on trading and our outlook for the rest of 2026. Then we will open it up to your questions. Turning to the headlines. Entain performed well during Q3. Not only does it mark our 10th consecutive quarter of online growth, this consistency demonstrates our ever-strengthening operational execution and how that is translating into resilient performance. Importantly, Q3 highlights the strength of our diverse and globally scaled business.
Not all markets or results will go our way all of the time, but the breadth of our portfolio and the product offering enables Entain to consistently deliver growth while also navigating headwinds. During Q3, we continued to see broad-based momentum across our business. In the U.K., our hard work and investment is driving market share gains and partly offsetting the increased tax burden, whilst elsewhere, Spain, Canada, and New Zealand all continue to deliver double-digit growth. These helped us absorb the headwinds of particularly customer-friendly sports results in August and September and the ongoing volatility in Brazil. Excluding Brazil, Q3 online NGR grew 5%, driven by volume growth of 7%, affirming the strength of our underlying momentum. BetMGM also continues to perform well. As you heard from Adam and the team earlier this week, they remain focused on their execution and continue to lean into BetMGM's competitive strengths.
BetMGM delivered a solid quarter and remains on track with guidance for the year. Across our markets, our continued focus on improved product and customer experiences is driving consistent top-line growth. At the same time, we are making good progress with our initiatives to improve efficiency, increase agility, and become better connected to capture our scale advantages. Despite our resilient performance and ongoing optimization initiatives, our industry is already navigating a more challenging U.K. tax environment. The speculated further tax hikes, this time on gaming machines, threatens the viability of many of our shops with significant consequences to jobs, local communities, the U.K. high street, as well as the racing industry more widely. Whilst we will continue to strongly urge the government to fully consider the broad economic impact of any tax decisions, Entain must also remain focused on delivering what is in our control.
With our strong foundations, global footprint, and disciplined allocation of capital, this supports our confidence in delivering our group's guidance for 2026 and sees Entain well-positioned to be a long-term industry winner. Thank you. Over to Mike.
Thanks, Stella. Good morning, everybody. As Stella said, we're really pleased with the Q3. It's another quarter that reinforces both the quality and value of our diverse portfolio, and that ongoing momentum we're seeing across the group. Turning to the numbers, as ever, all growth rates are referred to a constant currency. Overall group NGR grew 2%, with online up 3% and retail flat on a like-for-like basis. Those headline growth rates belie much stronger underlying performance due to both particularly unfavorable sports results weighing on the margin, as well as continued challenges and deliberate actions taken in Brazil even before the ban introduced in September. Excluding Brazil, online NGR grew 5%, supported by strong volume growth up 7%. Year to date, that puts us, for online ex Brazil, up 8%, reassuringly ahead of our 5%-7% guidance.
Coming back to the margin, it was a very different picture for sports and gaming this quarter. Gaming delivered yet another strong quarter up 8%, so we're very happy with that result and fantastic delivery by the teams. Sports, however, was down 3% due to those sports results, particularly football in August and September, which more than offset a strong finish to the World Cup in July. As you remember, Q3 lapped a weak sports margin comp prior year, and the quarter was broadly flat versus that. Compared to a normalized plan margin, Q3 sports results were roughly a 4% drag on the quarter's online growth. Similarly, this was felt in retail, with NGR down 2%, despite volumes being up 2%. To add some color from the markets, as usual, let's start with the UK&I.
UK&I delivered yet another outstanding quarter as we continue to regain market share with online NGR up 14%, driven by standout volume growth of 15%. Despite that heavy sports margin impact, online sports was still up 3%, while gaming accelerated to 17%. In retail, our U.K. business continues to be the strongest proposition in the market and an integral part of the high street, where we proudly employ over 12,000 colleagues up and down the country. In Q3, NGR was up 3% on a like-for-like basis as both sports and gaming continued to perform well. That U.K. performance is a consistent trend and has been driven by three things: improved product, whether that's choice, features, or speed; increased disciplined investment as we've leant into market turbulence driven by the high gaming taxes, whilst many others have pulled back; and of course, best-in-class execution.
It's strong evidence that our returns-based focus alongside operational excellence is a winning formula. Moving to international. Again, some really strong performances weighed down by sports results and of course, the ongoing situation in Brazil. Overall, NGR was down 4% and online NGR down 3%, reflecting the challenge in Brazil market and customer-friendly football results in Europe. Just as we talked to at the half, even before the shutdown in September, the Brazil performance was a combination of both the market and the deliberate choices we've made to not chase unprofitable growth, unlike many of the competition. Excluding Brazil, international online NGR was up 1%, so positive, but still weighed down by those sports results. That margin impact was most pronounced in Italy, where the margin was down more than three percentage points year on year. But importantly, volume growth remains strong at 9%.
That underlying growth provides a strong foundation to build on as we revitalize the Eurobet brand and strengthen the proposition. We have every confidence that the changes the team are making there will begin to shine through, and we see huge opportunities ahead in Italy as an integral part of our portfolio. Elsewhere in the world, Spain, New Zealand, Canada, all up double digit despite those adverse sports results. Australia continues to perform well with online growth in line with expectations. A final mention to Entain CEE, which continues to perform strongly with online up 4% alongside double-digit volume growth. In summary, we continue to perform in line with expectations through our returns on disciplined investment and operational excellence.
Our diverse, globally scaled portfolio continues to demonstrate we are well-positioned to navigate any regulatory or market volatility, and we are focused on controlling what we can control while strengthening the foundations of the business. I want to again emphasize as a final point, behind continued growth and consistent execution, our priorities remain very clear: optimize our cost base, improve cash generation, and strengthen the balance sheet, all with an absolute laser focus on shareholder value. I'll now hand back to the operator for your questions.
Thank you very much. To ask a question, please press star followed by one on your telephone keypad now, and if you change your mind, please press star followed by two. When preparing to ask your question, please ensure that your device is unmuted locally, and we kindly ask participants to limit themselves to one question and one follow-up question. We have a question from Ed Young at Morgan Stanley. Ed, you are now live.
Hey, Ed.
Good morning. First is on UK&I. Obviously, lots of initiatives across the four brands bearing fruit, given the acceleration you are seeing. Can you help us with what you are seeing from the competitive set and the general environment, i.e., is the higher RGD finally sort of making an impact on the competitive dynamics? Then the follow-up, you mentioned on Italy there, you sort of talked about the Eurobet revitalization. Can you give some color on what really lies behind that and reasons for optimism? Obviously, volume was better than the revenue number, but it still sort of suggests there is some market share loss. So where do you see the big opportunities, and how should we think about that business into Q4 and into next year? Thank you.
Hi, Ed. Thanks for your questions. Let me just talk about the U.K. and Ireland for a little bit. Clearly, we have been doing a lot of initiatives to improve our customer offering. That was already in play 18 months or so ago, I guess, when we really sort of started to see some of those improvements starting to get put together and then sequentially hit the market. But over time, we have been improving the coin economies on things like Foxy and Gala. We have now introduced a refreshed Ladbrokes app. We have got general improvements in the app that have been recognized by external benchmarking on both Coral and Ladbrokes. So these are all things which are moving the dial in the right direction, which is basically what we said we would do.
So giving a more competitive offering, I think, is driving those market share gains, which clearly we are very, very pleased about. In terms of the impact of the tax coming into the market, I have to say it is still really early days. It only started in April, and that was on gaming, and it does not start on sports until April next year. In terms of the changes to the market, the investment by competitors, the impact of the illegal black market, it all happens kind of sequentially. I do not think we have seen a huge change in the U.K. right now. I think there is some indications that things will be moving. There is a lot of activity by black market operators increasing their investment behind advertising and trying to secure players, which is as expected, and that is not going to go away.
Our strategy has to remain one of being a go-to preferred operator providing four really great brands here in the U.K. and using the benefit of having that visibility both on the high street and online for both Ladbrokes and Coral. So that is really what we are seeing at the moment. Mike gave, I think, quite a good detailed answer on Italy, but I can hand back over to Mike if you just want to say a couple more words about Italy.
Without it being too broad brush, it is across the piece. We have got a new team in Italy who have really been doing deep dives on the business and what to do with the Eurobet brand and really how we can realize its full potential. Whether it is about operational execution in the retail, whether it is about the online technology platform, deployment of marketing spend, bringing the best-in-class of tools from all across the group and applying them to that market is really going to pay dividends, and we will be able to update a bit more on that at the full year.
Thank you very much, Ed. Our next question is from Estelle Weingrod at JPMorgan. Estelle, you are now live.
Hi, good morning. Two questions from me. The first one on Brazil. It has been a very competitive market. Wanted to ask you both like sports betting and iGaming. We would like to understand better where the weakness has been coming from. I guess also if Bolsonaro was to win, OSB could be back on the table. How would you approach Brazil then, as it has been challenging, and would you consider not entering again? I just have a question on Austria. I know Austria is relatively small, but it has been a recent topic of discussion given the expected gaming sector overhaul in 2027. What framework are you expecting at the moment? You would likely have to exit before year-end for a few months. What is your best take on Austria and the likely impact it would have? Thank you.
Thank you, Estelle. I will take the first one on Brazil, and Mike is going to take the second one on Austria. Yes, obviously Brazil is proving to be a volatile and challenging market. Clearly, the fact that the entire market was closed down with a provisional measure on the 25th of September has had, obviously, a clear impact for many of us. Prior to the market being shut down, as I think we said in the presentation, we were always already taking what we would call pragmatic approach to making sure that we were investing in the right sort of customer and not chasing volume at any cost. I think that has proven to be the right thing to do because the fact that the market can be closed down with no notice does put you at a degree of risk if one does not take a sensible approach.
In terms of the market opening back up, clearly we do not know what is going to happen. Presidential results will be on October 25. I cannot predict what is going to happen, but I think one of the things that I can say is our brand, Sportingbet, is a great brand. It has been around a long time in Brazil. It has got one of the best equities, and it is predominantly a sports brand. It is about 70% sports. If the market came back and it was sports only, then I think we would be well set for that. If it came back and there is advertising bans, then I think we would be relatively well set for that because we have got long-term brand equity.
Our intention is to reopen up Brazil, seeing what the framework looks like when it eventually happens and making sure that we are doing it with the appropriate level of investment to be what I would call proportionate and sensible. That is really where we are at. If I hand over on Austria.
Yeah. On Austria, currently the cool-off period is drafted at nine months, but everybody in the industry is lobbying against that. If it does pass, it will come in at some point in 2027. I think there is two important points. One is that the performance of that business in recent times, the EBITDA contribution has been weighed down by player claims. Whilst we might have an impact to overall online NGR growth, the impact on EBITDA is pretty de minimis. It is not something that concerns us, but clearly we would like to be able to get up and running. The second point is that we have followed all of the rules. We have done everything that the government could want us to do. We have paid our taxes. We have managed player claims. We are in the best possible position to capitalize on that market.
If we see a return, we are going to be the most competitive person in that market, when it regulates properly. We have got optionality, which is always what we like to have.
Thank you.
Thank you very much, Estelle. Our next question comes from Ben Shelley at UBS. Ben, you are now live.
Hey, Ben.
Hi, good morning, and thanks for taking my questions. I've got three, please. One, you've reiterated your GBP 500 million 2028 free cash flow target. Appreciate some regulatory and tax uncertainty, but putting that to one side, can you outline the key drivers in getting there? What are the biggest swing factors or buckets versus 2026, and what should we be thinking about? Next, I wanted to ask about the cost base. As you've highlighted a number of optimization opportunities, it would be helpful if you could elaborate on where you see the greatest scope for improvement. Then along similar lines, should we expect a discrete cost savings program to be announced at some stage, or is management more focused on delivering margin expansion through a broader, more holistic approach to group cost efficiency? Thank you.
I'll take all three of those, Ben. Look, this is a trading update. Rather than the full year where we'll talk about a lot of these things, we've reiterated the GBP 500 million because at the moment, that's the existing guidance that we give to cash generation. The reason we continue to reiterate that, because we haven't recut it yet, and we will do something at the full year to articulate that in a different way, is we remain very confident about this business's ability to generate cash. I'm not going to get into the ins and outs of it. I think I've said to people before that I'd like to be able to articulate that in a different way the full year, which I'm not going to do now, but we remain very confident about our ability to generate cash.
In terms of cost optimization, we won't be announcing any kind of Project Romer 2 . Managing our costs, optimizing the cost base is a way that we're running the business. It's not a discrete project. It's something that we think about and do every day. It's something the ExCo talk about alongside growth, and it's a critical component in being able to generate cash in the long term. We'll obviously keep updating people, and you've already seen where we've made some headcount reductions and other initiatives, and we may announce things like that, but we're not going to announce a big project. It's simply not a one-off exercise. It needs to be woven into how we run the business.
Thanks very much. Appreciate it.
Thank you very much, Ben. Our next question is from Jamie Bass at Citi. Jamie, you are now live.
Good morning. Thank you very much for the questions. I also have two. First one is again on Brazil. From your understanding of the process as it goes through Congress, if it does go live again, as it stands, I understand that licenses have essentially been revoked. Would you expect that you would have to go through the licensing process again and pay a fee for the license again in Brazil when it reopens? Second question on Italy, on the sports results impact, could you give any kind of breakdown of how much of that has come from customer-friendly results in Serie A versus the Champions League? Thank you.
Okay. Well, let me just talk about Brazil. Clearly, we don't know exactly what's going to happen. We don't anticipate that when it opens, we're going to have to reapply for our licenses. We take whatever comes our way. At the moment, the provisional measure is for 120 days, at which stage it either gets ratified, changed, or revoked. We are planning for multiple of potential scenarios. If you had to ask me for my best guess, I think the market will reopen in some form or another, and we will be back there. On Italy, the football is very strong. Very strong indeed. Serie A, poor sports results. Champions League, poor sports results.
Both of those facts were true, and we also were very strong in the south of Italy with Eurobet, and in particular, the sports results for football were weak in the south of Italy. Hopefully that answers the question.
Got it. Thank you.
Thank you very much, Jamie. Our next question comes from Andrew Tam at Rothschild & Co. Andrew, you are now live.
Hi, good morning. Just a quick one. I threw a part one on New Zealand. Can you talk about your confidence in the New Zealand auction process and the decision to bid for three licenses there, given the notable absence of some of your main peers? The second part of that, is there any risk that New Zealand kind of looks like Brazil post the liberalization of that market? Then finally, are there any potential impacts or flow-on impacts from the Australian AUSTRAC action into the New Zealand licensing decision at all? Thanks.
We were delighted to get everything that we wanted in New Zealand, and we feel incredibly confident about the opportunity there. It was surprising to us the mix that came through on the licenses, but I can't say that we're disappointed that that's the competitors that we now have. We're really excited about that market. I wouldn't ever describe it as something that could end up looking like Brazil. I think that it's going to be a really great place to operate. We already have a presence there, and we really enjoy working on the ground with New Zealand, and we look forward to taking that forward with gaming.
I think your other question was on AUSTRAC. AUSTRAC is clearly an ongoing process. We're very transparent about that, so there's no new news there. This is something that will work out over time. Clearly, just to emphasize what Mike said, we have a very strong relationship in New Zealand already because obviously we are the sole provider of sports betting through TAB New Zealand. So we feel very confident about the opportunity there and excited about the fact that we have three labels.
Great. Thank you.
Thank you very much. Thank you, Andrew. Our next question comes from Pravin Gondhale at Barclays. Pravin, your line is now open.
Hi. Thanks for taking my questions, and good morning to all. Could you chat about the underlying sort of volume strength here? It was impressive in Q3, excluding Brazil, and U.K. was clearly a standout. From here, we have sort of slightly tougher Q4 comp, and there is no World Cup next year, and then U.K. comps would also get tougher. So how do you think about sustaining that mid to high single digit online growth excluding Brazil into 2027 and sort of broader underlying momentum on volumes and the top line there? Thank you.
I am not quite sure we fully heard the question. The line was not perfectly clear, but I think you are really talking about sustainability of online growth in 2027. The answer is that you always have puts and takes in terms of the things that are going to drive growth in a particular year. We do not have the World Cup in 2027, but the World Cup is something that we did not factor a massive increase for. It is nice to have, and it is good for getting new first-time depositors, but we have other factors which we are excited about. One we just talked about was the opportunity of an entire new market with New Zealand.
We believe we've also got strong momentum in a number of the different markets where we're focusing in on to get growth, whether that's places like Spain or Canada or it's U.K. continued momentum because we're continuing to increase share. We have a multitude of initiatives in place that gives the confidence that there should be continual growth that will come through the business. I think that was the answer to the question. If I missed anything, I apologize.
Just bring it back to this year. You're right about Q4. If you think about our guidance is 4%-6%, including Brazil. Ex-Brazil, we're saying we're going to be at the very top end of that 5%-7% guidance that we gave before. In this print, we've said year-to-date, we're seeing online ex-Brazil up 8%. You can do the maths that there's a slightly softer Q4 in there. Given the sports margin results that we saw in Q3, we have to factor in that there are things that we can't control, and ultimately, this growth number is what flows to the EBITDA guidance, which is the most important part of what we guide to.
Yeah. Thank you both.
Thank—
Sorry about the delay, but you both answered a couple questions clearly. Thank you very much.
Thank you very much, Pravin. Our next question comes from Luis R. Chinchilla from Deutsche. Luis, you are now live.
Hey, good morning. Thank you so much for taking my questions. If the U.K. government were to increase the machine gaming duty to 40%, as suggested in certain media reports, how much of the resulting tax headwind could the company realistically mitigate through machine mix optimization, estate rationalization, and cost efficiency initiatives?
Thanks for the question. In terms of the challenge that we currently face regarding a potential increase to machine gaming duty in retail, there is, as I think you'll see in the U.K. press, a lot of pushback against taking such an action to potentially increase the duties from 20% to 40%. Let me explain why it's so important that we get this message through to government. First of all, since this time last year, already 630 betting shops have closed across the industry, and that's before putting the gaming tax up. If the gaming tax is put up as potentially mooted, then independent analysis has shown that circa 1,500 betting shops across the industry will close and circa 16,000 jobs would be lost. And the net take by the Treasury would go down because of those direct impacts.
The most important point is that we get our message across that putting up gaming tax like that is actually self-defeating and hollows out an already very underperforming high street. That's the focus at this moment in time. Clearly, we can't control what comes out of the budget, but we will have mitigation plans that we will put in place, should there be any increase. But at the moment, the key focus is trying to make sure that the key message that putting the taxes up closes shops, reduces jobs, and reduces tax income.
I'd just add that look at the performance of the U.K. business, even in the face of the existing increase in tax. We've got the best portfolio on the high street. I think we've got one of the best online businesses you can have. We are best placed to deal with anything that comes down the road and benefit from where others will struggle.
Thank you so much. For my follow-up, given the recent regulatory developments in Brazil, have you changed your investment plans, headcount, or marketing commitments or even your technology roadmap because of the recent developments? Are you waiting to see what ultimately happens with the market before you make any long-term decisions?
We have a relatively small team that work in Brazil. They are focused on doing other things for the group while we wait and find out what the Brazil outturn ends up being. I think as we said before, the key thing is to make sure we have a sensible approach to investment in Brazil, given the volatility that we have seen, and when the market opens up, that we will continue a conservative, if you like, approach to make sure that we're not running at a loss in a market where it is very difficult to predict the future. We will be adapting as we go.
Thank you so much for taking my questions.
Thank you, Luis. Our next question comes from Richard Stuber at Deutsche. Richard, your line is now open.
Thank you. Good morning. Thanks for taking my questions.
Richard.
Just a couple, please. First of all, hi, can you hear me?
Yes.
Yeah.
Oh, hi. Sorry. The first question is, I was wondering, could you give us an update on the timing of the remaining stake of Entain CEE? I know that you are still slightly above your leverage target, but would you consider doing share buybacks given where the current shares are trading? My second question is a more high-level question, I guess, regarding sports results. I guess historically, a lot of people used to bet on the win-draw and used to look at favorites winning. But are we seeing more generally people betting now more on things like player performances, more accas, without just having the win-draw, so therefore you're going to see greater margin volatility going forward? Any sort of color around what people are betting on in football would be great. Thank you.
Yeah. If I talk to the first one, clearly, when we've got something to say on Entain CEE, we will say it, but I would not randomly comment on it on a trading statement call. You are absolutely right on the leverage, and that is a very big focus for us, and that is our primary objective. But after we have got leverage to where we would like it to be, then clearly at this share price, buybacks is something that we need to consider. But the primary focus is to delever the business and strengthen the balance sheet.
On to sports results. The reality is players like to have more exotic bets these days. You are seeing across the industry, people moving away from single bets to accas or multis. That I think is going to continue to be the case, and sometimes you get really good margins from that, and sometimes you do not. But long term, I think the trend in margins should be positive from doing that, but importantly, it generates the interest level with the players that is so important. Certainly in our business, I think that was lagging multis, certainly over the last two or three years. I think we have got a very competitive product now. Across the World Cup, for example, the level of multi-play was much higher than it was previously. So that is something that I think is here to stay.
But there is more volatility associated with that, and therefore we just have to live with that volatility, but look at the underlying margin contribution.
Great. Thank you.
Thank you, Richard. Our next question comes from Jack Cummings at Berenberg. Jack, your line is now open.
Good morning. Thanks for taking the questions. Two questions, please. First one on Australia. I think the half one performance was ahead of expectations, but the Q3, as you said, it was in line with expectations. I appreciate you flagged tougher comps, but anything to mention there in terms of competition, and do you think you continue to grow market share in Q3? My second question on international. International online NGR was down 3%, but +1% excluding Brazil. Were volumes also positive if you excluded Brazil in the quarter? Thank you.
On Australia, we are still very happy with the performance in Australia. I think we spoke to the fact that you would see some slowdown as we were comping last year. We do believe that we are gaining market share. We think the team are executing really strongly on the ground, and we expect to continue to gain market share in that market.
I think the other question was about where our volumes were in rest of international. Off the top of my head, they are about +3%.
Yeah.
Thank you.
Thank you very much, Jack. Now for our final question, we come to Conroy Gaynor from Bloomberg Intelligence. Conroy, you are now live.
Hello.
Conroy, your line is open.
Hi there. Sorry about that. Good morning, everyone, and thank you for taking my question. I just had a follow-up on the machine gaming taxes. I think your position is pretty clear on what this means for the retail landscape in the U.K. and jobs and everything like that. But I guess my question is, what things can you do, what levers can you pull to ensure that any kind of shakeout of this ends up in your online ecosystem, as opposed to competitors or black market?
Well, it's a very complicated question, because we haven't actually had the increase in machine gaming duty, which I hope we won't have. Stage one is we continue to lobby with the facts to say that it will not generate a positive outcome for the Treasury. In terms of the positioning ourselves on the high street, we are the best, I believe, by far, retail operator in this space and we've continued to increase market share over time. When there's any disruption, we are well-versed with how to deal with that. We've got the most motivated staff, we've got the most compelling footprint, and we really know how it works. It's a very well-oiled machine. If there were to be increase in taxes, we would be a relative winner in the fact that we would gain market share in retail.
It is a much more complicated question regarding people migrating from retail to online. There are a number of people who, in particular, value the experience of going into retail and don't want to be online customers. If it does go online, some customers go online, then clearly there is work to do to make sure that we capture as much of that as possible. I think we have to take this in a staged approach, which is we are looking at all aspects of this. We have a very strong project team working on potential outcomes, but our primary focus in terms of messaging right now is that this is a really bad idea for people, for jobs, for the high street. We'll continue doing that until the budget. Thank you so much for the question.
Understood. Thank you.
Thank you. I just wanted to wrap up by saying thank you very much for listening today. Clearly, if you have any follow-up questions, please do follow up with Davina and the investor relation team. Thank you so much