Entain chief calls on government to use maths rather than emotion as it considers gambling tax rises in upcoming budget

The chief executive of gambling giant Entain has called on the government to use maths rather than emotion when it comes to tax rises for the sector in next month's budget.

Stella David was speaking as the owner of Ladbrokes and Coral issued a trading update for the third quarter of the year on Wednesday.

Chancellor of the exchequer Rachel Reeves has signalled that gambling taxes are set to rise in the budget, something that has caused grave concern not only to bookmakers but also British racing's leadership, and David warned that such a move could backfire for the government.

"It's really important that we as a business and the wider industry have an active engagement with government on this issue because it is very well proven that every time you increase tax the black market increases in size," David told analysts. "If you put extra regulation in place that limits opportunities for players they tend to go to the black market as well."

Both David and chief financial officer Rob Wood pointed out Entain was already a top 20 taxpayer in the UK without being one of the 20 largest companies, with an effective tax rate which meant that for every pound made, two-thirds would then go to the government.

Stella David: "We are in close dialogue with the Treasury"

"We are in close dialogue with the Treasury and it is very important that the maths are used rather than emotion to decide what the right course of action is," David added.

David said there were a number of mitigations Entain could employ against a tax rise including less generous bonusing and odds and a reduction in marketing, while Wood said sports sponsorship, including racing, would be another area which could be cut.

The company has also recently warned betting shop closures would be considered if tax rates rose, a move which would affect racing as 60 per cent of Entain's contribution to the levy comes from its retail estate.

David said: "There's no doubt that increases in taxes which affect the retail shops would make some of those shops marginal to unprofitable, and it would have a damaging effect on the high street.

"It's a sliding scale: the further taxes go up, the more the impact is. There's no scenario where there is no impact and we would have to take actions accordingly, unfortunately, in that situation."

Key takeouts

• Total group net gaming revenue up six per cent

• US joint venture BetMGM expected to deliver net revenue of at least $2.75bn and earnings of $200m this year

• BetMGM set to return at least $200m to its parent companies in 2025

Punter-friendly results outside the UK limited Entain to a six per cent growth in net gaming revenue (NGR) in the third quarter of the year.

In the UK and Ireland NGR grew by eight per cent, in line with expectations. There was 15 per cent growth online, while the company's betting shop estate grew by a more modest two per cent, with improved performance across both sports betting and gaming.

Entain's international operations recorded an increase in NGR of one per cent, with customer friendly sports results in September, especially in Brazil and Australia, offsetting online growth.

Football results in both the Champions League and locally meant NGR in Brazil fell by 11 per cent, while in Australia NGR dropped by six per cent. A rugby league match between Canberra Raiders and Brisbane Broncos, in which eight of the ten most popular try scorers touched down, was described as "very expensive not just for us but for the industry" by David.

The company was boosted by its US joint venture BetMGM which performed ahead of expectations. BetMGM, in which Entain has a 50 per cent stake along with US casino giant MGM Resorts International, recorded an increase in revenue of 23 per cent to $667 million during the period.

It has raised its guidance for this year, with net revenue anticipated to reach at least $2.75 billion with core earnings of approximately $200m. 

BetMGM is also set to start distributing cash to its parent companies with at least $200m expected to be returned to them in 2025.

David said: "Entain’s transformation continues at pace, with our strategic execution and expanding bandwidth delivering growth across our portfolio. While we still have more to do, our third-quarter performance is further evidence of the quality of our diverse business and its underlying momentum."

David Brohan, gaming and leisure analyst at stockbrokers Goodbody, described the news as "a solid update from Entain".

He added: "Momentum remains strong, notwithstanding some unfavourable sporting results in the quarter."

Entain's share price ended the day down 2.43 per cent at 819p.

Read more . . .

Paddy Power to close 57 betting shops across the UK and Ireland with almost 250 jobs at risk 

Why William Hill could close up to 200 betting shops - and how fear of gambling tax rises is a driving factor

‘The only winners will be the black market’ – Entain warns against betting tax hike 

Ladbrokes and Coral owner Entain appoints Stella David as permanent chief executive 

Sign up to receive On The Nose, our essential daily newsletter, from the Racing Post. Your unmissable morning feed, direct to your email inbox every morning.