Entain Plc (ENT.L), a leading betting and gaming company, held an earnings call where interim CEO Stella David and CFO Rob Wood discussed the company's 2023 performance and outlined their plans for the coming year.
The company reported a 14% growth in Net Gaming Revenue (NGR) and a 36% NGR growth from BetMGM, although organic online business NGR declined by 3%. Adjusted EPS was 44p, and a second interim dividend of 8.9p per share was confirmed.
Entain expressed confidence in the Brazilian market's recovery and their ability to return to NGR growth by the end of 2024. They also highlighted the anticipated impact of regulatory changes in the Netherlands and the U.K., which could affect EBITDA by approximately £40 million.
Key Takeaways
- Entain Plc focused on core markets, aiming for organic growth, margin expansion, and winning key markets.
- BetMGM's success is a highlight, with a 36% NGR growth in 2023.
- The company reported a 14% NGR growth overall but faced a 3% decline in organic online business.
- Adjusted EPS for 2023 was 44p, and a second interim dividend of 8.9p was announced.
- Regulatory changes in the Netherlands and the U.K. are expected to impact EBITDA by about £40 million.
- Entain is optimistic about long-term growth despite acknowledging short-term challenges.
Company Outlook
- Project Romer is projected to deliver £70 million in net cost savings by 2025.
- Focus on commercial excellence, simplifying customer journeys, and delivering great products.
- Anticipated regulatory changes in the U.K. and the Netherlands to impact EBITDA.
- Confidence in the Brazilian market recovery and the U.S. market's growth potential.
Bearish Highlights
- Online business faced challenges with a 3% NGR decline.
- Regulatory changes in the U.K. and the Netherlands pose potential risks.
- Underperformance in online markets such as the U.K., Australia, Brazil, Germany, and the Netherlands.
Bullish Highlights
- Retail and BetMGM segments performed positively.
- Growth in the U.K., international, and CEE retail markets.
- Project Romer expected to deliver significant cost savings.
- Optimism about returning to NGR growth by the end of 2024.
Misses
- Missed opportunities for Pix payments in Brazil.
- Over-reliance on paid television advertising in Brazil.
- Need to improve product offerings in the U.K. to compete effectively.
Q&A Highlights
- The company is actively recruiting a new CEO with relevant experience.
- Plans to invest in marketing to recapture market share post-regulatory changes.
- Focus on improving product localization and marketing execution in Brazil.
- The company is implementing ARC, a safer gambling tool, in international markets.
Entain Plc remains committed to its strategic priorities, emphasizing operational momentum and focusing on its core betting and gaming business. Despite acknowledging the complexity within the business and the impact on agility and execution, the company is making strides in simplifying structures to improve efficiency. Entain's dedication to product development, customer engagement, and a strong company culture is evident as they navigate the evolving regulatory landscape and aim to capitalize on market opportunities in 2024 and beyond.
Full transcript - None (GMVHF) Q4 2023:
Stella David: I'm joined here by Rob Wood, who is the CFO and the Deputy CEO. We've got Sameer Deen, who is the Chief Commercial Officer. And at the end, we've got Satty Bhens, who is the Chief Product and Technical Officer. We've also got quite a few of the management in the audience today. And hopefully, at the end of the session, you'll have a chance to talk to some of those informally before you go. Let me get down to business. I'm going to kick off with the reflections and thoughts, having been the interim CEO for nearly three months now. Then I'm going to give you a brief overview of the performance in 2023, but also looking forward to the priorities that we have in 2024. Rob will then take you through the financials, and then Sameer and Satty are going to provide detail on what we've been doing and what concrete actions we have taken with specific examples and what more we're going to be doing as we go forward. And then I'll wrap up, and then we'll have an opportunity to do Q&As. So let me start with my reflections. Yes, I am an interim CEO, but i am definitely not a caretaker CEO. I am not here to tread water in any way, shape or form. We need momentum as a business. And I'm very much focused on execution. We are moving at pace. And my job, as I see it, is to hand this business on to the permanent CEO with great positive operational momentum. And I'm very pleased to say that the recruitment process for the permanent CEO is going very well. I'm also pleased to say that we've added strength to our bench on the Board. In the last two or three months, we've added Amanda Brown, and we've added Ricky Sandler. And hopefully, in the next week or two, we'll be able to announce the addition of yet one more Board member. So the strengthening of the bench, along with the initiation of the Capital Allocation Committee, means that the Board is going to be look in depth at what other things we need to do to maximize and improve shareholder returns. Now the Capital Allocation Committee was only set up very recently. So as I'm sure you hopefully will appreciate, it's not the timing for me to update any more on that because it hasn't reached any conclusions. If I now look into the business itself, I'm also really encouraged by the enthusiasm dynamism of the management team that I've been working very closely with. And fundamentally, Entain is a strong business. It's working in an industry with strong growth dynamics. And our absolute focus under my watch is that what we're going to focus in on being who we are, and that is a betting and gaming company. Now I understand the prior aspiration to move into broader interactive entertainment. But quite frankly, that was a distraction. We are laser-focused on being 100% a betting and gaming company. And my style within the organization, which I think is important, is one of making it safe, although I am demanding, but making it safe to share the brutal truth, or what I like to call them the elephants in the room. Because actually, if we face the elephants in the room, we can really, really get into proper debate, proper real change at real pace. So what are these elephants? Well, firstly, complexity. Complexity has gradually accumulated over time in this business, and that has been exacerbated by the fact we've done numerous acquisitions. And the problem with the complexity is hampering our agility and therefore, our ability to get things done. So we have a great opportunity, I believe, to unlock the ways of working and drive more effective and more efficient outputs. In the U.S., we're very proud of the successes that we've had with BetMGM, and its performance quite rightly is a key focus for us. And where I like to think of MGM and ourselves, Entain, that we are the co-parents of BetMGM. But being fully transparent, it took us, and that is Entain, some time to realize just how quickly we needed to feed BetMGM with better product, better customer experiences and better, more focused U.S. tailored products. Now the good news, as Satty is going to tell you later on, is that the work that he and his team have done over 2023 have really helped BetMGM be much more competitive, and there is a lot more positive news to come in 2024. However, this all leads to another elephant in the room. Delivering product and tech solutions for BetMGM at the pace that we have had to do it has meant there has been some considerable cost in our other markets. The good news is that now we have the experience curve and the capacity going forward to not only feed BetMGM with what it needs, but also feed better, more exciting products for our customers in other key markets. And we must prioritize getting our products right in the key markets, particularly the U.K. and Brazil. Now I believe that the strategy that was presented in November is sound. And I'm going to give you a couple of charts on it in a few -- sorry, I'm going to talk to you in a couple of chart's time. But actually, right now, the key isn't strategy. The key is delivering and executing on brilliant basics, and that's where we are going to really focus our efforts. The devil is absolutely in the detail. It's a case, and this is what I say in the business, is roll our sleeves up, listen to the people in the business and have an absolute laser focus on delivery. And I believe, fundamentally, this will deliver superior results and importantly, on this journey, when a new permanent CEO comes in place, it is a perfect transition because why wouldn't we put in place the building blocks to make sure that we're now back ahead in the race. So I believe it is a completely consistent approach that we're taking. I'd now like to step back and just do a brief overview of 2023. In all honesty, and I think you know it, 2023 was a challenging year for Entain. And without doubt, performance has been mixed. It's no -- it's absolutely true. We faced significant regulatory headwinds in some of our markets. However, our operational performance was also mixed. We delivered strongly in some areas. But in other areas, we had issues. So let me start on the positive side. I would love to call out specifically SuperSport in Croatia. They go from strength to strength, strong double-digit growth and a great management team doing a great job. However, on the other side of the equation, the U.K. We have had a very long internship process of doing multiple affordability measures. And that is generated, along with other things, significant complexity in the customer journeys. And in Brazil, there were some operational decisions that were made back in 2022 that simply did not work. We lost significant market share. However, we have taken action, the leadership has been changed, and we are starting to see strong green shoots of a big recovery taking place in Brazil. And Sameer is going to go through how we're optimizing the customer journeys in both the U.K. and Brazil later on. I want to also call out BetMGM. It had a good year, delivering NGR at top end of range and also supported by a significant improvement in product, and there's a lot more to come in 2024. And then, finally, on this slide, I have to refer to the DPA. That was successfully concluded, and it's a key milestone in getting to draw the line under a significant regulatory overhang for the business. So therefore, now we can and we absolutely must focus in on executing our strategy. So just to remind us of our strategy. These are, as presented in November, top of our strategic pillars. It's who and what we are. We are a leading player in the global betting and gaming industry. That's where 99% of our revenues come from. And our goal is to provide customers with the most entertaining experience with the safety of market-leading player protection. We have three key focuses: one, organic growth. Growing in our existing markets is a key must-win for us. Margin expansion, and Rob's going to talk through the financials and also where we are on Project Romer. And then winning in the U.S., the largest and fastest-growing market in the world. Clear objectives, and it's all underpinned by our key enablers: people and culture, product and tech, and good governance. And what I want to do just right now is take a pause and highlight and talk to people and culture. This is an incredibly important part of getting Entain back into winning form. We can and we are doing better here, but there is a huge opportunity to drive performance through unlocking the power of our people. We have numerous initiatives in play in this area. And it's a team that from the top of the company, from the Exco and to the senior leadership team, absolutely committed to increasing engagement, aligning objectives and breaking down the silos. I have no doubt, based on my many, many years of experience because I'm quite old now, that these changes will generate improvements, absolutely guaranteed. So there's a lot to do, but we are taking action, and we are executing it now. I just want to take a moment just to talk a little bit more about BetMGM, and I want to add a little bit more color to the performance. You have already heard from Adam -- from BetMGM that it was good year with the NGR, top end of guidance, H2 was EBITDA positive. But what I think is behind all that is that our team worked with the BetMGM team incredibly hard to start to deliver the type of product solutions and customer experiences that makes us really competitive going forward. And I think the successes that started to come through towards the end of 2023 means that the alignment between ourselves, Entain, and MGM is better than it's ever been. I have a regular dialogue with Bill Hornbuckle, and I am confident that the relationship between ourselves is as good as it's ever been. And we already started 2024 on a very good upward track. The Super Bowl went seamlessly, and there are new products and improvements to the apps, which Satty again will go through, which gives us confidence for the future. So with both parents of BetMGM committed to investing into the growth, we are positioned very well for 2024 and look forward to a positive market share progression. So in summary, my last slide before I hand over to Rob. We have a clear priority of winning in our core markets, must-win markets. The U.K. the U.S. and now Brazil. We do that through commercial excellence, simplifying customer journeys and providing our customers with great products. Another area of simplification is in our structures, enabling the business to be more agile and more efficient and therefore, more effective. Underpinning of successful execution is harnessing the power, the true power of our teams, and we have a global set of very talented people in the business. Quite frankly, this is not rocket science. It's really simple. It's difficult to execute, but it's really, really simple. My mantra internally is we focus in on the vital few, not the trivial many. And what do I mean by that? It means that we make sure we're laser-focused on doing the things that move the dial. It's about sticking to the plan, it's about hard work, and it's about delivery. We will not turn this business around overnight. It's going to take time. It's going to take sustained hard work. And -- but we're already making some real progress with tangible outputs. So we are delivering, and we will continue to deliver tangible reasons to believe in Entain's future growth. And on that point, I'm going to hand over to Rob and come back at the end of the session. Thank you.
Rob Wood: Thanks, Stella. Good morning, everyone. So as usual, I'll take you through the financial highlights of our results this morning. I'll also provide more detail on our regional performance across our businesses followed by an update on our efficiency program, Project Romer. And finally, I'll share more detail on the outlook statement that we included in our RNS this morning. Let's start with the financial highlights from 2023. And as usual, all revenue growth numbers that I mentioned are in constant currency. As a group, and therefore, including our share of BetMGM's revenue, we delivered NGR growth of 14% or plus 2% on a pro forma basis. Within that, there were some favorable growth numbers. BetMGM delivered NGR growth of 36% at the top end of our guidance. In retail, NGR ex U.S. grew 8% and with the benefit of acquisitions. But encouragingly, retail also grew 2% on a pro forma basis. And total online NGR ex U.S. was up 12% year-on-year. However, as we know, our organic online business had a challenging year with pro forma NGR down 3%. Down 3% was in line with our updated guidance at Q3, but adverse to our expectations of low to mid-single-digit growth earlier in the year. That online underperformance meant that EBITDA was 2% lower year-on-year at £974 million. That excludes the accounting of TAV New Zealand, which results in reported EBITDA of £1.8 billion. We've discussed the New Zealand accounting treatment before, and there's a breakdown of the impacts in the appendices. The underlying £974 million of EBITDA figure is in line with our revised expectations following those customer-friendly results in October. Further detail on Q4 trading can be found in the appendix. But in short, group NGR in Q4 improved from 10% in Q3 to 14% in Q4, with continued pleasing performances across retail, recent acquisitions and BetMGM. However, our pro forma online growth continued to disappoint with Q4 seeing a similar performance to Q3 at minus 6%. Adjusted EPS for the year was 44p. You'll note from our RNS this morning that EPS, inclusive of separately disclosed items, was materially negative in 2023 after recognizing the DPA settlement and taking impairments in particular to our Australian business following the point of consumption tax increases and some softer market growth in that territory. So the balance sheet now. Liquidity is strong and leverage ended the year at 3.3x. On a pro forma basis, leverage is 3.1x or 3.6x if you include the full DPA settlement cost. Finally, on this slide, we've confirmed a second interim dividend of 8.9p per share. This brings a total for the 2023 financial year to £130 million or 17.8p per share, which is in line with our progressive dividend policy and represents 5% growth year-on-year in dividend per share. The next slide now outlines our revenue mix and growth rates by markets for each of our online and retail channels. All of the data on this page is pro forma, so as if we own the acquisitions for the entire year, and we also include Entain's share of BetMGM NGR within online. Firstly, you'll notice new segmentation: U.K., international and CEE as well as the U.S. We intend to report our ex U.S. business using these three segments from 2024 onwards, showing splits for online and retail channels as well as reflecting our new operational structure under Sameer's new role. We will also remove the new opportunities segment, absorbing those remaining costs into online. Removing new opportunities is symbolic of our new absolute focus on sports betting and gaming going forwards. To help you adapt your models to this new structure, we will provide more information with the Q1s and interims. Now moving on to key insights for 2023, and I'll start with retail. The U.K. and Ireland, it remains our largest retail business and it performed well in 2023, growing 2% on a like-for-like basis. International, which is 2/3 Italy, that grew strongly at 10%, and CEE delivered 4% growth in retail. And seeing our retail businesses delivering growth like this is particularly important when also considering the long-term benefits to our online platforms in those markets, particularly markets where there are advertising restrictions, like Italy. Moving now to online, where we see a mixed picture. The U.K. declined 6% in 2023. This was primarily driven by our implementation of new affordability measures, which have led to more complex customer journeys, but also due to limited product development while we prioritize the U.S. We've identified the issues in the U.K., and we're addressing them. And Sameer and Satty will talk more about this shortly. International, that represents just over half of our online business, and it declined 4%. Whilst we saw growth in many territories like Italy, Georgia, Belgium, Spain, Canada and the Baltics, we did underperform in some important markets, namely Australia, Brazil, Germany and the Netherlands. Australia, that was down primarily due to slower market growth, but also from mitigation actions against point of consumption tax increases and new entrants increasing competition. In Brazil, as already mentioned, our performance was behind expectations as a result of past operational missteps and intensifying competition ahead of regulation. The decline in Germany that primarily represents tightening restrictions on player deposits, but also coupled with a lack of regulatory enforcement. And lastly, Netherlands was also down year-on-year. And a decline was expected following reentry of the previous market leader. However, the decline in H2 was greater than expected due to further tightening of compliance measures. On the plus side, BetCity remains number three in the Netherlands market. To CEE now, which was 8% of the mix and showed strong growth of 13% year-on-year, particularly in Croatia, where SuperSport continues to lead in a growing market. So 2023 was mixed for online with pro forma growth ex U.S. behind the levels that we believe our portfolio should be delivering. The good news is that we understand where our issues are, both by market and at the product level. If we exclude regulatory impacts, we estimate that sports NGR for pro forma online was still in decline last year. Whereas in contrast, gaming NGR ex regulatory impacts was in mid- to high single-digit growth. Therefore, we're rightly focused on those core underperforming markets and also on our sports product, and Sameer and Satty will talk to you about these shortly. Turning now to our usual EBITDA bridge. The impact of lower online growth can clearly be seen here on the left-hand side. Even after stripping out an estimated £121 million of regulatory impacts, our underlying business was -- for online was only broadly flat year-on-year despite operating in growth markets all around the year -- all around the world. Acquisitions added a very welcome £118 million of EBITDA to online, but it's clear that improving our online organic performance is key to returning to earnings growth. More positively, we're pleased with our performance in retail. You might remember last year, I guided to £30 million of above inflationary costs for retail, reflecting wages and energy. As you can see here, the underlying organic business managed to mitigate around 2/3 of that, whilst also continuing to invest in the future in our estate, but also in new gaming cabinets and in SSBTs across many of our markets. Corporate costs increased by £18 million as we reached full reps contributions and made further investments into governance. After a few years now of above inflation increases, we should see this corporate cost base return to more normalized growth going forward. The next slide outlines cash flow and net debt movements during 2023. Underlying free cash flow was robust at £524 million, a slight improvement year-on-year, in part as more favorable working capital flows offset increased corporate taxes and increased CapEx, which largely reflects acquisitions. As always, a more detailed cash flow is provided in the appendix. We closed the year with leverage at 3.3x or 3.1x on a pro forma basis, excluding the DPA liability. While payments against the DPA over the next four years will slow our pace of deleveraging, we expect to return to deleveraging from 2025 driven by a return to growth in online. Now on to our efficiency program, Project Romer. We continue to make good progress here to simplify our organization, enabling the business and our colleagues to be more agile in their execution and more effective in their delivery as well as driving efficiencies in the cost base. We've completed the initial phase of the project, giving us increased confidence that we're on track to deliver approximately £70 million of net cost savings in 2025. I plan to update more fully on Project Romer at our interims in the summer. Finally, moving on to thoughts on the outlook for 2024. Firstly, importantly, trading so far this year has been in line with expectations. However, as we look to the balance of 2024, we want to highlight expected regulatory change in two of our key markets. In the Netherlands, the KSA have proposed tighter deposit limits with expected implementation in Q2. In the U.K., we've got the overall story is now positive. We're delighted that this long-awaited regulatory review of the gambling act is drawing closer to a conclusion. We look forward to the implementation of online slots staking caps, which has been announced now, and we're encouraged by current discussions on a potential agreement for uniform safer gambling measures across the market. This is a revolutionary change for U.K. online, much like retail back in 2019 when the triennial review came in and we think it's positive in the long run for Entain. However, for 2024, we may see further player disruption that comes with change. And equally, we may see opportunities to invest incremental marketing to capture market share as the playing fields finally get leveled across the market in the U.K. In aggregate, we expect these dynamics across the U.K. and Netherlands could reduce 2024 EBITDA by approximately £40 million. In conclusion from me, we saw a mixed performance across the group in 2023. There were positives in retail, BetMGM and recent acquisitions, but our organic online business underperformed. However, we started 2024 in line with expectations. And whilst we are cautious on the outlook for online in 2024, we're making great operational strides to improve the business. And we've now increased confidence of a return to NGR growth by the end of this year and into 2025. To hear more about that, let me hand over now to Sameer.
Sameer Deen: Thank you, Rob. Good morning, everybody. By way of introduction, I joined Entain in 2021 as Chief Financial -- Chief Strategy Officer. Sorry about that, Rob. Mid last year, I took responsibility for our Lat Am region, where I initiated and led the turnaround of that business. And late last year, I took on commercial responsibility for the whole group with the exception of our U.S. and CEE joint ventures. I have now been in my current role for just over two months, and I've spent my time deepening my understanding of our various businesses and teams. Today, I would like to share with you my initial areas of focus and key actions. To start off with, as Stella highlighted earlier, we have a globally diversified portfolio with strong underlying market growth, yet we have underperformed in certain regions in '23 and my immediate focus is on delivering organic growth in two of them: the U.K., our largest region; and Brazil, the fastest-growing market. I will use my time today to walk you through how I assess the business and the go-forward plan for both the U.K. and Brazil. The way I look at our business is through the important lenses of acquisition and retention. Of those two, retention is the key driver to return to organic growth. On average, prior year cohorts drive 80% to 85% of in-year revenues. Businesses that exceed that 80% to 85% net revenue retention threshold are able to sustain growth. The most effective way to bolster retention is by improving our customer experiences through better products. Today, my team and Satty's are working more closely than ever to prioritize, develop and deliver products that are simple, easy and fun for our customers to use. Let me now come on to what we are doing specifically in the U.K. and Brazil. The U.K. is our largest region outside the U.S., and so it's critical. The online market is growing at about 5% per year, and winning here is essential to Entain's overall performance. On acquisition, we continue to successfully attract customers with our trusted brands. This is reflected in our strong actives, which grew over 30% in the last two years with attractive payback periods on our marketing spend. On top of that marketing efficiency, we intend to utilize our retail portfolio to further bolster acquisition through omnichannel promotions and products. As a reminder, we have over 2,000 shops, which is the largest retail footprint in the U.K. with leading market share. This omnichannel approach will be enabled through a new single leadership team across both U.K. online and retail, which I put in place earlier this year. Now returning U.K. online to growth, however, will require a step change in our approach to retention. While we have a very strong active base to build from, net revenue retention has gone backwards since '21, and we know we need to get better. And so we are proactively addressing retention through three levers. Firstly, our consumer-facing apps can be much better by focusing on brilliant basics, such as improved UX on our core customer journeys and site speed. Faster is always better for online customers. Secondly, improving key sports product features, such as bet builders and cash-out functionality; and thirdly, simplifying our safer gambling journeys. We have rightly continued to introduce new measures to protect our players, but we have created complexity for both customers and colleagues in the process. For example, certain safer gambling journeys have increased customer service center contacts, resulting in longer away time for our customers. Now we intend to make these experiences simpler, easier and better, and we'll keep you apprised of our progress. Hopefully, that gives you some flavor for what we are focused on in the U.K. Now turning to Brazil. As a reminder, Brazil is the fastest growing market outside the U.S. with approximately £2.5 billion in '24. As I mentioned, I began leading the business mid last year and established a new local leadership team shortly thereafter. Although it is still very early days, sporting bread is seeing growth, and we're beginning to deliver on the commitments we laid out in November. Firstly, from an acquisition perspective, we've seen first-time deposits returning to strong year-on-year growth, driven by two key changes. One, shifting away from overreliance on pay TV towards both open TV and digital advertising; and two, a refreshed brand and creative strategy that is now in motion. From a retention perspective, we are seeing initial signs of year-on-year actives growth as well as higher withdrawal and deposit activity per player. This has been driven by three key changes. Firstly, launching instant withdrawals and deposits has been critical. Through a better integration with Pix, Brazil's most popular payments platform; second, increasing our local sports offerings, focused on more Brazilian football. And third, expanding our gaming portfolio to include local favorites, such as Aviator, a virtual crash game that everybody loves in Brazil. To wrap up, I am pleased with the changes we are making in Brazil and the positive response from our customers. I hope you can see that we are forensic in understanding the issues and laser-focused on addressing them. Now we're already bringing this approach to the rest of our business, including the U.K., working much more closely together with Satty and the rest of our teams to put ourselves on the right path back to organic growth. With that, I'll hand it over to Satty to talk about our progress in product in tech.
Satty Bhens: Thanks. Hi, and welcome. I'm Satty Bhens, Chief Product and Technology Officer at Entain. Excited to be back to share the progress we've made since November and outline the plans for the rest of the year. In November, I highlighted the richness of our platform. Remember, it's regulated in 40 onward jurisdictions. It covers U.S. and European sports, casino, poker and bingo. I also talked about brilliant basics. It's no surprise them talking to customers, they want us to deliver on the brilliant basics, simple actions that just work every time. And finally, I touched on how market localization is making a big difference in the U.S. So today, I want to cover the following three topics. First, I want to highlight the product improvements in the U.S. and demonstrate how our relentless focus on Brilliant Basics is really driving product improvements for BetMGM customers. Second, I want to share the progress we are making in scaling localization capabilities and accelerating our product velocity, both key ingredients to winning in our key markets. And third, I'm going to highlight our customer-facing product road map, sharing key product milestones market by market. So let's jump into this. On the back of launching single accounts, single wallet in our 21 markets before the NFL, are thrilled that in January, we launched our app in Nevada right before the Super Bowl. Knowing that 2/3 of the fans in the stadium were using our app during the game highlights the value of launching in Nevada ahead of the event. And Vegas is unique. It's the destination for betters in the U.S. Even before we got to the Super Bowl, we had some great wins for NFL customers. For example, our end game uptime increased 10 percentage points over the '22 season, a fantastic achievement for our sports teams at Entain and BetMGM. Quite frankly, these are the brilliant basics that customers actually love. Our single game pilot product in the U.S. is getting better and better. As you can see, the SSBTs that's highlighted here, we're seeing players engage more and more with our single gaming products. Yes, we have more to do, but the path is very clear. And we're seeing some great momentum. And I'll share more on our progress with Angstrom a bit later. Our game library continues to grow. We now have 3,600 games in the U.S. That library generates close to 300 million spins a week. Finally, in November, I talked about getting to the top end of the leaderboard on app launch speed. While we're getting to a much better, much faster app experience. And the great news is that the work that we're doing in the U.S., the speed improvements we're making there are actually reaching other Entain markets now. So what you see on the right-hand side are images captured from my phone, overlaid with the timings that show at launch speed in seconds. So every few weeks, I put myself in the shoes of our customers, and I record key journeys on my phone and track how long these core journeys take. I must say I feel so much happier now than one year ago. Under 2.5 seconds for app launch time is actually pretty good. Our focus is paying off. We absolutely want to be a leader in app speed in all our key markets. That ongoing focus on brilliant basics is vital. It's actually a never-ending priority on our '24 road map. So I'm loving the product improvements we're all making in the U.S., but it's going to get better in other markets, too, much better. We aspire to be a world-class digital product team. That means delivering fresh, slick, fun, modern experiences. The experience is that we want to compete with Silicon Valley companies, not other bedding companies. The very best digital companies deliver smaller, more frequent product releases that meet and exceed customer expectations. That's our ambition, too. We want to set new standards for betting and gaming experiences. So how are we doing this? First, we have rewritten the rule book on how fast we can deploy customer-facing product improvements. For our Sportsbook, we can now deploy feature improvements every two weeks. In 2023, we can only release every six to eight weeks. Today, we can also deploy smaller product improvements on demand every day if we want to. This is how product-led digital companies operate, and it's far better for customer adoption to see smaller changes more often. So this year, we will have 4x more Sportsbook releases than we did in 2023. Second, and I spoke about this in November. In 2023, we started building dedicated customer-facing teams for the U.S. In 2024, we are scaling from 10 dedicated market teams to over 30 dedicated market teams. That means in the U.S., in the U.K. and in Brazil, we can dedicate capacity to focus on unique customer needs for those markets. For me, it's super exciting to see a global platform and yet be totally locally focused. In this model, any improvements in one market can easily be transferred to another. And finally, we have completely rewired our front-end sportsbook architecture. What does this mean? Simple changes to brand, UX, navigation, icons, et cetera, meant we had to make the changes in six different products in sports gaming, casino, bingo, poker and so on. It also meant multiple teams had to coordinate these changes. There are multiple handoffs and quite frankly, our experiences across products was very, very inconsistent. Going forward, those changes -- those design changes that used to take weeks can now be done in one place and seen across all our products in just a few days. That's 6x less effort for design changes across our product portfolio. With this in place, we can now refresh and modernize our interfaces. Over the next few quarters, we'll be rolling out design changes that reflect who we want to be going forward, not who we were five years ago. And I'm very confident that our customers are going to love our new designs. As I'm sure you can tell, I'm really excited about the underpinnings we're putting together to increase the pace of product improvements. So let's talk about what we're going to -- what's on our road map for 2024. While we're off to a great start to the year, we've already released our app in Nevada right before the Super Bowl, as I said earlier. And of course, we had a fantastic Super Bowl weekend with a much faster app across all the U.S. During peak times in the event, we were serving 1.3 million clicks per minute on our BetMGM Sportsbook, so we can operate at scale. Next up in the U.S. is our fully integrated Angstrom baseball models, followed shortly with NBA models. We have some exciting 100% in-house single game pulling markets coming online for baseball. For me, I'm most excited by our in-play micro bets, so look out for that next month. It's exciting to see our product ambitions come to life in the U.S. We're really starting to get some fantastic momentum. In 2024, we will go beyond the U.S. We want to deliver products that our customers will love to use in the U.K. and Brazil. Central to that is leveraging our U.S. work on Single Game Pale and Angstrom. We want to build our own European football models and to completely revamp our bet builder capabilities. We're also going to migrate some of the great design work we've done in the U.S. with BetMGM to Brazil and to other markets where it makes the most sense. And as you heard from Sameer, Ladbrokes (LON:LCL) and Coral are getting some much-needed love. Our teams are working flat out to fix the basics, build our future Bet Builder product and refresh our designs all in time for the next football season. And just to be clear, this road map only reflects the key customer-facing product improvements. We have much more on the road map, including some really exciting product innovations coming out later this year. So to recap, we're on course for a great Single Game Pole product powered by Angstrom for the U.S. Our focus on brilliant basics is taking hold, and we're getting some really positive customer feedback. We want to always be at the top end of the leaderboard when it comes to speed, and we're on track for that, too. We have built a product development engine that can deliver better quality experiences at a much faster rate. By the end of this year, we'll have a full localization capabilities in all of our priority markets. And finally, we've started to build an innovation agenda. More on that later in the year. I see no reason why we can't start to win share on our product capabilities going forward. I'd now like to turn it back to Stella for her closing comments.
Stella David: Thank you, Satty. Thank you, Sameer, and thank you, Rob. So I think it's clear, we had a year in 2023 with many challenges. But I think the good news, and if I were in your seat, I would hope that we would do this. We are telling you the full suite of our issues, but also the suite of our solutions. We know what's gone wrong, and we're laser-focused on doing things to fix those and to drive our strategic priorities. This year definitely will be a year of transformation and progressively day by day, we will demonstrate that the group can get back to structural growth as we exit the year. Thank you so much for listening today. I really appreciate the time. We've taken quite a long time on this. But now we're going to open it up to questions. So, I don't know who's going to hold the process on this. Davina?
A - Davina Hobbs: [Operator Instructions] So if we start. James?
James Rowland Clark: James Rowland Clark from Barclays (LON:BARC). My first question is for Stella. You talked about culture earlier. It can obviously be difficult to inspire an incentivized staff at a time when the share price is underperforming. And operationally, it's not been what you've wanted. So can you talk about the green shoots of improvement that you're seeing there in the atmosphere amongst the staff. My second one is on online growth in 2024. So I think, Rob, you said at the Q3 update that you'd expected to see low single digits given the regulatory impacts you're referring to here at EBITDA, what's the impact on the top line and also the exit rate from 2024. And then, finally, on product development. It's a major focus in the U.K., Brazil and the U.S., and that's totally understandable. Big markets and very exciting markets as well. How can you reassure us that you're maintaining your speed of product development outside of those markets? Any examples you can provide about improvements? Because obviously, certain markets did underperform as well there.
Stella David: Right. So I think I'll take the first one, and then Robin and Satty take the next one. So look, I could talk all day about culture. So this is a bad question to start with, okay? The organization, there's 30,000 people or so work in Entain in all sorts of different levels. And in order to motivate people when we've had a period of bad results, the key is having a really open dialogue with people, making sure that people in the business understand that we understand that we haven't been quite right. And it is very, very important that authenticity and honesty is part of that journey to getting back into a better place. Then you increase the level of commitment by a whole suite of things that we do. And I can give you some examples. Really taking advantage of communicating in-depth into the organization to make sure people know what the road map is that we're on. And one thing which has been very liberating for staff in the organization is to feel the pride in being a betting and gaming company. I think some people got a little bit confused about interactive entertainment. And people need to feel pride and they need to feel that there is a sense of momentum and direction. And I think we're putting that back in. We can't resolve the problem immediately. The bonuses will be not great this year because the performance was not great. But again, it's about a road map to say we are improving the product. We are understanding the customer journeys, and we are making sure that we're working to get high-performance teams into the organization. If there's one thing I know, it's about how to build engagement of people and organizations. It's something I have done before, and it is literally, as I said, you roll your sleeves up, you engage with people, you generate that momentum, that sense of pride and then you get to a better outcome. But there is no silver bullet. You are judged every single day on doing the right thing, and then people give you their followership. You can't demand it; you have to earn it. And I think the executive team, of which many of them -- most of them are here today, absolutely have bought into that journey. And the big layer -- the layer of senior leadership team, we call them the Entain leadership team, are also engaging in that journey. But we face the brutal truth. When we're not doing things right, we're trying to get under the skin and get that authenticity. I will stop.
Rob Wood: So let me take the second question, James. So this was about online growth expectations in 2024. As you rightly said, back in November, we called out our best forecast of low single-digit growth for the year with decline in H1, growth in H2. So what does this morning's guidance mean for that? Well, the first thing, it's important to say that we're on track year-to-date. And we were also in line with expectations across November, December. So the last four months basically in line. The outlook statement this morning was because we wanted to say what we see over the balance of the year, just be super transparent about what we see. I'll come back to explaining where the numbers come from, from -- in a moment. The £40 million EBITDA impact. If you translate that entirely to lost revenue, that would be around two to 3 points. So therefore, that low single-digit growth could become low single-digit decline. That's a mathematical consequence of what we're saying. I wouldn't necessarily change the exit rate, which was mid-single digits that we spoke about in November. So that's unchanged. Let me just -- now I've got the moment. Let me talk a little bit more about the £40 million, is obviously the new news this morning. So part of that is the Netherlands. It's a smaller part of it. The KSA updated just before Christmas, so it's new news versus the November guidance that does feel likely to happen to us and therefore, important to clarify that we expect those changes to be made and that you should assume is an ongoing sustained impact out into future years as well. The larger part of the £40 million is recognizing that the U.K., as I said earlier, is about to embark on the most seismic change to the online regulatory environment that we've seen for a while, both in the shape of a state cap on slots and we hope, a uniform approach to safer gambling across all operators. What we wanted to do is allow for two things. One, as much as we believe that will be a positive Entain, but also for customers, I think it will be positive for customers, all regulated operators, certainly a positive for Entain in the long run. One, we want to recognize that with any change, there can be a cost of implementation. There may be some players that are impacted, and so some short-term negative. Two, if the change goes as we expect it might do, we would like the flexibility to be able to invest more in marketing to recapture some of the market share that we seeded over the last two or three years. So, we're creating the ability to do that. The reason why I give that clarity around marketing is if a large chunk of the £40 million is marketing, that's not an adverse revenue impact. And so therefore, the question is quite hard to answer with precision. But for the sake of simplicity, if you assume it's all revenue, then we could end up being low single-digit negative based on everything that we see today. Importantly, though, for the long run, we think the U.K. developments are a positive. So you'd like to think it's a positive impact to '25 and beyond.
Sameer Deen: James, on your third question in regard to kind of product and the implications of kind of focusing on three markets and what about the rest. I think the great news is that there's a lot of work we're doing that is on shared journeys, not specific to our market. So speed, for example, reflects to every market. I think if you look at our bwin product today in Europe, it's probably the fastest step in the market, not because we focused on it but because we focused on other markets. All the journeys around cashier will also benefit all our markets. And so there is a trickle-down effect of our work in the U.K., U.S. and Brazil. One more example, the Bet Builder product we're building for the U.K. will be available anywhere with those football markets. So I think we see significant improvements for our non-key markets as a result of our prioritization.
Estelle Weingrod: Estelle Weingrod from JPMorgan (NYSE:JPM). I just have two questions. To come back on '24, I guess it implies slightly lower online margins. Are you still comfortable with your midterm ambition, especially the online margins you guided for, for full year '25? And just one on Brazil, you mentioned small improvements. Can you just comment on the competitive landscape in Brazil right now?
Stella David: Do you want to take that? And then Satty, yes?
Rob Wood: Let me kick off with online EBITDA margin. So back to the last question, if the £40 million is all NGR driven or even if some of its marketing, we would expect some compression of the 2024 EBITDA margin as a consequence to that. To the mid-to longer-term EBITDA margin, clearly, that's a long way away. What I would say is that the only new news that would be a negative would be the Netherlands. You have to assume that, that has some compression on EBITDA margin. If the U.K. turns out to be positive as we think it is, then that would be a positive to margins. I'd also say that Project Romer, I touched on it earlier, having completed the first phase, we have increased confidence in the impact of Romer on margins as well. So I would say a mixed picture, bearing in mind the Netherlands aspect. Perhaps the last thing to say, just to be super clear. I know it's a bit awkward. But if we withdraw the new opportunities segment and then reallocate that remaining cost to online, that equates to about a 0.7 impact to online EBITDA margin. So it's a reallocation, but nonetheless, that does have an impact. But on a like-for-like basis, the medium-term guidance still stands. Netherlands is a drag. Hopefully, U.K. is an opportunity.
Sameer Deen: And on the Brazilian question, look, the market is definitely very competitive, certainly ahead of regulation, new entrants a lot more domestic players and also foreign players looking at the market. But as I said, we've made a lot of changes, both in terms of our front-end products, our payments capabilities, and we feel good about what we're -- the early signs of the turnaround in Brazil.
Kiranjot Grewal: It's Kiranjot Grewal from Bank of America (NYSE:BAC). Just three questions from me. Firstly, on Angstrom. Once it's fully integrated and Nevada also separately comes onboard in terms of single wallet, single app, do you think your app, the BetMGM app will be on par with the bigger operators? Or is there more work needed after that? And then building on that, do you have any expectations on how much benefit you might get from bringing Nevada onto single wallet, single app? And the last one is around the other regions. Netherlands and U.K., you've been clear on your expectations for next year. But the other problem regions have been Australia and Germany. How do you think those two might develop in '24?
Stella David: Satty?
Satty Bhens: So let me talk about the product road map and expectations from a product perspective for the U.S. So I think from the single account, single wallet piece in Nevada is really dependent on regulation. So we're working with the regulator there. It's not a technical hurdle, so to speak. It's more of getting approval and doing any delta work for that. So that will be as online as quickly as we can get that online. I think in terms of product parity with Angstrom. As far as we can see with our road map, yes, there's no reason why we would not be able to meet the product expectations of our competitors, at least from a customer point of view. So no reason with that. I think we will have a chance to differentiate differently than our competitors, too. So I'm looking forward to that. In terms of numbers, I think I want to pass on that and let Adam and the team in BetMGM address kind of the commercial impacts of those. I'm not in a position to kind of reflect their plans today. But from a product perspective, parity and even perhaps exceeding parity in some cases and some use cases is certainly on our road map.
Rob Wood: So, I'll touch on Australia and Germany. So Australia, we have -- as we said in November, we are cautious on the market outlook in 2024, both ourselves, Tabcorp flatter or calling the market down in 2024. Still significantly up when you compare to pre-COVID, but there is a sense of COVID reversion in Australia. Across 2023, we were slightly adverse to market. We were minus 6%. I think the market was more like minus 3%. So we have given up a little bit of share. We're probably 17% now, previously 18%, but after a long run of gaining share in Australia. The point of consumption tax mitigation measures that I referred to earlier, we'll annualize against that. So that will give us some benefit. But if the market is down, we do expect Australia to be down. The big news for -- or the main focus for the Australian team is actually New Zealand. So we continue to be super optimistic about what we can do in New Zealand. There's already best part of £200 million of revenue there that has no EBITDA against it. So that's -- once we drive EBITDA margins to normal levels over the years ahead, that's a great growth opportunity for us. The platform migration from the old sort of state-run Tab New Zealand business onto the Australian platform is due in Q2. So that will be a nice catalyst for us. So that's the real focus. So if you combine the two together, we have a strong outlook for 2024. But Australia, we would expect to be backwards. Germany, Germany is frightening to think is now only 3% of our revenue mix. For those following us for a while, it was about 15% just a few years ago. So it's a much smaller piece of the pie. There's still a tough regulatory environment as we know. There's no real update when we were asked about it in November. The one thing I would do is just echo Cathy's comments earlier that things like the development in app speed, the Bet Builder products, Germany is heavily football business, it has to be a benefit and bwin's still such a strong brand in the German market. So in the long run, we still think there's growth to come from Germany in the near term, I would expect the regulatory drag to still continue in 2023.
Joe Thomas: It's Joe Thomas from HSBC. I'd just like to again explore the £40 million, please. My understanding was that the £5, £5 slot limit was very much as expected. So I'm just trying to understand what the delta is and why it's different. And then I suppose just a related question to that. When it comes to your affordability, how do you think you compare to the wider market, perhaps thinking Tier 2 and 3 operators, but also against the Tier 1 operators that are out there in the U.K. So two sort of related questions.
Stella David: [indiscernible] and you do the £40 million because you've got that off at. So on affordability in the U.K., it's -- the journeys that we've gone on have been very complicated. We've started -- we put in measures over a long period of time, which means that I think we are more complex in terms of the journeys that we go through with our customers than some of our Tier 1 and Tier 2 and Tier 3 competitors. So there is an opportunity here for us to make sure that we're leveling the playing field in terms of the customer journeys that were going on while still retaining the same level of customer safety. So I think that's the truth there. In terms of slots, we welcome the change to the limits. I think it's a good thing, and we've been anticipating it. But it's not going to be implemented for some time. I think it goes live in September with a six- or eight-week, six-week period for those limits to change. So it's going to not have much material impact in 2024. But going forward into 2025, we think we will see some upside as there is churn in the market as people go from being these particularly Tier 2 and Tier 3 operators that have gone for very high limits. Yes.
Rob Wood: And that really is the answer to the first part of your question as well. When you think about the U.K. outlook, you must think about '24 separately from '25 and beyond. So there's £5 state cap on slots exactly, as you say, is expected. It was the outcome we were hoping for. If it comes in late in Q4 more likely to be near-term negative and hence, the call out, but longer term positive. And coupled with that opportunity or that flexibility to be able to invest more, we have great brands in the U.K. with Gala and Foxy, Ladbrokes, Coral, obviously. We would love to put some investment behind those and capitalize on the transformation that will happen in the industry. And so that flexibility is important to us.
Stella David: And I just had one other thing just about the U.K. and Satty, I think, mentioned it. Some of our apps have been a bit unloved in the U.K. So we believe there's some great opportunity for the customer experience, particularly on Ladbrokes and Coral, to get ourselves into a more competitive place as we start to do some of the things that Satty said. And again, that's about as being honest with ourselves. Our apps don't get rated as highly as we would like them to versus the competition. And so therefore, our aspiration is to get that back into a podium position.
Joe Thomas: And just one final one. I didn't get a chance to get into all the footnotes this morning, but I saw that you've written down the long-term growth rates implicit in the Australian business, which is behind the goodwill write-off. What are the long-term expectations now compared to where they were before?
Rob Wood: So no change, really, you should think about the impairment as the accounting catch-up of the progress in 2023, so the point of consumption tax increases, but also the market being minus 3%. So the impairment is a consequence of that. In terms of the longer-term outlook for Australia, we still see growth, particularly when you roll New Zealand into it. Short term, though, I'm reasonably bearish on 2024. I don't see growth in 2024.
Unidentified Analyst: Few questions from Joe Staff. You may have answered some of them, but I can't answer for him. So I'll run through them anyway. It's probably the first one is a bit more about clarity of phasing in the U.K. So we talk about the need for both increased investment, i.e., marketing, but further regulatory adjustments. Do we expect both of those to occur in first quarter and second quarter? Or should the investment come after we finish the regulatory adjustments? There's a bit of clarity around phasing. Sameer, on Brazil, I think it was on your chart. But when did FTDs and actives first begin to grow again in Brazil? And then BetMGM, probably for a couple of you. Satty, did you say that 2/3 of those in the stadium for the Super Bowl were using BetMGM app? And Caesars (NASDAQ:CZR) has often been quite strong in Las Vegas and Nevada, do we think as a result, BetMGM is likely to be a share leader in Nevada? And finally, I think you partially answered it, Rob. But in Australia and Netherlands, do we expect to grow in line with the markets in 2024?
Stella David: Right. Quite a few questions. We're trying to answer them between ourselves. So I think phasing in the U.K., I mean, we are very much dependent upon the regulatory changes when they actually happen. But we already know that the slots changes is towards Q3, Q4, and everything is back weighted into Q4 really in terms of investment if we were to take advantage of marketing investments that it would be towards Q4, yes. Brazil?
Sameer Deen: Yes. So just on Brazil, FTD growth started approximately midyear '23 shortly after we took over and started shifting the marketing mix and the active growth, we started seeing early this year.
Stella David: And then BetMGM, just on the Nevada.
Rob Wood: Yes. Look, it's currently Caesars and BetMGM from an online mobile perspective in the state. I think we've still got some work to do with single accounting the wallet to really drive our position and improve our position. But currently, it's as far as I can see, a two-horse race.
Stella David: And then Australia and Netherlands, Rob is going to take that one.
Rob Wood: So we've spoken about Australia. So just focus on Netherlands. The reality is when change like the proposed deposit limits comes in Q2, it's hard to know how you'll compare to others because you don't know what limits others already have. So our expectation is that we implemented fresh measures in the second half of the year, and that probably puts us at the more prudent end of the market. So logically, therefore, that's opportunity, but it's just too early to say. So at this stage, I would park that question until the interims.
Stella David: One more.
Roberta Ciaccia: It's Roberta Ciaccia from Investec. I have actually three questions, if I may. The first one for Stella. So you talked a lot about simplification of the business, et cetera. Can you tell us what is your view in terms of brand strategy? Do you think you will keep all your brands? You talked also about reinvesting behind Ladbrokes and Coral, et cetera. What do you think, especially in the U.K. Do you think you need all these brands? First question. Second question, probably more for Rob. We've talked about all the different key markets for you. We haven't really touched on Italy. What are your plans there? Do you believe that there will be more consolidation in the market? And importantly, when do you think you will have to pay the new license fees? Third question, still for you, dividend policy going forward?
Stella David: Great. Thank you for the questions. So I'll start off on the journey of simplification. So simplification is actually a very broad thing that we are looking at and acting upon within Entain. Because of the way that things have built up over time, we have lots of processes internally where there are too many handoffs, it takes a long time to get simple things done. So -- and again, these numbers may not be totally accurate, but they're certainly given to me as an example in the business. And it doesn't matter if it's accurate, it's actually direction of travel. When somebody says to me to do a flight of advertising, and what I mean the campaign, I mean something simple like putting together an e-mail communication. And I've shown the journey that it actually takes something like 25-man hours to do it when actually, it should take something like half an hour to do that kind of thing in terms of time. It doesn't matter the half hour is wrong and the 25 hours is wrong, it's the direction of travel. There are complexities when there are multiple handoffs in our organization to make decisions. And that means that people are slower. It takes a lot more time, and it takes the energy and the creativity out of things. So that's just one example, which is in the brand space. So I use that one just to paint a bit of color about how we can take complexity out of the system. And you can take complexity out of the system by making sure that objectives are aligned from day one. And one of the things that I hope we've demonstrated here today the alignment between product and tech and commercial is absolute critical component of releasing additional value. The fact that we've got Satty and Sameer set on the stage to get today is not by accident. It's because we see this as a key unlock, not only just within Entain, but as an unlock with Entain and BetMGM. We now have top to top commercial and product and tech meetings on a regular basis with counterparts in BetMGM. So Sameer comes along to those meetings because we've got to make sure we align and we actually have a flow through. So that's just sort of try to paint a picture of why we can improve our operational simplicity and get significant values from that. If we then talk about brand strategy, yes, we do have a lot of brands around the world. Quite a lot of them are very localized, and it would be very foolish for me to suggest that we would change that narrative because a lot of what we do, as we increasingly know is about local enjoyment about how the brands personify themselves, diving up the elements that are important to our customers in different places around the world. I think the question about Ladbrokes and Coral specifically, I mean, I think one could do a desktop analysis and say, wouldn't it be more efficient to have one brand? That's a very big ask. We would have to get very much under the skin of it to even think going down that route. So for today, certainly, under an interim CEO, I think the right thing to do is try and optimize the way that we are delivering both Ladbrokes and Coral. As more identified separate entities, I would say the best thing to do is being more clear about the differentiation that we have of those brands. But I think the question is a really good one, but I think it's one that takes quite a lot of long-term thoughts in terms of actually going forward. So look, that was my question. Your second question?
Rob Wood: Yes, I'll do Italy and dividend policy. So I'll start with the easy bits, when do we expect online licensing to happen. Our planning assumption is Q4. But you might know more there, Roberta, but Q4 this year for online. In terms of our plans for that market, look, our absolute focus is on our own business and in particular, Eurobet, although we will benefit from the Bet Builder developments that we were speaking about earlier. So Eurobet is the focus. In Italy, it's a fabulous market. As you know, the growth potential is just as good as it was a few years back. We're number three or number four, depending on how you measure it. So good strong position in that market, great retail estate. Retail is taking share. We have ceded some share online to the market leader as is the and the other three straightforward. But as we look forward in aggregate, we've got a strong position there in a growing market. And I think I'm right in saying that we've doubled our EBITDA in Italy over the space of just three or four years. So, continue to invest and support that market. In terms of dividend policy, so we've announced our progressive dividend policy. As always, the Board will keep that under review. But just recently, the capital allocation committee discussed it, and we're supportive of continuing with it. So that's where it stands.
Unidentified Company Representative: Back to me before I ask the question. [Operator Instructions] And that instead, I have got one from Monique Pollard and she asks Rob, could you please give us some more color on 2024 like-for-like growth aspirations for online split by U.K. International and CEE. Well, U.K. product improvements for 2024, but build a cash-out improvements, et cetera, just be playing catch up to the market leaders or pushing ahead of peers. I think it's probably for you, Satty and Sameer. On the U.S., how quickly should we see wind margin expansion and market share improvements come through? Could it be as early as Q1, Q2, for example?
Stella David: Okay. So I think you're taking the first question there. Or do you want me to take one first. You're okay?
Rob Wood: I can dive in. It is early in the year. And I try and refrain from setting too many expectations early in the year. But of those three segmentations for online, I would expect CEE growth, U.K. most likely decline and international more mix.
Satty Bhens: So on the U.K. piece on Bet builder and cash out. I think when we talk to our customers, what we're talking about is meeting their expectations. So it's really getting to a parity state before the football season. But what we're really trying to do is own the entire experience going forward. And so I expect beyond the start of the football season, we'll be able to push on and be differentiated in the U.K. We are also innovating in the U.K., but I'm not going to share what that is today. But we will be in a position later this year to actually do things that we've never done or haven't done in recent years to actually to give something unique from our brands.
Stella David: And I think the last question was on margin expansion in the U.S. I don't think we can really comment too much on that, but I think we can say that we've got some really good stuff with Angstrom, yes.
Unidentified Company Representative: Okay. Thank you. Another question come through from Andrew Tom. This is about leverage. If you add in the DPA, then I think 3.6x was the number. How do we do lever is organic growth enough? Or do we have to do? Or do we need to do something else?
Rob Wood: Yes, I can take that. So firstly, to confirm 3.6x is the number on a pro forma basis at year-end, inclusive of the DPA. The primary and best way to delever is EBITDA growth. And that's, of course, the absolute focus of the management team. And you've heard from Satty and Sameer, that's what we're all working around the clock to do, is deliver EBITDA growth. Clearly, over time, things like the DPA will roll off. Romer will help CapEx. Maybe interest will come down, interest rates at some point. SDIs will come down. This year, we've got quite a big outlay from Project Romer onetime costs, for example. But really, EBITDA growth is the primary way to delever.
Unidentified Company Representative: Thank you. Another one from Ivor Jones. I think you tried to head this off in the past with your early comments, Stella. But when will the Capital Allocation Committee come to conclusion about possible disposals? And how and when will that be communicated?
Stella David: Well, I thought I did had it off in the past, but I'll try again. The Capital Allocation Committee has only just really got going. And it is -- there is nothing to report because there is no output at this stage. So that hasn't changed since 20 minutes ago.
Unidentified Company Representative: I have had a follow-up on similar lines, but slight tangent to that. But I will ask it because it's from...
Stella David: So it hasn't changed since 21 minutes ago.
Unidentified Company Representative: From Nick Kissack. It was more about the objective. What's the objective of maximizing shareholder value? What do we mean by that?
Stella David: Well, I think you've got to look at the challenge we have. Again, elephants in the room, our share price hasn't been very good recently. And so if you're looking through the lens of maximizing shareholder value, there have been some clear missteps. And isn't it a good idea to look through the lens of what the opportunities are to really get that back on track. And so it is one mechanism that I think is a very valid one to look through. And so the Capital Allocation Committee can say it. The capital allocation committee is a subcommittee of the Board. It's a very valid thing to have. But at the same time, in parallel, as a business focus, the management team are really focusing in on getting back to organic growth because that is the biggest way of getting shareholder -- maximizing shareholder returns.
Unidentified Company Representative: I think we've answered that. A slight one from -- another one from Ed Young. But hopefully, Ed, we've answered it now. But his second question is in the context of being a betting and gaming business, which we're pleased to be rather than something else, what are the costs that are booked -- were booked in new ops that are worth keeping and absorbing into online rather than cut?
Rob Wood: Shall I say that?
Stella David: Yes.
Rob Wood: So the main costs that have been cut for '24 onwards relative to 2023 and prior was investment behind Unicorn as a B2C brand. So that's where savings have been made, and that was communicated as part of the Romer savings as well. The -- what's left, a couple of components. One is the esports wagering team has continued. Why? We know that some operators in our market around the world, for them, wagering on eSports is a big part of their product offering, sometimes the number four product, sometimes the number five products. Actually, for SDS in Poland, it's the number four product. For us as a group, I think it's number 15, something like that. So we think it's relatively small investments in '18 that will help us have the most extensive esports offering on the market in terms of breadth of product, breadth of betting opportunities. And therefore, if you like wagering on esports, then come to our brands because we have the most in-depth offering and then you get cross-sell benefits as well. We see quite high cross-sell between sports betting and esports betting, particularly popular in sort of Europe and Lat Am parts of the world. So that's the main cost base that we're retaining. There are some other investments in technology, innovation that went into that segment that we want to keep, and that transfers across to online.
Unidentified Company Representative: Thank you. One from Changing Tack, one from Jack Man. Underlying finance costs increased quite significantly in 2023, as I'm sure they did for many other companies. What does '24 look like?
Rob Wood: So as I think about the increase in costs, the majority of it reflects interest rates rises. That was about 60% of the increase. The balance reflected the additional debt, in particular, following the SuperSport acquisition at the back end of '22, meaning that, that was already in flights for the whole of 2023. So I would expect some incremental interest cost. But it feels like the interest rate environment is more stable. And therefore, that big uplift that we saw in '23, I don't expect to be repeated.
Simon Davies: Simon Davies from Deutsche Bank (ETR:DBKGn). Three quick ones from me, please. Can you update us on rollout of ARC into your international markets? How far has that got? And are you refining the process so that you don't have the same levels of drag as you've seen in the U.K. Secondly, on Brazil, you referred to some operational mishaps. I think it was -- or missteps. Can you give a bit of granularity around what those were and to what degree they have all been addressed? And finally, progress on bringing in a new CEO or announcing a new CEO. How long can we expect that to take?
Stella David: Should I take offense to that question? Look, so first of all, ARC is in many of our markets, it is part of our toolkit for safer gambling. It is not the only one. It is an important part of the journey. But we are using a suite of other things in different markets to make sure that the appropriate measures are being used. So that's the way I think I would approach that question. The CEO process, we have a very high-quality recruitment consultant that is retained working on this. It has been obviously a priority for the Board. The key thing is to get the right person to do the job in the long term. So hopefully, the benefit -- one of the benefits that I may bring to this situation is that we give the breathing space to recruit the right person, whether there needs to be any sort of time for notice periods or anything like that, we can handle that. The absolute critical thing is it's the right person with the right experiences that comes to do this job. And the process has very much taken advantage of the opportunity to look into spaces where we can get people to the interview process who've got relevant experience, not just CEO experience, but experience that can easily translate into a business like Entain so that whenever that change takes place, we don't drop the ball. So that's where we're going on that. And then I think, Sameer, do you want to talk to the Brazil question, yes?
Sameer Deen: Yes. So, on Brazil, I think one of the biggest mishaps was missing the Pix opportunity. So Pix is ubiquitous payments and fixed Instant is just a critical, critical customer feature people want to come in and out, deposit money, withdraw money, play in play. And so that had a disproportionate impact on our business. And that was one of the first things that we started to focus on, and we saw almost immediate sort of impact from giving -- by providing that key customer feature. I think from a marketing perspective, the prior team leaned in too heavily into paid television. So in Brazil, you've got 200 million plus population, but pay TV is a relatively small upscale market. And so turning away from Open TV, where you've got broad football rights on Globo and elsewhere, I think it was just a strategic misstep. And so we're trying to address that by increasing our exposure to open air TV. Obviously, those deals are -- there's -- as I said, the market is competitive and a lot of people want that advertising space. But we've got long-standing relationships. We've got a trusted brand. We have good relationships with a lot of the media houses. We've got a new agency that is helping us negotiate some of those deals. And then finally, we're really addressing the product suite. And so becoming a lot more localized serial markets, [indiscernible] and so really focused on product and localization and better marketing execution. And those are the three things that I think that you've got to do in all of our markets that are underperforming, and that's the approach that we're taking there in the U.K., and we'll roll that out elsewhere as we need to.
Rob Wood: And maybe just add one last thing, which was we were running Brazil from Europe, whereas now or firstly, Sameer took over with extensive LatAm experience, and now we have an operational team on the ground in Brazil. And so you're less likely to miss these major developments that are happening on the ground and you're much more agile.
Stella David: Okay. Unless there's any more questions, I think I'm going to wrap this up and say thank you very much to everybody for coming. If there's any sort of follow-up questions that we've not answered, clearly, speak to the IR team, and we can hopefully answer those questions. I just hope that you realize that we have really focused in on getting the inputs right for this business, really focusing on what we've done right. But very importantly, we've lasered in on where we haven't got it right. And if you believe the inputs that are good generate good outputs, these will return and time back to the growth that we all believe it deserves. So, thank you so much for being here.
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