Directors take punt on Entain

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Gambling group Entain may be attempting to put on a gallop when it comes to grabbing market share, but in profitability terms it has suffered some serious handicaps.

Although the owner of the Labrokes, Coral and BetMGM brands reported double-digit increases in revenue and underlying pre-tax profits last year, it lost nearly £880mn on a reported basis as it paid £585mn to settle an HM Revenue & Customs’ investigation into alleged bribery at a “legacy facing Turkish business” sold in 2017. It also wrote off £289mn against the carrying value of other underperforming businesses.

Entain’s share price is down 29 per cent this year at just over 700p, continuing a slide from its peak of 2,500p in September 2021. 

The company has attracted attention from an activist — New York-based hedge fund Eminence Capital, which went public with its opposition to Entain’s decision to fund the £750mn purchase of Polish company STS by issuing shares last year. The issuance increased the company’s share count by 8 per cent. It felt the deal was value destructive and accused management of “empire building”.

Since then, there have (perhaps unsurprisingly) been changes at the top of Entain, with ex-chief executive Jette Nygaard-Andersen stepping down in December and chair Barry Gibson announcing in April that he will retire in September. Senior independent director Stella David has stepped in as interim chief executive until a permanent replacement is found and she will become chair once Gibson steps back.

Gibson and David were buying shares last week, with the latter’s purchase the more significant of the two at almost £1mn. Eminence Capital, whose founder Ricky Sandler gained a board seat in January, also spent just over £50mn topping up its stake. It is now Entain’s third-biggest shareholder, with 5.8 per cent of the shares, according to FactSet.

Westons sell £262mn of ABF shares

The upward momentum in Associated British Foods shares over the past year meant that the 4 per cent hit to shares caused by the recent sale of a 1.4 per cent stake by its majority shareholders has not caused any significant damage. 

A subsidiary of Wittington Investments, a company owned by the family of chief executive George Weston and non-executive Emma Adamo, sold almost 10.3mn shares, netting around £262mn.

The shares were sold via a placing with institutional investors. The move reduced the family’s stake to 56.1 per cent but once the company completes a £500mn buyback announced last November, it is expected to rise back up to 56.4 per cent, where it stood before the buyback was announced.

ABF, which owns the Primark discount clothing chain, as well as food brands like Kingsmill bread and Twinings tea, recently beat analysts’ expectations with a 39 per cent increase in first-half operating profit of £951mn. What’s more, with Primark still adding new stores and profitability at its grocery business picking up, the company upped its interim dividend by 46 per cent to 20.7p and said profitability and cash generation prospects for the full year to September 14 were also running hotter than initially forecast. 

Shore Capital analyst Darren Shirley last week upgraded his earnings per share forecast for ABF by 10 per cent, stating that there was “a healthy growth trajectory re-emerging” at the group.

Little wonder that the Westons are keen to maintain control of ABF, despite selling off other UK assets in recent years. 

Wittington Investments pledged not to sell any more shares during the current financial year, adding that it is “committed to maintaining a majority stake” in the company.