We’ve got some half price cracked ice: The numbers coming out of the UK this week were, on the face of it, surprisingly strong. Entain’s UK online net gaming revenue rose 13% in H1; Evoke increased UK and Ireland online revenue by 3.5%; and Rank’s UK digital NGR grew 8% across the year before accelerating to 12% in Q4.

• Retail trading was also healthier than the political rhetoric surrounding the sector might suggest.
• Entain produced 3% like-for-like retail growth, Evoke achieved 4% and Rank reported 5% growth at Grosvenor Casinos and 4% at Mecca Bingo.

And miles and miles of carpet tiles: The three companies are very different entities in key respects, but their results point to the same underlying conclusion: regulated UK gambling demand remains resilient. But profitability is a different matter..

• The increase in RGD from 21% to 40% in April has initiated what Rank CEO Richard Harris called a “seismic shift” in the digital market.
• It will be followed next April by the scheduled increase in sports-betting duty, while land-based operators must also contend with the threat of a further rise in Machine Gaming Duty.

TVs, deep freeze: The resulting pressure is already visible. Entain’s UK online EBITDA declined 8% to £148m despite its double-digit revenue growth. The new remote gaming rate reduced H1 EBITDA by £56m, even though it applied for only one quarter.

• Rank expects an additional £35m hit from RGD in FY27. It believes cost and marketing measures can absorb approximately £20m, leaving an anticipated £15m reduction in digital profitability. As Harris put it: “Digital profitability will inevitably reset in the year ahead.”
• Evoke said its gaming duties rose by £46m across the group, with approximately £30m attributed to the UK changes.
• The duty increase was also the trigger for the strategic review that culminated in the recommended acquisition by Bally’s Intralot.

And David Bowie LPs: Entain is perhaps being the most aggressive in its response in the hope of grabbing market share during the disruption. Its redesigned Ladbrokes app, improved Bet Builder, ‘coin economy’ rewards and AI-supported bonus optimization helped UK online gaming NGR rise 13% and sportsbook NGR 11%.

• On the call, CFO Mike Snape described the performance as “yet another knockout,” while CCO Andy Hicks said he remained “highly confident in the prospects for the UK business.”
• Yet the company was cautious about H2 because the response of rivals to the new tax regime remains uncertain.

Ball games, gold chains, what’s-names: Evoke, in the throes of what might be termed a life-saving takeover, has understandably placed greater emphasis on profitability. Its William Hill business delivered double-digit online growth, supported by Vegas, product improvements and more efficient bonusing.

• By contrast, revenue at 888 continued to decline as Evoke deliberately withdrew from lower-return volume.
• That selectivity helped UK and Ireland online adj. EBITDA rise 28% to £77m.
• Rank has similarly cut above-the-line advertising, supplier costs and headcount while retaining customer incentives and increasing targeted performance marketing.
• Its recent growth has come primarily from new digital customers, rather than the migration of Grosvenor or Mecca venue customers.

And at a push: But it was retail gaming and betting which was in the political spotlight this week. Burnham’s government this week promised to give councils greater power to reject new betting shops and adult gaming centres, arguing that vape shops, betting shops and “rogue operators” had displaced the businesses and community spaces people wanted.

• The government intends to remove the Gambling Act’s aim to permit principle and require planning permission for new AGCs.
• Yet the number of betting shops is contracting rather than proliferating with the total number of UK betting shops falling from almost 9,000 in 2015 to fewer than 5,900.
• Evoke closed around 270 William Hill shops across Q425 and Q1 this year, reducing the estate from 1,302 to 1,024 locations.
• In bingo, Rank closed nine uneconomic Mecca clubs, leaving 41.

Some Trevor Francis track suits: Though not directly impacted by the RGD rise, the closures are related. Evoke’s retail revenue declined 2.6% because of the smaller estate, but rose 4% like for like, while adj. EBITDA increased 5% to £31.2m.

• Entain has now outperformed the retail market for eight consecutive quarters, aided by proprietary BetStation terminals that generate more than half of its retail sports NGR.
• Rank’s remaining Mecca estate more than doubled underlying operating profit to £8.9m. At Grosvenor, 850 additional gaming machines helped machine NGR rise 11%, supporting an 11% increase in operating profit to £35.5m.

From a mush in Shepherd’s Bush: Yet the politics of retail gaming are arguably disconnected from the reality. Removing aim to permit may further restrict new openings, but it cannot by itself regenerate high streets or reverse the economic pressures causing shops and clubs to close.

• Nor will the change happen immediately. The principle is embedded in section 153 of the Gambling Act and must be replaced with a new licensing test, requiring consultation, legislation and parliamentary time.

No income tax, no VAT: Arguably, operators have coped with the first stage of the tax shock better than might have been expected. Revenue remains positive, product investment is producing share gains and extensive mitigation programs are in place

• But those are finite measures and should be set against what appears to be an infinite appetite to bash the sector. Loss-making shops can only be closed once and marketing can only be cut so far.
• The rise in sports-betting duty will test that resilience again. A further rise in MGD would potentially be disastrous: Harris warned that any MGD increase would mean “fewer venues, lower employment, and reduced tax receipts within 12 months.”

No money back, and no guarantee: The UK market is already far down the path towards fewer operators, fewer venues, lower promotional intensity and greater advantages for businesses with scale, proprietary technology and recognisable brands.

• This week showed the surviving operators can still grow. But it did not demonstrate that the government can continue extracting more without eventually shrinking the regulated market it is taxing.

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