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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good morning, and thank you for joining us today for our full year results presentation. I'll start with a brief overview, touching on the headlines for the year. Rob will take you through the numbers and guidance, and then back to me for an update on our progress and demonstrating how we are delivering our growth and sustainability strategy. And finally, Rob and I will take any questions you have. But before we get into the detail, I am delighted to be able to welcome our Chairman, Barry Gibson with a few words on our progress as Entain.
Good morning, Barry, over to you.
Thank you, Jette. Good morning, everybody. As you'll hear from Jette and Rob, it's been another strong year for our business and one in which we've continued to make meaningful progress towards our ambition of being the world leader in sports betting, gaming and interactive entertainment. It's 3 years now since I had the honor of being appointed Chairman of Entain. And in that time, it's been an intense period of transformation.
And I wanted to take a moment to reflect on the fact that we're a discernibly different company today to the one we were just a few years ago. Every aspect of our business model, strategy and culture has been renewed, analyzed, stress tested and where necessary, improved. To pick out just some of the changes we've made, the Board and the leadership teams have been overhauled. We have an incredible talent, bringing fresh ideas and new perspectives to the opportunities we have in front of us. 100% of our revenue is now from markets around the world that are either domestically regulated or which we have a clear path to regulation.
And we're proud to be setting the standard for the industry as the only global operator focused solely on these markets. We've developed an innovative and industry-leading technology ARC to keep our customers safe. We've overhauled our governance processes across the organization to ensure the highest standards. We've worked constructively and proactively with regulators around the world to help create an environment that balances a fair and an open recreational market with the need to provide protection for the small minority of customers who may run into problems. And finally but by no means the least, we've launched the Entain Foundation, which with a £100 million commitment over 5 years focuses on making positive contributions to the communities in which we operate around the world.
A huge amount has been achieved but it was clear that there's still much to do. There remain issues relating to our legacy business that need to be resolved that do not reflect the type of business we are today. But that makes us even more determined to continue to innovate and progress all the while staying true to our philosophy that only a truly responsible company can be truly sustainable. Of course, none of our success would be possible without the extraordinary dedication and expertise of Entain's 28,000 colleagues around the world. And I'd like to take a moment here on behalf of the Board to thank them for all of their hard work and dedication.
Looking ahead, it's clear that the sector we operate in will continue to evolve and to grow at pace. The worlds of media, gaming, technology and entertainment are converging and the experiences that we at Entain are able to give our customers are at the very center of this exciting inflection point. This position we occupy combined with the talent, capabilities and commitment we see right across the business means we're able to pursue ambitiously the $170 billion addressable market that we see before us. But more than that, it gives us the fuel to further evolve our business and deliver on our ambition to be the global leader in betting, gaming and interactive entertainment. The capabilities that we have in our Entain platform stem from our significant and growing scale means that we can outperform our markets.
We have a rigorous process to assess any M&A opportunity and we can be rightly proud of our track record of value creation here. We have an unwavering commitment to responsibility, which is why sustainability is 1 of our 2 core strategic pillars. As I've already mentioned, 2022 has been a year of significant progress that has enabled us to grow our revenues and our EBITDA. Our profits came in just shy of £1 billion and we've been able to invest our capital astutely to drive growth whilst also rewarding shareholders with dividends. We believe we present a compelling investment opportunity of a growth business operating responsibly in a growing market, delivering good financial returns for our stakeholders.
It's been quite the journey so far, but we are as confident as ever in our future prospects as we look to the road ahead. And with that, I'll hand you back to Jette.
I'm very pleased with our performance in 2022, delivering financially, strategically and sustainably. Group NGR was up 10% in constant currency and that rises to 15%, including our 50% share of BetMGM. While online NGR overall was down 2% across the year, I'm particularly pleased with the underlying strength of our performance. If we exclude the significant regulatory movements in the U.K. and Netherlands that we have absorbed, our online NGR was up approximately 3%, and that is whilst facing into the strong COVID comparator.
And what I think fully reflects the underlying strength of our business and delivery against our strategy is our online NGR 3-year compound growth rates of 12%. That 3-year CAGR increases to 18% when we include our share of BetMGM. Importantly, our growth is profitable. EBITDA was towards the top end of raised guidance for the year, up 13%. The growth we deliver is not just profitable, but both high quality and sustainable too.
Entain is the most diversified and regulated operator by geography and products. Our continuing customer focus and broadening recreational audience is evidenced with Q4 delivering another record quarter for online actives, with a 7% increase over the year. The five acquisitions we announced during the year saw us expand our footprint across Croatia, Latvia, Poland and Canada as well as secure a significant position in the Netherlands, all adding further to our diversification and scale. And with our acquisition of SuperSport in Croatia, we also established Entain CEE as a platform for further expansion across the region. I'll come back a little later to talk more about why scale and its advantages are important to our business model and strategy.
We now operate in over 40 markets, all of which are regulated or regulating. This not only sets a new standard for global operators, but underpins and differentiates the sustainability of our business. Over in the U.S., BetMGM continues to go from strength to strength. We are firmly established as a top 3 operator with access to around 48% of U.S. adult population. 2022 revenues were ahead of expectations, and our progress remains on track to deliver positive EBITDA in the U.S. in the second half of this year.
So to round off before I hand it over to Rob, 2022 has been a successful year as we continue to make good progress against our strategic ambitions. We have strong underlying momentum with high-quality revenues and profits, underpinned by diverse and sustainable growth. Our Entain platform continues to power outperformance as we execute in delivering on the significant growth opportunities ahead. Over to you, Rob.
Thanks, Jette, and good morning, everyone. As always, I'll take you through the financial highlights of our results announced this morning. Given we've been busy on M&A, I'll also touch on our performance and track record of value creation through M&A before wrapping up with some guidance commentary for 2023. As always, the more detailed financials are included in the appendix, so you can review those at your leisure. So kicking off with 2022 financials.
We delivered another year of strong performance with NGR up 10% to over £4.3 billion or up 15% to almost £5 billion if we include our share of BetMGM, both on a constant currency basis. Much of the detail on revenue drivers was covered in our fourth quarter trading update in early February. EBITDA hits a new record and was at the top end of our upgraded range at £993 million, which is up 13% year-on-year. Excluding our investments in BetMGM, adjusted EPS was 93.2p, which was up 15% versus last year. Before acquisitions and investment in BetMGM, we generated almost £0.5 billion of free cash flow.
Our balance sheet remains strong and flexible, supporting our active M&A ambitions. And as you saw, we announced 5 transactions during the year. We ended the year with leverage at 2.8x or 2.6x on a pro forma basis, which was a little better than expected because our acquisition of BetCity actually completed in early 2023 rather than before the year-end. And to the final hexagon on this slide, dividends. We are confirming today a second interim dividend bringing the total paid for this financial year to £100 million or 17p per share, in line with our new policy outlined at our interims last August.
Turning to our EBITDA bridge, and we have set out the key drivers of our 13% growth for the year. Year-on-year movement in online reflects the lapping of strong COVID comparators as well as absorbing various regulatory changes. Retail continued its rebound from COVID closures with a healthy underlying performance, particularly in the U.K. and Italy, where volumes are ahead of pre-COVID levels on a like-for-like basis. For our new opportunities division, investment spend on innovation was in line with the guided £25 million, whereas launch spend for Unikrn was less than we'd originally expected.
As I outlined on our Q4 call, this reflects the later launch of Unikrn during the year with costs shifting into FY '23. Corporate costs were £10 million higher and reflecting the growing scale of our business as well as ongoing RG investment. So coming back to online. As usual, this slide sets out the key moving parts of our online performance during 2022 and how we think about these metrics for the current year. Starting with NGR, which was 2% lower in constant currency versus last year.
As you know, the prior year was a tough comparator particularly in H1 because it included an online boost from COVID, while retail was closed. But the most significant headwind we absorbed was from major regulatory changes, in particular, in the Netherlands and U.K. In the Netherlands, the regulator required that we close our operations in October 2021, whilst we wait for new licensing. And in the U.K., the ongoing implementation of strict affordability measures impacted NGR by around 10% in the year. In total, we estimate that we absorbed a 5-percentage point drag on NGR during 2022 as a result of these 2 changes.
While we continue to face headwinds in 2023, we expect total online NGR growth of low to mid-single digits on a pro forma basis. Our contribution margin for 2022 came in at just over 41%. This was at the top end of our guidance, albeit down 1.1 percentage points versus the prior year reflecting again the COVID comparator as well as geographic mix and our increased focus on regulated markets. As you know, we manage this business to contribution margin. And in October with the Q3 update, I talked at length about the various levers the business has in order to maintain our contribution margin of approximately 40%.
That expectation of 40% is maintained for 2023. However, we remain mindful of some downward pressure to that given our increasing blended tax rate from regulated markets. The most significant pressure comes from Australia, where point of consumption tax rates are increasing. However, we are confident of mitigating part of the impact through continued market share gains as delivered in 2022. Inflation in operating costs in 2022 was in line with guidance and reflects the increasing scale of our investment in our business.
The watch out here is for 2023. We maintained the mid- to high single-digit inflation guidance for OpEx on a pro forma basis. However, your models will, of course, need to reflect the OpEx for acquisitions. Therefore, on an absolute basis, 2023 OpEx will see an increase of low-teens percent year-on-year. And finally, EBITDA margin of 27.1% for 2022 was just inside our guided range despite the regulatory impacts I mentioned earlier.
For 2023, we expect EBITDA margin of approximately 26%, down on 2022 due to lower contribution margin, as I mentioned earlier, whilst 26% is still ahead of pre-COVID levels, it would have been approximately 29% without our strategy to focus only on regulated markets. So as our regulated revenue mix nears 100%, we have now absorbed most of the full impact of becoming fully regulated, which puts us in a strong position versus other operators. Therefore, over time, with increasing benefits of scale in the Entain platform, we remain confident that our long-term EBITDA margin should trend towards 30%. The next slide now outlines cash flow movements during 2022. Underlying free cash flow remains strong, coming in at £490 million for 2022.
This is slightly lower year-on-year due to a swing in working capital to an outflow this year which is only due to timings as Entain remains broadly a working capital-neutral business. As always, a more detailed cash flow is in the appendix. Net debt reflects our busy M&A activity during the year and our $225 million investment into BetMGM, which was the same amount as 2021. As I mentioned, we closed the year with leverage at 2.8x or 2.6x on a pro forma basis, a little under guidance as BetCity completed just after the year-end. Our growth and strong cash generation means that we continue to delever pre-acquisitions and our liquidity remains strong with over £1.1 billion of available cash once you include our undrawn RCF.
Slide 9 is one you've seen before, reiterating our capital allocation priorities. Our business delivers profitable growth with strong cash generation which, combined with our balance sheet strength, means we can continue to support our strategic agenda, investing to grow both organically and through M&A, whilst also delivering returns for our shareholders. On to M&A. And given it was another busy year in 2022, I wanted to give you a reminder of why the transactions we deliver are so compelling from both a financial and strategic point of view. M&A remains key to our growth strategy.
The right-hand side shows how each of our notable transactions in the last few years are aligned to our strategy of deepening our presence in existing markets, entering new markets and expanding into adjacent markets and audiences. And the left-hand side of this slide shows that the financial rationale is just as compelling, on average, more than doubling the value of our acquisitions in just 3 years. Value creation comes from both being highly disciplined on price and also from supercharging EBITDA growth through synergies. Synergies come from both cost efficiencies and, more importantly, from revenue opportunities as we leverage the Entain platform, often expanding content and product offerings overnight. We have an excellent track record of value creation through M&A.
And as such, it remains core to our growth strategy. My last slide is our usual one on guidance, which gives you a snapshot of the key moving parts for the year ahead. Online is as discussed earlier. For retail, we historically expect broadly flat EBITDA progression. However, in 2023, we faced some exceptional inflationary cost headwinds, in particular from wages and energy in the U.K., costing an incremental £30 million versus 2022.
The various cash flow items will be in line with expectations, and we now expect 2023 effective tax rate to be around 23%. Whilst on tax, just a point to note on BEPS, which is the international tax reform project that is expected to introduce a minimum global corporate tax rate of 15% from January 2024. Now as Entain Plc is a U.K. tax resident and our online business is headquartered in Gibraltar, which recently increased its corporation tax rate to 12.5%. We therefore only expect a small impact on our effective tax rate following implementation of BEPS next year.
With that, I'll hand back to Jette.
Thank you, Rob. As Barry mentioned, we have a compelling investment case, and I will outline its key elements over the next few minutes. In summary, we operate in an exciting growing and expanding markets. By leveraging our scale and capabilities, we drive outperformance, not just from our existing operations, but from the businesses we acquire. And because of our approach to responsibility and sustainability, our growth has more resilience, enabling us to deliver superior financial returns.
So we can deliver much more than the sum of the parts as we look to triple the size of our business. It all, of course, starts with our strategy. While we've shown you this many times, it's worth noting that given the significant progress we have made, our sustainability agenda has moved forward. By putting our sustainability strategy as 1 of 2 key pillars, it means that our growth is more sustainable and resilient. Entain is a leading operator in a market that is not only regulated but also growing at pace driven by powerful market dynamics.
It is these compelling and attractive global trends, which underpin our addressable market being worth around USD 170 billion over the long term. The key dynamics driving this significant market growth are regulation, online penetration, innovation and customers. Starting with regulation. There is an increasing number of countries and territories that are looking at, in the process of or have recently regulated betting and gaming in some form. Today, Entain operate in over 40 territories, and there are a number of regulated and active markets where we are not currently active.
The fast-growing U.S. market is a fantastic example of increasing and expanding regulation, opening up new markets. We have a leadership position in the U.S., a market we estimate, including Canada, is worth around USD 10 billion today, and we see that growing to over USD 37 billion. Globally, the momentum of the off-line online shift continues. Excluding the U.K., the online penetration of the regulated markets where we operate is less than 30%.
This is a significant opportunity for us given the strength of our brands and online capabilities. As a technology-led entertainment company, we can explore innovation and changing consumer behaviors to open up new markets, develop new products as well as new verticals which enables even broader engagements with customers as well as future growth opportunities. We've already started to explore one of these adjacent markets with skill-based wagering for esports. Our focus on regulated markets have broadening customer base and increasingly diverse revenue mix sees us on average, growing our online NGR by double-digit percent each year, driven by high single-digit organic growth plus M&A. As I mentioned earlier, online revenues, excluding BetMGM, delivered a 12% CAGR over the last 3 years, and we've never had more active customers engaging with us, up 7% during 2022.
Our strategy is clearly working, and we are confident that we can continue to grow. However, there is more that we can do to improve our business and maximize the opportunities that our scale and advantages can deliver. The Entain platform is what enables our scale advantages, providing a powerful combination to drive continued outperformance, maximize efficiencies and opportunities and deliver superior growth. Our platform includes our best-in-class product and content provided through award-winning in-house studios and close relationships with leading games providers. We have highly advanced analytics, leveraging our customer data.
We deliver industry-leading standards of player protection underpinned by our broad regulatory expertise. Our marketing excellence is built on our MarTech capabilities that enables us to intelligently deploy our brands and products. Given the range of sports across our geographies, our sportsbook pricing and risk management expertise, operating at significant scale across multiple geographies and sports. And of course, we have amazing talent across our business. These elements empower our brands, particularly post acquisition, to grow faster than our markets as they benefit from broader and deeper product ranges, economic efficiencies and more intelligent access to customers.
For example, Enlabs' EBITDA margins improved by 5 percentage points by leveraging the Entain platform capabilities and efficiencies.
The majority of our NGR currently sits on our core technology platform, making it the largest B2C platform globally. Our ambition over time is to migrate more of our businesses onto our core platform to drive further scale benefits. Therefore, we are evolving our technology platform and operating model supporting a broadening product offer whilst maintaining a close relationship with our customers at a local level. While the Entain platform today enables us to turn the flywheel faster, generating superior growth and returns in each of our markets, we see further efficiencies, growth synergies and benefits ahead. Let me give you some examples of how our platform capabilities are delivering a better experience for our customers.
We put the customer at the center, the increasing volume, variety and quality of our data enables intelligent decision-making. Leveraging our data insights create a better product offering, for example, by tailoring our approach to product launches, we deploy new games and products specifically where we know they will resonate with customers, be it at a global, regionally or brand level. Therefore, customers enjoy engaging and relevant new products, whilst we achieve greater efficiency and higher returns. Not only does that inform our in-house product development, but it also provides an attractive proposition for leading games manufacturers for exclusive partnerships. In 2022, using this approach, our targeted game launches delivered almost 50% more GGR than benchmark averages.
This intelligent decision-making is applied across our global brands, including BetMGM. As the chart on the right-hand side shows the significant work we've done on root cause analysis has improved the customer experience. Our new user interface has simplified customer journeys and reduced friction. We have reduced reasons for customers to contact us whilst also making it easier for customers to self-solve. For example, our customer self-service videos have seen 2/3 small interactions, and we doubled the number of customers self-solving thereby not needing to speak with the customer service agent.
Our record level of active customers reflect our growing appeal to a broader customer base. Our teams in Australia continue to differentiate our brands by creating engaging media content. We have evolved our horseracing video series with latest documentary Miles In Front. This unique and differentiated content, which surrounds our offer is one of the many reasons why Ladbrokes and Neds continue to engage new and existing customers and gain market share.
Our new and highly successful Coral Racing Club in the U.K. was only launched in November and already has over 70,000 members. We know our customers love racing. So this lets them get closer to the action, allowing them to experience being a racehorse owner for the day. One of the club's horses won second place at Doncaster in December, seeing the members that day share the £13,000 price pot.
Our core racing club will feature in our marketing at Cheltenham next week. So for those of you going, keep an eye out for it. Likewise, our Ladbrokes free-to-play fan zone has been very popular with over 90% of customers enrolled supporting their favorite team and unlocking personal benefits such as boosted markets and free 5-A-Side bets. These players are highly engaged with 50% active every month. Our soft launch of Unikrn is a clear demonstration that our ambitions are beyond our traditional audiences.
We've built the offer from the perspective of esports fans, providing them with a new experience specifically designed for gamers. Across our offer, we continue to innovate through both our award-winning in-house studios as well as our close partnerships with third-party providers, providing our customers with the latest titles and the widest range of games. We continue to test, learn, experiment with new formats, including multiplayer free-to-play and live game shows as well as partnering with leading household entertainment names. The clearest illustration of the Entain platform's capabilities is demonstrated by the success of BetMGM who are firmly established as a leading market operator in the U.S. Our operational excellence is evidenced by our continued leadership of the iGaming market as well as online sports betting market share in day 1 states where BetMGM are able to leverage the full playbook of the Entain platform.
During 2022, we supported BetMGM's launch in 8 jurisdictions, taking it to over 48% of the U.S. adult population. We added over 1,900 games in 2022 and customers are showing how much they love them, 8 out of our top 10 games are in-house or exclusives. So whilst we maintain strong momentum in iGaming, we are also making progress on product development and have high ambitions for our sports offer, specifically around parlays and we look forward to sharing more plans with you later in the year. Our platform runs at unrivaled scale, which is why it is able to support BetMGM through major tent pole events like the Super Bowl.
It performed excellently with 100% uptime and with all bets settled within 1 minute of the final whistle. This great experience is important for our customers, particularly those enjoying sports betting for the first time. Meanwhile, the deployment of Entain'sMarTech and CRM capabilities are driving CPAs lower, delivering a record year-on-year improvement in 2022 and are well on track to reach our long-term target CPA of $250. Our strategic bonus optimization underpinned by the data analytics from the Entain platform has seen BetMGM deliver over 3.5x more NGR per active than last year resulting in same-state online NGR growth of 51% versus 2021.
The Entain platform capabilities, together with the brand strength of our joint venture partner, enables this rapid market growth, leading position and path to profitability, all at significantly lower capital investment than others. This enables BetMGM to take the next natural step in optimizing bonusing and focus on NGR as the business transitions to profitability in the second half of this year. Part of our strategy is to diversify our revenue base through geography, product and a broader, more recreational customer base, and we are making great progress as well as the significant market opportunity that exists, importantly, this strategic revenue diversification provides greater resilience, improving sustainability of earnings and driving long-term value for our stakeholders. It provides an in-built hedge enabling the group to absorb various regulatory or specific market changes. As a result of our market share growth and new market entries, we have the most regulated geographically diverse revenue base of any of our major global peers.
The record actives for our online business illustrates our increasingly broad customer base as well as the quality of our engagement. As the chart on the right side shows, this is driving improving retention rates, cohort, longevity and long-term sustainable growth. So stepping back, let's look at further evidence of how our operational excellence, scale and platform have delivered growth superior to the market. The depth, breadth and caliber of our data analytics seize our customer focus and understanding, embedded in how we execute. That's across brands, products and the broader offering, enhancing and innovating in a way that resonates with our customers and their changing demands.
As you can see from this slide, our customer-focused multi-brand strategy has enabled us to consistently outperform our markets with increasing share across Entain's largest markets and brands. I remain immensely proud of our continued industry leadership and commitment to the ESG agenda. This is not by accident. We don't treat it as a race. We set the standard for our industry simply because we believe it's the right thing to do and our approach to sustainability is embedded into the core of our business.
That is why sustainability sits on an equal footing with growth as a key strategic pillar. Player protection continues to be at the very forefront. We reached a milestone in rolling out ARC across 22 international markets by the end of 2022. And we know ARC is working by reducing risk levels amongst our customer groups, in turn, preventing harm from occurring. In the U.S. as well as our support for PlayPause and GameSense, Entain and BetMGM led peers in creating the U.S. first operator industry standards for responsible gaming. Our numerous awards of recognition across the globe are also a testament to the reach of our initiatives. Investing in our people and communities is another important cornerstone of our sustainability approach. Our ambition is to be the employer of choice, attracting and retaining the best talent globally.
We proactively listen to our colleagues through our your voice survey from which we have established well-Me, women and pride networks to embed our DE&I agenda. We are taking meaningful steps to improve our gender pay gap, particularly in tech and revenue-generating functions. We supported our colleagues through initiatives such as [ winter warming ] and are running new training opportunities for colleagues to develop further. We want all colleagues to feel supported and empowered in their work. Our investment in communities, both in the U.K. and internationally, is unwavering with the Entain Foundation's ongoing support to SportsAid, Trident Leagues and wider projects aligned with our ambition to see more equal representation in the tech industry. So in summary, before we move on to questions. We are a leader operating in highly attractive, fast-growing global markets. We deliver outperformance and growth through leveraging differentiated scale and capability advantages. We deliver high-quality growth that is diversified, sustainable and profitable.
And through the Entain platform, we are well positioned to maximize the growth whilst also continuously evolving to capture the exciting opportunities ahead. Before I finish and open up for questions, I'd like to say that none of our strategic and financial performance would be possible without the talented people across our business. So I would like to thank them for their hard work and contribution. With that, I'll hand the call over to our operator, who will open up the lines for Q&A.
[Operator Instructions] First question comes from the line of Ed Young of Morgan Stanley.
I've got 3 questions, if that's okay. The first 1 is on online revenue growth. You mentioned there are continued online revenue growth headwinds this year. What are you accounting for in particular? And really driving that, what is your implicit assumption for your underlying organic pro forma growth this year? The second -- 2 are on M&A. You talked about in time moving across I guess, it's about 30% of group revenue that doesn't go to your main platform. What would the margin benefit be if you did in time, move that across? And on Slide 10, can you just elaborate what you mean by doubling value? I assume it means doubling EBITDA, but you've not said that.
I just wanted to check what that thought process means for how you talk about the M&A track record.
Thanks. Ed, Let me kick off by talking a little bit about M&A, and I'll hand you over to Rob for this year in terms of what we are assuming on the underlying and also on the valuation side of things. So when it comes to M&A, well, you're absolutely right. So when we look at M&A, we look at it from different angles. But first and foremost, we always look at each and every acquisition on a stand-alone basis, so on its own merits.
And we look for the best teams and the best brands, and we've talked about this. And typically, we are always buying high-performing businesses with a pole position. Now often they come with their own technology, so it's not priority 1 for us to migrate onto our platform, but we already stopped doing some of the synergy works when they come on to the Entain family, for example, through sales synergies. So we basically give them access to our games or we look at the different supplier agreements. So we can always start to extract synergies when it comes to revenues and other benefits in the beginning. But then longer term, it is our intention that we will move them on to the Entain platform, and that should then drive other benefits. And they really come in terms of operational efficiencies. And it depends on how the business have been operated. So there's a lot to go for there. So that's why we have that as a target.
But first and foremost, I just want to stress that we are buying companies on a stand-alone strategic and fundamental merits. And then we look at the synergies as a benefit, first and foremost, sales synergies and then down the line operational efficiencies from the excellence of the Entain platform. Rob, handing over to you online revenue growth, what we're assuming underlying and the valuation question on M&A from prior acquisitions.
Okay. Thanks, Jette. Ed, so a lot there. So firstly, what are we assuming around ongoing regulatory impacts, clearly, U.K. affordability. You heard us talking about. We estimate a 10% impact to the U.K. online business last year from regulatory measures, and that is continuing into the first part of this year. We expect or we hope that, that will ease as the year progresses. Of course, we need to wait and see what's in the white papers though.
So U.K. affordability really is the main one. But as you know, we're not licensed yet in the Netherlands for bwin and Party. So that's an ongoing impact. Germany is another area where a new regulator was established from the 1st of January this year. So really hopeful that we start to see increased enforcement as we've spoken about many times. So that's another area where it's very difficult right now for the compliant operators, but we hope that will improve as the year progresses. So a few areas, but I would point to U.K. as being the #1.
Without that, to give you a feel for it, in the mid-single digits, maybe mid- to high fields like the underlying growth rate in the business at the moment. M&A. So a tricky question around what the impact on margin would be once we are fully onto 1 Entain platform, a number of ways you could look at that. The businesses that are on their own platform, on average, their EBITDA margin is not dissimilar to the Entain Group. There are some higher, some lower.
So therefore, if you multiplied out what the OpEx opportunity would be and similarly, CapEx as well. You can make some sensible assumptions. Another way of looking at it would be to look at announcements on past deals around synergy potential because a lot of that is technology based, and that will give you a feel as well for the type of savings that are available from doing that. More importantly, though, it's the strategic benefit of developing 1 platform working with global leaders around emerging technologies and so what -- to that scale benefit of a single platform that just gets more and more powerful and other operators are unable to compete. To the last question around the math behind the doubling in value.
It's mostly EBITDA movement. You're absolutely right. There is a little bit on the multiple as well. So it's multiple improvement under the Entain umbrella versus what we paid for it. But the lion's share of that movement is EBITDA growth.
Okay. Understood. So if margins are similar, I think your OpEx as a percentage of NGR is mid-teens and 30% of revenue is £1 billion. So we're saying that sort of it could be [ 130, 150, ] that kind of number. Is that kind of -- that's what you mean by applying that OpEx across those other businesses?
It is. The only watch out with that is that, that assumes a total saving. And of course, there would be some incremental aspect. If you think of customer services, for instance, there's a volume part of the cost base as well. But that is the math that I was thinking about. Yes.
Next question comes from the line of Kiranjot Grewal of Bank of America.
Okay. Three questions from me. If we think about online into '23, ex acquisitions, what are the sort of countries that are your biggest contributors to growth that you expecting for '23? Secondly, we've seen a step-up in competition in Australia as of sort of late last year. How have you been performing in terms of market share there? And are you considering any sort of risk from a step-up in competition there? And then thirdly, you have a pretty strong balance sheet as it stands, especially at a time where others are more levered and face increasing financial costs. In this backdrop, are you seeing a step-down in competition for M&A?
Kiranjot, well, let me kick off with these questions and then Rob can chip in later on. So first and foremost, when it comes to online 2023 and ex acquisitions, where do we expect to see the growth coming from. Well we're really expecting to see growth coming from all this, all of our media markets, except, of course, as we just spoke about the U.K. So they come in bigger buckets. So Brazil, we see strong growth there while there is more competition, and we expect that business to be growing through the year.
And hopefully, we'll get the regulation done soon. Italy has started the year really well as well. The market is growing there. They came into the year with strong growth in actives from Q4. Australia, which I'll come up -- come to later, to your second question.
Obviously, we're seeing the pop there, but -- and market is likely going to soften during the year, but we still believe that we are in a strong position to take share there and grow through the year. So we're in a good position as well. Enlabs also going to see good growth in the market towards our expectations. So really, the call out is U.K. and then, of course, we have Germany and Netherlands as well with Germany we're waiting to see what we can and -- what the enforcement will be there.
So it's really a mix effect through the year. But some of the bigger markets, Brazil, Italy, Australia, Enlabs, we should expect to see growth from them. When it comes to Australia, and you're right, there has been some noise in the market. There's been a lot of generosity from competition, but it really remains as competitive as ever. But listen, the team has just done a great job through 2022.
So we've seen NGR up 12% or 8% in constant currency. We've seen actives up and they're doing a lot in product innovation, leaning into social trends, they will be launching their Ladbrokes racing club soon. So as I said before, while we do expect that probably the market will be a little bit softer in 2023. We do expect us to be in a good position to continue to see share. And you saw on the slide that we had in the deck that we have grown market share.
Q4 was 19% and full year, 18%. So that's up a couple of percentage points. So the Australian business is doing really well, and that's pleasing, of course. And then you asked about M&A as well as balance sheet, but let me start with the M&A question. I mean -- so listen, our pipeline is exciting as always. And I think I said on the call in Q4 that when we buy companies, we typically look for the best brands, the best teams. We very much like companies that have a pole position in the market. And typically, you are paying a premium for a market leader.
So when it comes to valuation, while public valuations have come down, as we typically look for the best companies, we haven't really seen [ any ] need on the multiples for the top players in each of the markets. But I do think that we have some benefits to our approach. We are a smart buyer and first and foremost, we're also a good buyer because typically, what we are doing is helping the company with their growth. And that's really appealing for an ambitious team or maybe a founder. So I do think we have a lot of opportunity there just because of our experience and approach to M&A generally. I think I hit on the main point, Rob, anything to add?
Not really. I mean I think in Australia, interesting to see the latest developments with a new competitor launching in Q4 as you're all aware, so far, a lot of noise, but limited impact on the numbers. So I hope that, that continues to be the case. When I look at our performance relative to the market, we were around 11 points stronger in terms of year-on-year growth in both H1 and H2, sort of indicating that we didn't feel the impact of competitive presence and so growing materially well in Australia, whilst the 2 largest competitors declined. And hopefully, that will continue into 2023 as well.
Perfect. And just to confirm on your online guidance, you're including the U.K. and the Australian headwinds, right, as part of it?
Correct.
Yes, from what we know. Sorry. Yes.
The next question comes from the line of Joe Thomas from HSBC.
A couple from my side, please. The first thing is just on the EBITDA margin guidance that you're talking about, Rob. You're talking about 26%. You've previously flagged that you're expecting it to be down year-on-year. I just wanted to clarify exactly why you think it's moving? I think I heard, and I may be wrong, that it was to do with some of the market withdrawals, I think the nonregulated markets, but that's different to prior messaging. So perhaps you could just clarify, help me with my confusion there? And then secondly, just returning to the point about Slide 10, can you tell us what you're doing on the multiple when you work out the value uplift? I'm just conscious that a lot of these businesses are being bought on relatively low multiples compared to what one would typically think of as an online multiple in the U.K. So perhaps you could just give a bit more color around that would be helpful.
Rob, do you want to kick off EBITDA margin guidance? And back to Slide 10, the valuation calculation?
Yes. Let me do that. So EBITDA margin. So if we go back a couple of years to pre-COVID, we were around about 25%. The guidance for 2023 is 26%. So still moving in the right direction. Just 1 data point to dwell on. I mentioned it during the presentation that our deliberate strategic decision to only focus on regulated and regulating markets has accounted for about 3 percentage points of EBITDA margin. So in other words, we'd be looking at 29% this year rather than 26%. And that just shows the impact of that strategy, but it's the direction everyone is heading in, and we're delighted to be leading the sector in that regard.
So we're well set from that perspective. And therefore, further opportunity to grow margin over the -- in the future now that, that big barrier is behind us. To the specifics of why 26% this year and 27% in 2022, it's all about contribution margin. And I mentioned a few of the drivers earlier. But in particular, Australian [park] is the largest impact.
That's at least 0.5 points on contribution margin, but more depending on how well we're able to mitigate against that. We also factor in things like a rebuild of bwin and party in the Netherlands, inevitably, that will be a drag on contribution in the early stages. And there's also pressure around, as we mentioned at the beginning of the year coming out of a few final markets where the prospect of regulation just seems too distant now. That has a small impact as well. Plus there are 1 or 2 new territories where we're looking to launch the business.
And then the last thing I would say, it's just a mix impact. But when we've got businesses performing really well, like Australia and Italy, which operate in territories where the contribution margin is below average, you do get a little mix impact as well. So the answer to your question is it's all in the contribution margin line and those are the drivers why it steps backwards next year, in particular, Aussie [park]. But we will still shoot for 40%. You've heard me many times talk about we manage the business to a 40% contribution margin. So even if taxes go up, we still want to deliver at that level and really pleased that we managed to do that in 2022 in a year where NGR came under pressure for all the reasons we know about. So we're still able to deliver that sort of margin, and that's the plan for 2023 as well. Hopefully, that answers your question.
And then very quickly on the M&A one. The way that the maths works, we take year 3 EBITDA and apply a 10x multiple to that is almost all online EBITDA. And clearly, what we pay for these businesses in some instances, has actually been over that, but the blend is a little bit below that. So there's a multiple arbitrage. But as I said to Ed's question earlier, really, it's all about the EBITDA growth within those businesses that's driving the doubling in valuation.
The next question comes from the line of James Rowland Clark of Barclays.
I have 3 main questions, please. In the introductory comments, Barry mentioned the legacy issues that you still have faced in the business. Could you just update us on the HMRC investigation and also any color on what those other issues are assuming he's referring to a few. And then secondly, on new opportunities. Could you perhaps provide a little bit of color on the shape of the £25 million loss for innovation and for new opportunities through H1 and H2 and would Unikrn be breakeven in the second half?
And then finally, on BetMGM. I know you're looking to breakeven in the second half. And I guess, as your market share at the moment is just sitting at a touch below your long-term target. Could we expect that you might, [ might not ] broken even look to invest a little bit more to regain share and that actually might be a sort of slight headwind to the profit uplift from BetMGM for the next couple of years?
Thank you, James. Let me kick off with your first question, and I'll also take that BetMGM and then hand you over to Rob. So really, the Chairman this morning, Barry Gibson took the opportunity to talk about the enormous progress of the business. So he was not announcing anything new, but basically reminding everyone about the items from the past that needs to be determined. And so there's nothing new around the HMRC.
We are cooperating as we've done all the time, but we are still waiting to hear more but Barry was not raising any new issues. He was merely reminding everyone of the things from the past that still needs to be determined. So that's on Barry Gibson's comments this morning. When it comes to BetMGM, I mean we are quite confident when we look ahead for the year in terms of profitability in the second half. And first and foremost, it's really a function of where we are at the moment and the model.
So how the cohorts develop, states that are already contribution positive. So 5 states were contribution positive last year, all of the iGaming states and there should be more than 10 states being contribution positive this year. So when we run the math and our models, that's really what leads to profitability in the second half with the states that we know now and the bigger states that are coming online is, of course, Ohio that went online in January and then tomorrow, we are launching in Massachusetts. And from what we know now, it's a couple of smaller states and product launches that we have to go, there. Now when it comes to marketing and promotion, and we talked about this in the market update for BetMGM in January.
It is quite deliberate that the team there is focusing on being rational in the market. We've done a lot of work based on the Entain CRM and BI that basically give them confidence in what they are doing on bonus optimization, and that's really how this is playing out now. But they have full flexibility. We talked about before, we try to keep our marketing flexible so they can invest where they see the highest ROI. So that's really something that the team is managing.
I think the other big opportunity for us when you talk about investment, that is really an opportunity around the sports products. And we launched our new app, and we're already seeing a number of improvements there also in terms of single game parlay. But the team is really focused on investing more into a sports product, and we'll be announcing through the year, and that's very much focused on parlay specifically single game parlay and in play. So yes, there is flexibility from the team we might invest more but we are quite confident in reaching profitability in the second half of the year. Rob, can I hand over the second question in terms of the shape of the curve for new ops and Unikrn?
Sure. James. So the first thing to point out is it's more weighted towards Unikrn than innovation, the spend in 2023. And when it comes to phasing during the year, I'd expect H2 to have investment than H1. Why is that? Because we have a number of new markets that we're planning to launch in later in 2023. So I would wait to spend more towards Unikrn than innovation and more towards H2 than H1.
The next question comes from the line of Ivor Jones from Peel Hunt.
I'm trying to work out the implications of the commitment to only have revenues from nationally regulated markets by the end of the year. I can see from the graph on Page 21 that Brazil is about 7% of online revenue. Others about 12% of online revenue. If -- how much of the other is not domestically regulated if we try to think about what might happen if Brazil doesn't regulate and if other markets don't regulate as you're expecting, what's the possible revenue impact?
So when you look at regulated and regulating just over 92% of group NGR comes from regulated. So it's really that last 7% to 8% of group NGR that we are looking at. And the biggest market, as you rightly pointed out here is Brazil that sits with the a 6% to 7% of online NGR. So that's the biggest market we are waiting for. And when we look at Brazil and also the other markets that we haven't exited yet, we're quite confident that they all have a clear path to regulation.
And that's really what we are saying. So when we look through the remaining markets, we were very, very diligent in looking at do we see a clear path to regulation than we are staying in. However, if we don't, then we will pull out. And that's what we've done. So Brazil is the bigger one. And overall, it's 7% to 8% of group NGR that is still to be regulated.
And when you're coming up with that percentage, you're excluding BetMGM, you're talking about the online revenues reported in the group?
So it's -- so when you look at the 92% to 93%, that includes the 50% of BetMGM.
So it's a bigger percentage of the group's online revenue?
So it's 7% to 8% of group revenue. So it's a bigger percent of online.
Okay. And given the commitment to only be domestic by the end of the year, does that -- will that commitment hold? Or if you get to the end of the year and some of those markets have not licensed -- in giving you a license, would you then continue to operate in 2024?
So we'll look at it on a case-by-case basis. The most important thing for us is that we need to see that those markets have a clear path to regulation. So for example, when it comes to Brazil, the latest we've heard is that hopefully, they will regulate over the next couple of months. That would mean that we would potentially launch by end of year that could fall into 2024. So we are not pulling out of Brazil, but we need to see that these markets have a plan for regulation when we stay in them.
Okay. So the commitment referred to in the January statement could flex beyond the end of 2023?
Yes, so take Brazil, as an example, Brazil is a market that we have a very strong position in -- as you saw from our results there, we are growing strongly. And therefore, what we've said now is that the markets that we're in, we believe that there is a path to regulation. So in 2023, you shouldn't see that as a strict deadline. That's really what happened when we came out with the new announcement in January.
That's really helpful. And just one other thing. You refer in the presentation to 2,000 employees involved with MGM -- with BetMGM. How do you think about the costs of supporting BetMGM? Can we refer back from those some of the time, of those 2,000 employees to work out a cost within the group?
Not really. A large part of them are, you could say, dedicated to BetMGM, but very often, we're also tapping into other groups of the organization. So for example, the CRM team or the BI team or the market team. So when we talk about 2,000 people, those are 2,000 Entainers that are supporting BetMGM, not 2,000 people that are every day working with BetMGM. That's a smaller group.
So if I wanted to project out a contribution to Entain from BetMGM net of costs required to support it. Have I got enough information to get there?
So there are other benefits than that. So basically what BetMGM benefits from is the scaled operation of Entain. So you should add -- we actually talked about the direct benefits from, let's say, the Entain platform. And we did that last year, which is around 600 to 700 basis points. So that is the scale of the operation, not having to pay licenses, getting access to the games portfolio. All these things give them a marketing benefit around 600 to 700 basis points. That does not include headcount. That is really from the scale of our operation and tapping into all those benefits.
The next question comes from Louise Wiseur with UBS.
[Indiscernible] I wonder if you could please go back a bit on that. And any indication of what you've seen in Q4 and maybe year-to-date? You mentioned in the past that you expect the [ area ] of regulatory oversight by the regulator on noncompliant operators that should help you win back some of the business that you lost in the last few years. Have you seen any change so far and maybe year-to-date? The second one is on the U.S. from responsible gambling. I think you mentioned in a press release that the MGM led U.S. and online operators commitment to the first responsible gaming standards for the industry and I was wondering if you could give maybe some more color on this and how this has been received by the regulators for each state? And the last question is on the consumer backdrop. Have you seen any change versus what you've said in the past.
I think in Q3 and Q4, there was no change versus Q2, but maybe any change year to date? And if so, which regions have been more impacted? I would assume given your comments today that there hasn't been much change, but I just wanted to check on that, please.
Sure. Louise, let me start by answering U.S. and your question around deterioration. And then I'll hand over to Rob for your first question. I couldn't hear in the beginning. I think it was about Germany, but Rob, maybe you heard it better. But let me kick off with the U.S. and consumer backdrop. So starting from the back. So we're not seeing any deterioration on the player metrics from economic backdrop.
So our spend per head metrics are aligned with our strategic focus shifting towards a broader and more recreational player base. So there's really nothing new to report there. And I'll just reiterate as you've heard us say before that we are relatively resilient as a business, even though we are not completely immune from it. But our diversity of the group mix provides some insulation, of course, from that in specific markets. And then I would also add to that when we talk to the teams around the world and maybe specifically the Baltics that were really hard impacted by inflation in 2022.
I mean, what they are saying is it's not getting worse. So nothing new to report there in terms of the consumer spend and behaviors. And when it comes to the U.S., you're absolutely right, BetMGM just like Entain wants to lead on responsible gaming. And there's been a number of initiatives and you've seen them launch the partnership with GameSense, Entain actually helped lead getting the industry together, the online operators on 12 principles that the markets would operate by when it comes to responsible gaming and safer gaming. And BetMGM is also now tipping into our ARC program.
So they've started implementing the markers of protection, as you might recall, in ARC, the first level is really a number of highly detailed markers of protection that we can implement into our customer journey that will flag different behaviors from customers. And it's been well received by the regulator. So we're really pleased with that and leading in the industry in the U.S. Rob, over to you on the first question Q2 and noncompliant operator, I think it was about Germany, but maybe you heard better than I did.
Yes. I did, yes. I'm sure it's about Germany. So I think the answer to the question is -- have we seen any material change year-to-date or in Q4. The answer is no. With the exception, though, that the new federal regulator, the GGL took over responsibility from 1st of Jan from the individual states that it had it before. So we hope that, that now delivers a more unified and forceful framework and there has been some movement at various levels, but it is early days, and they're building resources. So the answer to your question is no, not yet, but remain hopeful because it needs to come. It's so severe how disadvantaged compliant operators are versus [others] and clearly seen that with the impact on our business. So we remain optimistic, but no material change as yet.
I've got a couple of questions that have come in by e-mail in 2 sets. So I'll ask them and then the other. The first one, we have our bonds maturing later this year. Any update on how we plan to refinance them? And then also, can we give an update on what we're hearing about the much anticipated and much delayed white paper?
Okay. Thank you, David. I will start with the white paper, and then I'll hand over to Rob for the bonds. And now that it's you asking the question. I don't want to sound like it's Groundhog Day. But really, there is nothing new to add regarding the timing. So as ever, we await for an imminent white paper. We've seen some media reports, of course, around its potential arrival soon. And really, from our side, we're just keen to get it out and get it published. And we've talked on prior calls about how the industry continues to evolve and how we continue to evolve our customer checks and broadening our recreational mix, which we hope will help offset some of the potential impacts on the white paper. But nothing new. We are waiving it totally imminently, and we'll see if it's out when we have our next call. Over to you, Rob, on the bonds.
Thank you. Yes, this is an easy one. So as I've said before, we have the option of redeeming those bonds by cash, but we are also looking at options to refinance them as well. And those options include both loans or a new bond. So all options available to us and we continue to assess.
And the last set of questions that have come in by e-mail is in terms of the headwinds we talked about for regulation and in particular, perhaps U.K. affordability. Can you give a bit of a shape to those in 2023? And then lastly, one more about the market post the World Cup? Are we seeing any tailwinds from that and impacts on football matches as a result of the shifting timetable and any difference in behaviors in the first quarter? And anything we can say on the promotional environment in the U.K. I think this questioner is a key horse race follower who was asking about anything in particular on Cheltenham.
Okay. Well, let me start by the last -- with the last one on Cheltenham and hand over to Rob for the others. So it is imminent, it's this week and we're looking forward to it. We have a lot of promotions out there that we're really excited about, both for Coral and Ladbrokes. And as always, when you have the tent-pole events, we do see more activities around promotions in the market. But that's how we like it. We also have a number of horses that we are -- stables that we are sponsoring. So hopefully, we'll see some of them doing well in some of the races there. But look out for our promotions if all of you are joining Cheltenham later this week. Rob, over to you on World Cup and regulatory headwinds this year and timing.
Okay. Thank you Jette. So let's start with the World Cup. So we spoke about it on the Q4 call. We did have a good tournament across all metrics, really. And therefore, as expected, that has given us some momentum into the new year. For example, actives in Q4 saw the best performance and FTDs in Q4 were the best performance of the year. So that sort of evidences the momentum, but then we expected the momentum into the new year. So there's no real impact versus outlook for the year, but we have nonetheless seen that momentum that you alluded to. The only downside is it's great having a big football business. But when football margins are poor, it's pretty painful. And February was an ugly month, but then January was a good month, and that's just the way things go. In terms of impact on the U.K. from the various regulatory changes that we made were really starting in 2021, but through 2022, it was gradual and through the year, there was no sort of single moment that we're looking forward to annualizing against, it's more gradual than that. And therefore, I think I said at the start of this call, that whilst I don't expect the impact on 2023 to be as severe as 2022, it will be towards the beginning of the year and we then hope that it eases as we progress through the year. That's, of course, dependent on anything that may come out of the white papers. But absent that, then I do expect the impact to gradually ease as the year progresses.
Great. Thank you. There are no more questions. I suppose you can tell. So I'll hand it over to you Jette to close.
Okay. Thank you, David. And thank you, everyone, for listening in this morning. We look forward to seeing you all in April again. And meanwhile, of course, if you have any other questions, do get in touch with David and the IR team. Thank you, and goodbye.