GVC Digital Operations Up 18 Percent in Q1, Too Early to Tell on FOBTs, Says CEO

Posted on: April 5, 2019, 12:01h. 

Last updated on: April 5, 2019, 12:01h.

When online gambling giant GVC acquired Britain’s biggest retail bookmaker, Ladbrokes Coral, last year it had the most to lose from the government’s threat to put the squeeze on highly lucrative but controversial fixed-odds betting terminals.

GVC CEO Kenny Alexander says that its subsidiary, Ladbrokes Coral, would need several weeks before it could begin to assess the impact of the FOBT reforms that came into effect on April 1. (Image: Racing Post)

But Morgan Stanley noted this week that GVC has a “better growth profile” than its competitors, and its Q1 results would appear to bear that out.

The UK government has since made good on its threat. The reforms — which cut maximum stakes on the machines from £100 ($130) to £2 ($2.60) — came into effect on this week, on April 1, as the betting industry warned of shop closures and layoffs.

GVC’s £4 billion ($5.21 billion) Ladbrokes buyout made it one of the biggest betting companies in the world, propelling it onto the FTSE 100, the index of companies with the largest market capitalization in the UK.

But as the biggest land-based betting company, and therefore the one with the most FOBTs, Ladbrokes has highest exposure to the economic fallout from the reforms.

Shock Absorber

Following a trading update on Friday, GVC CEO Kenny Alexander said it was too early to tell how badly the company would be affected, adding that it would need “several weeks” to assess the impact.

The company’s powerful online presence — which includes major brands like bwin, partypoker, Sportingbet and FoxyBingo — went from strength to strength during the quarter, a factor that will help the company absorb the shock of the regulatory clampdown.

While land-based operations were predictably flat, online net gaming revenue (NGR) was up 18 percent at constant currency rates for the three months to March, while overall results for the quarter were up 9 percent.

MGM Joint Venture Will Make Small Loss

Like all the big players in the UK gambling industry, GVC hopes it can offset headwinds at home by striking gold in the newly liberalized US sports betting landscape. The company has entered into a joint venture with MGM Resorts in a bid to corner the market — or markets, since regulation is occurring on an intrastate basis.

Each company invested $100 million into the venture, which promises to “a world-class sports betting and online gaming platform” with “meaningful early mover advantages.” GVC said it expected to lose £4 million ($5.2 million) to £5 million ($6.5 million) this year on the startup.

“We continue to see good volume growth across all major online brands and territories, and we remain very confident of achieving our target of double-digit online NGR growth,” Alexander said. “At this early stage of the year, the board is confident of delivering EBITDA and operating profit in line with expectations.”