GVC Holdings Says 2017 Earnings at ‘Top End’ of Company Forecast
Posted on: January 11, 2018, 06:00h.
Last updated on: January 11, 2018, 04:44h.
GVC Holdings says in a trading update to investors that its 2017 earnings will be “at the top end of management’s internal expectations.”
Following a strong fourth quarter where net gaming revenues rose 21 percent to 279.5 million euros ($333.9 million), GVC says its full-year bottom line is now expected to be upwards of €1 billion ($1.2 billion). That represents an 18 percent growth on the company’s 2016 performance.
Sports betting operations played the largest role in fourth quarter performance. GVC sportsbooks, which include bwin, Sportingbet, and gamebookers, saw net gaming revenues surge 35 percent.
Traded on the London Stock Exchange, investors didn’t react to the earnings note. GVC Holdings stock was flat, with shares trading 0.37 percent lower to 955 GBX ($12.86).
In December, GVC Holdings entered into a takeover agreement with British bookmaker Ladbrokes Coral that could cost as much as $5.35 billion.
Adding Ladbrokes Coral, which itself is forecasting 2017 full-year revenues of more than $1.2 billion, will make GVC Holdings into one of the world’s largest gaming companies. Ladbrokes overtook foe William Hill as Britain’s largest bookmaker after merging with Coral in 2016.
GVC’s rapid ascension has taken the boutique internet gaming firm that began with CasinoClub in 2004 to today’s dominating position in both land and online operations. But it has come at a high cost.
In 2015, GVC paid $1.62 billion for a reverse takeover of Bwin.party and its online betting and internet poker brands. Should it pay the $5.35 billion maximum for Ladbrokes Coral, GVC will have spent nearly $7 billion in just two years.
GVC says now is the appropriate time to buy Ladbrokes Coral, as financing conditions are favorable. Banks backing the acquisition include Barclays, Credit Suisse International, Deutsche Bank, Mediobanca, and The Royal Bank of Scotland.
Price Determined by FOBTs
While Ladbrokes Coral will officially become part of the GVC portfolio at some point this year, the final purchase price remains unknown.
GVC is waiting for the UK Department for Culture, Media, and Sport to hand down its verdict on the max betting limits for fixed odds betting terminals (FOBTs). Labeled the “crack cocaine of gambling” by critics, FOBTs are massive revenue generators for land-based betting shops.
FOBTs are currently allowed to take wagers as high as £100 ($135). The UK government is deliberating whether there’s a need to lower such bets, with reports surfacing that the max could be slashed in half to £50.
For Ladbrokes Coral and its shareholders to receive the maximum $5.35 billion offer, the FOBT limit will need to be £50 or higher. Anything less drops the purchase price to $4.28 billion.
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