GVC accelerating into 2017

GVC accelerating into 2017

Thursday, March 23, 2017 Posted by Scott Longley
Boss Alexander positive on German regulatory progress

GVC chief executive Kenny Alexander hailed the company’s success since the merger with £1.1bn BwinParty saying that progress “couldn’t have been better” and suggested that there was more to come as the evidence from trading in the first few weeks of 2017 suggested growth was accelerating.

Alexander was speaking as the company revealed its first annual results since the merger was completed in February last year showing pro-forma net gaming revenue up 9 percent to €894.6m and clean EBITDA up 26 percent to €205.7m.

In current trading pro-forma net gaming revenue was up 15 percent to date in the first quarter. “The growth in the business has continued,” Alexander told analysts of the company’s earnings call. “In fact it has accelerated and we have started the year very well.”

He added that the company was now well-positioned to build both organically and through potential further M&A. “Organically we have done a lot and there is more to come,” he said. “We have built the business largely on the back of successful M&A. If we see further opportunities, we will definitely explore them. We are pretty flexible when it comes to both territory and vertical.”

Talking through the current state of the business, Alexander was keen to stress that he has hopes that Germany – the company’s biggest market – would resolve the overhanging regulatory issues which have bedevilled operators in the country for many years.

“I’ve never been more confident about the regulatory environment in Germany,” he said. “The current evaluation is a very, very good sign. I believe we are now on the path to sensible taxation and regulation, not just sport but also for gaming. I’m quite confident we will get a satisfactory resolution for gaming and poker. For the avoidance of doubt, we pay all relevant taxes.”

He pointed to the failings of the previous management of Bwin in not fully pressing home the advantage of having the most recognisable sports-betting brand in the German-speaking world.

“For some reason, the previous management decided they didn’t want to grow the German market. They got less aggressive, due to the regulatory backdrop. The Bwin brand is at its strongest in the German-speaking markets, but they were continuously losing market share. We have got more aggressive, we are recovering market share and the return on investment is very good.”

He added that GVC was “running the (Bwin) business better”, pointing at one stage during the presentation to the work GVC had completed since the merger in improving the Bwin algorithms. He added that he wasn’t concerned that a progress towards a fully-regulated market would lead to heightened competition.

“When regulation comes, whatever shape that will be, we think the market will become more competitive. Sky Betting & Gaming are suggesting they will go in, and I hear other big players are considering going in.

“But Bwin is the biggest brand in Germany, the most popular so when the market resulted properly, people can come in, but we are well-established and it is seen as a German brand. I’m not concerned about new entrants.”

With regard to further M&A opportunities, while Alexander didn’t rule out potential deals involving land-based gaming businesses, he said he “preferred” online deal. “I’m not fixated about any given company or country,” he added.

GVC would likely have recourse to the debt markets if it sought a bigger acquisition. In February the company secured a €250m six-year term loan that was “significantly oversubscribed”, suggesting there would be further institutional interest should the company seek to tap the markets for further debt finance.

Looking at the results, analyst Simon French at Cenkos said there was “plenty of reason for optimism” from the figures released today. “We see scope for ongoing positive newsflow over the next 12 months,” he added.

Totally Gaming says: The details of GVC’ success on completing and making a success of the merger were fascinating to listen to ad likely the details give an object lesson in how to complete such potentially hazardous tasks. Alexander was assuredness personified and there can be no doubt that he has ambitions to further propel the company both organically and via M&A.

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