GVC to put foot on marketing pedal
GVC to put foot on marketing pedal
GVC wowed investors with its first-half results published this morning which displayed the full benefits of the company’s leap into the top rank of online gambling companies with revenues and operating profits rising threefold off the back of the Bwin.Party acquisition.
In comparison with last year, total revenues in the six months to June were up over 220% to €390.6m and clean EBITDA soared over 250% to €91.2m as the company bulked up following the £1.12bn buyout completed earlier this year. The shares rose 23.5p or almost 3.5% in early trading as investors warmed to the figures.
In constant currency and pro-forma terms, the UK-listed firm said net gaming revenue (NGR) was up 12% to €432m while clean EBITDA was up 42% to €104.4m. In the third-quarter to date the company said average daily NGR was up 15% in constant currency terms.
The operator behind the Casino Club and Sportingbet brands said it was already upgrading its guidance on what it now believed it could gain organically from the acquired Bwin.Party businesses, partly off the back of a greater focus on cross-sell opportunities.
It added that it will be increasing the percentage of NGR it currently expends on marketing in order to drive further growth. The current percentage stands at 21% and the company guided towards the 23%-24% mark for the future, still lower than the current industry average.
Responding to questions from analysts, chief executive Kenneth Alexander said he believed GVC’s marketing is “fairly efficient” but noted that regulatory issues (Turkey being an example) meant the company couldn’t fully invest in marketing in some key territories. “We came into the Bwin business and removed some of the low ROI marketing efforts,” he said. “In some of the markets we are currently in, there are places we can’t invest because of the regulatory environment. We are investing much, much less than our peers, but opportunities are there to create further top-line growth.”
Alexander pointed out that in terms of regulated and taxed revenues, the percentage now stood at over 70%. He added that the company welcomed regulation, though Germany – which represents circa 25% of GVC’s total NGR - remains “unclear”. “Hopefully sports-betting will be regulated – the Lander (German states) are still to agree but for now it remains in a state of flux. We have an interim licence in Greece, and we’ve just relaunched Bwin into the market. Brazil I expect to regulate over the next three years and we have seen some movement there recently.”
Noting the upcoming regulatory regimes in Czech Republic, Poland, Netherlands and Belgium, Alexander said the “general theme” was towards more regulation and tax. “But with it comes greater opportunity to grab market share,” he said.
The company reiterated it was on track to achieve the €125m of cost synergies it had previously identified as part of the Bwin.Party transaction. It highlighted during the presentation the extent to which revenues were driven by having control of the technology platforms behind all its major products, particularly with regard to the BwinParty backend where the company said it was pleasantly surprised by the quality of the product and what it sees as the significant opportunity to drive further growth.
“We think owning our own technology is the key,” said Alexander. “If you have you don’t have control of the technology, in this sector you will undoubtedly fail.”
During the period, GVC has arranged a new €250m financing facility with Nomura that will come into force early next year. It also signed its largest B2B deal to date with Betfred and received confirmation from the New Jersey Casino Control Commission that it could continue as the partner with the Borgata in New Jersey.
Totally Gaming says: The number of analysts that attended this week’s results presentation shows just how far the company has come and its elevation to the FTSE250 shows how important the company has now become as an industry standard-bearer. Alexander was keen not to rule out further M&A following the Sportingbet and BwinParty acquisitions and given its success in executing both integrations, its claims will not be easily dismissed by the shareholders at any potentially underperforming target.