GVC sees revenue soar following Ladbrokes Coral acquisition

GVC sees revenue soar following Ladbrokes Coral acquisition

Thursday, September 13, 2018 Posted by News Team
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Operator boosted across all channels after acquisition was finalised on March 28th

GVC Holdings has reported a 191% year-on-year increase in net gaming revenue for the first six months of the year, after completing its acquisition of Ladbrokes Coral Group. 

Net gaming revenue leapt from £386.6m in H1 2017 to £1.13bn. Once VAT costs of £19.2m were taken from that total, revenue for the period was up 195% from the previous year at £1.11bn, driven by the strong growth of GVC’s legacy business and the addition of Ladbrokes Coral’s operations from March 28th. 

The company generated £673.8m of this sum from its online business - up 85% year-on-year - of which £537.5m came from sports betting and gaming under its sports-driven brands. A further £143.6m was generated from its games-driven sites.

Gross profit for the online business came in at £467m. Once variable costs were taken out, the contribution from the iGaming business was £290.6m, up 51%. 

Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) for online were up 49% at £168.6m. Underlying operating profit for the online division came in at £140.2m after depreciation, amortisation and share-based payments. 

GVC said that this showed enough positive momentum to suggest it would succeed in delivering its full-year target of double-digit annual growth from the division. 

“This will not be straight-forward given the competitive and slower growth of the UK market versus many of the international markets we operate in,” the company said. “However, we still have many of the benefits from the Ladbrokes Coral integration to harvest and the performance of the business places us in a strong position. Furthermore, in markets where we are taking share we will invest excess returns to further strengthen our competitive position.”

Looking to retail, GVC reported total net gaming revenue of £351.5m, comprising £147.5m from sports wagering, and £204.0m from machines. Gross profit from the channel was £250.4m, with underlying EBITDA of £67.5m. 

Once share-based payments and underlying depreciation and amortisation were taken out, underlying operating profit from the retail business was £56.6m. 

GVC noted that the Ladbrokes Coral business had been impacted by poor weather and shop closures in the first quarter, while a strong Cheltenham Festival had been offset by Tiger Roll winning the Grand National. This, it said, was “the worst result in the book” at the off. 

However, it added, the retail channel was boosted by a strong World Cup. Looking ahead, it said that the decision to cut maximum fixed odds betting terminal (FOBT) stakes from £100 to £2 allowed it to ramp up its plans to transition to a smaller retail estate, with around 1,000 shops to be closed. 

This is being led by a team tasked with minimising the impact on the business. New FOBTs from Scientific Games are being rolled out across the retail estate, along with a new shop till system. The introduction of these new features are designed to help support revenue, while the £130m in cost synergies to be realised from the Ladbrokes Coral merger will protect the operating cost base, GVC said.

European retail posted total net gaming revenue of £67.0m for the six month period, comprising £51.8m from sports betting and £14.6m from gaming. Underlying EBITDA came in at £12.5m, reflecting the impact of three months of earnings from Ladbrokes Coral. 

The operator aims to leverage its Italian retail estate to support the online offering in the country when a ban on marketing is implemented in 2019. Efforts are underway in Belgium to expand its retail estate through the acquisition of independent operators, selling its products via newsagents and rolling out self-service betting terminals.

The operator generated a further £15.3m in revenue from other operations, with underlying EBITDA of £1.2m. This vertical, GVC said, had been positively impacted by the sale of its Kalixa payments subsidiary.

Across all operations GVC generated gross profits of £763.2m, and underlying EBTIDA of £235.0m. It posted a profit after tax of £113.8m, having made a loss of £6.4m in H1 2017.

On a proforma basis, if revenue from Ladbrokes Coral Group had been included from January 1st, GVC saw revenue increase 8% to £1.72bn, generating an underlying operating profit of £277.9m.

“The acquisition of Ladbrokes Coral completed on 28th March and the integration of that business is progressing well,” GVC chief executive Kenneth Alexander said. “We have now identified capex synergies of at least £30m in addition to the £130m cost synergies and we are well placed to deliver those savings while driving top line growth. We are gaining market share in all our key markets and we will look to reinvest to further strengthen our market position.”

Looking ahead, Alexander hailed the repeal of the Professional and Amateur Sports Protection Act for providing the business with a “significant new market opportunity”. This has already seen GVC establish a joint venture with MGM Resorts to provide sports betting and iGaming services to US land-based casinos.

“The combination of MGM’s leading brands together with GVC’s proprietary technology, and both businesses’ combined betting and gaming expertise, puts the Group in the best possible position to benefit from what could become the world’s largest regulated sports-betting market,” he said.

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