For the second time in a year, GVC Holdings, home of Ladbrokes Coral, have revised their full year profit projections. The holdings company originally from Luxembourg, has raised its profit guidance following a very strong showing in H1. The impressive performance has been credited to an impressive online operation that has in turn allowed GVC to offset a weakening retail sector.
Net gaming revenue (NGR) for the six months up to June the 30th reached £1 billion which represents a 5% year-on-year rise. Note however, that that figure is based on the assumption that Ladbrokes Coral’s pre-acquisition figures are to be included and factors in 61% of results from the date the acquisition closed on March the 28th 2018.
For the online side of the business, revenues rose to £1.02 billion in the first half of the year, over half of which came from gaming as opposed to sports betting. GVC, whose gaming stable includes Party Casino, partypoker, Foxy Bingo, Foxy Casino, CasinoClub, Gioco Digitale and Cashcade, bought in a collective £74.6 million, representing a 17% year-on-year raise.
Sports betting revenues from the likes of Bwin, rose to £462.3 million which, in turn, offset a 32% year-on-year decline in revenue. The acquisitions of Georgia’s Crystalbet, in April 2018, and Australia’s Neds, in November of the same year, also helped offset the B2B decline.
Retail Hit
One not entirely surprising takeaway from the set of results was the declining retail side of the business. Here, GVC reported revenues of £586.8 million, marking a 12% drop on a pro forma basis. On the high street, sports betting revenue declined slightly to £275 million, while machine revenue fell 20% year-on-year to £311.8 million.
While this will inevitably be attributed to the cut in Fixed Odds Betting Terminal (FOBT) stakes from £100 to £2 that came into force in April this year, the operator said that, while there was a growing impact, retail performance had been stronger than expected. Adding that customers were now using over the counter and self-service betting terminals instead.
The cut in maximum stakes is still expected to reap a savage effect on UK high street betting shops with GVC brands Ladbrokes and Coral originally saying that they expected 1000 shops to shut over the next two years, an estimate that has since been reviewed to the only slightly better 900 locations.
Nationwide, the stake cut is expected to lead to a £137.5 million decline in UK retail revenue over 2019, reaching £120 million a year by 2021. Over that same period, up to 900 betting shops will be at risk of closure. Already, we have seen an 8.1% drop to 3,274 shops at the end of June following the closure of 203 shops, 157 of which were directly applicable to the FOBT cut.
William Hill Hit
In contrast to GVC, William Hill reported a loss of £64 million in the first half of the year. This, it is claimed, is also due to the impact of cuts to in-shop machine maximum stakes which the company has claimed has cost them almost £1 billion. Even this though was greeted with a sigh of relief as forecasts had predicted much worse for William Hill, so much so that shares rose by more than 5% in early trading as a result of the release of the latest set of figures.
However, the concerning figures are proof that Hills have struggled to adapt to the new pricing plans for the controversial machines, with revenues from high-street bookmaking down 12%. In actual fact, there was a small increase in sports betting but this was all but wiped out by a 25% slump in FOBT income overall.
William Hill would likely have reported £51 million in profits were it not for the FOBT curbs but instead took a £63.5 million hit. This, coupled with an £883 million drop reported in its full year results in March, means William Hill have now taken a £980 million hit in FOBT changes. Because of this, the firm announced plans to close 700 shops and, in turn, threaten about 4,000 jobs. Previously to the new laws, William Hill made more money from the machines than it did from sports betting.
Elsewhere, the firm behind Paddy Power Betfair, Flutter Entertainment, has met with a much smaller decline in revenue since the FOBT cuts as it was less reliant on the machines in the first place. Bucking an industry trend, Paddy Power shops were actually making twice as much from sports betting than it did from machines and, as a result, have taken less of a blow financially.
