Covid-19 leads to 11% decline in GVC revenue in H1

16 July 2020

GVC Holdings has reported an 11% year-on-year decline in revenue for the first half of 2020, though outgoing chief executive Kenneth Alexander hailed the strong performance of the operator’s online business during the period.

The operator described the first half as an “encouraging” start to the year, despite the impact of novel coronavirus (Covid-19), which shuttered the group’s retail outlets and significantly reduced available betting markets.

The revenue decline was entirely due to the retail shutdowns, with UK retail’s contribution down 50% on a like-for-like basis (removing permanently closed shops from 2019 figures), and amounts wagered down 52%. European retail revenue fell 48% in the first half, with stakes down 54%.

Online, however, was up 19% year-over-year in H1, with a 31% rise in igaming revenue complemented by a 5% rise in sports betting. On a constant currency basis - using 2020 exchange rates for 2019 figures - the sports contribution would have risen 8%. This came despite customer wagers dropping 15%.

“Given the extraordinary circumstances in which the group is currently operating, delivering double-digit online net gaming revenue growth in all of our major territories is a very strong performance,” said GVC CEO Alexander, who today announced that he would step down from his role, with chief operating office Shay Segev stepping up as his replacement.

“It is a clear testament to the strength and diversification of our business model, the quality of our technology, the enduring appeal of our brands, and the talent, commitment and professionalism of our people,” Alexander added.

For the first half, GVC said earnings before interest, tax, depreciation and amortisation was expected to come in the range of £340m to £350m. The operator said “robust and decisive cost management” had allowed it to operate at cash neutral throughout the lockdown period.

Alexander added that this had enabled the business to take advantage of growth opportunities as and when they present themselves, picking out GVC’s increased investment in the BetMGM joint venture with MGM Resorts as an example of this.

A number of key milestones were achieved in the period despite the disruption caused by Covid-19. The migration of the Ladbrokes Coral brands to GVC’s proprietary platform was completed in May, while in February shareholders approved the relocation of the operator’s place of management and control, and tax residence, to the UK.

GVC also significantly stepped up its social responsibility measures during the period, Alexander added. This saw it voluntarily introduce stake limit setting functionality and allow customers to set curfews to limit their activity. It also blocked reverse withdrawals, ahead of the Gambling Commission making this temporary prohibition mandatory for all operators, amid wider cross-sector efforts to protect customers.

“We continue to focus on providing our customers with the tools to empower them to manage their own play, whilst deploying our market-leading technology to monitor for potentially problematic changes in behaviour and intervene as required,” he explained.

This had resulted in no evidence of any increase in problem gambling during lockdown, he said.

“Hopefully this has also been duly noted by those whose preference for punitive and mandatory restrictions runs the risk of driving customers into the hands of unscrupulous black-market operators,” Alexander said. “As has been the case in other countries in which stringent and misguided regulation has been introduced.”

The H1 performance came after net gaming revenue in the second quarter of 2020 declined 22% year-on-year, with declines in retail and online sports betting partially mitigated by online gaming growth.

In the three months to 30 June, online revenue was up 22%, with a 6% decline in sports offset by a 45% hike in gaming revenue. With major sports leagues resuming during the period, GVC noted that betting activity was now close to pre-pandemic levels.

Online gaming, it added, continues to trade ahead of expectations as sports return, though below peak levels seen during the quarter.

Retail, on the other hand, saw revenue fall 86% on a like-for-like basis. Following the reopening of English betting shops from 15 June - with those in Wales, Northern Ireland and Scotland following later in the month - and early response from customers was described as “encouraging”.

European retail, comprising shops in Italy, Belgium and the Republic of Ireland, saw revenue fall 90% in Q2, though all outlets reopened during the month.

“All in all, our resilient performance through what has been a turbulent first half and the proven strength of our business model means that the group can look forward to the future with confidence,” Alexander said in conclusion.