GVC estimates £150m earnings decline from sports shutdown

16 March 2020

GVC Holdings has revealed that its earnings before interest, tax, deprecation and amortisation (EBITDA) for the current year could be reduced by up to £150m (€166.1m/$184.6m) if certain sports events are to be suspended as a result of the novel coronavirus (Covid-19) pandemic.

A number of leading sports events such as football’s English Premier League, the UEFA Champions League and Europa League, as well as all major leagues in the US, have been put on hold as organisers seek to help slow the global spread of Covid-19.

GVC said while it is currently difficult to quantify the precise impact on earnings due to uncertainty over the length of the postponements and what other events will be cancelled, believes EBITDA for the 12 months to 31 December 2020 will be reduced by between £130m and £150m before any mitigating actions.

This is based on a series of assumptions. The Ladbrokes-Coral operator believes that all football will be postponed until July 2020, with the 2020 Uefa European Championships pushed back to summer 2021. It expects all major horse racings such as Aintree - including the Grand National - and Royal Ascot to be cancelled and all other meetings take place behind closed doors.

The estimates also take into account its Belgian and Italian betting shops being shut for three months. 

However, should its UK retail estate be shut down by the pandemic as well, EBITDA would be reduced by between £45m and £50m per month, including monthly staffing costs of approximately £20m.

In GVC’s financial year to 31 December 2019, around 45% of group net gaming revenue was generated from betting on sports events, while 43% of online net gaming revenue also came from sports.

“While we do not underestimate the challenge presented by Covid-19, GVC is in a robust position to manage the impact on our operations,” GVC chief executive Kenneth Alexander said. “We are a diverse global business, with an experienced and expert management team, which operates across multiple products and markets. 

“Our priority is to protect our employees while maintaining our offer to our customers at this difficult time.”

The update comes after GVC this month announced a year-on-year rise in loss after tax for 2019, despite also reporting a 2.3 % rise in proforma net gaming revenue during the year.

Proforma revenue for the 12 months to 31 December 2019 totalled £3.66bn, based on the assumption that Ladbrokes Coral was part of GVC for all of 2018.

However, GVC this month also revealed in a trading update that for the period from 1 January to 23 February this year, trading group net gaming revenue was up 5% on a constant currency basis, while online net gaming revenue was 16% higher than in 2019. GVC said this was due to strong sports margins in the first two months of the year.

GVC is the latest major operator to issue a warning over the financial impact of coronavirus. Earlier today (16 March), Flutter Entertainment, the parent company of Paddy Power Betfair and FanDuel, said the cancellation of sports events around the world could lead to a £110m decline in EBITDA.

The Stars Group also said that it would be impacted by the postponements, but added that 62% of its overall revenue in 2019 was generated from poker and gaming in 2019, and, as such, is confident of long-term revenue growth.