GVC hails transformational year as revenue reaches £3bn
GVC Holdings chief executive Kenneth Alexander has credited excellent operational execution, effective marketing and a good World Cup for helping drive growth in the operator’s 2018 results.
Underlying net gaming revenue for the year - including Ladbrokes Coral results from March 28, 2018 - soared from £815.9m (€949.7m/$1.08bn) in 2017 to £3.0bn. On a proforma basis, incorporating Ladbrokes Coral’s performance from January 1, 2018, NGR was up 9% year-on-year to £3.6bn.
When VAT and Goods and Services Tax of £44.3m were stripped out, annual revenue stood at £2.9bn on a reported basis, or £3.5bn on a proforma basis.
"The Group's full year results reflect a very strong performance with proforma net gaming revenue 9% ahead of last year and proforma underlying EBITDA 13% ahead,” GVC chief executive Kenneth Alexander said. “2018 was a transformational year for the Group with the completion of the Ladbrokes Coral acquisition in March making the Group the largest online-led sports-betting and gaming operator in the world.
"Excellent operational execution, effective marketing and a good World Cup helped both the legacy GVC and the acquired Ladbrokes Coral businesses perform ahead of expectations and materially ahead of the market, delivering market share gains in all our major territories.”
The reported results included a £1.7bn contribution from GVC’s online business, up 115% year-on-year, which GVC credited to the strong underlying performance of the legacy business, and a positive contribution from nine months of Ladbrokes Coral. This included £829.3m of sports revenue, and a further £710.4m from gaming via the sports brands.
On a proforma basis, online revenue was up 19% at £1.9bn, driven by a £1.5bn contribution from the operator’s sports brands, with £10.2bn wagered on sports over the year. GVC’s legacy sports brands saw revenue grow 27% year-on-year, boosted by growth across territories such as Germany, Italy and Brazil. These brands benefitted from the roll-out of new games, high levels of cross-sell into non-sports products and a successful World Cup.
Georgian operator Crystalbet, acquired in March 2018, saw net gaming revenue grow 61%, contributing 6.6 percentage points of legacy sports growth. Ladbrokes Coral’s sports brands also performed well, with revenue up 15%. Coral’s UK-facing site saw revenue increase 16% from FY2017, while Ladbrokes benefitted from a more refined approach to marketing, with revenue up 12%.
In Australia, the Ladbrokes.com.au grew 17%, with sports wagers up 20%, though this was offset in part by a higher-than-usual margin of 10.7%. The Australian business will be further boosted by the acquisition of the Neds online sports betting business in November, allowing the operator to run a dual-brand strategy and giving it access to strong technology and personnel.
The Italy-facing Eurobet brand, acquired through the Ladbrokes Coral deal, saw revenue grow 20%, with amounts wagered up 11%. Ahead of a range of marketing restrictions being introduced in the second half of 2019, GVC plans to leverage the brand’s retail network to ensure its online arm continues to grow.
Overall sports brands gaming NGR was 25% ahead, with growth driven by new slots content, improved cross-sell, an expanded live casino offering and improved user-journeys.
GVC’s online gaming brands saw revenue grow 16% on a proforma basis to £351.4m, driven largely by a stellar performance from partypoker, which saw revenue grow 40% year-on-year. Partypoker was boosted by investment in live events, pooled liquidity between France and Spain, and ongoing enhancements to user experience.
This was supplemented by an 11% increase in the revenue contribution from the Gala brands, which benefited from a sponsorship deal with UK TV quiz show The Chase, and a 14% increase in revenue from GVC’s casino brands. The GVC brands saw growth aided by the introduction of new content and efforts to offer customers a more personalised user experience.
The Foxy bingo brand was migrated to GVC’s proprietary bingo platform in November 2018, ending its long-term partnership with 888’s Dragonfish, and the operator said that post-migration performance had been positive.
Looking at GVC’s retail division, acquired through the Ladbrokes Coral deal, reported revenue for the nine months post-acquisition came in at £2.4bn. On a proforma basis, covering the full calendar year, revenue was down 8% at £3.1bn.
Sports betting revenue was down 9% at £547.3m. GVC noted that the positive impact of the World Cup and a full year of horse racing was offset by a stronger comparative period in 2017, when the operator’s over-the-counter performance was boosted by price guarantee offers.
Machine revenue for the year fell 1% to £780.7m, which the operator said suggested that customer demand was impacted by negative coverage of B2 machines. The roll-out of new Equinox cabinets had a positive effect on Q4 revenue, in which machines posted a 3% increase. GVC noted that this growth had been driven by B3, rather than B2 content.
The European retail divison, meanwhile, posted reported revenue of £211.7m, or £278.8m on a proforma basis, up 16% year-on-year. The proforma figure comprised largely of sports betting, up 15% at £210.2m, with a further £66.0m (up 18%) from other over-the-counter revenue. Gaming machines made a £2.6m contribution to European retail revenue.
GVC generated a further £43.8m in reported revenue, and £53.1m in proforma revenue from other sources, such as its financial trading business, since-divested payments division Kalixa and telephone betting service telebet.
The M&A-related expansion of GVC’s business led to a significant increase in cost of sales for the year. Looking at results on a reported basis, cost of sales for the period increased from £214.6m in 2017 to £931.0m, leaving a gross profit of £2.0bn for 2018. Administrative costs rose to £1.9bn, and after a £8.4m contribution from joint ventures and associates was factored in, resulted in GVC’s operating profit for the year growing to £67.3m, compared to a theoretical £4.5m loss for the combined businesses in 2017.
Finance-related expenses rose to £63.9m and currency exchange losses amounted to £81.7m. These were offset in part by gains of £58.3m, arising from the change in the value of financial instruments, and £1.1m of finance-related income. This resulted in a pre-tax loss of £18.9m, and a net loss for the year of £56.4m once income taxes of £37.5m were paid.
GVC also revealed that trading in the first quarter of 2019 had been strong, with group net gaming revenue 11% ahead of Q1 2018, online revenue 22% ahead, European retail up 9% year-on-year and UK like-for-like retail revenue 2% down.
“This represents an excellent start to the year, and at this early stage, the board is confident of delivering EBITDA and operating profit in-line with expectations,” GVC said.