Soon we’ll not be supporting this browser anymore.
This means our website may not look and work as you would expect. Read more about browsers and how to update them here.

Skip to main content
  • Register
  • Help
  • Contact us

GVC - online driving progress

George Salmon | 5 April 2019 | A A A
GVC - online driving progress

No recommendation

No news or research item is a personal recommendation to deal. All investments can fall as well as rise in value so you could get back less than you invest.

Entain plc Eur0.01

Sell: 1,953.50 | Buy: 1,955.50 | Change 0.00 (0.00%)
Chart View factsheet

Market closed | Prices delayed by at least 15 minutes | Switch to live prices

GVC has released a short first quarter trading update. Underlying net gaming revenue is up 9%, in line with the rate of increase seen over last year, and the board remains confident of meeting its targets for the year.

The shares rose 1.6% in early trading.

View the latest share price and how to deal

Our view

Online gaming specialist GVC is a serial accumulator. The latest addition, Ladbrokes Coral, makes it an unusual mix of established high street name and digital disruptor.

That split is reflected in recent trading updates. UK in-shop trends have been weak, and tighter restrictions on gambling machines look set to make things worse. The government's move to cap staking on fixed odds betting terminals (FOBTs) will hopefully make society richer, but the lost profits will make GVC poorer. Around 1,000 shops are likely to close.

However, we think there are positives.

The group reckons it can get £130m of cost savings from integrating the two businesses. That figure's actually increased from the initial target of around £100m, despite the tighter restrictions on FOBTs.

In any case, the group's trump card remains its online business. While the FOBT hit will likely see group profits dip in 2019, the mushrooming digital division means we think GVC looks well-placed to deliver strong growth in 2020 and beyond, provided of course regulations don't get tighter.

In time, those earnings could be boosted by an exciting opportunity in the US. A Supreme Court judgement has given every state the power to legalise sports betting if it wants to.

The chance to snap up market share in such a populous, affluent and sports-mad country is a once in a generation opportunity. Of course such opportunities don't come without risks. It remains to be seen how quickly different states give the thumbs up to sports betting, and there'll be plenty of competition for a seat at the table.

But we think GVC has given itself a good chance of success. At least initially, casinos will be the go-to location for sports betting, and GVC has teamed up with MGM Resorts. There's a lot to like about combining GVC's experience with MGM's well-established brand.

The multitude of moving parts means GVC has been fairly volatile in recent times, and significant share sales from key directors rocked investors' confidence in March.

However, trading remains impressive, and the dividend is well-underpinned by earnings and cash flow. The prospective yield is 6% so investors should get paid to wait and see if GVC can deliver the goods stateside.

Register for updates on GVC

First quarter trading details

First quarter growth was again driven by the Online business, where underlying net gaming revenue rose 18%. Win margins were flat, with wagers up 19%.

While trends were similar in UK and European Retail, in that improved sports and machine wagering helped offset softer sports win margins, net gaming revenue was flat year-on-year. GVC says it will fully assess the impact of the lower machine staking limits in the coming weeks.

CEO Kenneth Alexander said "This trading update reflects a continuation of the strong trends reported on 5 March 2019, and represents an excellent start to the year. We continue to see good volume growth across all major online brands and territories and we remain very confident of achieving our target of double-digit online NGR growth."

Find out more about GVC shares including how to invest

Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by Thomson Reuters. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.

This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research for more information.