We don’t support 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 - longstanding CEO to go but a resilient first half

Emilie Stevens, Equity Analyst | 16 July 2020 | A A A
GVC - longstanding CEO to go but a resilient first half

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: 1,695.00 | Buy: 1,697.00 | Change 26.50 (1.59%)
Chart View factsheet

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

Net gaming revenues for the first half were 10% lower than last year. That reflects store closures and the cancellation of sporting events, despite the online business posting strong growth in the period.

GVC expects cash profits (EBITDA) for the period to be £340m - 350m.

The group's CEO since 2007, Kenneth Alexander, announced his retirement and will be succeeded by Shay Segev (GVC's Chief Operating Officer) on July 17.

The shares fell 3% on the news.

View the latest GVC share price and how to deal

Our view

GVC had a resilient first half, as online gaming revenues from the likes of partypoker and Foxy Bingo, went some way in filling the hole retail shop closures and sports cancellations left over lockdown.

As a result first half profits are expected to be in the region of £340m - 350m, not too dissimilar to last year's £366m. Which combined with the group's significant cost saving measures, meant GVC succeeded in its target of being cash flow neutral over lockdown.

Added to this was news that early signs of trading at retail shops has been positive and sports business has returned to almost pre coronavirus activity levels.

Despite the positive news the shares were stung a bit by the announcement that GVC's architect and longstanding CEO will step down. A significant change at the helm at what is a turbulent time comes with risk.

The new man at the top has his work cut out too. Coronavirus comes at a time when the group was already contending with the introduction of a £2 stake limit on fixed odd betting terminals, which acts as a drag on revenue and profits.

And the sector continues to face intense regulatory scrutiny, which recently led to a ban on using credit cards for gambling online. We can't rule out further policy hurdles in the near to medium term.

Considering the uncertainty at the moment, GVC's balance sheet gives it resilience and financial headroom if needed. But it also means GVC is in a position to invest in opportunities to grow. Focus is on the nascent US market, where market size estimates range from £5bn to £20bn - potentially the largest in the world. GVC's joint venture with casino group MGM Resorts as BetMGM is a good starting point and it's technology should stand it in good stead to add scale. But competition is fierce, with rivals like William Hill over there too, so we'll have to wait for more detail on the pickup.

GVC has proven resilient and as things stand, it looks like the full year could be less off course than first expected. There are also some real opportunities for growth across the pond, and longer-term we think GVC is one of the better placed names in the sector. For now though investors should keep in mind the near-term could be a bumpier ride, and we'd like to see how well retail demand recovers before suggesting out-and-out positivity.

GVC key facts

  • Forward Price/Earnings Ratio: 14.8
  • 10 year average Forward Price/Earnings ratio: 9.9
  • Prospective yield: 2.9%

We've introduced this section in response to recent survey feedback

Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn't be looked at on their own - it's important to understand the big picture.

Register for updates on GVC

Half Year Results (constant currency)

Online net gaming revenue (NGR) rose 21% over the first half, reflecting a strong performance prior to the outbreak and a resilient performance during lockdown - driven by growth in the Gaming business. Gaming revenues rose 32% overall and were up 46% in the second quarter. Sports revenues rose 8% in the half, reflecting strong trading prior to lockdown but the subsequent cancellation of sporting events meant performance was held back.

GVC says customers have "welcomed the return of sports" and activity is close to pre coronavirus levels. The return of sports means online gaming activity has started to normalise, but it's still trading ahead of expectations.

UK and European Retail revenue fell 50% and 47% respectively - reflecting store closures over lockdown, which saw second quarter revenues fall by around 90% in both regions. In the UK, all shops re-opened by the end of June and in Europe all shops in Belgium, Italy and Ireland also opened. Early trading is said to be encouraging.

GVC's cost control meant it was able to achieve its target of operating at cash flow neutral lockdown.

A second round of investment has been committed to BetMGM (the Group's US Joint Venture with MGM Resorts), bringing the total investment from both parties to $450m.

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.