GVC paid out a juicy 50 cents a share special dividend in June, but the bumper pay-out can not disguise the operational difficulties the company has been facing with the shares now trading close to 12-month lows.
GVC's highest margin internet site is German-speaking CasinoClub, but it is up against a lot of competition so a sizeable portion of the first half rise in marketing and affiliate costs (from €8.3m (£7.1m) to €11.4m) was spent keeping that site's high rollers happy. Despite these efforts, CasinoClub's Net Gaming Revenues (after deducting winnings, charge-backs and promotion bonuses) still fell 9 per cent to €13.7m and the site's clean cash profits dropped €9.5m to €7.2m.
Even without the European Court of Justice giving seemingly conflicting judgements on internet gaming laws in the EU, it obviously makes a lot of sense for GVC to use CasinoClub's cash flow to develop other products. One is its southern European online sports betting site Betaland and another is last summer's acquisition Betboo. The latter offers online bingo, casino and sports betting in Latin America.
Broker Arbuthnot forecasts 2010 NGR up from €52.6m to €58.1m, but expects adjusted pre-tax profits to fall from €15.8m to €8.4m. A five per cent tax charge suggests EPS of 26c (around 22.3p), down from 44 cents in 2009.
GVC (GVC) | ||||
|---|---|---|---|---|
| ORD PRICE: | 105p | MARKET VALUE: | £32.7m | |
| TOUCH: | 103-107p | 12-MONTH HIGH: | 222p | LOW: 91p |
| DIVIDEND YIELD: | 8.2% | PE RATIO: | 5 | |
| NET ASSET VALUE: | 202¢* | NET DEBT: | €5m | |
| Half-year to 30 Jun | Net gaming revenue (€m) | Pre-tax profit (€m) | Earnings per share (¢) | Net div per share (¢) |
|---|---|---|---|---|
| 2009 | 26.0 | 8.23 | 25.9 | 20.0 |
| 2010 | 28.1 | 1.50 | 4.4 | 10.0 |
| % change | +8 | -82 | -83 | -50 |
Aim: Gambling. * Including intangibles of €62.6m, or 201¢ a share. £1 = €1.165 | ||||
