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GVC boosts full-year profit expectations

The bookie upgraded profit expectations after the impact of the stakes cut on fixed-odds betting terminals was not as bad as expected
GVC boosts full-year profit expectations

Investors in GVC (GVC) will be relieved by this set of results. So far the impact of the maximum stake cut on fixed-odds betting terminals (FOBTs) has been less severe than both the company and analysts expected, with UK retail like-for-like net gaming revenue (NGR) down just 10 per cent.

IC TIP: Hold at 569p

Granted, this new regulation only came into effect in April, but management was confident in the ongoing impact of mitigation measures, and said that substitution into sports betting was better than anticipated, with like-for-like over the counter wagers up 4 per cent. Up to 900 shops are expected to close over the next two years, seemingly severe, but again better than initially anticipated. This in part prompted a £10m improvement in full-year cash profits and operating profit forecasts, now expected to fall in the range of £650m-£670m.

GVC’s online business saw NGR improve by 51 per cent to nearly £1.02bn, driven in part by sports betting. The migration of the Ladbrokes Coral UK digital business onto the GVC technology platform during the second half of the year and into next year is expected to further benefit the online division. In the US, GVC is on track to have online sports betting fully running in New Jersey for the start of the American football season in September.

Analysts at Goodbody expect adjusted EPS of 59.2p in 2019, increasing to 73.3p in 2020.

GVC HOLDINGS (GVC)   
ORD PRICE:569pMARKET VALUE:£3.31bn
TOUCH:568-569p12-MONTH HIGH:1,151pLOW: 504p
DIVIDEND YIELD:5.9%PE RATIO:na
NET ASSET VALUE:551p*NET DEBT:59%
Half-year to 30 JunTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20181.1111425.116.0
20191.78-12.3-0.617.6
% change+61--+10
Ex-div:22 Aug   
Payment:26 Sep   
*Includes intangible assets of £5.94bn or 1,021p a share