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GVC feels pain following triennial review

With 450 shops to close, the impact of the stake limit on fixed-odds betting terminals is less than half what was originally expected
GVC feels pain following triennial review

The government’s triennial review, and the cut to maximum stakes on fixed-odds betting terminals that resulted, has hit the gambling industry hard. However, for GVC (GVC) it hasn’t hit as hard as expected. The group saw a £118m hit to UK retail’s adjusted cash profits due to the review, but it now plans to close 450 of its shops, less than half those originally anticipated. It was enough for management to award a bonus of £2.5m to be shared among its ‘front-line’ staff. Strip out the impact of the review and incremental taxes and the group’s online adjusted cash profits were up 20 per cent, while UK retail was up 5 per cent. 

IC TIP: Hold at 787p

The group is in the process of integrating its mammoth acquisition of Ladbrokes Coral, which was approved by shareholders in March 2018. Management said it has already migrated Gala and Coral onto its technology platform and hopes to have Ladbrokes on board in time for the UEFA Euro 2020 football tournament in June this year.

Trading in the year so far has started well, with online net gaming revenue leading the group – up 16 per cent, versus 5 per cent at a group level. Management is targeting double-digit revenue growth in the division, but acknowledges regulation is creating “opportunities as well as challenges”.

Broker Citi is forecasting adjusted EPS of 79p in 2020, rising to 96p in 2021.

GVC HOLDINGS (GVC)  
ORD PRICE:787pMARKET VALUE:£ 4.59bn
TOUCH:787-788p12-MONTH HIGH:957pLOW: 504p
DIVIDEND YIELD:4.5%PE RATIO:na
NET ASSET VALUE:483p*NET DEBT**:73%**
Year to 31 DecTurnover (€bn)Pre-tax profit (€m)Earnings per share (¢)Dividend per share (¢)
20150.2525.540.056.0
20160.72-174-51.030.0
Year to 31 DecTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20170.79-22.6-6.929.8
20182.94-18.9-12.232.0
20193.60-174-26.435.2
% change+23--+10
Ex-div:12 Mar   
Payment:23 Apr   
*Includes intangible assets of £5.36bn, or 921p a share **Includes lease liabilities of  £364m