GVC (GVC) chief executive Kenneth Alexander thinks the US will be the world’s biggest regulated market for gambling within the next five years. Most US states are in the process of legalising sports betting after laws banning such activity were overturned in May. GVC has taken advantage of the situation with a 50:50 joint venture with MGM Resorts – a partnership Mr Alexander called the “the deal everyone else wanted” – aimed at creating a sports betting and online gambling platform with an initial investment of $100m (£76.6m). Broker Numis has approved of the tie-up, which it says will combine MGM's brand and multi-state licences with GVC's technology.
It’s been a good period for deals at GVC. Mr Alexander said the Ladbrokes Coral acquisition, which completed in March, "couldn’t have gone better", and is largely behind the dramatic increase in the top and bottom line. Management has identified £30m of capital expenditure synergies, adding to a longer-term target of £130m in cost savings by 2021. GVC is currently transferring Ladbrokes onto what Mr Alexander called its "market-leading platform". Indeed, the digital product continues to prove popular with customers: online net gaming revenue rose by a third during the first half.
Together, the online business and US opportunities should help make up for the impact of tighter regulation in the UK. In May, the Department for Culture, Media and Sport announced it would cut the maximum stake allowed on fixed-odds betting terminals (FOBTs) from £100 to £2. In response, GVC said it had spent the past two years creating a business that could withstand any structural or regulatory shocks in any of its markets. Even so, Mr Alexander expects that once the changes come into effect, GVC's UK retail division will shrink to around 15 per cent of group cash profits. During the reported period, net gaming revenue from UK retail fell 3 per cent as the World Cup boost failed to fully offset lower footfall across betting shops.
Analysts at Numis expect EPS of 79.1p during 2018, compared with 49p in 2017.
|GVC HOLDINGS (GVC)|
|ORD PRICE:||1,057p||MARKET VALUE:||£6.11bn|
|TOUCH:||1,056-1,058p||12-MONTH HIGH:||1,184p||LOW: 789p|
|DIVIDEND YIELD:||3.3%||PE RATIO:||53|
|NET ASSET VALUE:||640p*||NET DEBT:||50%|
|Half-year to 30 Jun||Turnover (£bn)||Pre-tax profit (£m)||Earnings per share (p)||Dividend per share (p)|
|*Includes £6.22bn of intangible assets or 1,076p per share|