GVC Holdings Reports 17% Profit Rise Due to World Cup Betting
GVC Holdings, an FTSE 100 company which owns Bwin.Party Digital and Ladbrokes Coral Group, reported a rise in profits in 2018 due to the Russian World Cup, which was considered a successful tournament by most standards. GVC said in its report that it hopes to offset expected decline in the UK gaming market by an uptick in the US gambling sector.
In a Thursday financial report, GVC Holdings said revenues are up 8% year-to-year over 2017. For the first six months of 2018, revenues were £1.7 billion.
Underlying operating profits were up 17% year-to-year, with a total of £278 million in profits on the year.
The report was good news for investors, because GVC said it had “good momentum” and it was making gains in all “key territories”.
Ladbrokes Coral Acquisition
The Ladbrokes Coral acquisition earlier this year was lauded in the report. Already, GVC had earmarked £130 million in cost savings from the acquisition. Cost savings are a reduction in business expenses which happens in acquisitions and mergers, when the two companies eliminate redundancies.
Besides the original estimated cost savings, GVC Holdings said it located another £30 million in cost savings since its last financial report.
UK Retail Down 3 Percent
The company reported UK retail was down 3% on the year, though the report suggested UK revenues would have been down significantly more if it had not been for the World Cup. One reason for the drop in retail business was a number of horse races were canceled due to the “Beast from the East” — an unexpectedly harsh cold wave whichm, along with Winter Storm Emma, hit the United Kingdom and Ireland from February 24 to the weekend of March 17-18.
Revenue from gaming machines was down 3% in 2018. GVC Holdings said the negative media coverage of fixed-odds betting terminals (FOBTs) led to the decline in revenues. It is a better explanation than William Hill gave, which claimed the coming 2019-2020 FOBTs bet reduction had led to a similar decline in gaming machine revenues.
FOBTs Revenue Drop Dreaded by UK Companies
FOBTs are a boogeyman of the UK gambling sector, as they have been called the “crack cocaine of gambling”. The gaming machines are considered highly addictive by critics of UK gaming machines. The rapidity with which bets are made on FOBTs tends to be the main factor behind compulsion and problem gambling, which is why the UK Gambling Commission is lowering the bet maximum from $100 a spin to $2 a spin.
Anticipation of the new regulations, which are likely to go into effect in 2019 after a parliamentary vote, has all UK gaming companies bracing for its impact. GVC Holdings has closed nearly 1,000 of the Ladbrokes betting shops it acquired in the acquisition, in anticipation of the withering effect the new policy will have.
George Salmon: £2 FOBT Limit Hitting Home
Echoing a common sentiment in the UK gaming industry, Hargreaves Lansdown gaming analyst George Salmon said that “the full impact of the £2 FOBT limit is starting to hit home”. The limitation on FOBT bets is expected to have a massive impact on UK’s betting shop industry, which have come under heavy criticism from Labour MPs, researchers on problem gambling, and anti-gambling advocates.
Mr. Salmon said the loss of revenues in the United Kingdom eventually might be offset by booming revenues in the United States, where a May 2018 Supreme Court ruling opened the door for sports betting in dozens of U.S. states. The Supreme Court decision overturned a 1992 federal ban on single-game sports bets in 46 states.
George Salmon on US Sports Betting
Now individual US states have the right to legalize brick-and-mortar sportsbooks and betting shops. Eilers & Krejcik estimates as many as 30 US states eventually will have legal land-basd sports betting, alongside intrastate mobile sportsbooks. The same report suggests the US sports betting industry could generate $6 billion a year by the year 2023.
GVC Holdings has signed a deal with MGM Resorts to supply sports betting products to the Las Vegas casino company. MGM Resorts also signed a data sharing agreement with the NBA pro basketball league.
George Salmon said the full impact of the US sports gambling industry is yet to be known, because it is up to individual state legislatures to legalize bookmaker bets. Salmon said, “Only time will tell if this punt will pay off, but there’s a lot to like about the prospect of combining GVC’s tech knowhow with MGM’s globally renowned brands.”