GVC lifts profit forecasts as betting shops perform better than expected

The owner of Ladbrokes and Coral raised profit forecasts on Thursday after their betting shops performed better than expected following the imposition of curbs on FOBTs.

For the second time this year GVC Holdings said the effect of the government's decision to cut the maximum stake on controversial gaming machines to £2 had not been as bad as first feared, with the company upgrading retail operating profit forecasts by £10 million.

As a result of that upgrade and strong online performance, GVC raised its forecast for the group's earnings for 2019 to between £650m and £670m.

Betting shop performance is of major importance to British racing not only through the levy the shops produce but also the income from media rights.

GVC had previously said the cut in FOBT stakes would lead to around 1,000 betting shop closures, but that forecast has been cut subsequently to 900.

Nevertheless, like-for-like retail net gaming revenue (NGR) fell by ten per cent in the first half of 2019, according to GVC's interim results. About 150 of their betting shops have already closed their doors this year with a further 200 likely to shut in the remaining months of 2019.

GVC is set to close around 900 betting shops

GVC chief executive Kenny Alexander told the Racing Post: "Our estate is very well managed. It's very efficient and as a result we're performing slightly better than we had expected.

"We will be shutting close on 900 shops though. It's still going to have a big, big impact on us, but the retail estate still is an important part of the group.

"It will contribute something like 14 per cent of the group's ebitda [earnings before interest, taxation, depreciation and amortisation] and will generate about a hundred million of cash, which is important."

Alexander said horseracing remained an important part of GVC's UK business. "Our relationship with the racing industry is pretty good but obviously there are big, big challenges in terms of funding racing and prize-money," he added.

"There are big challenges but they are not insurmountable. What I would say is that we contribute a hell of a lot of money to racing, so we do pay our way."

Overall group NGR was five per cent up on last year at £1.81 billion with strong growth in online NGR, which was 17 per cent ahead.

GVC also said they were "on track" for a full online launch in New Jersey in time for the start of the NFL season in September, while they downplayed the potential effects of new regulation in Germany where GVC's bwin brand is one of the market leaders.

Alexander added: "The business has performed very, very well –ahead of expectations – and is growing faster than any of our competitors."

Charlton: GVC no longer sponsor the shirts of the recently-promoted Championship clubCredit: Getty Images

GVC was last month among five leading bookmakers to commit to a cumulative £100m contribution to tackling problem gambling over the next four years, while the company had also withdrawn all marketing associated with English and Scottish football teams and donated existing shirt sponsorships to the Children with Cancer charity.

"I think we have made great strides but there is more to be done and I think we are heading in the right direction," Alexander added.

However he told analysts the industry did still occasionally "shoot itself in the foot", citing the "absolutely ridiculous" tie-up between 32Red, Wayne Rooney and Derby County.

Alexander has also had to face personal criticism over the level of his pay and the circumstances surrounding the sale of GVC's Turkish business in 2017.

"It hasn't affected me at all," he said.

Analysts at Goodbody described the announcement as a "very positive update from GVC", while the company's share price was down 1.6p (0.29 per cent) at 545.2p on Thursday afternoon.

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