How GVC Holdings Became the UK’s Second-biggest Operator

Posted by Harry Kane on Saturday, September 14, 2019

The iGaming market in the UK has continued to grow of late, peaking at a total gross gaming yield (GGY) of £5.6 billion in the year ending September 2018. However, this represented growth of just 2.9% on the figures recorded in March of the same year, hinting at a potential slowdown that could hinder market expansion in the near-term.

There are certainly challenges within the sector, from the spectre of Brexit to increasingly stringent regulatory measures and the upcoming Remote Gaming Duty (RGD) hike of 6% (which will be rolled out in October).

However, some iGaming brands continue to thrive against an increasingly uncertain backdrop, with GVC Holdings offering a relevant case in point. But why is this company continuing to thrive, and what can other operators learn from their example?

GVC Holdings – Now the UK’s Second-Largest Online Operator

Last week, GVC released its latest financial report for the six months ending June 30th, and it’s fair to say that the performance of the operator raised short-term expectations in the market considerably.

Overall, the company announced pro forma net gaming revenue gains of 5% during the first six months of 2019, alongside a total return of £1.81 billion.

Beyond this, its underlying earnings also rose by 5% to a hefty £366.8 million, and this undoubtedly represents relatively impressive growth in a challenging economic climate.

These figures even encouraged the operator to publish bullish full-year earnings guidance in a range of between £650 and £670 million, which shows an increase on the previous target of £630 million (established at the beginning of 2019).

Some figures were a little more disconcerting, of course, which is only to be expected given the challenges currently facing online and multi-channel casino operators in the UK.

For example, GVC’s post-tax profit declined to just £2.1 million during this six-month period, from a much healthier level of £113.8 million during the first two quarters of 2018.

Increased taxation and duties have certainly eaten into the operator’s profits, whilst the FOBT crackdown also targeted land-based bookmakers such as Ladbrokes and slashed offline revenues by as much as 56%.

The good news is that this sudden decline profits is likely to be short-term in nature, with operators like GVC striving to switch their attentions online and pursue high-growth markets further-afield in Europe and the United States.

Remember, the FOBT cap was only rolled out in April, so operators are still in the process of developing new growth strategies that enable them to minimise financial losses and develop brand new revenue streams.

How GVC’s Growth Has Been Driven Online

GVC Holdings can also seek solace in the fact that this years’ growth to date has been driven primarily by online revenues, as the operator continues to increase its virtual presence and leverage the lucrative iGaming niche.

Overall, GVC’s online revenue rose by 17% to £1.02 billion in the six months ending June 30th, with the company drawing a subsequent operating profit of £185.5 million.

This represented increased profits of 9% in comparison with quarter four 2018, although it may be argued that this growth will decline slightly when the RDG is increased to 21% in October.

The revenue generated by casino gameplay also increased by 17% to £574.6 million, with these figures boosted by various acquisitions and the development of new instant play platforms. This also more than compensated for a sudden decline in B2B revenue, which dropped by one-third to £8.6 million and came as no surprise to commentators within the industry.

As for online sports revenues, GVC recorded an increase of 18% to £462.3 million during the same period of time. This was impressive, particularly given that the first half of 2018 produced figures that were boosted by significant levels of World Cup betting.

This was largely attributed to improvements in handling wagers, which accounted for a 13% increase and laid the foundations for the operator to record similar profits going forward.

In the UK, total online revenues grew by 13% during H1 this year, with Ladbrokes.com leading this charge as it looked to overcome the impact of the aforementioned FOBT cap. Along with impressive showings by GVC’s stellar Coral and Gala brands, the operator has begun to supersede many of its rivals and emerge as “the number two online operator” in the UK.

Growth was even more pronounced in more progressive, higher-growth markets, with online revenues increased by 155 in Italy. GVC’s Eurobet, bwin and Gioco Digitale brands led the way here, with these entities having benefited from far greater efficiencies since they became fully coordinated under single management.

If we cross over into Germany, we see that online gambling revenues increased by a staggering 23% during H1, and once again the dominant bwin brand was central to this growth.

Both iGaming (which contributes 55% to the total online yield) and sports betting experienced significant growth in Germany, and whilst regulatory uncertainty remains for the time being, it has yet to impact adversely on the market’s overall performance.

The Last Word – What Can Others Learn from GVC’s Success?

Incredibly, some of GVC’s other markets enjoyed even higher levels of growth, including Brazil (52%), Georgia (49%) and Spain (16%).

The latter nation moved to slash the rate of tax payable by iGaming brands to 20% last year, whilst empowering semi-autonomous enclaves like Ceuta to offer even greater financial incentives to operators.

This sustained level of success has certainly created a template for other operators to follow, particularly in terms of how online acquisitions allows brands to increase their presence in the lucrative iGaming market.

GVC Holding’s international focus is also something that other operators should follow wherever possible, as it owns key subsidiaries in high-growth markets throughout Europe.

This enables the brand to offset the growing financial risk in the ultra-competitive UK market, whilst also creating an opportunity to target burgeoning regions such as North America.

As a note of caution, however, GVC has also announced that it expects “to be given dispensation to relax any maximum monthly customer loss or spend limits that may be implemented” in countries such as Germany.

This flies against the tenacious approach that operators are taking to responsible gambling in the modern age, and GVC could be caught cold if regulators in Europe continue to crackdown on and sanction brands that fail to adequately safeguard their customers.