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GVC scraps dividend despite solid performance in face of pandemic

The group said its board felt it was not prudent to pay a dividend at this time due to the “continuing uncertainty around further lockdowns"

GVC Holdings -

GVC Holdings PLC (LON:GVC), the owner of bookmakers Ladbrokes and Sportingbet, has decided not to pay a dividend for the first half of the year due to continued uncertainty about the effects of the coronavirus (COVID-19) pandemic.  

The FTSE 100 gambling group reported net revenue of £1.6bn for the six months to June 30, 2020, which was down 11% year on year as online revenue rose 21% at constant currency rates, but bookmaking turnover was roughly halved because of the coronavirus lockdown. 

Underlying profit (EBITDA) fell 5% to £348.6mln, in line with management’s guidance of £340-350mln, while post-tax profit was flat at £2.1mln.

With the return of most of the major sporting calendar and the reopening of its retail estate, the company said it is “well placed” for the rest of the year and full-year EBITDA is now expected to be in the range of £720mln-£740mln.

The board said it “does not consider it prudent to pay a dividend at this time”, referring to the “continuing uncertainty around further lockdowns and restrictions as a result of COVID-19”.

However, the fact that there was positive cashflow of £80.5mln in the period was down to most of GVC’s 14,000 staff in its bookmaking shops having been on government furlough schemes, so paying a dividend would have been a sore point to say the least, without even taking into account the cloud hanging over the group’s head as the HMRC investigates its former Turkish business, about which there were no new comments in the statement.

GVC's new chief executive Shay Segev, who stepped up after longtime boss Kenny Alexander abruptly stepped down a month ago, said he felt it was an “encouraging performance” given the unprecedented trading environment.

“These results show that we have a strong foundation. As a technologist, I have huge admiration for what Kenny and the rest of my colleagues have achieved but I am also determined to pursue a programme of continuous improvement as we focus on our four technology-enabled priorities. 

“These are leading the US market, organic growth, expanding into new markets, and being the most responsible operator in our industry,” Segev said in the results statement.

He added that the US is the company’s biggest growth opportunity, where the BetMGM joint venture is operating in seven of the 21 states where gambling is allowed, with a further four expected to go live by the year-end.

Shares in the group rose to 810p and then fell to 777.2p in early trading on Thursday, down 15% in the year to date.

Broer Peel Hunt said the new full-year guidance implied a 3% upgrade to its forecasts.

“With these strong results, and modest upgrade on the focus on the US, the current hot topic in the sub-sector, we believe GVC’s shares will continue to recover the ground lost on the announcement of the resignation of the previous CEO.”

Richard Hunter, head of markets at Interactive Investor, said: “Despite a torrid first half of the year, GVC has dug deep and so far emerged relatively unscathed”, though other developments “have taken some of the shine away”.

He said GVC’s diversification was underlined as other strands of its business, such as poker and bingo took up some of the slack, from sports betting.

Despite its various headwinds, Hunter said: “The statement of the strategic priorities is headlined by the potential of the US market. The company’s joint venture with MGM Resorts in the form of BetMGM has already seen investment of $450mln and net gaming revenue is expected to be $130mln this year, even at this early stage. GVC estimates that the entire market could be worth some $20bn by 2025, as an increasing number of states in the US relax their gambling laws and as the propensity to bet on sport in particular takes a further hold.”

   --Adds share price and broker comment--

Quick facts: GVC Holdings

Price: 998.4 GBX

AIM:GVC
Market: AIM
Market Cap: £5.84 billion
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