GVC Holdings PLC, the global sports betting and gaming group, today reports trading for the period from 1 January to 31 March 2020 (“Q1”) and provides a further update on the impact of COVID-19 and the mitigating actions being taken.  This follows the Group’s previous announcements of 16 and 17 March 2020.

Summary

• GVC started the year well, with Group net gaming revenue (“NGR”) +1% and Online NGR up +19%cc¹ in the first quarter
• However, the closure of retail outlets and the cancellation of sports events significantly reduced revenue from mid-March
• In previous announcements the Group estimated the impact of COVID-19 before any mitigating actions equates to a reduction in EBITDA² of approximately £100m³ per month
• However, following the initiation of a number of mitigating actions the Group now expects to reduce this EBITDA impact to approximately £50m per month
  • As a result, the average monthly cash outflow would be limited to approximately £15m per month, and the Group is confident that further cost actions will enable it to achieve its target of reducing the cashflow to breakeven
• The Group’s financial position remains robust, however given the ongoing uncertainty regarding timings of the easing of shutdown measures around the world, the Board has taken the prudent decision to withdraw the second interim dividend that is due for payment on 23 April 2020

Kenneth Alexander, GVC’s CEO, commented:

“As our Q1 trading numbers once again demonstrate, GVC is a business that, in normal times, delivers an outstanding performance.  However, while our global and product diversification is standing us in good stead during the current uncertainty, the COVID-19 pandemic is posing an unprecedented challenge to our business and our industry.  We are responding decisively, and have put in place a range of measures to keep our people safe, strengthen our financial position, limit cash outflow, preserve jobs and maintain a compelling customer offer.  I am confident that we will emerge from this period in a position of strength, and we will be well placed to take advantage of a range of attractive growth opportunities which we believe will be available to us.

“We are also sensitive to the fact that at this time of economic stress and isolation, it is vital that we ensure a safe, responsible and enjoyable gaming environment for our customers and do everything that we can to minimise the potential for harm.  Accordingly, not only have we supported the Betting and Gaming Council’s 10 pledge action plan on safer gambling, but we have gone further and introduced a range of additional safeguarding measures to ensure that we are able to rigorously monitor and protect anyone who may be vulnerable at this time.

“Finally, I would like to thank our outstanding teams around the world for the manner in which they have rapidly adapted to the challenge, and for their continuing hard work and commitment to ensuring GVC’s long-term success.”

Current trading
In its 2019 full year results on 5 March 2020, GVC reported that the current year up to 23 February 2020 had started strongly.  That momentum continued until the Group started to see the impact of COVID-19 on sporting events and store closures in mid-March.

The performance of the Group for the year to 31 March 2020 is set out in the table below, with key highlights as follows:

• Total Group NGR +1% (+2% cc¹)
• Online NGR +16% (+19% cc¹), with continued strong growth in all major territories
• UK Retail like-for-like (“LFL”)⁴ NGR -19%
• European Retail NGR -3% (flat cc¹) supported by continued market share gains in Italy
• For the period 1 January to 15 March 2020 all divisions performed strongly, supported by favourable sports margins:
  • Group NGR +9% (+11% cc¹)
  • Online performed strongly across both gaming and sports, with NGR +20% (+23% cc¹). Since then there has been an encouraging performance in gaming in the absence of sporting events, in line with the Group’s expectations
  • UK Retail like-for-like (“LFL”)⁴ NGR -5% despite the annualisation of the triennial review impacts
  • European Retail delivered strong NGR growth at +20% (+24% cc¹)

For the avoidance of doubt, the guidance provided on 5 March 2020 is withdrawn.

Impact of COVID-19
On 16 and 17 March 2020 GVC provided assessments of the impact of cancellations of sporting events and store closures on Group EBITDA³ for the year to 31 December 2020.  These announcements were based on the Group’s modelling which assumed that: a) football is suspended across Europe; b) major sporting events are cancelled or postponed (Aintree, Royal Ascot, Euro 2020 etc); c) horse racing in the UK and Ireland is suspended; d) all retail outlets in the UK, Republic of Ireland and mainland Europe are closed; and e) there would be a modest increase in GVC’s gaming business which accounts for 57% of Online NGR.  Taken together, GVC estimated that these events would result in a reduction in EBITDA of approximately £100m³ per month before any mitigating actions.  This would break down by the Group’s key reporting divisions as approximately 20% for Online, 63% for UK Retail and 17% for European Retail.

Mitigating actions
GVC’s teams around the world are working hard to reduce costs and re-prioritise activity in order to preserve free cash, whilst continuing to offer its customers great gaming experiences and to position the Group to emerge from the current restrictions in a position of strength.  A number of opportunities have been identified so far which reduce costs by approximately £50m per month.

For example, in the UK GVC is eligible to receive the government grant towards employment costs as we furlough retail colleagues and retain them on full pay, as well as the business rates relief, which together the Group estimates will reduce costs by nearly £20m per month.

In Italy and Belgium GVC operates a franchising model where the store operating costs (rent, employment, utility and other costs) primarily reside with the franchisee.

Other measures taken include reductions in online sports marketing, sports content and trading costs.

Resultant estimated cash outflow
After adjusting for the impact on EBITDA, adding additional cash costs incurred (such as interest, capex, tax and other costs) and allowing for retail capex reduction, the average monthly cash outflow would be approximately £15m per month.  The Group continues to work through cost mitigation opportunities and is targeting a break-even cashflow per month objective, thereby preserving cash at broadly current levels during this period of retail closures and reduced sporting events.

The following table sets out, for illustrative purposes only, the effect of our modelling and mitigating actions on EBITDA and average cashflow over a month of severe COVID-19 impacts:

Financial position
GVC is in a robust financial position, with net debt/EBITDA as at 31 December 2019 of 2.69x.  The Group had accessible cash of over £350m at 31 March 2020, of which over £250m is cash at hand after excluding cash held on behalf of customers, cash in shops, ringfenced PSP funds and other items which may not be immediately available.

In addition, GVC has a £550m Revolving Credit Facility (RCF) which is currently undrawn.  This facility has a financial covenant which is only tested if the facility is drawn by more than 35% at a quarter-end.  The covenant measure is calculated on a trailing 12-month pre IFRS 16 basis with a net debt/EBITDA limit of 4X.  Unrealised synergies can be added to EBITDA.

GVC currently has two bonds in issue, totalling £500m.  One of £100m is due 2022 and one of £400m is due 2023.  In addition, the Group has Term Loans of €1,125m and $786m, both due 2024.

Dividend
Due to the ongoing uncertainty as to how long restrictions as a result of COVID-19 will be in place around the world, the Board has taken the prudent decision to withdraw the payment of the second interim dividend of 17.6p per share announced on 5 March 2020.  This was due to be paid on 23 April 2020 with a total cash cost of £103m.  However, the Board recognises the importance of dividends as a part of shareholder returns and will consider dividends with future results announcements.

2019 Annual Report and Annual General Meeting (“AGM”) and Directors Remuneration
The Group’s annual report for 2019 is today published on the Group’s website at gvc-plc.com.  Copies will be posted to those shareholders requesting a hard copy as soon as it is practical to do so.  The 2020 AGM was scheduled to be held on 30 April and in normal circumstances an AGM Notice would be circulated with the annual report.  Owing to the public health guidance on social distancing, the Board has decided to postpone the AGM.  The Group will issue an AGM Notice once the Board is confident it can safely hold a meeting on a specified date.

The 2019 Annual report sets out details of the directors’ 2019 incentive outcomes and 2020 implementation.  However, the payment of directors’ 2019 bonuses and the grant of the 2020 LTIP awards have been postponed.  The Remuneration committee will consider the impact of COVID-19 on GVC’s performance and remuneration in due course and review the implementation of the policy for 2020 as appropriate.

Notes

• Growth on a constant currency basis is calculated by translating both 2020 and 2019 performance at the 2020 exchange rates.
• As at 31 January 2020, company compiled EBITDA consensus for the financial year to 31 December 2020 was £776.3m on a pre-IFRS 16 basis.
• The £100m approximate impact on monthly EBITDA is derived from the two announcements of 16 & 17 March as follows: The EBITDA impact over 3.5 months of sports and major events cancelations and European Retail closures of approximately £130m – £150m equating to approximately £37m – £43m per month; the EBITDA impact of UK Retail store closures of approximately £45m – £50m per month; and the EBITDA impact of the cancellation of horse racing in the UK & Ireland of approximately £20m- £25m per month. Taking each of these at the mid-point and allowing for overlap derives an approximate monthly impact on EBITDA of £100m.
• UK Retail numbers are quoted on a LFL basis. During the period, there were an average of 3,131 shops in the estate, compared to an average of 3,464 in the same period last year.

About GVC Holdings PLC:
GVC Holdings PLC is one of the world’s largest sports-betting and gaming groups, operating both online and in the retail sector.  The Group owns a comprehensive portfolio of established brands; Sports Brands include bwin, Coral, Crystalbet, Eurobet, Ladbrokes, Neds and Sportingbet; Gaming Brands include CasinoClub, Foxy Bingo, Gala, Gioco Digitale, partypoker and PartyCasino. The Group owns proprietary technology across all of its core product verticals and in addition to its B2C operations provides services to a number of third-party customers on a B2B basis. The Group has also entered into a joint-venture with MGM Resorts to capitalise on the sports-betting and gaming opportunity in the US.  The Group, incorporated in the Isle of Man, is a constituent of the FTSE 250 index and has licences in more than 20 countries, across five continents.

For more information see the Group’s website: www.gvc-plc.com

GVC is pleased to announce Grainne Hurst has been promoted to the position of Group Corporate Affairs Director and will be joining the Group’s ExCo team.

In the newly created role, Grainne will build on the Group’s ambition to lead the industry on responsible gambling and develop relationships with the media and external partners.

Grainne was previously Director of Responsible Gambling at GVC, a position she held since the Group’s acquisition of the Ladbrokes Coral Group in March 2017, where she led the company’s parliamentary liaison. Previously she has served as a government Special Advisor as well as in a variety of senior Communications roles in other FTSE 100 companies including Asda. She also brings corporate affairs experience from Luther Pendragon, one of the UK’s largest communication consultancies.

Commenting on her new appointment, Grainne Hurst said: “Ensuring that GVC continues to lead the way in safer gambling, corporate social responsibility and regulatory affairs, has never been so important. I am delighted to be joining the talented management team at GVC, following my maternity leave as well as working with our industry and charitable partners to deliver a successful, sustainable and socially responsible business.”

GVC CEO Kenneth Alexander added: “Grainne brings a wealth of experience to this new position, both within GVC where she has spear-headed our Changing for the Bettor Safer Gambling campaign, and from previous communications roles. I am delighted to be promoting from within GVC, after an extensive external search, which proves we have the existing talent and expertise to develop our leadership team. I look forward to welcoming Grainne back from maternity leave next month”.

Gamingtec, a platform solutions provider, announced new slot games in its casino portfolio with Relax Gaming, a supplier of unique and high-performing iGaming content.

Gamingtec B2B partners gained access to Relax Gaming RNG games, including the latest and greatest slots: Mega Masks, Snake Arena, and TNT Tumble, as well as high-quality aggregated content through their Silver Bullet and Powered By studio partnership programmes. So far, 19 slots powered by first-class technology have been integrated into Gamingtec’s state-of-the-art platform and have become available on both PC and mobile devices.

Sapar Karyagdyyev, CEO of Gamingtec, said: ‘We continue to expand our network of premium suppliers. Exciting and dynamic content by Relax Gaming is an excellent fit for our brand. I am convinced our cooperation will be long-term and prosperous.‘

Gurkan Atakul, Casino Products Manager at Gamingtec, mentioned: ‘Our aim is improving our casino portfolio with best providers and I am glad we started our cooperation with Relax Gaming. I believe their games will be a great addition to our casino portfolio.‘

Daniel Eskola, Relax Gaming CCO, added: ‘Gamingtec is a reliable platform provider and is a good partner for the distribution of our content globally. We are sure Gamingtec will enjoy our fast-growing portfolio and wide range of content from our third-party studio partners’.‘

Currently, Gamingtec`s casino and games portfolio includes more than 5000 high-quality and fascinating games. Cooperating with the most famous brands in iGaming industry, Gamingtec provides only the most innovative and entertaining content to its partners.

About Gamingtec:
Gamingtec is a fast growing, independent software platform provider. The company offers secure state-of-the-art software platform and turnkey solutions in the iGaming industry. More than five thousand games produced by different developers are integrated and available as a turnkey solution or via flexible API integration. The company’s clients also benefit from advanced CRM software, bonus engine, and payment gateway.