Gambling Industry Acquisitions and Financial News — Weekly Round-up for June 1, 2018

By Brian Cullingworth, Last updated Jun 1, 2018

Spanish Online Gambling Market Thrives In Q1-2018

Online poker already benefitting from shared player pool

Spanish regulator Dirección General de Ordenación del Juego (DGOJ) released very positive market statistics Thursday reflecting improvements in online poker thanks to shared player pools with France and more recently Portugal, and good year-on-year growth in overall revenue.

Highlights of the report include:

• Overall online revenue up 28 percent y-o-y at Euro 163.3 million;
• Sports betting up 15.9 percent at Euro 81.7 million;
• In-play betting accounted for 62.5 percent of sports revenue and 67 percent of betting handle;
• Fixed-odds betting delivered 34.9 percent of revenue and 30.2 percent of handle;
• Online casino revenue was up 51 percent at Euro 56.6 million, with online slots delivering 52.7 percent of that;
• Online poker improved to Euro 21.5 million with revenue made up of cash games (up 30 percent at Euro 8.4 million) and tournaments up 50.2 percent at Euro 13 million;
• Online poker cash game spend increased y-o-y by 19 percent, whilst tournament spend was up 40.4 percent;
• Online bingo revenue rose almost 30 percent at Euro 3.5 million, although the contest element plunged 80 percent to just Euro 200,000;
• Active users were up almost 25 percent in the quarter to 800,000;
• Player deposits were up 58.7 percent at Euro 562 million;
• Marketing spend topped Euro 76.3 million – a 35 percent y-o-y improvement.

Shares Soar After GVC Issues Trading Update

Double digit growth in online gaming revenues

The UK-based online gambling group GVC Holdings plc issued a trading update Friday, forecasting higher cost synergies from its GBP 4 billion acquisition of bookmaker Ladbrokes Coral, and posting a 17 percent growth rate in online gaming revenue.

Shares of the company rose as much as 4.6 percent to an all-time high of 1,028 pence on the London Stock Exchange following the update.

The owner of the Sportingbet, Bwin, PartyPoker and Foxy Bingo brands, said it expected cost synergies from the Ladbrokes deal to be at GBP 130 million annually by 2021, compared with GBP 100 million pounds projected at the time of acquisition deal.

Total group net gaming revenue for the period from Jan. 1 to May 20 was up 7 percent, with the biggest boost coming from online channels.

The update covers the first 20 weeks of the current year together with the release of pro forma financials for 2016 and 2017.

GVC announced that effective immediately it has changed its reporting currency from Euros to GBP.

Key highlights of the update include:

• Completion of Ladbrokes Coral Group acquisition on 28 March 2018;
• Cost synergies upgraded to at least £130m (from £100m) by 2021;
• Double-digit Online NGR growth continues, +18 percent in constant currency;
• Sports Brands NGR +16 percent (+18 percent cc);
• Games Brands NGR +16 percent (+18 percent cc);
• Legacy GVC and Ladbrokes Coral businesses both double-digit growth;
• UK Retail Like-for-like NGR -5 percent impacted by adverse weather;
• European Retail NGR +32 percent (+28 percent cc) boosted by a strong performance from Eurobet;
• Total Group NGR +7 percent.

Drilling down into the online gambling part of the update, GVC reported that pro forma online NGR grew +17 percent against the same period in 2017. Sports Brands total NGR growth was +16 percent, with a gross win margin of 10.4 percent (2017: 9.2 percent), whilst amounts wagered grew by 4 percent. Games Brands also enjoyed a strong start to the year with NGR +16 percent.

GVC legacy brands continued to grow strongly during the period, with NGR +19 percen (+21 percent cc). Sports Brands NGR increased by 17 percent (+19 percent cc), with sports +23 percent and gaming +12 percent. Sports gross win margin was 11.0 percent (2017: 9.4 percent). Amounts wagered were up 1 percent year-on-year, however, adjusting for regulatory changes in some Eastern European markets, wagers grew by 6 percent.

Looking ahead to the FIFA World Cup in Russia, bwin has recently launched a ground-breaking marketing campaign, starring amongst others, Diego Maradona. Games Brands NGR growth was +20 percent (+23 percen cc), with partypoker continuing to be a key driver (+41 percent), also supported by a good performance from the casino brands. Meanwhile, the acquisition of 51 percent of Crystalbet was completed on 13 April with good early performance of the business. Since acquisition, amounts wagered are up 45 percent year on year (year to date +34 percent) at Crystalbet, with NGR +83 percent (75 percent year to date).

Ladbrokes Coral online brands grew 14 percent (+16 percent cc) over the 20 week period. Sports Brands NGR growth was 15 percent, with sports NGR +20 percent driven partly by an improvement in gross win margin to 10.0 percent (2017: 9.1 percent). Amounts wagered grew by 5 percent. Gaming revenues from Sports Brands grew 9 percent.

In the UK, Coral continued to perform well with NGR +15 percent over the period. Ladbrokes.com’s performance has begun to improve with NGR +6 percent, as the brand benefits from corrective measures implemented in 2017. Ladbrokes Australia continued to gain market share, with NGR up 18 percent (+27 percent cc). Eurobet also enjoyed a strong performance with NGR +44 percent (+39 percent cc), benefiting from a better gross win margin of 11.1 percent, versus the weak comparative in 2017 (7.8 percent). Finally, in a competitive UK market Gala NGR grew 8 percent.

Kenneth Alexander (CEO) said:

“It is very early days since the completion of the acquisition of the Ladbrokes Coral Group, but from what I have seen so far I am excited about the opportunities and even more confident of delivering shareholder value. The online operations continue to grow strongly and this is before we have started to implement best in practice across the enlarged group. Regulatory challenges across the industry cannot be ignored but through our scale, diversification, proprietary technology and people, GVC is very well placed to continue to succeed.”

Another Strong Year For Paf

Online gambling revenues up in 2017

Finnish operator Paf reports that revenue from both online and land gambling operations rose last year, increasing overall turnover 2.6 percent to Euro 116.5 million and enabling the company to allocate Euro 18 million to regional community projects.

Group operating profit rose over 80 percent y-o-y to Euro 27.6 million.

Online GGR rose to Euro 84.5 million from Euro 81.9 million in the preceding year, whilst GGR from land and shipboard gambling rose from Euro 31.5 million to Euro 31.9 million.

“2017 was a very strong year for Paf,” said CEO Christer Fahlstedt. “Our net result nearly doubled during the year and we saw a steady growth in all markets despite the sale our Italian subsidiary in February 2017. This shows that our strategy, which focuses on key markets and cost effectiveness, has already borne fruit.”

GVC Management Could Face Shareholder Discontent Over Pay Packages

Shareholder advisory bodies say remuneration at gambling group is excessive

Despite a positive series of acquisitions and financial results, the board at GVC Holdings plc could find itself facing shareholder concerns regarding the high level of executive remuneration at its agm next month, according to a report in the publication This Is Money over the weekend.

InfoPowa readers may recall that Playtech plc stakeholders earlier this month refused to approve a remuneration report which signed off a 67 percent pay rise to CEO Mor Weizer.

The GVC objections centre on share options awarded to chief executive Kenny Alexander worth GBP 44.9 million which have been paying out since 2016, and similar rewards to chairman Lee Feldman worth GBP 22.5 million.

The reward scheme was introduced after GVC’s GBP 1 .1 billion takeover of online betting firm Bwin.party, the report notes, and are linked to GVC’s share price, which recently topped GBP 10 a share.

Because the reward is paid over nine instalments, it has not thus far attracted too much attention, but This Is Money claims that options maturing in 2017 took the chief executive’s total remuneration to GBP 18 million over the year, observing that this is 550 times the average GVC employee salary.

Over the same period Feldman’s reward totalled GBP 8.8 million, including a GBP 1 million bonus.

Asked for comment, Luke Hildyard, director of campaign group The High Pay Centre, said that payments one tenth or even one hundredth of this size would still be an extraordinary windfall in most people’s eyes and more than enough to reward or incentivise anyone.

Pirc and Glass Lewis, two firms that advise shareholders, agreed, declaring the rewards to be excessive and urging shareholders to vote against the report of GVC’s remuneration committee at the agm in Gibraltar next month.

Glass Lewis went so far as to brand the un-capped rewards as ‘exceptionally disproportionate’.

If shareholders object, it will not be the first time; last year 43 percent of them rejected the remuneration committee’s report, This Is Money notes.

GVC declined comment when approached by This Is Money.

Paddy Power Betfair Kicks Off Share Buy-Back Program (Update)

Goldman Sachs International to repurchase ordinary shares on behalf of gambling group

Paddy Power Betfair plc has followed up on its Q1 trading update pledge to return GBP 500 million to shareholders over the next 12 to 18 months, initially commencing with a share buyback of GBP 200 million.

In a stock exchange advisory Tuesday the company revealed that it has entered into irrevocable, non-discretionary arrangements with Goldman Sachs International to repurchase ordinary shares on its behalf for a maximum consideration of GBP 200 million.

The share buyback programme will commence 29 May 2018 and continue for 3 months, subject to market conditions. The maximum number of ordinary shares to be repurchased under the share buyback programme is 12,692,692, and the purpose of the share buyback programme is to reduce the company’s share capital. Shares purchased by the Group will be cancelled.

Goldman Sachs International will make its trading decisions in relation to the company’s securities independently of, and uninfluenced by, the Paddy Power Betfair group.

Ardent Group Acquires Share Holding In Swiss Casino Davos

Aligns for upcoming vote of online gambling

The Belgian Ardent Group (formerly Circus Group) has acquired a 44 percent share holding in Stadtcasino Baden AG’s Swiss subsidiary Casino Davos for an undisclosed consideration.

The deal strategically positions the Ardent Group for potential regulatory change as a new Swiss gaming law is expected to be voted upon in the second week of June. The law enables Swiss terrestrial casinos to launch online operations on their successful application of a license extension.

“For this reason, Stadtcasino Baden Group has made the strategic decision to operate Casino Davos in the future together with a partner with many years of online casino experience,” a press statement reads. “The choice fell on the Casino de Spa SA, which is part of the Belgian Ardent Group, and already successfully runs its own licensed online casino.”

“If the gambling law is passed on June 10, we will immediately and together with our new partner, develop a competitive online offer for Casino Davos to promote us as early as possible for an online license extension,” Detlef Brose, CEO of Stadtcasino Baden AG, said.

“This extension of the concession would be an important step in securing the long-term future of the penultimate Swiss mountain casino.”

Stadtcasino Baden AG remains the largest shareholder in Casino Davos with a 46 percent stake, while the Davos Tourism Organization retains its 10 percent share.

OPAP Reports A Solid First Quarter

Revenue and profitability both rise in Q1-2018

Greek online and land gambling group OPAP has posted its Q1-2018 results showcasing a rise in revenues and profitability due to the performance of betting and video lottery terminal businesses.

Highlights from the report include:

• Gross gaming revenue up 5.1 percent year-on-year at Euro 377.3 million;
• Net gaming revenue up 5.9 percent year-on-year at Euro 253.1 million;
• Amount wagered by customers up 2 percent at Euro 1.08 billion;
• Gross operating profit up 4.9 percent at Euro 147.9 million;
• Net profit up 20 prcvent at Euro 39.9 million;
• EBITDA up 11.1 percent at Euro 87.2 million on margin of 23.1 percent.

In his report CEO Damian Cope described the company performance as strong, demonstrating good growth in key financial metrics as a result of investments made in 2017.

“Both our betting and VLT categories performed well and the new relationship with our agents also helped to realise tangible improvements,” he said. “We continue to invest in the optimisation and modernisation of our retail estate network, with several hundred new OPAP stores opening during 2018,” he said.

“Our comprehensive technology transformation programme is also approaching the final phase as we plan for the completion of all our main retail platform migrations, plus our new online platform, by the end of Q3.”

Cope said that economic challenges facing Greece have had a dampening effect on the disposable income of OPAP’s customers, but that the company looks forward to increased business associated with World Cup football betting.

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