Online gambling group GVC (GVC) says it is reaping the benefits of previous brand investment by Bwin.Party, the rival operator it acquired at the start of 2016. GVC implies Bwin’s brands are now strong enough to cut back on big sponsorship and brand spend, in line with its leaner approach to marketing.

‘Having their name on Real Madrid shirts in the past has certainly help build up the brand,’ says GVC chief executive Kenny Alexander.

GVC says it is ahead of schedule with a target of achieving €125 million annualised synergies from the Bwin merger. Alexander says the initiatives are focused on staff numbers, technology, marketing spend and head office costs.

‘Our half year pro-forma EBITDA is up 42% to €104.4 million. Yes, this is helped by Bwin synergies, but we are also growing the business,’ says the CEO. Analysts had forecast €91 million EBITDA for the period.

‘We are increasing the number of customers and also getting more value out of our existing customers,’ adds Alexander. ‘In particular, we are reducing the churn on VIP customers, getting them to stay with us for longer and spend more money with us.’

GVC hopes to increase its position in the B2B market, having recently won a deal to transfer UK betting provider Betfred on to its technology platform. This adds credibility to GVC’s sales pitch and would arguably put it up against the likes of Playtech (PTEC) when trying to convince other operators they could save money by switching to the GVC system.

The business remains optimistic on opportunities in the US where it has a licence to operate, although the market has been slow to take off.

Stockbroker Cenkos says GVC trades on a 42% discount to Paddy Power Betfair (PPB), which it calls ‘nonsensical’.

It is worth noting that GVC has historically traded at a discount to the mainstream bookmakers as it derives a proportion of its earnings from unregulated territories. The market is discounting its valuation in recognition that these geographies could either impose heavy taxes or ban operators completely.

‘Three quarters of our revenues are taxed or regulated,’ claims Alexander. ‘There is no change in stance from the board – we continue to grow in regulated areas and also seek opportunities in unregulated ones.’

GVC says it is confident of achieving full-year results at the upper end of market expectations for 2016. It also remains committed to restarting dividends next year.

Chief financial officer Richard Copper will leave the business in early 2017. He will be replaced by Paul Miles, currently finance boss at consumer credit group Wonga and previously at insurer RSA (RSA) and life assurer Phoenix (PHNX).

Issue Date: 20 Sep 2016