Public excitement around trying to predict winners in the World Cup tournament helped to drive an 8% rise in net gaming revenue for gambling firm GVC (GVC) in the six months to June. Importantly for investors, the much-prized dividend has been lifted by 9.6% to 16p per share.
The company seems pleased with its performance, although it does state that the weather worked against its fortunes in the first quarter of the year. Numerous horse races were cancelled, reducing its opportunity to collect bets.
Nonetheless, investors don’t appear to be too blown away by the numbers given GVC’s share price has fallen by 0.5% to £10.57 on publication of the results.
There are no earnings upgrades from the selection of analyst notes we’ve seen and it looks like the company is going to spend surplus profits on marketing efforts to take more market share.
The recently-acquired Ladbrokes Coral business contributed two months’ worth of trading in the half year results. The acquisition arguably increases the risk around GVC as it brings an estate of physical stores in the UK to what has historically been an online-only business.
GVC chief executive Kenny Alexander is optimistic the enlarged company’s UK operations will continue to deliver despite a competitive environment, tighter regulation and anticipated slower growth.
Alexander believes the fastest areas of growth for GVC are Germany and Australia, which have been experiencing strong trading.
Davy Research analyst Michael Mitchell says GVC has started the second half of 2018 strongly and is ahead of expectations with extra profits likely to be reinvested to help win more market share.
Shore Capital analyst Greg Johnson says he may trim his full year £745m earnings before interest, tax depreciation and amortisation (EBITDA) forecast to £740m as earnings were slightly lower than anticipated on higher digital marketing costs.
He flags GVC’s growth in the second half needs to be in line with the first half, although the company should benefit from further synergies.
Numis analyst Richard Stuber implies the fourth quarter period could be tough for the gambling sector as there are tough year-on-year comparative figures to beat.
