Global betting group GVC (GVC) has enjoyed a strong start to 2019. In a first quarter to 31 March update the Ladbrokes-owner reported a 18% jump in online net gaming revenue, after smoothing out currency swings.
That progress is widespread, and in the face of softer win margins in the UK and Italy, demonstrates the FTSE 250 company's diversified business, management said.
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Yet hopes that this news might reassure investors after a period of significant uncertainty seems to have largely failed. Shares in the company have nudged barely 1.4% higher in early trade on Friday, adding 8.4p to 591.4p.
The chart below puts today's move into stark perspective, the stock having lost half its value since July.
Put another way, GVC has had roughly £3.4bn swiped off its valuation in eight months, getting kicked out of the FTSE 100 index at the end of February this year.
BEHIND THE COLLAPSE
Many investors will already be well aware of the massive blow betting shop operators have suffered after the UK Government clamped down on fixed-odds betting terminals, or FOBTs.
These are the electronic casino-style gaming machines that critics have accused of feeding problem gambling, although not everyone agrees with that claim. But regulators acted, slashing maximum FOBT stakes from £100 per spin to £2.
These new rules came into force just days ago on 1 April but investors have long been anticipating the worst for bookmaker profits.
Interestingly, the UK's gambling watchdog recently issued a statement threatening further action on bookmakers that try to circumvent the new FOBT rules.
Muddying the waters further for investors recently was the near £20m sale of shares by senior GVC management just days after the company's full year 2018 results that the company said showed profits ahead of guidance.
HUGE QUESTIONS
While these new FOBT stake caps are UK-only betting industry consultancy Regulus Partners still sees the longer-term impact as a big unknown. To what extent, its analysts rhetorically ask, will lower income from FOBTs be replaced by other types of in-shop wagers and online betting?
Negative regulatory outcomes can take off ‘chunks, not just slivers’ off GVC’s trading performance, Regulus says.
Davy Research analyst Michael Mitchell points out slowing growth rates for the business. Total net gaming revenue before currency moves had risen 11% in the first seven weeks of this year, but that figure has shrunk to 8% for the first three months.
