Ladbrokes owner ploughing ahead with 900 store closures despite rising profits and healthy online sales
- GVC Holdings has upped its full-year profit forecast, latest update shows
- 900 UK-based stores will be closed over the next two years amid rule shift
- Shares in GVC ticked up 3 per cent to 772.6p after the statement this morning
Labrokes owner GVC Holdings has upped its full year profit forecast, amid healthy online sales.
While GVC’s finances look set to be given a boost, the group is still ploughing ahead with plans to close 900 of its bricks-and-mortar stores over the next two years.
The company’s British high street stores posted an 18 per cent like-for-like drop in revenues for the quarter, driven by the changes to fixed odds betting terminal rules, but these remain ahead of expectations.
Closures: GVC Holdings will close 900 of its UK stores over the next two years
The maximum stake on FOBTs has been cut by the Government from £100 to £2, prompting a string of Britain’s biggest gambling giants to look overseas to boost their bottom lines.
The group’s over-the-counter wagers in UK betting shops rose by 7 per cent in the third quarter even in the aftermath of the crackdown on betting machines.
The company said ‘strong online momentum’ across all territories had helped to drive higher earnings across the group.
The group’s share price is up 3.03 per cent or 22.6p to 772.6p this morning.
Earnings before tax and interest for 2019 are now expected to come in between £670million and £680million, up from previous estimates of between £650million and £670million.
Total net gaming revenue for the group fell 1 per cent in the quarter, while net gaming revenue for the year to date is up 3 per cent against the previous period.
This growth has largely been driven by a surge in online revenues, which jumped 12 per cent in the last three months, buoyed by a 16 per cent rise in online sport betting revenues.
On the up: GVC’s share price is up 3.03 per cent or 22.60p to 772.60p this morning
Kenneth Alexander, GVC’s chief executive, said: ‘I am delighted that the group’s financial performance has allowed us to upgrade our full-year earnings before interest and tax expectations again.
‘Online momentum remains strong across all major territories, with net gaming revenue up 12 per cent in the quarter despite the prior period containing part of the World Cup.
‘This performance continues to be driven by our industry-leading technology, products, brands, marketing capability, and people.’
GVC completed a refinancing of £1billion worth of debt last month.
Russ Mould, investment director at AJ Bell, said: ‘GVC has had a very difficult year ever since being caught up in considerable shareholder backlash against directors dumping about £20m worth of shares and chief executive Kenny Alexander receiving very large stock awards.
‘The company also lost its place in the FTSE 100 index and under pressure from investors, Alexander took a six-figure pay cut.
‘The company’s fortunes seemed to have turned around since reporting half year results in August when it said the full year should be better than expected. True to its word, its latest trading update confirms that business is going swimmingly and that earnings guidance has been raised again.’
He added: ‘One of the biggest risks for any gambling company’s profit margins is tighter regulation and GVC is no stranger to having to monitor policy changes. Higher taxes as more territories regulate activities would hit margins but operating legally in a regulated territory is something that most investors want.’