GVC posts Q1 revenue growth despite Covid-19 setbacks

GVC Holdings has reported a year-on-year rise in revenue for the first quarter, despite business slowing down due to the novel coronavirus (Covid-19) global pandemic, but has chosen to cancel a planned dividend payment due to ongoing uncertainty over the outbreak.

In a trading update, GVC said total group net gaming revenue (NGR) for the three months through to 31 March was 1% higher than in the same period last year,

GVC said this was primarily down to growth within its online division, with NGR from this segment up 16% year-on-year. The operator saw online sports and gaming revenue increase by a combined 17% during the period.

In contrast, UK like-for-like retail NGR was down 19% in the first quarter, while European retail NGR also slipped by 3% on a year-on-year basis.

Though GVC did not release further information about its performance in Q1, it did go into further detail about the impact of the coronavirus crisis on business.

Shortly after it was confirmed last month that many major sports events would be put on hold in order to help slow the spread of the virus, GVC estimated that the impact of this on business, before any mitigating actions, would reduce its EBITDA by around £100m (€113.8m/$123.1m) a month.

However, following a number of mitigating actions the business, GVC said it now expects to reduce this impact to approximately £50m per month. GVC also said that as a result, average monthly cash outflow would be limited to around £15m, with the group adding it is confident further cost actions will enable it to achieve its target of reducing cashflow to break-even.

Such mitigations include GVC taking advantage of the UK government scheme to award grants to business to help with employment costs, with GVC having place retail staff on furlough and on full pay. GVC is also eligible for business rates relief, which it estimated would reduce costs by nearly £20m per month.

Meanwhile, in Italy and Belgium, GVC operates a franchising model where store operating costs such as rent, employment and utility primarily reside with the franchisee, and such would not cost the group.

Other measures include reductions in online sports marketing, sports content and trading costs.

“As our Q1 trading numbers once again demonstrate, GVC is a business that, in normal times, delivers an outstanding performance,” GVC’s chief executive Kenneth Alexander said.

“However, while our global and product diversification is standing us in good stead during the current uncertainty, the Covid-19 pandemic is posing an unprecedented challenge to our business and our industry. 

“We are responding decisively, and have put in place a range of measures to keep our people safe, strengthen our financial position, limit cash outflow, preserve jobs and maintain a compelling customer offer.

Meanwhile, as part of its plans to limit the impact of coronavirus, GVC said that it has taken the decision to withdraw the payment of a second interim dividend of 17.6p per share that was announced last month. This was due to be paid on 23 April with a total cash cost of £103m.

GVC said it recognises the importance of dividends as a part of shareholder returns and will consider dividends with future results announcements.

GVC added that it is in a “robust financial position”, with its net debt to EBITDA ratio at 2.69x as of 31 December 2019. The group said it had accessible cash in excess of £350m at the end of March this year, of which over £250m is cash at hand after excluding cash held on behalf of customers, cash in shops, ringfenced PSP funds and other items which may not be immediately available.

In addition, GVC has a £550m revolving credit facility that is currently undrawn.