Summary

  • GVC Holdings reported net revenue growth of 26% in Q3 2020.
  • Strong contribution from the Online and Retail business witnessed during the period.
  • William Hill reported net revenue negative growth of 9% in Q3 2020.
  • Caesars UK Bidco recommended a conditional cash acquisition process for William Hill.

GVC Holdings PLC (LON: GVC) and William Hill PLC (LON: WMH) are betting stocks. Shares of GVC were down by around 1.12%, and the shares of WMH were trading flat from the previous closing price (as on 21 October 2020, before the market close at 11:00 AM GMT+1).

Value addition from the acquisition of Bet.pt in Portugal?

GVC Holdings PLC is a UK based sports betting and gaming company. Some of the brands owned by the Company include Coral, Crystalbet, Eurobet, Ladbrokes, Foxy Bingo, Gala and Gioco Digitale. GVC Holdings has a joint venture with MGM Resorts in the US. GVC Holdings is included in the FTSE-100 index.

Sports betting license in Germany

On 12 October 2020, GVC Holdings announced that it got the sports betting license in Germany. It received the license for bwin, SportingBet, Ladbrokes and Gamebookers brands from the German regulator for the sport betting products. The license has a limit of €1,000 that can be conditionally increased to €10,000. Based on the enhanced due diligence the limit can be increased to €30,000 for 1% of the customers with a loss limit. Annual bonus per customer is capped at €100. There is also a deposit limit until the customer verification is complete.

Q3 2020 trading update (ended 30 September 2020) as reported on 8 October 2020

In Q3 20, the net gaming revenue of the Group increased by 12% year on year. The Group delivered a double digit growth for the nineteenth consecutive quarter. GVC Holdings has also agreed to takeover Bet.pt in Portugal that would extend the business operation boundaries to Iberia. The gaming and betting market in Portugal is growing and the acquisition would provide a strong foothold. By 2023, the sports betting and gaming market in the Portugal is expected to be close to €450 million.

Geographic Diversification

(Source: Group website)

Performance of Online business in Q3 2020

The total net gaming revenue of the online segment grew by 26% in Q3 20 that was driven by the diverse business model and a strong portfolio of brands. The performance in all the key markets was very supportive, and they are ahead of the pre-covid levels. The net gaming revenue of Online Sports division increased by 24%, and for the Gaming division it was up by 27% in Q3 2020.

Performance of Retail business in Q3 2020

The net gaming revenue of the retail business in the UK was down by 5%. There has been a slight recovery in the UK after the phased reopening of the stores with a volume growth seen in self-service betting terminals. The net gaming revenue of the retail business in Europe witnessed an increase of 2% as it had a good recovery in Italy.

Strategic Framework

(Source: Group website)

Share Price Performance Analysis of GVC Holdings PLC

1-Year Chart as on October-21-2020, before the market close (Source: Refinitiv, chart created by Kalkine Group)

GVC Holdings PLC's shares were trading at GBX 1,013.00 and were down by close to 1.12% against the previous closing price (as on 21 October 2020, before the market close at 11:00 AM GMT+1). GVC's 52-week High and Low were GBX 1,156.50 and GBX 292.70, respectively. GVC Holdings had a market capitalization of around £5.99 billion.

Business Outlook

Amid the challenges posed by the pandemic, the Group has delivered a resilient performance in the year to date in 2020. GVC Holdings expect the EBITDA to lie in between £770 million and £790 million for full-year 2020. The EBITDA guidance improved by £50 million from the prior expectation. However, the current expectation is based on the assumption that there is no significant disruption in the market.

 

Future of William Hill after the potential takeover by Caesars?

William Hill PLC is a UK based gaming and betting company. The online betting business of the Group has a license in 10 countries. The UK is one of the largest online betting and gaming services market of the Group. In the US it has an operation in 14 states. William Hill is listed on the FTSE-250 index.

Q3 2020 trading update (ended 29 September 2020) as reported on 21 October 2020

(Source: Group website)

The Group net revenue growth was -9% in Q3 20. The performance improved compared to the net revenue growth in H1 20, which was -32%. The performance was supported by good trading activity in the online business in both the UK and International market. The Group has decided to repay the funds of £24.5 million received under the covid job retention scheme, given its strong financial position. William Hill repaid the revolving borrowing facility in Q3 20, and it would also receive the VAT refund from HMRC regarding the incorrect VAT applied to specific gaming machines in H1 20. William Hill has received a cash acquisition offer from Caesars UK Bidco following which the shareholders of the Group would receive a cash payment of 272 pence per share. The acquisition is conditional based on shareholder and regulatory approval.

Performance of Online business in Q3 2020

The Online business segment reported growth of 4% in Q3 20, which was better than the growth of 1% generated in H1 20. The Online UK business net revenue grew by 4% in Q3 20, which improved significantly from -8% change in net revenue in H1 20. The Company added new features in the UK online gaming segment, and it also introduced new betslip prior to the start of the new English Premier League season.

The Online International business net revenue growth was 6% in Q3 20. An updated version of Mr Green live casino was launched in the Online International market. To drive the growth, the Group launched new applications with local offers in some of the major markets.

Performance of Retail business in Q3 2020

The net revenue growth in the Retail business on a like for like basis was -2% in Q3 20; however, the performance improved significantly from -49% growth in H1 20. The phased reopening of the gaming estates in the UK supported the business activity, and at some of the main retail shops, the footfall was the same as the pre-covid level.

William Hill's position in the US

(Source: Group website)

Share Price Performance Analysis of William Hill PLC

1-Year Chart as on October-21-2020, before the market close (Source: Refinitiv, chart created by Kalkine Group)

William Hill PLC's shares were trading flat at GBX 280.00 against the previous closing price (as on 21 October 2020, before the market close at 11:00 AM GMT+1). WMH's 52-week High and Low were GBX 313.00 and GBX 28.63, respectively. William Hill had a market capitalization of around £2.94 billion.

Business Outlook

The Group had a resilient performance in Q3 20, and it is on the recovery path to run the business at the pre-covid level. The recent restrictions announced by the UK government would play a critical role in the business upturn. The Group highlighted that the closedown of 100 shops for a period of four weeks would bring down the EBITDA by close to £2 million.

 

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