Trading Update, German Regulatory Update, Notice of Interim Results

Clarissa Elsner

GVC Holdings PLC (AIM:GVC), a leading online gaming company,gives the following update for the six months’ trading to 30 June 2011.

Trading update

Trading remains broadly in line with expectations. The Group has seen an encouraging performance from its Betboo brand, showing strong growth in Net Gaming Revenue (“NGR”) and launching into further Emerging Markets. NGR from CasinoClub has also improved, but its profit contribution is reduced, reflecting the cost of TV marketing.

Overall NGR in H1-2011 was 13% higher than in H2-2010 and 8% higher than H1-2010 which itself benefited from the FIFA World Cup. Most notably there has been a 62% increase in the value of sports stakes in H1-2011 over H2-2010 arising from the growth in the Group’s emerging markets brand.

NGRH2-2009
€’m
H1-2010
€’m
H2-2010
€’m
H1-2011
€’m
CasinoClub14.513.713.814.6
Betaland9.812.210.010.5
Betboo2.22.13.15.2
26.528.026.930.3
Sports4.44.74.05.9
Gaming22.123.322.924.4
26.528.026.930.3
Sports wagers25.038.930.449.3
Sports gross margin†18.5%13.7%13.9%13.4%

†Sports gross margin is calculated by dividing the gross win by the total amount wagered (less customer bonuses). Sports NGR is Sports gross margin less chargebacks, bad debts, duty etc.

CasinoClub

The Group made a further substantial investment in marketing in H1-2011 with the launch of a TV advertising campaign in Germany. Whilst the campaign was successful in reactivating lapsed customers leading to a recovery in Casino revenues to above those earned in H1-2009, its ability to generate active new players was more limited. Contribution was impacted by the cost of the marketing campaign, and the continuing increase in the proportion of new business sourced through affiliates. As a result the contribution margin for the period fell to 50% as compared to 62% in H1-2010 and 58% in H2-2010; we anticipate as the benefits of this marketing expenditure come through, margins will improve again.

Betboo

Betboo is the Group’s emerging markets brand, acquired in July 2009 with a Latin American focus and, since January 2011, launched into other emerging markets.

NGRH2-2009
€’m
H1-2010
€’m
H2-2010
€’m
H1-2011
€’m
Sports0.2(0.1)0.41.6
Gaming2.02.22.73.6
2.22.13.15.2
Sports wagers2.97.85.623.3
Sports gross margin*9.3%3.9%8.2%9.1%

Betboo has shown strong growth in NGR and the Group is committed to make significant investments in the Betboo business; we commenced an aggressive marketing campaign in Latin America in Q2-2011, The aim of this marketing campaign is to achieve a step-change in the revenues ahead of the 2014 FIFA World Cup which is being held in Brazil. The Group also successfully launched Betboo into other emerging markets during the half year with better than expected initial results.

Betaland

As previously disclosed, the FIFA World Cup in the summer of 2010 benefited the results for that period. Whilst we do not expect this year’s performance to reach the same level therefore, trading in H1-2011 has been encouraging. The Group achieved a gross margin of 17.3% (H1-2010: 15.2%) on wagers of €26.0 million (H1-2010: €31.1 million).

NGRH2-2009
€’m
H1-2010
€’m
H2-2010
€’m
H1-2011
€’m
Sports4.24.83.64.5
Gaming5.67.46.46.0
9.812.210.010.5
Sports wagers22.131.124.826.0
Sports gross margin*19.6%16.1%15.2%17.3%

Boss Media

There have been no further developments in the legal dispute against Boss Media brought by GVC. Court and arbitration proceedings are pending.

Trading since half year end

In the first 27 days of July 2011, the average daily NGR has been €166k split as follows:

  • CasinoClub – €76k
  • Betaland – €47k
  • Betboo – €43k

German Regulatory Update

A material part of the revenues and profits of GVC are derived from Germany, whose draft State Gambling Treaty (“draft Treaty”) threatens to prohibit the acceptance of wagers from online casinos offered to German residents.

On 18 July 2011 the European Commission issued a Detailed Opinion against the draft Treaty. A Detailed Opinion is issued if the European Commission considers that a draft treaty, if implemented, would create barriers to trade, services or establishment within the European Union (“EU”).

The European Commission, in its Detailed Opinion, said that the proposed German State Treaty was in breach of EU law.

GVC understands that the German Länder are due to meet on 18 August 2011 to discuss these developments. GVC will issue further statements as appropriate on its position following the meeting of the Länder in August and on any further comments from the EU.

Date of interim results

The Group expects to release its Interim Results on Thursday 29 September 2011, along with a further trading update at that time.

 

For further information:

GVC Holdings PLC
Kenneth Alexander, Chief Executive OfficerTel: +44 (0) 20 7398 7702
Richard Cooper, Group Finance Directorwww.gamingvc.com
Arbuthnot Securities LimitedTel: +44 (0) 20 7012 2000
James Steel / Tim Willis

Media enquiries:

Abchurch
Henry Harrison-Topham / Oliver HibberdTel: +44 (0) 20 7398 7702
henry.ht@abchurch-group.comwww.abchurch-group.com

 

About GVC Holdings PLC

GVC Holdings PLC is a leading online gaming company. The Group is headquartered in the Isle of Man and is licensed in Malta, and the Netherlands Antilles.

In December 2004, the shares of Gaming VC Holdings S.A., GVC’s predecessor company, were admitted to the AIM market of the London Stock Exchange. The GVC Group has not and has never transacted wagering activity by players in the US. Further information on the Group is available at www.gamingvc.com.