GVC to Focus on U.S. Market as UK Tightens Controls

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Sep/13/2018

(Reuters) - The United States will be the biggest regulated market for Europe’s leading gambling companies within five years, GVC Holdings Chief Executive Kenny Alexander said on Thursday after reporting another decline in UK retail revenue.

While British online gambling is growing strongly, Alexander said planned curbs on fixed odds betting terminals were hastening the decline in the high-street business and would eventually knock 100 million pounds ($131 million) off its core earnings and mean the closure of around 1,000 of its Ladbrokes Coral shops.

GVC and rivals William Hill and Paddy Power have switched their focus to the other side of the Atlantic, signing investment deals with casino chains including MGM and Eldorado after a Supreme Court ruling opened the way to widespread legalisation in May.

“We have done the deal with MGM. I think that the U.S. is going to be the biggest regulated market out there in five years,” Alexander told Reuters by phone after publishing results for the first six months of the year.

As outlined in July, GVC reported a solid set of half year results that showed 8 percent growth in gaming revenue from a year ago - when including Ladbrokes Coral in both annual figures. It also flagged extra cost-savings from its 4 billion pound purchase of Ladbrokes that was completed in March.

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Alexander said GVC, which has gaming sites in 21 languages and accepts bets in 19 currencies, would start launching its products and brands in the U.S. market as and when individual states pass regulations.

So far nine states are on the road to formal regulation of an industry that has long been limited to back-street bookmakers and isolated legal islands like Las Vegas and Atlantic City.

“MGM is the biggest land based operator and it’s a 50/50 JV and I think we will be the market leader in the U.S. in five years,” Alexander said.

“We’ve partnered up with the biggest in the U.S. at the moment.. So whatever you think the market leader is going to make in five years we are going to make the half of it,” he added.

Shares in GVC, which has expanded rapidly through acquisitions and joined London’s FTSE 100 bluechip index in June, hit an all-time high when it announced the deal with MGM to launch an online platform in July. The shares have since fallen 8 percent and traded flat at 10.58 pence on Thursday.

The company said it had identified an extra 30 million pounds of capital expenditure savings in addition to the 130 million pounds previously targeted in the Ladbrokes deal.

In its home market, it benefited from England’s progress to the semi-finals of the soccer World Cup in July, driving a surge in online bets and new accounts.

However, its UK retail business saw like-for-like gaming revenue fall 3 percent which the company blamed on “very cold weather” early in the year and negative publicity around the government’s move to cut maximum stakes on betting terminals (FOBTs).

Britain is to cut the maximum stake on such terminals from 100 pounds to just two pounds to try to tackle problem gambling although the date for the change is yet to be confirmed.

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