Betting and gaming operators in the UK are already seeing the negative impacts from the recently introduced cut to the maximum stake on fixed-odds betting terminals. Gambling group GVC Holdings PLC has just published its financial update for the first quarter of the year, reporting a 17 per cent rise in its online net gaming revenue, whereas earnings from its retail business in the UK for the same period are flat.
GVC, which is one of the world’s largest gambling groups and owns brands like Coral and Ladbrokes, posted growth of 8 per cent on its net gaming revenue (NGR) for the quarter. This is the total pro forma NGR for the group and it is driven by a significant rise in the online sports (up 16%) and gaming (up 20%) businesses. The revenue for the UK retail sector, however, is flat and in the European Retail, there is a slight increase of 2 per cent, according to the Q1 Trading Update published on Friday.
The group describes the results as “an excellent start to the year” despite the restrictions on fixed-odds betting terminals(FOBTs), which dramatically reduced the maximum amount of the bets on these gaming machines this week and were seen by the majority of gambling operators as a genuine threat to their revenues. Starting Monday, April 1, from £100 the maximum stakes on FOBTs were cut down to £2. Most gambling operators, as well as many industry analysts, predicted that the new rules would have a devastating effect on the business, reducing earnings, slowing down overall growth, and leading to mass closures.
The new FOBTs limits, which were imposed as a measure to curb the increasing rate of problem gambling, are expected to force up to a third of all establishments with machines of this kind to close. GVC Holdings believes it may have to cease operations in up to 1,000 shops, which largely rely on the revenue generated from FOBTs. This would certainly result in massive layoffs across the country, as well as in significant drops in the total earnings.
In an attempt to circumvent the stake reduction, some gambling operators have introduced high-stakes roulette-style games. Following a warning from the UK Gambling Commission, however, Betfred and Paddy Power Betfair have decided to remove these games, which might be considered as a violation of the rules.
It is still unclear whether William Hill, another high-street bookmaker in the UK, would decide to add games of this kind to its product portfolio in order to offset the negative effects of the reduced maximum stakes on FOBTs. It received warning from the gambling regulator that the release of high-stakes games that would bypass the new rules would lead to regulatory action.
GVC Holding PLC Looks at US Market, Online Sector
In its Trading Update, GVC did not post any exact figures but only the growth percentages for net revenue year-on-year. Kenneth Alexander, CEO for the group, commented that it was too early for an assessment of the impact of the stakes restrictions and that the company was confident that would achieve the expected performance and EBITDA margins for the year. Still, the new limits would no doubt have a negative effect on the company’s revenues which is why it may look at the rapidly growing online sector.
As evident from the financial update, GVC is seeing a significant rise in its online division – both in sports betting and gaming. It is the single largest contributing factor for the total pro forma net gaming revenue growth in the three months ending March 31. Clearly, the company is banking on the improved performance of its online products in a time that sees many gambling operators struggling to sustain their retail operations.
Meanwhile, GVC has also entered the US sports betting market, which might prove to be a successful move considering the expected decline in Europe and the UK. Following a historic decision by the Supreme Court of the United States last May, the state-wide ban on sports wagering was lifted, giving individual states to decide whether they want to allow single-event betting or not. In July, GVC signed a joint venture with MGM Resorts International to create a sports betting and interactive gaming platform for the US. The $200-million joint venture called Roar Digital LLC is expected to report a loss of up to £5 million in 2019.
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Daniel Williams
