The beginning of the week saw the sports betting and gambling giant GVC Holdings publish an update regarding the impact that the coronavirus outbreak and the subsequent cancellation of sporting events are expected to have on its performance.
Less than a fortnight ago, on March 5th, 2020, the gambling group issued a trading update for the period from January 1st to February 23rd, saying that its performance so far in the year to date was strong. At the time, GVC Holdings said that its group net gaming revenue increased by 5%, while online net gaming revenue rose by 16%, both of the results being positively affected by strong sports margins in the first two months of 2020.
Now, at a time when the spread of Covid-19 continues across the globe, GVC Holdings has confirmed that it has been committed to protecting its customers, partners, colleagues and employees by enacting special plans aimed at minimising disruption to the business. Unfortunately, the spread of coronavirus has led to the cancellation of a number of live sporting events, which are known to have a crucial impact on the net gaming revenue of the group in the financial 2019.
As GVC Holdings has revealed, about 45% of its group net gaming revenue and 43% of its online net gaming revenue were generated from sports.
Gambling Giant Estimates the Impact of Three Major Assumptions
The sports betting and gambling group shared that, for the time being, it remains difficult for it to project the exact impact that a considerable reduction in sporting events will have on the company’s earnings before interest, tax, depreciation and amortisation (EBITDA) in the current financial year. That is the reason why GVC Holdings has come up with a case scenario based on three major assumptions.
The gambling group assumes that the retail sector in the UK will remain open for businesses, while its stores based in Italy and Belgium will not be operational for three months. GVC Holdings also assumes that the major European matches will be postponed until 2021, while all other football matches will be cancelled until July this year. Last but not least, the company assumes that major horse racing events will be cancelled, and the rest of the horse racing sector will remain operational behind closed doors.
The aforementioned assumptions would mean that there will probably be a considerably lower number of sporting events at least until August 2020. This, on the other hand, would be a massive blow for GVC Holdings’ EBITDA for the current financial year that is set to end on December 31st, 2020. For the time being, the projected EBITDA of the gambling giant would be reduced by approximately between £130 million and £150 million before any mitigating actions. In case that UK-based retail betting shops are also closed, the company has shared that the shutdown would cost another £45 million to £50 million of EBITDA on a monthly basis.
- Author
Olivia Cole
