Analysis: GVC cashes in where others dare not go
Bwin.party revenues are suffering from switch to regulated markets while GVC makes headway in LatAm and Eastern Europe
As bwin.party’s shift away from non-regulated markets stifled revenue growth in yesterday’s Q1 announcement, an altogether different strategy is paying dividends for rival operator GVC.
London-listed GVC has thrived by taking almost the exact opposite approach to bwin.party, benefiting from sports betting brands focused on Latin America, Turkey, Eastern Europe and a gaming brand focused on Germany.
Bwin.party’s top line revenues, meanwhile, have been heading in the wrong direction as its shift from “volume to value” plays out.
The percentage of revenue it attracts from “sustainable” territories increased to 56% from the 51% in Q1, at the cost of a 6% drop in overall revenues.
And it is this strategy, as well that of others withdrawing from grey or more volatile markets, which appears to be directly playing into the hands of the less risk-averse GVC.
As investment intelligence firm Edison noted in its 2013 GVC coverage, “much of GVC’s business is already in regulated markets where it is benefitting from some other operators’ withdrawals or reductions in marketing effort”.
Last April bwin.party ceased accepting new sign-ups from the likes of Argentina, Brazil, Columbia, and much of Eastern Europe, where GVC made 22% (40m) of its revenues last year.
GVC also benefits from two prominent brands in LatAm “ Betboo and Sportingbet “ contributing 9m to the bottom line during 2013. And that’s not to mention the positive impact a football World Cup this summer could have on that total.
Ivor Jones, an analyst at Numis, says bwin.party’s volume to value strategy is “work in progress” and that changing the risk profile of the business is an important step for an operator with grand ambitions.
“Bwin.party has the potential to be a market leader in several markets, and that is what it plans to do,” he says.
“It’s very hard to say whether or not its strategy is working yet. If it ends up with bwin.party being a profitable business with a lower risk profile then we will be able to say it has worked.”
The same point, he says, can be said of GVC’s business plan. And given the often unexpected way in which governments have treated online gambling in the past, he suggests it is better to be safe than sorry.
“GVC will be fine and more profitable in the short term “ so long as nothing changes in terms of regulation,” says Jones. “But as a public company investor I would rather have my money a company reducing risk rather than taking on more.”