Five things we learned from GVC’s H1 results as Kenny Alexander bids farewell

GVC Holdings hogged the headlines yesterday after long-serving CEO Kenny Alexander revealed he was stepping down to be replaced by chief operating officer Shay Segev.

The London-listed operator made the combined announcement alongside the release of its H1 and Q2 financial results, which made for some interesting reading due to the coronavirus pandemic.

Below, we assess the five major talking points from GVC’s call with analysts and investors.

So long King Kenny

Alexander’s 13-year tenure as GVC boss ended today. The Scot, who was determined to be the most influential person in gambling over the last decade by EGR contributor Alun Bowden, will be remembered for making some sector-defining deals. He oversaw the acquisition first of bwin.party and then of Ladbrokes Coral which helped to transform GVC from small AIM-listed operator to FTSE 100 behemoth.

The 51-year-old revealed spending time with his family in Scotland during lockdown made him realise that now was the right time to step aside.

Kenny Alexander

“This is something I’ve been thinking about for quite some time,” said Alexander. “My family is in Scotland and I come down to London every week between Monday and Friday, which I have been doing now for a long, long time.

“I am going to go back to Scotland and spend time with my family, rather than doing this crazy commute which I’ve been doing for 20 years.

“I am very proud of business I’ve built with the team. I’ve enjoyed my time in PLC land, in online gaming and at GVC, but all things must come to an end and the time was right for me,” he added.

The King is dead, long live the King

Segev is no rookie. The Israeli, formerly of Playtech and Gala Coral, claims to have been running nearly 80% of the GVC business behind-the-scenes in recent years and is often credited for kickstarting the omni-channel trend in the UK.

Segev joined GVC in 2016 and Alexander told investors his appointment was always part of the operator’s CEO succession plan. “I recruited Shay about four years ago and today that plan has been successful,” said Alexander.

“A handful of people have been absolutely critical to the success of GVC and nobody more so than Shay, who is a first-class operator.”

Segev also revealed his five key areas of focus as new GVC boss: the US market, organic growth, M&A, execution and responsibility.

Does this mean no more wheeler-dealing?

Alexander was the key handshaker at GVC and could spot a deal like few others in the sector. The £3.9bn 2018 purchase of Ladbrokes Coral in the UK has paid off handsomely, after he realised the brands were grossly underperforming, particularly online.

But Segev has been integral to GVC’s M&A process over the last few years, which has seen the operator target bolt-on acquisitions for entry into new markets, like Crystalbet in Georgia.

And it would be fair to expect more of the same, when normality is restored in a post-Covid world.

“Our appetite has not changed,” Segev said yesterday. “We have a proven track record of great success that delivers value.

“We have a few bolt-on things to look at in regulated markets for the right price and we want to enter new markets to deploy our technology, but there is no real timeline.

“It is more complex to do larger transactions at the moment because there is less cash.”

Are retail acquisitions a possibility?

“Digital is where we want to grow, ecommerce is growing faster, and we want to be a double-digit business. We do see some value in retail, it can be essential in some regulated markets, but digital is our focus.

“We might acquire something with retail elements to accelerate the digital business, and the UK was a good example of that as retail is a strong developer of omni-channel,” he added.

What’s in the numbers?

GVC reported a 21% increase in online NGR for H1 2020 as strong digital growth softened severe retail declines due to Covid-19. Yesterday’s numbers can be viewed in full here.

H1 EBITDA is predicted at between £340m-£350m due to strong online performance, but also lower levels of marketing spend in April and May as there were fewer sporting events.

GVC finance chief Rob Wood, who Alexander described as “by some way the best CFO he has ever worked with”, did warn the H1 uptick might not necessarily flow seamlessly into H2.

“Just a note of caution on H2 revenues,” said Wood. “There will be increased macro pressures and recessionary pressures and as lockdowns ease around the world, there will also be more competition for leisure spend.”

Wood also said: “We have benefitted from unusually good H1 margins in the UK and Australia. Heading into H2, we are absolutely confident on relative performance but cautious of market headwinds as well.”

Australia boosted GVC’s sports figures as racing ran throughout the Covid-19 disruption, leading to a 76% Q2 rise in revenue generated from the operator’s Ladbrokes and Neds brands in the country.

Outside of Australia, Wood revealed the key drivers of organic growth in H1 and Q2 were from the gaming business of GVC’s UK sports brands, as well as in core gaming brands Gala and Foxy, as online gaming enjoyed a surge in both new and existing users during lockdown months. The same theme could be applied to partypoker.

Europe, however, was down, due to a lack of tennis and basketball events, while Latam revenues also decreased as GVC’s South America-facing brands focus on localised football which is still to return.

Investing in the US opportunity

GVC is taking the US very seriously indeed. The operator and MGM Resorts are investing a further $250m into their JV, Roar Digital, and Alexander said GVC would do “whatever it takes” to become the market leader.

Segev has promised to make the market his number one priority as chief executive.

Despite stepping down, Alexander will keep a keen eye on GVC’s progress in the States as a major shareholder.

He said: “This is not a one-man show; it never has been that and I won’t be selling any shares for the foreseeable future.

“The US is the biggest catalyst for our share price. If we deliver on it, or even close to it, there is massive upside, so I’ll be holding onto them and I have complete faith that Shay will nail it.

“If he doesn’t, I’ll hunt him down. But no, it’s in great shape and I’ll be holding onto them indefinitely, and hoping to make some good money on them,” he added.