GVC CEO: We will not sell any BwinParty assets but more M & A could still be on the table for us

By David Cook
GVC Holdings announced its financial results for the six months ended 30 June this morning (Tuesday), showing that net gaming revenue and clean EBITDA both increased significantly year-on-year on a pro forma and actual basis.

GVC CEO Kenny Alexander spoke to Gambling Insider about the “greater than expected” impact of February’s BwinParty acquisition so far, Euro 2016, US operations and potential future M & A activity.

When we acquired BwinParty, we always knew we were getting some very strong brands, but I think we particularly underestimated how powerful the Bwin brand is in the German-speaking marketsKenny Alexander


How do these numbers compare with your expectations for the period?

They’re better than expected. We’re now confident of achieving results of the upper end of market expectations for 2016, so you can presume from that we are trading better than we had expected so far this year. The synergies are coming through as planned, in fact maybe a little bit quicker, but the most significant thing is that the business is growing at a faster rate than we had expected. The turnaround of the BwinParty part of the business has been far quicker and with far greater momentum than we had expected. As a result, we’re ahead of where we expected to be at this stage of the year.

The growth opportunities from the BwinParty acquisition have been called “greater than expected.” What would you put that down to?

I think it’s the power of the brands. When we acquired BwinParty, we always knew we were getting some very strong brands, but I think we particularly underestimated how powerful the Bwin brand is in the German-speaking markets. Then of course we’ve got PartyPoker, PartyCasino, Foxy Bingo and obviously the legacy brands that GVC already had, principally Sportingbet. I think we’ve got some very powerful brands and we’re investing less in marketing than some of our peers. We’re still getting very good growth and we only invested 21% of NGR (net gaming revenue). We’re going to spend a little bit more, so 23-24% of NGR on marketing, and that should fuel further growth in the coming months.

The report mentioned a successful Euro 2016, with wagering on the tournament totalling €162m and the gross win margin being 18.3%. How do you expect sports wagers to compare in Q3 with Q2’s €2.33bn on a pro forma basis?

I think it’s a similar level actually. The thing about Q3 is that the end of July and the start of August are traditionally quite quiet periods, because the football season is yet to start and the summer tournaments have come to an end, but then you go into late August and the start of September and you have the start of the Premier League and Champions League, which is very popular for us. I think Q3 is quite similar to Q2, but it’s a bit tougher this year, because Q2 had the Euros in June, which kept us quite busy through what can also be a quiet month. But I think it’s at a comparative level.

How would you assess the performance of NJPartyPoker under GVC’s ownership so far?

We’ve got the New Jersey licence, which is something we really wanted to get. It’s a small part of the business and it’s marginally profitable. In terms of the annual results, the US business plays a very small part, but what it does do is it gives us a lot of options if the US market were to open up. If it were to open up, we are licensed in New Jersey and we’ve got a lot of strategic options around the US market. In terms of this year’s EBITDA, it’s a small part. The revenues are relatively small and the profitability is quite small, but it’s a good thing and it gives us a lot of credibility. We’ve managed to be regulated in what is probably one of the most heavily regulated markets in the world. If you can get a New Jersey licence, it gives you a lot of credibility.

You have previously mentioned that you did not initially plan to keep hold of the gaming assets within BwinParty aside from sports betting. What are the chances you will look into that possibility again?

We’re very satisfied with what we’ve got. There are no plans to sell off any more assets. We did have a sales process for the payments part of the business, Kalixa, but in terms of various brands, be it sportsbook, casino, poker, bingo brands, there is absolutely no intention of any disposals in that area.

What do you see as your primary challenges moving forward?

The primary challenge is the remaining integration and migration of the Sportingbet brand on to the Bwin platform, which will be completed by the end of Q1 2017, and that will allow us to get the full synergy figure of €125m. We need to make sure we continue to improve the product, keep the marketing efficient and keep the top-line growth. Those are the two main challenges, but this year, every single strategic objective that we set out to achieve has been achieved – New Jersey, the premium listing on the FTSE 250, refinancing the debt, achieving integration. We’ve achieved everything we said we would do and in some cases, quicker than we thought we would do.

What are the chances you will still look towards conducting more M & A activity?

We’re much further advanced than we thought we would be with BwinParty. The technology is in much better shape than we previously expected it to be in. Our number one objective is to continue the organic growth. GVC has mainly been built on the back of doing M & A and creating a lot of shareholder value as a result. If there was a suitable opportunity there, we are in a position now where we would look to explore it. We’ve got the track record of doing two big deals and two big restructurings. We own our own technology and we’re a very strong team. If the numbers stack up, we will definitely look to do something and if nothing suitable comes along, we’ll just grow the business organically like we’re doing at the moment. We don’t need to do anything, but if something came up, we would definitely look at it.
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