Ladbrokes owner GVC raises profit forecasts despite FOBT impact
Ladbrokes owner GVC pushed its profit forecasts higher as its UK high street stores performed better than expected despite the clampdown on fixed odds betting terminals (FOBTs).
The gambling giant said its retail business “outperformed” expectations, while “strong trading” in its online arm helped to mitigate cost rises elsewhere in the business.
However, it said it still expects to close 900 stores over the next two years and will see annual retail earnings take a £137.5 million hit as a result of FOBT changes.
The FTSE 250 company, which also runs betting firm Coral, saw underlying pre-tax profits rise 30% to £212.1 million over the first half of 2019.
However, GVC saw reported pre-tax profits for the period to June almost evaporate, falling to £2.1 million from £113.8 million a year earlier, after it was hit by £183 million in one-off costs.
GVC said its earnings for the full year are set to be £10 million higher than previously forecast, as the company coped better than expected with the introduction of reduced FOBT stakes.
In April, the Government introduced a £2 limit on the betting terminals, down from £100, in a bid to tackle problem gamblers.
Earlier this year, GVC said that as many as 900 of its stores could close as a result of the new legislation, putting 5,000 jobs at risk.
The UK’s largest gambling firm said on Thursday that it has been impacted by the rule change, but its retail stores have reported revenues ahead of expectations.
Like-for-like net gaming revenue in its UK retail division slid by 10% as stores performed “stronger than initially anticipated”.
But the gambling firm added that it still “expects to close up to 900 shops over the next two years, as a direct result of these changes”.
It said it expects the impact to earnings to be £25 million less than initially predicted, as it also expects store closures to mitigate losses.
The company was also buoyed by a 17% jump in net gaming revenue from its online division.
Kenneth Alexander, chief executive of GVC, said: “The group’s performance in the first half was extremely pleasing with group proforma net gaming revenue 5% ahead.
“Our online operating model is proving highly effective, building on the sustainable competitive advantages of our wholly owned technology platform, leading product, cutting-edge marketing, leading brands and local execution, which are all delivered with an unrivalled understanding of the markets in which we operate.”