26th Sep 2014 11:20
LONDON (Alliance News) - Online gaming company GVC Holdings PLC will be launching into the Latin American markets of Mexico and Argentina in the fourth quarter of this year, Chief Executive Kenny Alexander told Alliance News Wednesday, and then will kick start expansion in Asia in 2015.
GVC was hoping to use the football World Cup in Brazil earlier this year as its spring board for expanding in Latin America, and it is doing just that, having pocketed a cool GBP2 million net profit after marketing costs in the first-half of the year from the World Cup boost, alongside a surge in new sign ups and new customers.
"The World Cup has gone, the Brazilian business is in good shape and now we are launching into a couple more Latin American markets later this year, and looking at an entry into Asia in 2015," Alexander told Alliance News.
Alexander said Mexico and Argentina are the two markets its looking at for the moment. The company would not confirm what countries in Asia it was looking to launch in first, but management said that China is a very lucrative market.
"We don?t do anything in Asia, it's potentially an interesting market. We're looking at putting in place a management team and a strategy. We're working on it, we have been for quite some time, and the aim is that at some point in 2015 we will kick-start our launch into the Asian market," said Alexander.
GVC recently announced its joint venture with Betit Securities Ltd to expand in Scandinavia, a new market for the company, which Alexander has described in the past as potentially a very lucrative market for the company. GVC took a 15% stake in the partnership for EUR3.5 million, but has a call option, for a minimum of EUR70 million, to buy up the rest of the joint venture by the end of September 2017.
"It is a very lucrative market and tends to be made successful by some local marketeers like Unibet and Mr Green. Rather than trying to do something ourselves, we bought ourselves an investment and backed a management team that has built businesses in this market before. It was a convenient way? and we thought it was our best chance to get into the Scandinavian market with something that is actually material," said Alexander.
GVC said that while its expansion plans go as far as Latin America, Scandinavia and Asia, it has no plans at all to enter the US market, an increasingly popular market for other betting peers as regulation in the country has begun to ease.
"We've never been in the US, we've never taken a bet in the US and it is not something that's on our agenda. We have no US strategy and I don't think we're big enough at this present time, it would be a complete distraction," said Alexander.
On Monday, the company posted strong growth in profit and revenue fox the six months to June 30, after a fifth consecutive quarter of growth. Its first-half pretax profit rose to EUR19.6 million, up from only EUR1.9 million in the first-half of 2013, when it booked EUR13.8 million in exceptional costs, while revenue surged to EUR105.1 million, up from EUR73.2 million a year earlier.
GVC said its current revenue mix is 30% in Turkey, its biggest market as it still provides services and its platform to East Pioneer Corp in the country, followed by Eastern Europe and Germany with 15% respectively, Latin America with 10% and around 10% from the UK.
"We're quite diversified now. We're not quite so reliant on one market as we were historically. I'm comfortable as long as one individual market doesn't go above 30%," said Alexander.
The UK government has planned to introduce a point of consumption tax on online gaming in the UK at the end of 2014, which means that duty will be payable on all bets made by UK customers irrespective of where the online operator is located. The forthcoming legislation is likely to have a significant impact on the betting sector.
Alexander said that at current run rates the UK consumption tax will cost the company around EUR1.5 million.
GVC said the third quarter has continued strongly, with trading per day at EUR628,000, 20% higher than the third quarter of last year, which was EUR523,000 per day.
"The number of in-play markets that we are offering are increasing and we've seen explosive growth in our mobile revenues as well. The plan is for the rest of this year and 2015 is to continue that investment in in-play and mobile, which should hopefully facilitate future growth," said Alexander.
Alexander said that in-play - which is customers betting on a game or event while it is in progress - is now a key part of the company's growth strategy, as around 70% of the bets it takes are now once the game has already started.
"It's not just football, tennis is another very important sport for in-play. In addition to in-play we have live streamed a lot more markets than we did last year, so you can watch the game live on our site and at the same time bet on the sport that you are watching," said Alexander.
The acquisition of e-gaming operator Sportingbet last year has been a game changer for GVC, which has posted very strong growth in revenues since the acquisition, increased its profits, and boosted its geographical footprint.
Daniel Stewart & Company, GVC's house broker, is forecasting earnings before interest, taxes, depreciation and amortisation of around EUR48.6 million for the full year, with EUR214.3 million in revenue. GVC said it's highly confident in meeting those expectations.
GVC declared a special dividend earlier this week. The company increased its quarterly dividend to EUR12.5 cents per share and in addition declared a special dividend of EUR2.5 cents, bringing its total interim dividend to EUR15 cents per share, up 43% on last year.
Alexander said the company will continue with its "aggressive dividend policy" and the kind of returns it is giving investors at the moment.
"We are committed to paying around 75% of our free cash flow back to shareholders, and if we have a windfall we will pay a special dividend," said Alexander.
GVC shares were down 0.8% at 472.92 pence Wednesday afternoon.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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