Following the initiation of numerous mitigating actions in response to the COVID-19 global outbreak, GVC Holdings has now predicted that EBITDA could fall by £50m per month, a figure significantly smaller than the initial £100m predicted last month.
GVC estimated the average monthly cash outflow would be limited to approximately £15m per month, while ‘further cost actions’ will allow the group to achieve its target of reducing the cash flow to breakeven.
The group noted that despite a strong performance at the beginning of the year, the closure of retail outlets and the widespread cancellation of sports has ‘significantly reduced revenue from mid-March’.
This strong start helped Group net gaming revenue (NGR) to grow by 1% and online NGR increase by 16% for January to March against the corresponding period of 2019, with strong growth across all key territories. UK retail like-for-like NGR saw a 19% drop, while European retail activity has fallen by 3%.
Kenneth Alexander, GVC CEO, commented: “As our Q1 trading numbers once again demonstrate, GVC is a business that, in normal times, delivers an outstanding performance. However, while our global and product diversification is standing us in good stead during the current uncertainty, the COVID-19 pandemic is posing an unprecedented challenge to our business and our industry.
“We are responding decisively, and have put in place a range of measures to keep our people safe, strengthen our financial position, limit cash outflow, preserve jobs and maintain a compelling customer offer.
“I am confident that we will emerge from this period in a position of strength, and we will be well placed to take advantage of a range of attractive growth opportunities which we believe will be available to us.”
GVC’s online division has also grown during the period, with the Group highlighting that the increase in gaming has been ‘encouraging’ as NGR increased by 20%. The growth is said to be ‘in line with the group’s expectations’.
To offset the costs from retail closures, GVC has also confirmed that it has identified a number of opportunities to reduce costs.
In the UK, GVC can qualify for the government grant towards employment costs to support staff members which have been furloughed. In addition, the gambling group can access the business rates relief, estimated to ‘reduce costs by nearly ‘£20m per month’.
In Italy and Belgium, GVC operates a franchising model where the store operating costs (rent, employment, utility and other costs) primarily reside with the franchisee. Other measures taken include reductions in online sports marketing, sports content and trading costs.
Alexander continued: “We are also sensitive to the fact that at this time of economic stress and isolation, it is vital that we ensure a safe, responsible and enjoyable gaming environment for our customers and do everything that we can to minimise the potential for harm.
“Accordingly, not only have we supported the Betting and Gaming Council’s 10 pledge action plan on safer gambling, but we have gone further and introduced a range of additional safeguarding measures to ensure that we are able to rigorously monitor and protect anyone who may be vulnerable at this time.
“Finally, I would like to thank our outstanding teams around the world for the manner in which they have rapidly adapted to the challenge, and for their continuing hard work and commitment to ensuring GVC’s long-term success.”