In response to the UK’s tightened regulations, Ladbrokes Coral owner looks to expand their digital business.
These tightening regulations and cut to fixed-odd betting terminals (FOBTs) stakes in the UK have been a blow to the gambling industry’s revenue. GVC Holdings; the owner of betting shop chain Ladbrokes Coral, has helped mitigate the effects with double-digit growth in their online operations.
The fallout from FOBT
In 2018 fixed-odd betting terminals (FOBTs) generated £1.7bn for the gambling industry. In April this year the maximum stake permitted on FOBTs was cut from £100 to £2.
Following the cut, revenue from GVC’s UK Highstreet betting shops dropped 10 per cent from the start of the year to the end of June. However, the gambling group announced that revenue from its online business was up 18 per cent in the same period.
Earlier this month rival betting chain William Hill announced that it was set to shut 700 betting shops because of the cut to FOBT stakes. The shops shutting will affect around 4,500 jobs.
GVC has also previously suggested that it is likely to close 1,000 stores.
Many bookmakers have begun expanding their online operations to mitigate the effects of losing such a profitable revenue stream.
For GVC, online growth has been rapid, with the biggest growth recorded in Brazil and Australia, where sales increased 38 per cent in both markets.
“Online continues to be the most impressive part of the business,” said David Brohan, an analyst at Goodbody.
However, he went on to highlight that GVC is still in the midst of some uncertainty because of an announcement due in August regarding the regulation of online sports betting in Germany. The market there is currently lightly regulated for gambling and online casinos. However, there may well be a heavy upfront cost for companies like GVC to acquire new licences to operate there.
“There’s always been a bit of uncertainty around Germany for GVC but if you had a regulated sports betting market that would be net positive for the group,” Mr Brohan said.
Chief executive of GVC, Kenny Alexander, said that a “strong trading performance” meant “any potential costs in 2019 associated with the new sports licences are expected to be fully mitigated”.
GVC is also attempting to gain a foothold in the US, a market that has exceeded industry expectations for growth after sports betting was legalised at a federal level in May last year.
Adam Greenblatt, chief executive of GVC’s joint venture with US casino company MGM Resorts, said that America was “undoubtedly the biggest market and growth opportunity for our business and our sector… in our generation bar none”.
Mr Alexander said that GVC was “on track” for a full online launch in New Jersey. New Jersey is biggest state to have legalised sports betting, and GVC’s launch should come ahead of the NFL season in September. GVC had also been granted licences to operate in Mississippi and Nevada.