FOBT Review Putting Future Mergers for GVC Holdings on Hold  

GVC Holdings Chief Executive Kenny Alexander has said further mergers and acquisitions could be on the horizon but only after the UK government’s gambling review is published.

Kenny Alexander GVC.

GVC Chief Executive Kenny Alexander has said the company will look to secure more high profiles deals when the time is right. (Image: sbcnews.co.uk)

Following the publication of the operator’s interim financials for the six months to June 30, 2017, Alexander has confirmed the need for further growth when the conditions are right. According to the results published on September 14, GVC Holdings saw net gaming revenue increase by 25 percent in real terms year-on-year.

Continued Growth for GVC

Although the €486.2/£431.4 million was offset by the continued cost of the £1.1 billion bwin.party takeover that completed in February 2016, the results are still positive. The company’s win margin from sports betting increased by 9.8 percent, but Alexander is wary of cutting any deals in this sector until the UK government publishes its review into Fixed Odds Betting Terminals (FOBTs).

Although GVC has invested heavily in the online betting world, retail shops currently bank a significant amount of revenue thanks to FOBTs. In 2016 the Treasury confirmed the betting machines generated £400 million in tax revenue.

GVC has previously looked to gain a footing in this market with a takeover of Ladbrokes Coral. Although talks eventually broke down, the recently merged operator owns more than 3,500 betting shops across the UK, but GVC is unlikely to revisit the real in the current climate.

With the government under pressure to reduce the maximum stakes for FOBTs from £100 to £2 per round, this could drastically alter the UK’s retail betting sector. Additionally, with the Chancellor Philip Hammond announcing that he’ll his next budget will be read on November 22, Alexander wants to proceed with caution until the results are in.

“We are not going to take any risk whatsoever on the triennial review or the (UK) Budget,” Alexander told Reuters.

Inevitable Consolidation Must Wait

However, even though deals might be off the table for now, Alexander has signalled the need for further consolidation across the industry in the face of ever-tougher regulation.

“We operate in an industry where regulation and increased taxation present headwinds and these are best addressed through scale and diversification. Our focus is to build further scale in markets where we have identified an opportunity for expansion,” Alexander wrote in GVC’s financial report.

Although GVC financials are heading in the right direction, other operators may feel the pinch if the government’s FOBT review calls for tough action. Opponents to the proliferation of the betting terminals include major groups such as the Church of England and the government may be forced into some kind of action.

However, with a spokesperson for the Association of British Bookmakers telling the Racing Post that a change could cost UK horseracing £100 million per annum, it could take a while before a verdict is reached.

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