Gaming revenues up for GVC Holdings in first half of 2010


Online gambling company improves total performance in first half of 2010

Online gambling group GVC Holdings plc has released a trading update for the first six months to 30 June 2010, showing that overall trading has been in line with expectations, with net gaming revenues for H1 2010 up 8 percent at Euro 28.5 million (H1 2009: Euro 26.5 million), and up 4 percent on H2-2009's Euro 27.5 million.

The Group ceased operating its loss-making Spanish focused bingo brand, Winzingo, in April 2010 and now has three core brands: CasinoClub, Betaland, and Betboo.

Management reports that in sports trading the overall gross win margin was 12.8 percent.

The Betaland margin was 16.1 percent, but there was a small trading loss from Betboo due to disappointing sports trading results during the Brazilian soccer season. Total stakes amounted to Euro 38.9 million, up 38 percent on H1-2009 (Euro 28.2 million) and up 59 percent on H2-2009 (Euro 24.5 million).

The mainly German-facing online casino operations at CasinoClub suffered from a weak economic climate and fierce competition, leading to a further decline in which revenues per day fell to Euro 75.7k from Euro 83.2k in H1-2009 and Euro 79.2k in H2-2009.

The decline has seen GVC invest in both retention and acquisition marketing to defend its highly profitable CasinoClub business. Around Euro 2.8 million was incurred in the H1-10 period compared to around Euro 1.5 million in H1-09. The inevitable consequence of this is that contribution margin from CasinoClub is expected to be closer to 60 percent rather than the 70 percent achieved in H1-2009.

On the positive side, both the number of average customers per day and the number of active customers per month grew reflecting the impact of the additional marketing expenditure. However, the average expenditure from customers continues to decrease.

Sportsbook operations at Betaland continued to grow strongly, seeing an 18 percent increase in the number of bets to 2.7 million; and a 10 percent increase in the number of customers to an average of 9,700 per month (H1-2009: 8,900), although the average bet size fell from Euro 13.7 to Euro 11.4 reflecting the more recreational nature of players recruited.

Gaming revenues performed strongly and rose 22 percent to Euro 7.1 million (H1-2009 Euro 6.0 million; H2-2009 Euro 5.7 million).

Management reports that the first year of ownership of Betboo has been successful and the Board remains confident about its long-term prospects in the rapidly developing South American economy. The sportsbook has seen material growth, and a strengthening of the trading team is expected to result in improved margins.

Gaming revenues are largely bingo-driven and have increased from around Euro 10k per day in January 2010 to around Euro 20k per day in the first 19 days of July 2010, whilst the average over the six month period was Euro 13k.

Betboo will likely be the brand used by GVC for the launch of a new European Sportsbook, which is expected to be live in early Q4-2010.

The trading update makes specific reference to the litigation with Boss Media, reporting that court proceedings in Malta are scheduled for 4 October 2010. The Board will continue to vigorously defend the Group's intellectual property and continues to pursue a number of claims against Boss Media, Management said.

Trading since the end of the H1 2010 period has benefited from the recent World Cup football tournament in South Africa, with sports revenues in the first 19 days of July 2010 totaling Eur 500 000, representing a 20 percent hold. Total average daily revenues for the first 19 days of July 2010 were Euro 27k from sports and Euro 122k from Gaming, a total of Euro 149k per day, an increase of 30 percent compared with Euro 115k per day for July 2009.

After the payment of the special dividend on 28 June 2010, and approximately Euro 1 million of costs associated with the re-domiciliation and re-admission to AIM, the Group's cash position at Friday 16 July 2010 was Euro 4.5 million, equivalent to Euro 0.145 per share.

GVC expects to release its interim accounts on Tuesday 28 September 2010.

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