iGB Intelligence reports iGB-Market-Monitor-May-2020-proof4 | Page 11

Part 1: The UK – Covid-19 compounds contraction anecdotally poker has seen a resurgence during the crisis and it can be assumed that as with other multi-product big brands, Stars will be enjoying a gaming boost during the global lockdown. The sports hit will certainly be drastic, though. GVC – plenty of headroom As with Rank, the focus for GVC has been on mitigating the cash burn while shoring up its finances. To that end, the company announced at the end of April a new £535m revolving credit facility designed with covenants that give the company headroom on its debt in the coming months. At the start of April, it also issued a trading statement for the first quarter, which showed that group net gaming revenue for the first three months of the year was up 1% overall, with gaming NGR up 19%. However, the impact from the shuttering of the retail betting shop estate and the lack of sports betting since the lockdown are set to severely impact the group. In online, despite the potential for gaming to be a slight beneficiary, it suggested online EBITDA would suffer a 20% fall in 2020. The analysts at Peel Hunt suggested that GVC would sail through the crisis relatively unscathed compared with smaller competitors, particularly in gaming, and added that there would likely be opportunities for GVC to gain market share, either organically or through acquisition. William Hill – fears over UK exposure As has been detailed on iGB in recent weeks, William Hill is arguably the most exposed in terms of indebted UK gaming companies. The amounts involved aren’t huge – it has a bond repayment due in June of £203m and an undrawn revolving credit facility of £425m. However, as analysts at Moody’s Investor Services identified when the rating agency recently downgraded the debt, the company is much more exposed to the UK as a percentage of total revenues (76% of 2019 revenues). In particular, in online it is also heavily skewed towards the UK, which accounted for 65% or £451m of total revenue in 2019. However, the good news is that the international element of online has been significantly increased via the Mr Green acquisition, a deal that has also boosted the firm’s online gaming exposure, which was worth 58% of total online last year. In the (to date at least) height of the market fears in late March, William Hill performed the worst, with a share price fall that took the shares all the way down to about the 30p level, valuing the firm at barely £300m. However, as was pointed out by the team at Peel Hunt, by late April it had bounced back significantly to about 104p. The team noted that the next announcement from William Hill would come in mid-May, when there might be more visibility over the return of sports and also some Table 7: GVC Q120 trading update selected figures 1Q20 overall rise in NGR (%) 1Q20 rise in gaming NGR (%) Group revenue 2019 (£bn) Group revenue est (RBC) 2020 (£bn) 1 19 3.6 2.9 Source: Company reports and analyst estimates Table 8: William Hill 2019 selected figures Online revenues in 2019 UK retail revenue 2019 (£m) UK retail forecast revenue 2020 (Numis est.) (£m) 451 717 394 Source: Company reports and analyst estimates iGB Market Monitor • The UK and Sweden • May 2020 8