Part 1: The UK – Covid-19 compounds contraction
Part 1:
The UK – Covid-19 compounds
contraction
The crisis for the UK gambling sector
caused by the Covid-19 pandemic and the
subsequent near-total global shutdown of
sport has been stark. The most recent figures we
have from the Gambling Commission, for the year
to March 2019, show that online betting in the
UK, including betting exchange activity and pool
betting, totalled £2.03bn.
Broken down into a crude monthly historically
based figure, we can estimate that in the month
since big-time sport was cancelled across the
board, the industry has ‘lost’ up to £160m in GGY
(depending of course on replacement activity into
either the minor sports available, esports, virtual
sports or other forms of gaming).
As analysts at RBC Capital Markets said in early
April, just as Covid-19 began to impact sporting
activity: “If there is no sports content, it follows that
there will be significantly decreased sports revenue
with perhaps just a small amount coming in from
the likes of esports and some non-mainstream
Chart 1: Percentage of 2019 revenue from sports
betting for selected operators
100
80
60
40
20
0
78%
45%
53%
Flutter GVC William
Hill
Source: Company reports
34%
The Stars
Group
international sports such as sumo wrestling.”
While there is some hope that some major
football will return in mid-May, notably the
German Bundesliga, and towards the end of the
month a limited programme of UK horseracing, it
is likely that the leakage in terms of lost revenue
will continue well into the early summer.
The pandemic has come at a time when
the UK market was already seeing signs of a
potential contraction. According to data from
the UK Gambling Commission, UK online betting,
excluding betting exchange activity and pool
betting, fell back by 11% between 2017/18 and
2018/19 to £1.83bn. Meanwhile, a handful of market
failures at the lower end of the scale – MoPlay
being the most prominent – suggests that the
consolidation at the top of the market is squeezing
the opportunities further down the ladder.
The RBC analysts suggested the leading lights
of the UK-listed sector – GVC, Flutter (and the
Stars Group) and William Hill – will be best-placed
to take advantage when sport returns. Indeed, the
team led by Julian Easthope suggested that the
big four could survive two years of disruption.
“Liquidity is the main investor concern,” they
wrote. “We estimate the monthly cash burn of
each group in a disrupted state. Even pre- any
mitigating measures, each of the groups has
sufficient liquidity headroom to survive at least
a year of disruption. Including mitigation, this
extends to two years.”
This would almost certainly not be the case
with operators in the mid-tier and below and
the willingness of investors – whether public or
private – to continue funding companies that
were already facing an uphill competitive battle
has to be questioned.
iGB Market Monitor • The UK and Sweden • May 2020 3