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