GVC Group trading update

The Isle of Man-based internet gambling group GVC Holdings has issued its trading update for the first six months of 2011, noting that performance is to expectations, with an encouraging performance from its Betboo and CasinoClub brands, but profits a little down due to marketing expenditure via television media.
Net gaming revenue showed strong growth, up 8 percent on H1-2010, and 13 percent on H2-2010. Most notably there has been a 62 percent increase in the value of sports stakes in H1-2011 over H2-2010 arising from the growth in the group’s emerging markets brand.
Overall NGR numbers were as follows:
CasinoClub: Euro 14.6 million (H1-2010 Euro 13.7 million)
Betaland: Euro 10.5 million (H1-2010 Euro 12.2 million)
Betboo: Euro 5.2 million (H1-2010 Euro 2.1 million)
Sports: Euro 5.9 million (H1-2010 Euro 4.7 million)
Gaming: Euro 24.4 million (H1-2010 Euro 23.3 million)
Sports gross margin 13.4 percent (H1-2010 13.7 percent)
Management reports that further substantial investment in marketing was made in H1-2011 with the launch of a TV advertising campaign in Germany. Whilst the campaign was successful in reactivating lapsed customers leading to a recovery in casino revenues to above those earned in H1-2009, its ability to generate active new players was more limited.
Contribution was impacted by the cost of the marketing campaign, and the continuing increase in the proportion of new business sourced through affiliates. As a result the contribution margin for the period fell to 50 percent compared to 62 percent in H1-2010 and 58 percent in H2-2010.
Betboo has shown strong growth in NGR and there are plans for an aggressive marketing campaign in Latin America in Q2-2011, the aim being to achieve a step-change in revenues ahead of the 2014 FIFA World Cup which is being held in Brazil. GVC has also successfully launched Betboo into other emerging markets during the half year with better than expected initial results.
Betaland trading in H1-2011 has been encouraging, achieving a gross margin of 17.3 percent (H1-2010: 15.2 percent) on wagers of Euro 26 million (H1-2010: Euro 31.1 million).
The litigation against Boss Media is still in progress through arbitration.
GVC attracts healthy German business, and the company is therefore following legal developments in that country with interest.  The current situation threatens to prohibit the acceptance of wagers from online casinos offered to German residents, the update notes.
“On 18 July 2011 the European Commission issued a Detailed Opinion against the draft Treaty. A Detailed Opinion is issued if the European Commission considers that a draft treaty, if implemented, would create barriers to trade, services or establishment within the European Union (“EU”).
“The European Commission, in its Detailed Opinion, said that the proposed German State Treaty was in breach of EU law.
“GVC understands that the German Länder are due to meet on 18 August 2011 to discuss these developments. GVC will issue further statements as appropriate on its position following the meeting of the Länder in August and on any further comments from the EU.”

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