GVC Holdings Will Not Pay Shareholders Second Interim Dividend

• GVC Holdings, one of the world’s top gambling firms, won’t be paying its second interim dividend to its shareholders because of the COVID-19 crisis.
• The company will also be holding off on paying director bonuses.
• GVC is still in a relatively safe position financially, with access to large cash and credit reserves.
• These preventative cost-cutting measures could prove wise if consumer gambling spending decreases, as it is expected to.

DOUGLAS, Isle of Man – GVC Holdings, one of the largest gambling and sports betting companies in the world, announced last week that they would be withdrawing their second interim dividend.

The company directly cites COVID-19 and the global cancellation of sporting events as the reason for withdrawing the dividend, stating that such a measure is “prudent” given the worldwide economic uncertainty.

Without mitigating measures, GVC expected to lose roughly £100 million ($122.9 million) in monthly earnings before interest, tax, depreciation and amortization (EBITDA).

The company plans to use of several key advantages to mitigate those losses, including using its eligibility for a government grant for employment costs and drastically reducing marketing for its sports betting operations.

With these measures in place, GVC expects COVID-19’s impact on monthly EBITDA to decrease to €65 million ($79.9 million). All sports betting firms are likely to see a sizable decrease in revenue as a result of COVID-19, so reducing liabilities is a must.

GVC will be withholding director bonuses for 2019 and reevaluating its policy for 2020 bonuses. The company’s report does not specify when those bonuses might be allocated or what the changes to 2020 policy might be.

Why Is GVC Withdrawing The Dividend?

Despite a successful start to the year with net gaming revenue up 1% over 2019 and online gaming revenue up 19%, COVID-19 represents a massive blow to GVC’s revenue streams.

The dividend would have cost £103 million ($126.5 million) at 17.6 pence (22 cents) per share. Even with GVC’s cash reserves in excess of €250 million and access to a revolving credit facility of £550 million, paying dividends could put GVC in a precarious position for maintaining long-term financial solvency.

Additionally, consumer behavior could be difficult to predict in the coming months, and the total betting handle could decrease substantially.

On March 17, the Boston Consulting Group released a “consumer sentiment snapshot” showing that 26% of consumers plan to spend less on gambling during the next six months.

In another snapshot released on March 23, even more customers indicated that they would spend less on gambling—a worrying trend for GVC.

As the world heads toward a recession or even a full-on depression, the responsible business decision for GVC is to cut unnecessary costs and ride out the storm.

News tags: BCG | Boston Consulting Group | Coronavirus | COVID-19 | EBITDA | GVC | GVC Holdings | Isle of Man