# GVC Holdings PLC Strong operational momentum, full year outlook ahead of expectations

- Link: https://www.directorstalkinterviews.com/gvc-holdings-plc-strong-operational-momentum-full-year-outlook-ahead-of-expectations/412790440
- Published: 2019-08-15T07:22:20+01:00
- Author: Giles Arbor

**GVC Holdings PLC** (LON: GVC), the global sports-betting and gaming Group, has
today announced its Interim Results for the six months ended 30 June 2019.

| Group | Reported^(1) |   |   | Proforma^(2) |   |   |   |   | 
| Six months to 30 June | 2019 | Pre IFRS16 2019 | 2018 | 2019 | Pre IFRS16 2019 | 2018 | Change^(10) | CC^(3) | 
|   | £m | £m | £m | £m | £m | £m | %  | %  | 
| Net gaming revenue (NGR) | 1,810.60 | 1,810.60 | 1,125.10 | 1,810.60 | 1,810.60 | 1,717.00 | 5% | 6% | 
| Revenue | 1,782.10 | 1,782.10 | 1,105.90 | 1,782.10 | 1,782.10 | 1,694.30 | 5% | 6% | 
| Gross profit | 1,184.10 | 1,184.10 | 763.2 | 1,184.10 | 1,184.10 | 1,163.40 | 2% |   | 
| Underlying EBITDAR^(4) | 376.8 | 376.8 | 265.8 | 376.8 | 376.8 | 406.4 | -7% |   | 
| Underlying EBITDA^(4) | 366.8 | 323.4 | 235 | 366.8 | 323.4 | 349.5 | 5% |   | 
| Underlying operating profit^(5) | 260.3 | 241.9 | 188.6 | 260.3 | 241.9 | 277.9 | -6% |   | 
| Underlying profit before tax^(5) | 212.1 | 202.2 | 162.1 |  |  |  |  |   | 
| Profit / (loss) after tax | 2.1 | -13 | 113.8 |  |  |  |  |   | 
| Diluted EPS (p) | -0.6 | -3.2 | 24.9 |  |  |  |  |   | 
| Continuing adjusted diluted EPS^(6) (p) | 31.3 | 29.9 | 32.2 |  |  |  |  |   | 
| Dividend per share (p) | 17.6 | 17.6 | 16 |   |   |   |   |   |

**Highlights:**

· Very strong operational performance:

o Online proforma2 NGR +17% (+18% cc3) and market share gains in all major territories

o UK Retail Like-for-Like7 NGR -10%, ahead of expectations

o European Retail proforma2 NGR +7% (+8% cc3) with growth in all territories

· Full year EBITDA4/8 and Operating profit5/8 now expected to be a further £10m 
ahead of expectations

· Interim dividend of 17.6p per share (H1 2018: 16.0p), an increase of 10% year-
on-year

· Net Debt / EBITDA (pre IFRS 16) leverage full year guidance improved to 2.9x

· Significant Responsible Gambling commitments:

o Ten-fold increase in contributions to Responsible Gambling causes

o Voluntary whistle-to-whistle television advertising ban in the UK

o Withdrawal of all marketing associated with English and Scottish football teams,
and donation of existing shirt sponsorships to ‘Children with Cancer’ charity

· US: New Jersey full online launch on-track for the start of the 2019 NFL season
in September

· The Group expects to continue to offer online sports-betting and gaming into Germany
in the period through to the new regulatory framework in 2021

Financial highlights (proforma basis2 pre IFRS 16):

· Proforma Group NGR up 5% at £1,810.6m

· Proforma Group underlying EBITDA4 down 7% at £323.4m but 11% ahead after adjusting
for the estimated impact of the Triennial Review and incremental Online taxes9

· Online underlying EBITDA4 was 22% ahead after adjusting for the estimated impact
of incremental taxes9

· Excluding net debt arising on IFRS 16 of £350.3m, adjusted net debt at 30 June
2019 was £1,929.3m (2.6x LTM underlying proforma EBITDA4)

Financial highlights (reported basis1)

· Reported Group NGR up 61% at £1,810.6m

· Reported Group profit after tax of £2.1m after charging £183.8m (£224.4m pre-tax)
of separately disclosed items, of which £184.3m relates to the non-cash amortisation
of acquired intangibles

· Continuing adjusted diluted EPS6 of 31.3p down 3%

**Kenneth Alexander (CEO) commented** 8:

> “The Group’s performance in the first half was extremely pleasing with Group proforma
> NGR 5% ahead. Online momentum remains very strong with proforma NGR 17% ahead,
> delivering continued market share gains across all major territories. Our online
> operating model is proving highly effective, building on the sustainable competitive
> advantages of our wholly owned technology platform, leading product, cutting-edge
> marketing, leading brands and local execution, which are all delivered with an
> unrivalled understanding of the markets in which we operate.
> In UK Retail, efficient execution of mitigation plans resulted in a Triennial 
> Review impact that was better than initial expectations, with like-for-like NGR
> 10% behind last year, prompting a further upgrade to our Triennial Review EBITDA
> guidance. European Retail proforma NGR was 7% ahead with good growth in all territories.
> The US JV, Roar Digital, is on track for its full launch in New Jersey in September
> and, building on the combination of proprietary technology, powerful brands and
> our marketing expertise, is well-placed to succeed.
> The Group made a number of significant Responsible Gambling commitments in the
> period. We were the first operator to commit to a ten-fold increase in contributions
> to Responsible Gambling causes, alongside calling for a total ban on sports-betting
> television advertising in the UK. We donated all our marketing assets held at 
> 42 English and Scottish football clubs, including perimeter hoardings, to GambleAware’s‘
> Bet Regret’ safer gambling campaign. We also committed to not sponsoring any English
> or Scottish football teams, and donated our existing shirt sponsorships of Sunderland
> AFC and Charlton Athletic to our charity partner, Children with Cancer. These 
> are decisive actions, and we will continue to work on a collaborative basis with
> other leading operators to enhance player protection across the industry.”

**Outlook** 8:

The strong trading performance of the Online business means that any potential costs
in 2019 associated with the new sports-betting licences in Germany are expected 
to be fully mitigated. With the outperformance in UK Retail, and Online and European
Retail trading in-line with expectations, the Board now expects the Group to deliver
full year 2019 EBITDA8 within a £650m-£670m range.

**Notes**

(1) 2019 and 2018 reported results are unaudited and reflect the acquisition of 
the Ladbrokes Coral Group plc on 28 March 2018

(2) The Group’s proforma results are unaudited and presented as if the current Group,
post the acquisition of Ladbrokes Coral Group plc, had existed since 1 Jan 2018.
The results of Crystalbet and Neds are included from the dates of acquisition (11
April 2018 and 28 November 2018 respectively)

(3) Growth on a constant currency basis is calculated by translating both current
and prior year performance at the 2019 exchange rates

(4) EBITDAR is defined as earnings before interest, tax, depreciation and amortisation,
rent and associated costs, share based payments and share of JV income. EBITDA is
defined as EBITDAR after charging rent and associated costs. Both EBITDAR and EBITDA
are stated pre separately disclosed items

(5) Stated pre separately disclosed items

(6) Adjusted for the impact of separately disclosed items, foreign exchange movements
on financial indebtedness and losses/gains on derivative financial instruments (
see note 8 in the interim financial statements)

(7) UK Retail numbers are quoted on a LFL basis. During H1 there was an average 
of 3,432 shops in the estate, compared to an average of 3,563 in the same period
last year

(8) References to profit expectations are made on a pre IFRS 16 basis

(9) After rebasing the prior year for the adverse EBITDA impact of incremental taxes(
UK RGD, Italian taxes and Australian POCT) of £18.8m, and adjusting the current 
year for the estimated £45.0m adverse impact of the Triennial Review

(10) Proforma 2019 (including the impact of IFRS 16) change v proforma 2018

**CHIEF EXECUTIVE’S REVIEW**

**Overview**

The Group made very good progress in the first half of the year, during which its
underlying financial performance was strong. The Group continued to make material
online market share gains across all major territories driven by a highly effective
operating model. The first three months post the implementation of the £2 stakes
restrictions on B2 machines in UK Retail has progressed well, and trends are ahead
of original expectations resulting in a second upgrade to profit guidance this year.
In the US, Roar Digital, our joint-venture with MGM Resorts, remains very well-placed
for the US sports-betting opportunity, and is on-track to launch a full online offering
in New Jersey ahead of the NFL season in September. The integration of Ladbrokes
Coral is progressing well with key platform migrations commencing in the second 
half of the year. The Group made significant Responsible Gambling commitments during
the first half, including a call for a total ban on all sports-betting television
advertising in the UK (excluding horse-racing) and the removal of gambling sponsorships
of UK football teams and pitch-side advertising hoardings. Working together with
the other ‘Big 5’ operators, the Group also committed to a ten-fold increase in 
Responsible Gambling contributions in the UK.

On a proforma basis Group NGR was 5% ahead of last year with strong growth in Online
NGR, which was 17% ahead, partly offset by the adverse impact of the Triennial Review
in UK Retail. Group underlying EBITDAR was 7% behind. On a pre IFRS 16 basis, Group
underlying EBITDA was 7% behind, however, after adjusting for the estimated impact
of the Triennial Review in UK Retail and incremental Online taxes9, EBITDA4 was 
11% ahead. Group underlying operating profit, pre IFRS 16, was 13% behind. On a 
post IFRS16 basis, Group underlying EBITDA was 5% ahead and Group underlying operating
profit was 6% behind.

On a reported basis, Group underlying profit before tax was £212.1m and after charging
£224.4m of separately disclosed items (£183.8m post tax), profit after tax was £
2.1m. The Group will pay an interim dividend of 17.6p, reflecting an increase of
10% compared to last year, and in-line with the new policy of double-digit year-
on-year increases. Net debt was £1,929.3m before debt arising on the adoption of
IFRS 16, representing a pre IFRS 16 leverage ratio of 2.6x. After absorbing the 
initial impact of the Triennial Review, the pre IFRS 16 net debt leverage ratio 
is now expected to increase to 2.9x by the end of the year. This compares to previous
guidance of 3.0x, and we continue to expect to reduce leverage by at least 0.5x 
per annum in subsequent years. The highly cash generative nature of the business
supports our commitment to double-digit annual dividend growth, and gives us the
financial flexibility to pay down debt, or continue to grow the business through
M&A.

Online proforma NGR was 17% ahead of last year, and 18% ahead on a constant currency
basis with continued double-digit NGR growth in all major territories. UK NGR was
13% ahead of last year, Germany NGR was up 23% cc, Australia NGR was up 48% cc and
up 28% cc when adjusting Neds to proforma basis, Italy NGR was up 15% cc and Brazil
NGR was up 52% cc. Sports NGR was 18% ahead and Gaming NGR was 17% ahead. After 
adjusting for the World Cup, Online NGR was 19% ahead and Sports NGR 22% ahead, 
with sports wagers 16% ahead.

The online division’s performance was materially ahead of the market and is driven
by the sustainable competitive advantage of the Group’s online operating model. 
Core to the Group’s superior operational execution is the all-product proprietary
technology platform that operates across multiple geographies. The platform is flexible,
highly scalable, cost efficient and enables us to rapidly deploy changes and enter
markets quickly. The Group provides a leading product offering by virtue of both
our proprietary sportsbook and a gaming platform that provides the broadest range
of gaming content in the market, including a strong pipeline of differentiated in-
house content. The Group now operates over 19 well-established brands across its
global footprint. The value of these brands is increasingly important as barriers
to entry increase in regulated markets. The reinvigoration of our two largest brands,
bwin and Ladbrokes, continues to yield impressive results. As demonstrated at our
Capital Markets Day in May 2019, we have highly sophisticated marketing capabilities
and expertise at our disposal. These marketing assets enable the deployment of market-
leading real-time CRM interaction with our customers, and in turn, are delivering
very impressive returns on investment. As the UK online businesses and the US JV
move onto the GVC technology platform during the second half of the year, the ability
to deploy these marketing techniques will increase throughout the Group. We have
built a highly experienced and talented management team, retaining the best management
through the acquisitions of bwin.party and Ladbrokes Coral. The Group also has many
years of experience in the markets in which we operate; we know our markets inside-
out which is a critical ingredient to our success. We believe the combination of
these key enablers will allow the Group to continue delivering the very strong growth
that we have reported during the last 12 months.

UK Retail like-for-like proforma NGR was 10% behind last year as a result of the
implementation of the cut in maximum B2 machines stakes to £2 on 1 April 2019. Like-
for-like OTC wagers were 4% ahead, reflecting higher than anticipated substitution
into sports-betting from displaced B2 spend. Prior to the stakes cut, like-for-like
machines trends were positive in Q1, with NGR 4% ahead driven by the new Equinox
cabinets that rolled out to 1,700 shops at the start of the year. Post the stakes
cut in Q2, like-for-like Machines NGR was 39% behind. These changes are now expected
to result in up to 900 shop closures over the next two years, lower than our initial
expectations, and resulting in a further EBITDA and Operating profit upgrade of 
approximately £10m. The transition to a smaller and more sustainable estate has 
been well planned, and the initial execution of our Triennial mitigation plan has
been highly effective. The UK Retail division remains a core part of the Group, 
driving online growth through the market-leading Grid and Connect multi-channel 
propositions, and also reinforcing brand recognition through the estate’s high street
signage.

European Retail proforma NGR was 7% ahead of last year, with OTC wagers 11% ahead
despite the World Cup comparative. All territories were in growth with Eurobet Retail
NGR 7% ahead, Ladbrokes Belgium NGR 12% ahead and Ladbrokes Republic of Ireland 
NGR 1% ahead.

**Safer Gambling and ESG**

As a global leader in sports-betting and gaming, with over 25,000 employees, the
Group is taking a leading role on ESG and corporate responsibility issues. The Board
level Corporate Social Responsibility Committee, chaired by Non-Executive Director
Virginia McDowell, has developed a strategic approach comprising the three principal
pillars of; Responsible Employer, Responsible Communities and Safer Gambling.

Throughout the first half of 2019 we set about embedding this approach across the
Group’s operations. The Diversity and Inclusion (D&I) strategy, now into the second
year of a three-year roadmap, has seen the roll-out of ‘Horizon’, our women-in-leadership
programme. In addition, the establishment of a partnership with Stonewall, who have
been at the forefront of campaigning for LGBT rights since 1989, will help us create
an accepting and inclusive workplace. To promote the well-being of our employees
we have introduced a new ‘Well-me’ programme which focuses on both physical and 
mental health as part of the Group’s comprehensive people plan. On the environmental
front, we have set a target to reduce our carbon footprint by 15% and have launched
a new recycling scheme across our office and UK Retail estate.

In the area of responsible communities, the Ladbrokes Coral Trust has announced 
a three-year partnership with Children with Cancer; and we continue to work with
SportsAid to back the next generation of UK athletes. Later this year the GVC Community
Fund will make the first round of grants from the £2 million fund established last
year, while a new Global GVC CSR Foundation will launch in Q3.

Notwithstanding all of these initiatives, perhaps the most important of the three
pillars is Safer Gambling. While the vast majority of consumers enjoy our products
safely, it is imperative that GVC does everything possible to protect the small 
minority of players for whom gambling becomes a problem. In January the Group launched‘
Changing for the Bettor’, a comprehensive package of measures designed to minimise
gambling related harm while enhancing our collective understanding of problem gambling
behaviours. In developing this package of measures we acknowledged that problem 
gambling is a complex issue and a multi-faceted approach is required to address 
it. ‘Changing for the Bettor’ includes seven key commitments, with substantive initiatives
attached to each. These include a five-year, multimillion-pound research project
with the Division on Addiction, a Harvard Medical School teaching hospital; the 
roll-out of a youth-focused education syllabus with GamCare and EPIC Risk Management
and the introduction of sophisticated online player protection tools.

To deliver our Responsible Gambling goals, we recognised that both cross-industry
collaboration and a substantial increase in investment is required. Accordingly,
in April GVC committed to a ten-fold increase in the funding of research, education
and treatment of problem gambling to 1% of UK GGR, a move that was matched by our
four largest UK peers in July. This joint-commitment will see the five companies
cumulatively investing £100m into treatment and research over the next four years,
with annual spend reaching £60m by 2023. At the same time, the big five operators
also agreed to work together to increase safer gambling messages within advertising
and to share player data in order to improve identification of vulnerable customers.

Our collaborative approach through bodies including the Senet Group and the Remote
Gaming Association (RGA), also helped to deliver the pre-watershed ‘whistle-to-whistle’
ban on broadcast advertising around sport in the UK, which came into effect earlier
this month. Whilst a welcome start, GVC believes the industry can and should go 
further. To this end, the Group has unilaterally committed to ending shirt sponsorships
and perimeter board advertising at all UK football clubs. To honour this commitment,
for the 2019-20 season the Group gifted the shirt sponsorship rights it held for
both Sunderland AFC and Charlton Athletic to our partner, Children with Cancer, 
while marketing assets including perimeter boards that the Group holds at 42 leading
English and Scottish clubs have been donated to promote GambleAware’s ‘Bet Regret’
safer gambling campaign.

In order to continuously improve our approach to responsible gambling it is important
to acknowledge and address mistakes made in the past. On 31 July 2019 we concluded
a regulatory settlement with the UK Gambling Commission in relation to historic 
failures in the Ladbrokes Coral businesses between 2014-2017, prior to its acquisition
by the Group. GVC has since conducted a thorough review and has transformed the 
process and systems which were at fault to prevent any repetition of these historic
failures.

To provide further details on our corporate [sustainability](https://www.directorstalkinterviews.com/sustainability-green-stocks-news)
performance, we published the Group’s second CSR Report in June 2019. Following 
extensive independent reviews of the Group’s ESG policies and practices we are pleased
to report that GVC has been admitted to two of the major Environmental, Social and
Governance (ESG) indices, the Dow Jones Sustainability Index (DJSI) and FTSE4Good.

**Integration**

The integration of the Ladbrokes Coral business is progressing very well. The GVC
integration model, based on detailed planning and rigorous execution, is again proving
highly effective at delivering the integration of a large scale business with minimal
disruption to business-as-usual activities. The announcement of an updated agreement
with Playtech in January enables earlier migration of the UK online brands from 
the Playtech platforms onto the GVC technology platform. The migration of these 
brands has already commenced with the successful transfer of Gala Spins in the second
quarter. The remaining migrations, including Ladbrokes, Coral and Gala Bingo, are
planned for the second half of this year and into the first half of 2020. The platform
migrations are a key enabler to further back office integration, and will result
in the delivery of material cost savings earlier than originally guided, reflected
in the previously announced £15m upgrade to synergies in 2020. Operating on the 
GVC technology platform will also further enhance the “develop once, deploy multiple
times” principle and unlock major opportunities to share “best-of-both” best practice
across the Group. The Group remains on-track to deliver £130m costs synergies by
2022 and £30m of capex synergies by 2021, in-line with guidance.

**US Joint-Venture: Roar Digital**

In the first half of the year the focus of our US sport-betting and online gaming
joint-venture was on establishing an optimal structure to capitalise on the long-
term opportunity afforded by the regulating US market. Whilst we anticipate that
it will take between three and five years before the majority of states are regulated,
we believe the value-creation opportunity is significant. During the half, the JV
established a head office in Jersey City, minutes from Manhattan. All senior management
roles are in place and hiring is progressing well, with over 100 employees now in
position. In the first half of the year the Group was granted licences in Mississippi
and Nevada, and Roar Digital received a transactional waiver to conduct business
in New Jersey.

The imminent migration of the US online offering to the GVC technology platform 
will materially enhance the product range and user experience, and will provide 
access to the powerful marketing tools deployed elsewhere throughout the Group. 
The JV will fully launch online in New Jersey at the start of the NFL season in 
September, combined with a ramp-up in marketing during Q4.

**Chairman Successor Search**

Within the Group’s 2018 Annual Report, we disclosed the Board’s decision to find
a successor to current Chairman, Lee Feldman. The decision will enable GVC to comply
with changes to the UK Corporate Governance Code in respect to the recommended maximum
tenure of a Chairman, which a significant number of the FTSE350 constituents are
also addressing. The Board is committed to a rigorous process, and has carefully
considered the key skills and experience that it believes are necessary. Stephen
Morana, GVC’s Senior Independent Director, is managing the candidate search, supported
by Russell Reynolds, the international recruitment firm. The search is progressing
well and a number of candidates have been identified. A further update will be given
in due course.

**Corporate Activity**

The Group has a very strong track record of delivering successful M&A, and ‘bolt-
on’ acquisitions are a key part of the Group’s growth story. We continue to assess
new opportunities in both existing and new markets. We also continually review our
existing asset base to ensure an optimal portfolio. In July we announced the disposal
of our 50% share in the Sportium JV to our JV partner Cirsa S.A, whilst continuing
to provide certain B2B services until 2024, resulting in a net cash consideration
of €70m. The disposal enables the simplification of our Spanish facing business,
where bwin is a leading online brand.

**German Regulation Update**

The rules that will govern the new online sports-betting licences in Germany were
discussed by Hesse, the state overseeing the regulatory process, in a ‘Q and A’ 
session with operators on 13 August 2019. Following the session, the Group believes
that significant further clarity on both the regulatory details and timings is still
required. If clarity is not provided in 2019, the likelihood of delays with the 
issuance of sports-betting licences in 2020 increases, and heightens the probability
of legal challenges impacting the roll-out. There is, therefore, a realistic possibility
that the regulatory position is not resolved until 2021, when positive re-regulation
of the German online sports-betting and gaming market is expected.

The Group remains confident that it will be able to continue providing online sports-
betting and gaming into Germany in the interim period through to 2021. The Group
expects:

· Bet-in-play markets, including as a minimum those markets related to the match
outcome and goal markets, to be permitted. These markets currently represent c80%
of the Group’s bet-in-play revenues in Germany

· To be given dispensation to relax any maximum monthly customer loss or spend limits
that may be implemented

· To continue offering online gaming into Germany

The Group then expects the Lander to re-regulate the German market by mid-2021, 
with regulation to include online gaming. As previously indicated in the Group’s
17 July 2019 post-close trading update, the strong trading performance of the Group
means that any potential costs in 2019 associated with the new sports-betting licences
are expected to be fully mitigated.

**Other Regulation**

The Group is a truly global operator with a worldwide geographic footprint, and 
therefore faces into both regulatory opportunities and headwinds. The Group’s scale,
geographic diversification and flexible operating model mean that it can respond
rapidly to new regulatory opportunities, while scale, technology and established
brands create ever higher barriers to entry in markets where regulatory headwinds
exist. Combined with our continued outperformance of the market, the Group’s business
model is proving adept at absorbing these regulatory headwinds, while continuing
to exploit regulatory opportunities.

Since the decision of the United States Supreme Court to repeal PASPA on 14 May 
2018, 10 US states have introduced and implemented sports-betting regulations, namely
Nevada, New Jersey, Delaware, West Virginia, Mississippi, Rhode Island, Pennsylvania,
New Mexico, Arkansas and New York. Other US states, including Washington, D.C., 
Illinois, Iowa, Indiana, Montana, New Hampshire, North Carolina and Tennessee, have
approved sports-betting laws without yet launching their regulated markets. Tennessee
became the first US state to adopt a mobile wagering only regulation. Montana and
Indiana are expected to launch their markets in the second half of 2019; some of
the other newly regulated states may choose to do the same. Our US JV expects to
enter all states where it is commercially viable to do so.

The Brazilian sports-betting market is on course to regulate by the end of 2020 
and provides the Group with a major opportunity to build on its existing position
in the market.

The Netherlands Regulator announced on 7 August 2019 that it had issued the Group
with a fine of €350k relating to bwin’s historic activity in the Dutch market that
the Regulator deemed to be in breach of its guidelines. The Regulator has also issued
similar fines against several of GVC’s main off-shore competitors in the Netherlands.
The Group intends to pay this fine, however firmly disagrees with the basis on which
the sanction decision has been taken and reserves its rights to potentially contest
the fine in the future. The Group is adhering to the Regulator’s current guidelines
and will continue offering its services in the Netherlands in compliance with these
guidelines. The Group fully expects to be successful in its application for one 
of the new online sports-betting and gaming licences that are due to be issued over
the course of 2021.

In the UK, Remote Gaming Duty, applicable to online gaming, increased from 15% to
21% on 1 April 2019. The cut in maximum B2 stakes to £2 on LBO machines was also
implemented on 1 April 2019. This change is expected to result in up to 900 shop
closures. The Group has planned extensively for this transition to a smaller estate
with a greater share of the market, and the overall impact in the quarter following
implementation was better than initial expectations. In July, the UK Gambling Commission
announced its intention to launch a 12 week consultation on the use of credit cards
to fund online gambling. Credit cards represent only 6% of deposit value across 
our UK brands, and any potential restriction on their use is expected to have a 
minimal impact on revenue.

A point of consumption tax was implemented in the majority of Australian states 
on 1 January 2019 (having already been implemented in South Australia in 2017 and
Queensland in 2018). The blended rate for the Group is 11.5% of gross gaming revenues.
Market-leading growth, combined with a disciplined approach to customer bonusing
and an increase in market overrounds, will help offset the impact of these changes.

In Italy, restrictions on the promotion of all sports-betting and gaming came into
force on 15 July 2019. The legislation does, however, allow for various forms of
informative advertising and customer contact. The ability to still advertise, albeit
restricted to informative forms, means the expected adverse impact on the market
is likely to be less than had been expected under a blanket advertising ban. The
Group’s portfolio of brands in Italy (Eurobet, bwin, Gioco Digitale) are very well
established, and combined with the Eurobet Retail estate, which offers a seamless
multi-channel solution, are expected to outgrow the market in the second half.

**Taxation Contingencies and Commitments**

In the UK, the Group has inherited VAT refund claims made by the legacy Ladbrokes
business in relation to VAT paid on certain gaming machines prior to February 2013.
The claims are being led by two other operators. The First Tier Tribunal ruled broadly
in favour of the other operators’ claim in July 2018. During Q2 2019, the UK Upper
Tribunal (the second-tier tax court) announced that a hearing will take place in
January 2020 in respect of the appeal by the UK tax authorities against those decisions.
If the UK tax courts ultimately find in favour of these other operators (and therefore
also GVC), the Group expects to receive a refund of approximately £200m. Given the
inherent uncertainty surrounding a claim of this nature, no receivable has been 
recognised as at 30 June 2019.

As disclosed in the 31 December 2018 financial statements, the Group made provision
for potential Greek tax liabilities for the years 2010 to 2017, resulting in a charge
to the Income Statement of £186.8m within non-trading items. Whilst dialogue continues
with the Greek tax authorities, there has not been any change in the position since
year end. The Group continues to make payments on account against the 2010/11 assessment
and, during the first half, made payments of £39.3m. These payments have been recorded
as a receivable on the Balance Sheet with the total receivable now amounting to 
£80.7m.

Since the acquisition of bwin.party in 2016, the Group has fully provided for, but
not fully paid, betting and gaming taxes on Austrian revenues as a result of ongoing
litigation over the Austrian authority’s right to charge taxes on overseas companies.
As at 30 June 2019, the amount accrued by the Group amounts to €75.9m, an increase
of €7.4m since the start of the year. The litigation is expected to be resolved 
during 2020.

**Brexit**

The UK and Gibraltar are now scheduled to leave the EU on 31 October 2019. Ahead
of that date, and in order to meet certain EU regulations, the Group will register
part of its online business under a Maltese online gambling licence. Some EU countries
also require companies operating online gambling services in those countries to 
locate their servers within the EU. To meet these requirements, some of the Group’s
servers were transferred to Dublin in June 2019. The Group’s online business will
still be headquartered in Gibraltar and the impact on our employees in Gibraltar
is minimal.

**Current Trading**

Current trading for the period 1 July to 11 August 2019 saw continued strong trading
momentum with NGR growth in Online and European Retail.

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