Q&A: Kenny Alexander on winning battles in the UK market

GVC CEO Kenny Alexander was in jubilant mood when he spoke to EGR Intel in March, just moments after the London-listed operator had released its full-year financial results for 2018.

The firm reported 9% net gaming revenue growth to £3.57bn, as EBITDA increased by 13% to £755m. GVC also detailed “very strong growth in online with market share gains in all territories” as online NGR rose by 21% to £1.87bn, after a 22% rise in sports brands and 16% on gaming brands.

Alexander said GVC “beat up William Hill and Paddy Power in the UK” and was “biting at the ankles of PokerStars”, insisting that its 2018 performance confirmed the company as the “largest online-led sports betting and gaming operator in the world”.

But the eyebrows of City analysts were well and truly raised just three days later when Alexander exercised an option to sell 75% of his shares in GVC for £13.7m. The operator’s share price promptly fell by 16%, but below, Alexander explains how GVC achieved everything it set out to do last year.

EGR Intel: How do you assess GVC’s full-year financial results?

Kenny Alexander (KA): They are very strong results. We achieved everything we were looking to do in 2018 and we are grabbing market share in our key markets, be it the UK, Germany, Italy, Australia or Brazil. They are our big key markets. Earlier in the year we also did the MGM deal so we are well-positioned in the US. The integrations are also going well – I could say whatever I like but the numbers speak for themselves. If it wasn’t going very well then the numbers wouldn’t be where they are. We just managed to get the deal done with Playtech, which was never a big deal for me really. I always thought we would get there and if we didn’t then it wasn’t the end of the world either. But we got the deal which is good for both Playtech and for GVC.

EGR Intel: Is early 2019 performance pleasing?

KA: We have continued into 2019 very strongly as well. Digital growth is up 22% so far this year so momentum has increased into 2019. I couldn’t be more pleased with the business and we are doing very, very well.

EGR Intel: What drives that digital growth?

KA: Our big markets have all grown strongly. In 2018 the UK was up 14% and in Germany bwin was up 23%, Australia was up 17%, Italy was up about 16%, Brazil was up 33% and partypoker was up 42%. Those are our big markets and they are all growing extremely well. The key driver is that I think we’ve got better brands than anyone. Brands are becoming more and more important. In fact they are absolutely crucial. In the UK we have Ladbrokes Coral with Gala and Foxy doing the bingo so great brands. In Germany, who wouldn’t want the bwin brand? It is the best in mainland Europe. We also have the second biggest poker network in partypoker. We have our own technology which is very good and that we are able to control. You see the deal 888 did with BetBright the other day, it shows that everybody now wants their own technology. I think we also have the best management and mid-management and the best people in the industry quite frankly.

GVC CEO Kenny Alexander

EGR Intel: 2019 means no World Cup and no FOBTs – what impact will that have on full-year finances?

KA: Obviously if you don’t have the World Cup it is going to impact on growth but I am still expecting digital to grow at least strong double digits. With the World Cup, we always talk about it but in reality I think it has a 1% or 2% effect on the overall business. Everybody is in the same boat. Everyone was also saying about the Q4 margins and how it is such a tough comparison but the way I look at it is that I don’t really bother with all that. All I care about is a level playing field and that we beat our competitors in our main markets. What matters to me is that we beat up Hills and Paddy and Sky in the UK and in Germany we must beat up Tipico. In poker, we must try to do better than Stars and I could go on and on. If we keep winning those battles, then all the rest of the stuff is what it is. Post-triennial, the vast majority of our EBITDA will be digital. UK digital was always going to be a smaller part of our business but it will remain important for omni-channel cross-selling. It drives a lot of our multi-channel revenue in the UK, but GVC is very much a digital business.

EGR Intel: You have made it clear there is a contingency plan for Brexit planning. How will this affect employees working in Gibraltar?

KA: We have nearly 1,000 employees in Gibraltar and in five or 10 years’ time I expect to have at least 1,000 employees in Gibraltar. We are not moving out of Gibraltar. Absolutely not. We have a contingency plan like getting these Malta licences for example, but we’ve always had contingency plans. No matter what happens in regards to Brexit, we are not moving out of Gibraltar. We are committed to it as the biggest employer there and we’ve got established operations there so there is no way we are coming out of Gibraltar. I think it is overplayed. People might have to queue up at the border – so what? Brexit is not something we discuss internally and we will remain in Gibraltar indefinitely.

EGR Intel: GVC has done a JV deal with MGM but is the US market on the backburner for now?

KA: It is not on the backburner as it is still very important to us and we have done the deal. We are putting the management in place and we have an office in New Jersey where we are building the team up there. I feel we have done everything we need to do in order to be the market leader in five years’ time. We are up to $100m of annualised revenue so we’ve got scale. We got the JV with the partner we always wanted in MGM. We are waiting for the states to open up. We’ve got management in place. We are sorting the product and New Jersey is just 3% of the whole population. We expect to make a small single-digit loss next year of around £5m and we will invest heavily in marketing next year also. It is not the be-all-and-end-all for GVC. We have got many other exciting avenues and opportunities of which the US is just one. We are not a complete punt on the US. At the same time, we still hope and expect to be the market leader.

EGR Intel: Neds was acquired in the Australian market – how is the integration going?

KA: We are integrating it with our current business. The two management teams know each other quite well through Dean Shannon. We’ve had Neds for five months and it is performing very strongly so there are no plans to rebrand anything. We will keep Ladbrokes and Neds as dual brands but on the same technology. The business grew 17% last year so we are very pleased with Australia.

EGR Intel: Are you enjoying being CEO and do you still have the appetite?

KA: One hundred percent. As long as you are winning, it is always fun, isn’t it? It is the same as poker. Who doesn’t like winning?