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StockBeat: GVC Underlines British Bookies' Lucky Streak

By Geoffrey Smith

Investing.com -- There is life after death-by-regulation for British betting shops, it seems.

GVC Holdings (LON:GVC), the owners of the Ladbrokes (LON:LCL) and Coral chains of bookmakers, raised its earnings guidance for the year after a strong third quarter that showed its high street stores shrugging off new rules that crippled their business with fixed-odds betting terminals.

The regulator had cut the maximum stake on FOBT to 2 pounds from 100 amid fears that they were highly addictive and responsible for a steep rise in indebtedness, especially among low-income households.

However, it seems that customers are happy to scratch their gambling itch by walking a couple more yards to the counter. In the third quarter: sports betting at its U.K. retail outlets rose 7% in year-on-year terms – an impressive performance given that the year-earlier period included the soccer World Cup, which featured an uncharacteristically long run by the England team.

As a result, the group raised its forecast for full-year earnings before interest, tax, depreciation and amortization to a range around 675 million pounds ($820 million), from a midpoint of 660 million earlier.

Bookies have been among the star performers over the last month in a U.K. market increasingly hobbled by Brexit fears. GVC, which rose 1.7% by 5 AM ET (0900), has now risen 9.1% in the last month, while rival Flutter Entertainment (LON:FLTRF), which owns the Paddy Power and Betfair chains, has risen 7.2%.

In part, that’s because the downside from the FOBT episode has not been as bad as feared. But it’s also due to optimism that both chains will cash in significantly from the liberalization of the U.S. betting market. GVC has teamed up with casino operator MGM and last month launched the BetMGM app in New Jersey – “a key milestone”, as the company called it on Wednesday.

“Our U.S. sports-betting joint venture with MGM Resorts remains very well-placed to capitalise on the U.S. sports-betting opportunity,” it added.

There was no indication from GVC that it intended to crash Flutter's agreed merger with Canada-based Stars Group, a move which analysts have said puts Flutter in pole position as regards exploiting the U.S. market.

There was no indication from GVC that it intended to crash Flutter's agreed merger with Canada-based Stars Group, a move which analysts have said puts Flutter in pole position as regards exploiting the U.S. market.

GVC comfortably outperformed the U.K. FTSE 100 on Wednesday, which recovered some 0.4% on unconfirmed reports of a move by the EU to break the deadlocked Brexit talks. Brexit, combined with the U.S.-China trade dispute, had led to sharp losses on Tuesday. The Euro Stoxx 600 was up 0.7%, while the German DAX led the way with a 1.4% rise.

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