Financial Updates 08 – 06 – 16

Coral has released H1 results that should be encouraging regarding the underlying strength of the business. Group revenue was up 13% to £604.9m, EBITDA was up 16% to £124.6m (+43% pre reg impacts), the broad theme was retail resilience and online growth in a period of mixed but net positive sporting results (stronger football, volatile horse racing: Cheltenham vs. Grand National).

These trends have continued into current trading, but two key themes stand out:

– continued declines in horse racing staking, the slack currently taken up by football and slots but important for mix, long-term trends and stakeholders
– some (unquantified) disruption caused by Gambling Commission LCCP reality check regulation which may give some comfort to William Hill post profit warning, but we doubt the disruption (or more accurately impact on forecasts) is likely to be anywhere near as severe

Coral Retail

– OTC revenue up 5%: stakes -1% led by declines in racing (NB, tea-time Grand National?) partially mitigated by +5% football staking (suggests remainder down c. 2-3%); GP +1.3pp (football driven)
– Machines +3% (MWA +4% to £1,039): driven by B3 (+13%), which now represent 39% revenue (suggests roulette -1.5%)
Operating costs +2%: due to wage inflation and training (NB, pre NLW impact)
EBITDA +1% to £79.3m: (+23% ex reg impact), suggesting Coral has regained its operational leadership in the LBO sector (especially given omni-channel, below)
LBOs -20: with 26 closing and 6 opening, suggesting expansion has turned into (limited) retrenchment despite overall resilience, which should caution against too much sector positivity

Coral Online

– net revenue +58% to £86.1m: driven by sports (+108% to £32.7m) and a strong gaming performance (+38% to £53.4m); Coral alone (ie, ex Gala) is therefore now very close to Ladbrokes online (ex Australia and exchanges) in terms of trading scale, with strong and – critically – profitable momentum
– EBITDA + 64% to £37.1m: (+118% ex POC), with marketing kept in line in % terms (26%), leaving strong operational gearing on a 14% increase in operating costs
– mobile 74% sports stakes, 70% gaming: suggesting strong technology management, mass-market penetration and games content
– Coral Connect delivered 4,000 actives per week: representing 40-50% of Coral revenue, with 35% of Connect customers using shops to deposit/withdraw; proving the power of Coral’s simple but effective omni-channel approach as well as the power of retail in the online space when properly leveraged
– Gala bingo + 15% to £47m, suggesting continued market outperformance despite strong scale and the brand’s separation from its retail asset base
– Gala casino -17% to £6m, reflecting what seems to be reprioritisation efficiencies as other sub-brands materially outperform

Eurobet Italia

– Stakes + 20% driven by the relocation of 250 shops to better locations as well as retail inlay (now 20% of stakes; likely much lower in revenue terms but still material directionally)
– Sports net revenue + 53% to £38.5m, driven by improved football results
– Virtuals stabilising on a period-on-period basis, though down 11% YoY
– EBITDA + 71% to £4.9m
– Eurobet now #2 licensed retail and online operator in Italy by gross win, with a 4ppt increase in retail share to 17%; behind only bet365 in locally licensed online
– Online revenue + 38% to £27.1m, driven by strong FTD growth (+110%) aided by TV advertising; Sports +70% to £14.1m (stakes +56%), gaming +15% to £13m