Punters with stakes in listed gambling companies have become used to nasty regulatory surprises. Only this week shares in the sector retreated amid reports that the culture secretary was prepared to cut the maximum stakes on betting machines from £100 to £2. Nevertheless, an announcement from GVC Holdings, issued after the close of trading on Thursday, that it was locked in a costly dispute with Greek tax authorities was unwelcome.
The online gambling company behind Sportingbet and Foxy Bingo warned that it was setting aside about €200 million over a disputed tax claim. The announcement did not go unnoticed in the City yesterday, with the shares tumbling 26½p to 921½p. A source said that the announcement had been made as soon as GVC was aware of the bill.
GVC plans to appeal against the charge, which relates to trading in 2010 and 2011 at Sportingbet, which it acquired in 2013, but it has entered a scheme with Greek authorities under which it will pay about €7.8 million a month for the next two years. The timing was awkward in more ways than one, with GVC in the middle of a £4 billion takeover of Ladbrokes Coral, which fell 1½p to 170¾p yesterday.
Despite the share price fall, stockbrokers were sanguine, with Peel Hunt telling clients that “the impact of the provision on our valuation of the merged entity is de minimis” and adding cheekily that the demand “makes no sense to us, except that it highlights that GVC is in a better balance sheet position than Greece”.
Analysts at Berenberg said that GVC’s appeal was likely to succeed and that Greece “grossly overstates how much GVC should owe in back taxes”, but they forecast a “50 per cent likelihood that [GVC] will end up not recovering the full €200 million, which has shaved 30p off our previous price target of £11”.
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The going on the wider market was easier. The FTSE 250 index ended the day up 93.84 points, or 0.5 per cent, at 20,615.58, leaving it broadly flat over the week, off 0.2 per cent. The FTSE 100 also finished positively, up 49.70 points, or 0.7 per cent, at 7,665.54, leaving it close to record highs but 0.8 per cent weaker over the week.
Outperforming GVC, and leading the mid-cap index higher, was Dechra Pharmaceuticals as investors continued to buy shares after its €340 million cash-and-shares acquisition of AST and Le Vet, two privately owned European veterinary pharmaceuticals companies. The shares, up another 82p at £23.28, have rallied despite Dechra raising £105 million to help to fund the deal through a placing of shares priced at £20.50. Stifel raised its target price to £21 from £18.
Joining GVC among the biggest fallers on the mid-cap index was Ocado, which eased back 24¼p to 494¾p. This was despite RBC raising its target price to 525p from 320p amid signs of profit-taking, after a rally this week sparked by the online grocer striking its second international partnership deal since November with Sobeys, of Canada.
HICL, the infrastructure investment company, also was weaker. It warned that the collapse of Carillion had triggered loan defaults at projects and management sub-contracts at the outsourcer. “The company previously announced that ten projects within the HICL portfolio had facilities management sub-contracts with Carillion subsidiaries,” HICL told investors. Although it said that there would be no hit to its dividend policy, the shares fell 6½p to a shade above 141p.
Still in the red was Dignity, the struggling funeral provider locked in a costly price war, which slipped another 29½p to 907½p. Tullow Oil, on a downgrade to “sell” from Stifel, trickled down 6½p to 218½p.
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Bearish broker research was also weighing on stocks in the FTSE 100. WPP, the advertising giant, was on the end of an “underperform” rating from Bank of America Merrill Lynch, which argued that the “digitalisation of the economy forces advertisers to radically overhaul their marketing strategy”. WPP drifted back 9p to £12.92½p.
The goldminers were off, despite the precious metal rising back towards a 17-month peak. Randgold Resources, the African miner, fell 68p to £71.30.
Back in fashion was Next, which extended its rally by 154p to £52.18, and the London Stock Exchange Group, up 92p to £40.24, amid reports that TCI, the activist hedge fund, was predicting a £15 billion takeover bid for the company.
Wall Street report
US markets closed at new records again and completed their best four-week run since 2016. The Dow Jones industrial average rose 223.92 points to 26,616.71. The S&P 500 was up 33.62 points at 2,872.87 and the Nasdaq gained 94.61 to 7,505.77.