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Friday Email: 18 September 2015

Every Friday morning our lead analyst Mark Riding sends out his weekly run-down and upcoming events in the investor calendar, like this one:

The markets have had yet another volatile week, but not extreme movement, trading in a relatively narrow range, but still very much up and down from one day to the next.

The past week has been quiet from a corporate perspective with only Galliford Try worthy of mention as they increased their full year dividend by 28%. We flagged this last week and they did not disappoint as usual.

The week ahead continues to be quiet with a couple of our additions this past week reporting to the market, namely AA and Card Factory, so it will be good to try and get a handle on what to forecast for them over the next two years.

We have had a big look at the indices and updated our data considerably to bring the FTSE 100 and FTSE 250 up to date. Whilst there was very little change to the FTSE 100, the was a fair amount of change in the FTSE 250 which has resulted in a lot of additions to DividendMax.

New into DividendMax (FTSE 100 & 250) this week that do or are expected to pay dividends are: Merlin Entertainment, AA plc, Auto Trader, B&M European Value Retail, Card Factory, DCC, Finsbury Growth and Income trust, Foxtons, GCP Infrastructure, Grafton Group, Hellermantyton, Just Retirement, Kennedy-Wilson, (looks good to me), Lookers, Marshalls, Northgate, Nostrum Oil & Gas, Onesavings (also looks good) Pets at Home, Spire Healthcare, Virgin Money and Zoopla.

New into DividendMax (FTSE 250) this week that do not currently pay dividends are: Aldermore, Allied Minds, AO World, CLS Holdings, Jimmy Choo, Indivior, John Laing, Just Eat, Riverstone Energy, Shawbrook, Vectura, Wizz Air andWoodford Patient Capital Trust (not too long before we see dividends from this giant of income investing I expect)

Finally GVC Holdings. I have had numerous requests as to what is happening there. Basically a member pointed out to me that their prospectus stated that they would cease to pay dividends in 2016 to facilitate the rapid repayment of the debt raised to make the BWIN party digital reverse takeover. We are not sure whether there will be any more dividends in 2015, but given the level of irrevocable support and the withdrawal of the only other actively interested party, it is likely that the offer will close prior to the next ex-div date. So, it is possible that the next dividend will be paid, but dividends will not be paid in 2016.

Below is the members enquiry to the company and the response received.


Hi, I know you're super-busy, but could you clarify: if/when your reverse merger deal closes, will you cease paying *all* dividends immediately....not just "2016" (per the deal paperwork).
It would be great if you could let me know.

Response from GVC

We are not allowed to volunteer any such information until the publication of our prospectus which is itself subject to ukla clearance and their timetable - which we do not know.

Here is the link to the paperwork:

From the paperwork:

The GVC Directors estimate that the implementation of the measures required to generate these estimated synergies and cost reductions would give rise to one-off costs of approximately €60 million, over 95 per cent. of which wouldbe incurred by the end of 2016. This would allow GVC to resume the payment of dividends in 2017 following a pause in the dividend through 2016, when most of the costs of achieving the expected benefits will be incurred.

Cash flow and dividend intentions

GVC believes that one important measure of performance is the ratio of net cash generated to EBITDA. In the year ended 31 December 2014, GVC generated €42.6 million in cash from Clean EBITDA of €49.2 million, after taking into account both working capital movements and the acquisition of tangible and intangible fixed assets, which is an 87 per cent. conversion ratio. GVC will seek to achieve a conversion ratio for the Enlarged Group of at least 80 per cent. post Completion and post-restructuring.

By applying its cash management capabilities to the integrated sportsbook activities, GVC believes that, by the beginning of 2017, the restructuring would drive substantial improvement in the Enlarged Group's cash flow from operations and free cash flow, facilitating the prompt repayment of the Cerberus Loan and the resumption of payment of dividends at a level which is comparable with GVC's quoted peer group of online gaming companies. The GVC Directors anticipate adopting a policy of paying a progressive dividend.


This email was originally sent on Friday 18 September 2015

The Friday email is delivered to over 20,000 subscriber’s every week, and remains a widely read run-down of recent events and what investors can expect in the week ahead written by our chief analyst Mark Riding.

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