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GVC drops 11% as HMRC expands Turkish tax probe over gambling arm

Published: 04:45 21 Jul 2020 EDT

GVC Holdings - GVC hit as HMRC expands tax probe over Turkish gambling arm

GVC Holdings PLC (LON:GVC) shares slumped on Tuesday after the group revealed that HMRC had ordered the firm to hand over information relating to its former Turkish-facing gambling business.

The owner of Ladbrokes said prior to July 20 it understood that no GVC entity was subject to the investigation, which it believed to be directed at a number of former third party suppliers relating to the processing of payments for online gambling in Turkey.

READ: GVC the gambling stock to own for the long-term, says JP Morgan

However, GVC said it has now been informed by HMRC that the tax authorities had widened the scope of their probe and were now examining “potential corporate offending” by an entity or entities within the GVC group that have yet to be identified.

The company said it was “surprised by the decision” to extend the investigation and that they were “disappointed by the lack of clarity provided by HMRC” as to the scope of the probe.

“HMRC has not yet provided details of the nature of the historic conduct it is investigating, with the exception of a reference to section 7 Bribery Act 2010, nor has it clarified which part of the GVC group is under investigation. In the meantime, the company continues to co-operate fully with HMRC regarding the provision of information”, the group said, adding that it sold off its Turkish facing business in December 2017.

Section 7 of the UK’s Bribery Act 2010 relates to a failure of commercial organisations to prevent bribery, including a lack of procedures in place to prevent such practices.

In a note on Tuesday, analysts at Shore Capital placed their rating for the stock under review from ‘buy’ pending greater clarity over the extent of the investigation, although they noted that the Turkish business had been sold prior to the company’s merger with Ladbrokes Coral in 2018.

Berenberg analysts said it was “clearly an unwelcome development, it is worth highlighting that any activity being investigated predates the improved governance standards implemented at GVC and the appointment of key board members”, including chairman Barry Gibson, who joined as chairman last year, Rob Wood as CFO at the closing of the Ladbrokes deal and new CEO Shay Segev who joined the company in 2016 but was at the time focused on the integration of GVC and BWin.

The shares dropped 8.7% to 795.8p in early deals.

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