There has been much speculation in the media and many articles published on bingo portals recently about the fortunes of Gala Coral, and until now the team at Bingo Hideout have not reported on this story. Bingo Hideout has not reported on what is a very hot topic because it is our aim to always try to bring the real story behind the news headlines and not to speculate.
Bingo Hideout have today been fortunate enough to obtain an exclusive interview with Gala Coral Chairman, Neil Goulden, and in the following frank interview Mr Goulden answers questions about not only the unfounded allegations that Gala Coral plan to break up the organisation, but he also gives his opinion on other key issues that face not only Gala Coral but other online bingo and gaming organisations in the UK at present.
1. The Observer reported that RBS had sent a speculative enquiry to various big names in the industry looking for potential investors or for interested parties to make a bid on Gala Coral bingo, casino, betting shops or e-commerce sites. Gala Coral have reportedly said in response to this article, that this is standard practice for banking organisations. If this is standard banking procedure why would the Observer state that the lenders were looking to break up Gala Coral?
“This really isn’t standard banking procedure, and it would be wrong to suggest that it is. The problem arose due to a meeting within the Mergers and Acquisitions division of RBS and not from the lending bank at all, it was purely speculative on the part of RBS Mergers and Acquisitions that there could possibly be an opportunity for investors in Gala Coral. There was never any consultation with either Gala Coral or the lending bank. In fact we have spoken to RBS, who we have a long standing and excellent relationship with, to pass on our feelings that they have failed in their duty of care in this issue. All financial organisations operate Chinese walls (this protects sensitive information and stops any conflict of interest), RBS M & A have circulated a badly written and a purely speculative research document which has then fallen in to the hands of the press. We have had an unreserved apology from RBS and assurances that this would not happen again. The whole thing is absolute nonsense”
2. It has been reported that Gala Coral have hired Lazard to investigate restructuring of the debt with the possibility of swapping debt for equity, is this the case?
“Yes, we have hired Lazard. They are looking at many different options to possibly restructure, swapping debt for equity being just one of those options.”
3. How would a debt to equity swap affect the position of Apollo (who purchased Gala Coral debt at a discount in 2008)?
“There would have to be at least 75% agreement, no one player can do anything on its own, it has to be consensual amongst the mezz syndicate.”
4. Apollo own Harrah’s one of the biggest names in the world of gambling, do you see their purchase of the Gala Coral debt as an indication to their intention (which the Gambling Compliance website has commented on)?
“We have an open and friendly relationship with Apollo, they don’t need to gain a foothold in the UK as they already have lots of UK gaming interests. They are very opportunistic and have invested heavily in the UK market already.”
5. Gala Coral have reportedly stated in response to the Observer article that ‘we are not looking to sell of the assets or break up the group. We have £200m on the balance sheet and we are not seeking an equity injection’ It has also been reported that the Gala Coral group will need to repay £80m to its lenders in September. In the Gala Coral financial review 2008 the Chief Financial Officer Gary Hughes, mentions a liquidity risk in as much that cash may not be available when the obligations fall due. Is there now such a liquidity risk?
“This is of course a standard ‘financial review’ statement, nothing to be concerned with at all. There are certainly no liquidity risks, we have £250million in the bank and a payment due of £40million in September so there are no problems with liquidity at all, we have enough available cash to meet our obligations.”
6. The current higher taxation faced by the bingo industry has been in the press constantly, Gala Bingo along with Mecca Bingo have been at the forefront of the campaign to put pressure on the government to reverse their unpopular decision. Do Gala Coral see the increase in taxation imposed as a major problem this year?
“In the short term it has caused Gala problems as we obviously - like others in the industry - hadn’t budgeted for the increase."
7. If the taxation is not lowered to 15% will this impact on the future of Gala Coral? If so to what degree, and how could this be offset?
“As I have said above the sudden rise in taxation imposed on the bingo industry is more of a short term problem to us than a long term one. However we have no information on what the government’s future taxation plans are so we can’t say for sure that we will be unaffected in the future.”
Recent news reports have seen William Hill and Ladbrokes announce that they are moving their egaming and telephone operations to Gibraltar, would this be something that Gala Coral might look to do?
“In my opinion it was only a matter of time before an announcement would be made that William Hill would move their online operation completely to Gibraltar, they were operating two servers and so joining both operations together in Gibraltar where tax is only 1% was a sensible move for them.
There would be no point to moving our operation abroad as only our sportsbook business is onshore and our egaming bingo business is already based in Aldernay. Our core business however is land based bingo, and as a European leader in the bingo industry we are concerned about the continuing attack on the bingo industry by the UK government and the unreasonable taxation policies. The UK government seems intent on killing off the bingo industry even though the UK bingo industry is seen as a world leader, and it is my belief that the UK Government would not make such attacks on any other industry sector, yet they don’t seem to see reason where the bingo industry is concerned, and that they themselves are causing redundancies by their unfair taxation policies”
8. Have we seen the last of the Gala Bingo hall closures for the foreseeable future?
“Certainly for the foreseeable future there are no other bingo hall closures planned. Again, we have no knowledge as to the Governments plans so couldn’t say 100% that closures would not happen in the future but we certainly don’t have plans to close any more.”
9. Party Gaming have just purchased Cashcade (the owners of big name bingo site Foxy Bingo) for a reported £100m. 888 Holdings are reportedly in negotiations with unidentified gaming firms about a prospective purchase /s to strengthen their brand, although the details of the company/s have not as yet been divulged. Have Gala Coral any intention of selling any of their online bingo brands, such as Gala Bingo and Sharon’s?
“Bingo and online bingo is our core business, and Gala Coral are only interested in continued growth and so all our plans are with the continued growth of our bingo brands in mind therefore selling off what is one of our growth areas is not seen as an option.”
10. Have 888 Holdings approached Gala Coral with an enquiry regarding a prospective purchase?
“We have not been approached by 888 Holdings or anyone else with such an enquiry”
11. Reports state that William Hill has suffered a knock to profits from unexpected major horse race results and football match results. Has Gala Coral experienced the same problem?
“Yes like the other bookmakers we have had a bad run in June /July, however we are recording higher profits than the other players. Things have started to pick up for August.”
12. If so, is the saying ‘the bookmaker always wins’ now considered to be untrue?
“No the saying still stands over the long term. Over the last twelve months our sportsbetting customers staked £3.5 billion; we paid out £2.9 billion and made £600 million”
13. Overall the situation worldwide is not good, however from Gala Coral’s half year statement it appears that Italian betting shops are doing well for the company. Does this mean that Gala Coral will look at other emerging markets such as China in the future?
“Yes you are right, Italy is proving very good for us, and yes we are very interested in emerging markets such as China. In fact we have just closed our Beijing office down after 3 years of trying to gain government approval for bingo in China. We have met with Government officials in Beijing and talked to all the right people, and all seemed very positive. However after chasing ‘shadows’ for 3 years we made the decision to walk away because of how slow moving negotiations are, we do still remain very interested though”
14. In the case of Italy, if the government there do adopt a more liberal approach to online gambling, does Gala Coral see this as market to possibly exploit? If so what form would this take, i.e. bingo, casino?
“The Italian government are great; they are flexible and relaxed about gambling duty. They believe that if people want to gamble let them do it, but they have to pay the tax on their gambling activities. Its part of the Italian culture, sports betting is very popular and we have found our Italian betting shops are performing very well. Others like William Hill have just left Italy but they have a different model to ours. Gala Coral operate as a franchise in Italy, our franchisees fit out the shops and the staff we supply the computer equipment and the know-how, and it works well as the risk is split and of course so are any profits - 50 / 50!
15. There are reports today of new legislation imminent in Spain, Spanish News states:
‘The online gambling market in Spain, has been presently untapped. With new regulations on the horizon, the market is set to explode, with 46 million Spanish speaking people in Spain providing a huge potential for growth.
Victor Chandler has already announced plans to become the first British bookmaker to secure an online gambling license for Madrid: “We are close to gaining a licence, which will make us the first firm to open the doors to internet gambling in the region and allow us to advertise in Spain’
Will Gala Coral now be looking to expand its operation in Spain?
“Things are a lot more complex in Spain, and as a more federal country things are not as clear as in Italy. It would be more of a problem for us to exploit the betting market in Spain, as they are not, as a nation known for sports betting, however Gala Coral are keen to go online in Spain.
16. In the Gala Coral 2008 financial review, the Coral and e-gaming brands seemed to fare a lot better than the land based casino and bingo operations. Has this trend continued into 2009?
“Yes they are faring well, and the gap is closing between bricks and mortar and egaming. However as discussed earlier high street bingo is our core market and egaming at present is the smallest side of the business. We are looking at ways that we can attract players back to the traditional bingo hall and do see in the future that they will return. We won’t be going down the more modern approach that Mecca has adopted (for example the new Mecca Bingo hall in Beeston) as we don’t feel that is what our players want, and we don’t want to lose touch with their needs.”
17. Will Gala Coral be looking at focusing on their strengths and exploiting them or looking to shore up their weaknesses?
We do want to play to our strengths and exploit our core competencies; we have over 2,000 retail operations, are the biggest UK bingo operator, we excel in liability management and have real bingo knowhow.
Of course we want to strengthen our weaknesses; we are at the moment a great company with a bad balance sheet. Debt is not necessarily a bad thing, but ours is maybe too high for a modern climate. We need to clear some of the debt so that we can free up cash flow, we have £250 million in the bank but we can’t spend it - and we need to be able to do so, so that we can grow the business.”
18. Running such a large organisation like Gala Coral, being Chairman of South Central Ambulance Trust and being a member of the low pay commission, when do you have time for sleep?
“Yes I do have time to sleep. The Ambulance Trust and Low Pay Commission are areas I have a great interest in. Friends tell me I should have been a politician, but I am interested in politics with a small ‘p’. I studied Politics at University and I like to understand the Government’s decisions and if its possible be involved in public policy making and outside of my family and sport this is an area that I have a keen interest in.”
When we interviewed Ian Burke of Mecca Bingo he spoke of his interest in cycling, do you have any interests that you enjoy, that provide freedom from your suit and act as a balance to your corporate life?
“I love sport, and cycling is a particular interest of mine. I often go on 50 – 60 mile cycle rides. I am up at 7.30am and go for a bike ride most Sundays. In fact Ian and I will be riding together next year in South Africa, though he is younger and fitter so I doubt I will keep up with him! I love sailing too, in fact I love all sports and in my younger days I used to play rugby and cricket but I don’t anymore.”