(Reuters) - The British government on Thursday confirmed it will cut the maximum stake on fixed-odds betting terminals (FOBTs) to two pounds from 100 pounds, in a move designed to tackle problem gambling.
The decision, however, deals a big blow to bookmakers, who have argued that the terminals are a major source of income for high street shops that are struggling to stay afloat as younger gamblers move online, putting jobs at risk.
Online gambling businesses also face a squeeze as the government said it plans to increase Remote Gaming Duty to offset its loss of income from the cut in the FOBT stake.
That is likely to take a toll on online gaming firms such as Sky Betting & Gaming and 888 Holdings (888.L).
Here are the latest reactions from bookmakers and industry heads to the UK government’s move.
WILLIAM HILL (WMH.L)
William Hill says new regulation could lead to 35-45 pct reduction in total annual gaming net revenue
Preliminary estimates suggest move could result in about 900 shops becoming loss-making, with a proportion of these at risk of being closed within a relatively short time of the change being implemented
Estimates move could reduce William Hill Retail’s annualised adjusted operating profit following mitigation measures by about 70 million to 100 million pounds
- Says board intends to retain existing dividend policy to pay out about 50 pct of underlying earnings
- In the first four months of the current financial year, about 70 pct of total gaming revenue was generated by stakes in excess of the proposed 2 pound threshold
** CEO Philip Bowcock: “The government has handed us a tough challenge today and it will take some time for the full impact to be understood, for our business, the wider high street and key partners like horseracing.”
“We will continue to evolve our Retail business in order to adapt to this change and we will support our colleagues as best we can.”
GVC HOLDINGS PLC (GVC.L)
- Company expects to be able to reposition UK Retail business within two years following implementation, with an anticipated fully mitigated impact of about 120 million on group EBITDA by the end of this period
- Says its offer for Ladbrokes Coral Group accounted for the likelihood of a 2 pound maximum stake and today’s announcement has no impact on the minimum targeted synergies of at least 100 million pounds per annum
** “Whilst we welcome the certainty provided by the announcement, we are disappointed with the outcome, particularly given the previous independent evidence on stake cuts published by both the Gambling Commission and the Responsible Gambling Strategy Board.”
“It is now important that the industry is given an adequate implementation period to help prepare and plan for the shop closures that will arise, including attempting to mitigate the impact of resultant job losses.
“Significant re-engineering of the machines and gaming software will also be required to effect these changes.”
PADDY POWER BETFAIR (PPB.I)
- Company estimates direct, pre-mitigation, impact of a 33-43 percent decline in total machine gaming revenue; in 2017, this would have equated to a 35 million to 46 million pound in revenue impact, representing 2-2.6 pct of group revenue
- Says potential mitigation factors on profitability include reduced direct variable costs, product development, substitution to other betting products and market consolidation
- Does not expect the proposed change to have a material impact on company’s UK retail strategy
** CEO Peter Jackson: “...the wider gambling industry has suffered reputational damage as a result of the widespread unease over stake limits on gaming machines. We welcome, therefore, the significant intervention by the Government today, and believe this is a positive development for the long-term sustainability of the industry.”
- Company says increasing the tax burden will impact its plans to create new jobs in the north of England in the years to come
** “Sky Betting & Gaming doesn’t have any FOBTs but now we - and Yorkshire’s economy - risk being punished because of them. Any increase in Remote Gaming Duty is a tax on hi-tech Yorkshire jobs,” the UK-based company, which Canadian bookmaker The Stars Group (TSGI.TO) has agreed to buy
“Rather than punishing a UK-based jobs creator, the government should focus on getting a fairer tax contribution from other tech companies who, unlike us, don’t already pay sufficient taxes on their UK activities.”
Reporting by Tenzin Pema in Bengaluru; Editing by Keith Weir