Business Bulletin 26 Mar 2017
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Radical measures could be coming on machines
Betting shop operators have been warned to brace themselves for bad news coming from the government’s review of gaming machines by former culture secretary John Whittingdale.
Whittingdale, who held responsibility for gambling in government until being replaced by Karen Bradley last July, delivered the gloomy message as guest speaker at the Association of British Bookmakers’ annual meeting in London.
The government launched a call for evidence into gambling in October with the main element the review of stakes and prizes for gaming machines, also known as fixed odds betting terminals (FOBTs), which make up more than half of betting shop revenues.
Opponents of the machines have called for the maximum stake to be cut to £2 from £100, something ABB chief executive Malcolm George claimed would lead to thousands of betting shops closing and the loss of £290 million to the horseracing industry in media rights and levy payments by 2020.
Outlining the opposition to machines from gambling industry rivals, campaigners and politicians who believe they have the press and public opinion on their side, Whittingdale said: “Given all of that I would have to say I do think there will be proposals for significant change.”
He added: “I can’t say I would be surprised if there are quite radical measures produced when we come to it and I think you should brace yourself.”
Whittingdale told the audience he was no longer in a position to give them information on the government’s plans and that he was speculating. However, he said culture minister Tracey Crouch was “not a great fan of FOBTs” and was concerned about their impact.
He said he thought government would invoke the “precautionary principle”, adding he thought the government was likely to publish its proposals in April after Easter.
In his speech, George said he believed the government was facing a dilemma over machines and warned a major stake cut would simply drive problem gamblers into other forms of gambling in casinos or amusement arcades, or even worse the illegal gambling sector.
He added: “The next few months will be critical, not just for betting shops, our shop colleagues and customers, but also for horse and greyhound racing and the whole eco-system that exists around shops.”
The BHA has acknowledged the importance of the betting shop sector to racing’s fortunes and that a cut in stakes could hit the sport’s finances if there were closures, although British racing’s governing body last week stopped short of calling for maintenance of the status quo.
BHA director of corporate affairs Will Lambe said: “We are not taking a position on the appropriate stake for B2 machines in LBOs, but material reductions in stake, which lead to a reduction in the number of LBOs, would cause losses of revenue to the racing industry.”
GVC won’t hesitate if deal is right
Kenny Alexander, chief executive of online gambling company GVC Holdings, was not ruling out more acquisitions last week when announcing results for 2016.
The owner of Sportingbet added Bwin to its roster last year and was also linked to possible deals with William Hill and Ladbrokes Coral.
Alexander told analysts: “Organic growth is the number one priority but we are as well positioned as any other company to participate in M&A [mergers and acquisitions] in my opinion.
“If we see the right opportunity we have the technology, we have the product, we have the management, we have the track record and we have the finance firepower to execute it.
“If we see the right deal and it is in the interests of our shareholders we won’t hesitate.”
Costs related to the acquisition of Bwin meant GVC made a statutory loss before tax of €138.6 million (approx £120m).
However, net gaming revenue rose nine per cent to €894.6m, while Ebitda (earnings before interest, taxation, depreciation and amortisation) was up 26 per cent to €205.7m.
Alexander added: “The acquisition of bwin.party in February 2016 was our most ambitious transaction to date and through the hard work of our people we have once again demonstrated our ability to create significant shareholder value through selected acquisitions.
“Our strategy of pursuing international diversification and scale through leveraging our proprietary technology is more appropriate today than at any time in our history. The organic growth opportunity is equally exciting and we are confident of delivering further growth in 2017.”
Good numbers for 888
Online gaming and sports betting company 888 Holdings also announced its preliminary results last week, with 2016 hailed as a “fantastic year” by chief executive Itai Frieberger.
The company, which last year teamed up with Rank to make an ultimately unsuccessful bid for William Hill, revealed revenue up 13 per cent to $520.8m (approx £417.5m). Adjusted Ebitda was up 12 per cent to $90.2m.
Frieberger said: “2016 was another fantastic year for 888 during which we continued to deliver very strong organic revenue and profit growth.
“This was again underpinned by further outstanding progress in casino, sport and across regulated markets.
“888’s further expansion in the UK, Spain and Italy is a strong demonstration of the group’s ability to drive excellent growth and build leading market positions across regulated markets as the industry continues to head in this direction.”
Frieberger said trading since the start of the year remained “healthy” with average daily revenue more than 11 per cent above the previous year at constant currency.
The company’s announcement did not rule out the prospect of further deals, stating 888 “has a strategy for sustainable growth and to deliver long-term value for all stakeholders by exploiting organic potential as well as evaluating attractive M&A opportunities”.
Frieberger added: “The board continues to see a number of significant growth opportunities for 888 both in new and existing markets and we look forward to another exciting year of progress.”
What’s happening this week
Ladbrokes Coral plc announce their first preliminary results as a merged company on Tuesday.
In January the group revealed it expected operating profit to be in the region of £275-£285 million.
However that was before adjustment for the shops sold under the Competition and Markets Authority ruling and an amortisation change. As a result adjusted pro-forma operating profit is set to fall to £257m-£267m.
Just as Paddy Power Betfair and GVC have done in recent weeks, the company is expected to reveal potentially significant costs resulting from the merger.
Analysts at Morgan Stanley said their “main focus will be on comments around merger integration and synergies, the impact of the forthcoming Triennial Review, and current trading”.
It could also be a momentous week in the history of British horseracing’s finances, with the secondary legislation that will deliver the government’s planned replacement for the levy system set to be voted on in parliament.
If everything goes to plan the new system should be in place for April 1, provided it receives European state aid approval.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][bsf-info-box icon=”Defaults-envelope-o” icon_size=”32″ pos=”left”]For more information about Racing Post’s B2B services, contact us or browse more of b2b.racingpost.com.[/bsf-info-box][vc_column_text]Racing Post B2B caters for all digital content requirements across web, mobile, tablet and retail. But we are more than just a data provider – we enhance raw data with the best and most recognisable content authored by the biggest names in sports betting. Racing Post B2B offers an unrivalled worldwide content portfolio for bookmakers and media associations. Acknowledged throughout the racing and gaming industries, the Racing Post creates bespoke products suited to your audience that will enable your company to maximise profitability by offering unique data, editorial or multi-media solutions.[/vc_column_text][/vc_column][/vc_row]