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It could lead to a big hit to earnings for some gambling stocks
Thursday 25 Jan 2018 Author: Tom Sieber

Renewed suggestions the maximum stake on a fixed-odds betting terminal (FOBT) will be cut from £100 to £2 have rocked the gambling industry.

The stock market value of the sector tumbled on 22 January following reports that new culture secretary Matt Hancock favours tough curbs on the controversial machines.

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Consultation on the FOBT review closed on 23 January but a final decision isn’t expected until the second quarter of 2018 at the earliest.

Fixed-odds betting terminals are a key source of income for bookmakers with high street shops. Therefore a significant cut to the maximum stake could have a negative impact on their future earnings, hence why shares in Ladbrokes Coral (LCL) and William Hill (WMH) were particularly weak on the £2 stake speculation.

The market had appeared to be pricing in a maximum stake of £20 so the double-digit share price falls in these names at the start of the week was perhaps unsurprising.

GVC (GVC), which recently agreed a deal to buy Ladbrokes Coral, saw a more modest share price fall and subsequently recovered its losses.

This could reflect the fact the terms of its takeover deal with Ladbrokes are dependent on the outcome of the FOBT review and it could therefore end up paying less than the headline figure of £3.9bn to buy the business.

The implication the Government reached its view before the end of the consultation period has led some observers to suggest bookmakers might seek a judicial review into the decision. (TS)

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