The operators see in the £2 cap a 'tough challenge'

William Hill and Paddy Power see sales hit from U.K. betting limit

William Hill shares dropped 3.2 percent to 307.40 pence at 9:30 a.m. in London, paring a decline of as much as 9.2 percent.
2018-05-18
Reading time 2:24 min
To weather lost revenue, Paddy Power said Wednesday it’s in talks to expand into U.S. sports betting, while William Hill is preparing to roll out operations in New Jersey, which instigated the legal fight that led to the high court ruling by repealing its gambling ban.

William Hill is now vulnerable to a takeover bid, according to Canaccord analyst Simon Davies Davies, a warning which has been echoed by the company’s own management.

Bookmakers already are eyeing opportunities to replace lost revenue. Paddy Power said Wednesday it’s in talks to expand into U.S. sports betting, while William Hill is preparing to roll out operations in New Jersey, which instigated the legal fight that led to the high court ruling by repealing its gambling ban.

Roulette and poker machines are used by thousands of betting shops across Britain, and have helped offset a decline in revenue caused by the growth in online gambling. Gamblers on the machines can currently stake 100 pounds every 20 seconds, and charities including GambleAware have long called for the government to reduce the maximum stake to remove the risk of customers losing thousands of pounds in a single session.

“We have chosen to take a stand,” U.K. Culture Secretary Matt Hancock said. “These machines are a social blight and prey on some of the most vulnerable in society, and we are determined to put a stop to it and build a fairer society for all.”

KPMG Analysis

A £2 cap would force half of the U.K.’s 8,500 betting shops to close, with 21,000 job losses, and cost the horse-racing industry -- which sells broadcasting rights to the bookmakers -- 50 million pounds a year, according to analysis by KPMG.

It would have a “catastrophic impact on the future of retail betting,” the Association of British Bookmakers, which commissioned the KPMG analysis, said before the decision.

William Hill shares dropped 3.2 percent to 307.40 pence at 9:30 a.m. in London, paring a decline of as much as 9.2 percent. Paddy Power lost 0.8 percent to 8,185 pence and GVC Holdings Plc declined 1.3 percent to 903.50 pence.

The lower betting limit isn’t certain to reduce problem gambling and could push people to more volatile products, William Hill said. The company is disappointed by the decision, which will have a high price in terms of shop closures and jobs, it said.

‘Tough Challenge’

“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 horse racing,” William Hill Chief Executive Officer Philip Bowcock said.

Paddy Power predicted the U.K. cap will cut its machine gaming revenue by 33 percent to 43 percent, which would have meant a reduction of as much as 46 million pounds last year, representing 2 to 2.6 percent of group revenue.

The government needs to give the industry “an adequate implementation period” for the new rule, gaming company GVC said in a statement. The company doesn’t plan to seek a judicial review of the decision, which will cut profit by 160 million pounds in the first full year its in effect, it said.

The U.K. Treasury also will lose tax revenue from the cap on bets, said lawmaker Philip Davies, who chairs Parliament’s cross-party group on gambling and lobbied against a 2-pound stake limit. The cap could mean a hit to the Treasury of 1.1 billion pounds over the next three years, and a loss to already cash-strapped local governments of 45 million pounds, according to the KPMG report.

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