Supplier News

UK – Ladbrokes warns of closures on suggested FOBT limits

By Phil - 24 March 2017

The British bookmaking sector is bracing itself for sweeping changes on FOBT play that could according to one leading industry executive, close more than half the bookmaking shops in London.

Jim Mullen, Chief Executive of Ladbrokes Coral Group, has said that as many as 1,000 of London’s 1,800 betting shops could be forced to shut due to the changes.

British MP John Whittingdale has warned that UK bookmakers should be prepared for a change in FOBT staking limit restrictions. Politicians want the maximum stake lowered from £100 to £2.

Speaking to the Evening Standard Mr. Mullen warned: “In London alone, potential shop closures could hit nearly 1000, with nearly half of all employees, 4,300, losing their jobs, and a potential tax loss to the Exchequer from these London shops alone of £230 million by 2020.”

Fitch Ratings has said that Ladbrokes would be the most exposed major UK bookmaker to the risk that the government will tighten regulations on gambling machines in betting shops.

Fitch said of Ladbrokes: “The group’s limited online presence and reliance on UK retail operations means it could face a material drop in earnings if new regulations were implemented. Nevertheless, the widespread introduction of the machines means that all operators would suffer. Ladbrokes’ results show that 50 per cent of its UK retail net revenue now comes from FOBTs. The proportion is similar for other operators.”

Ladbrokes has a 25 per cent market share, with around 9,000 FOBTs across the UK. This puts it second behind William Hill, which has a 29 per cent market share. But Ladbrokes’ online operations are much smaller than those of William Hill and operating profit from its UK betting shops represents over 90 per cent of its total operating profit, compared with 68 per cent for William Hill.

Fitch added: “The company has very limited headroom against our leverage guidelines; therefore tighter regulation could lead to a downgrade if there were no significant restructuring or cost-cutting measures. Such measures could include further store closures on top of the 50 planned over the next two years. A significant increase in closure rates would be possible, as we estimate that Ladbrokes has at least 150 leases coming up for renewal every year. Ladbrokes’ overall 2013 results were weak across its online, UK and European operations, and leverage is likely to fall more slowly than we previously expected due to limited positive free cash flow generation.”

The political campaign against FOBTs seems to be growing. GambleAware recently published figures claiming seven gamblers had lost more than £10,000 in a day while playing FOBTs during a 10-month period. Its studies showed that during 5.4m betting sessions studied over a 10 month period, three per cent of the total included at least one bet of £100.

The Association of British Bookmakers said: “As with all forms of gambling there will be winners and losers and the research also shows a customer won over £13,000 in four hours on a gaming machine. In both cases there is no reason to believe that the individuals could not afford their stakes. Losses in other forms of gambling can be significantly higher than the exceptional loss cited here.”

Mr. Mullen said back in February: “As the demands for something to be done grow, I would call on ministers and MPs to step back from the fray and take a serious look at the facts in three key areas. First, the truth is that there simply hasn’t been a big increase in problem gambling. Despite the lack of evidence of a surge in problem gambling, critics of FOBTs want the limit on stakes to be cut from £100 to £2. The industry estimates that this would lead to an extra 15,000 job losses, on top of the 6,000 already predicted to silence an increasingly fanatical and political campaign against FOBTs. I will not stand idly by and watch as a group of campaigners who do not like betting machines force thousands of my dedicated colleagues out of a job and onto the dole. We are talking about losing 15,000 to 20,000 jobs.”