Government review on Fixed Odds Betting Terminals could cost bookmakers millions

Investors will keep a watchful eye on the stocks of many of the UK's retail bookmakers after the Financial Times revealed Government plans to recommend new limits on fixed-odds betting terminals (FOBTs) in all high street bookmakers. 

The Department for Culture, Media and Sport will announce its findings of a review into the gambling industry next month and the betting machines that are branded by campaigners as the "crack cocaine" of the industry could be set to see maximum stakes reduced from £100 to as little as £2. 

The FOBTs, including popular casino games such as roulette, blackjack and slots, are a significant source of income for all high street bookmakers and a move to cut maximum spend to £2 would cost many of the country's largest bookmakers in excess of £150m worth of annual revenues. 

According to the Financial Times, three options will be considered when the review is published next month; either the maximum stake will remain at £100, reduced to £2 - as per the request of campaigners such as Campaign for Fairer Gambling, or a compromise of £20 or £30. 

According to analysts at Barclays, a £2 maximum stake would cost Ladbrokes Coral £449m in FOBT revenues in 2018, compared to just £87m for a £25 maximum stake. William Hill could be set to lose £284m or £55m and Paddy Power Betfair £55m or £10m. 

Any loss of revenue streams will, of course, have an impact on the share price of all affected firms. Simon French, an analyst at leading independent specialist securities firm, Cenkos Securities, claimed that gambling companies have already "priced in" to their share price a reduction in the maximum stake to £20. Mr French said "Anything at £20 or above will be taken very well by the industry and investors." 

Ladbrokes Coral, William Hill and Paddy Power Betfair all trade on the FTSE Index, find details of all brokers that offer stock market trades on our homepage.

Written by Abi Moses


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