The excitement earlier this week around a breakthrough on sports betting in the US has quickly disappeared for UK gambling stocks as a cut in the maximum stake on fixed odds betting terminals (FOBT) to £2 is confirmed.
There could be further bad news if the Government makes another change to gambling tax, potentially at the Budget in November.
AJ Bell investment director Russ Mould says the Government will want to find a way to keep getting the levels of tax it used to enjoy from betting machines when £100 stakes were allowed.
One solution could be pushing up point of consumption tax for online betting.
This threat would be the latest in a long line of challenges that gambling firms have to navigate.
Share price reactions following the FOBT news would suggest that investors aren’t overly worried, or perhaps they haven’t acknowledged the new risk.
William Hill (WMH), which warned this morning annualised adjusted operating profit in its retail division could be reduced by £70m to £100m because of the FOBT decision, falls 0.3% to 316.5p, paring earlier larger losses.
Paddy Power Betfair (PPB), which says the impact in 2017 would have amounted to between 2% and 2.6% of revenue, is up 1.5% to £83.75.
GVC (GVC), which completed the acquisition of Ladbrokes Coral in March, expects a £160m hit to earnings in the first full year. It ticks up 1.04% to 925p.
The terms of its takeover of Ladbrokes Coral included some contingencies based on the outcome of the review into FOBTs.
