Newly merged gambling operator Ladbrokes Coral may have its earnings slashed by a quarter, if the UK government launches a much talked about clampdown on fixed-odds betting terminals (FOBTs).
After selling 360 betting shops around the UK and receiving regulatory green light, Ladbrokes and Coral completed their previously announced merger earlier in November to form a £2.4-million gambling giant. The combined group now operates the largest chain of betting outlets in the country, overpassing the recent number one William Hill.
It could be said that Ladbrokes Coral is the company to have the largest exposure to the highly controversial FOBTs within the UK gambling industry. More than a half of the merged business’ revenue is expected to come from these particular devices. According to analysts, the operator may lose around £100 million in pre-tax earnings for its first year as a merged entity, if more stringent measures are introduced on the way the above-mentioned gaming machines are managed.
The FOBTs have long been seen as a big nuisance by the UK government due to the effect they produce on gambling customers. Under the current gambling regulations, when playing on FOBTs, bettors are able to place a maximum bet of £100 every 20 seconds. It is believed that this makes the gambling machines highly addictive and harmful to vulnerable customers.
Late last month, the UK government announced the beginning of a Call for Evidence period as part of its triennial probe into the country’s gambling industry. UK-facing operators will have to provide information about the way they manage their FOBTs and how their customers respond to the gambling machines. The Call for Evidence period is set to close on December 4.
According to analysts, the period announced by the government is shorter than originally expected and that this could mean changes in existing regulations may be introduced early next year.
Top government officials have suggested that the maximum amount players could stake every 20 seconds should be reduced from £100 to £2. Such a significant correction may not be implemented or at least not for now, but even if the maximum bet is reduced to £10, gambling operators will certainly face serious losses.
The FOBTs were introduced to the UK gambling public in the early 2000s and have become an increasingly popular product among customers. As a result, annual player losses on these particular devices have gone up from £1.3 billion in 2010 to £1.7 billion in 2015.
If new regulations emerge next year, this may unleash another wave of consolidation within the industry. However, merger and acquisition deals would probably come through at a slower pace.
