INVESTMENT EXTRA: Is it time to cash in your chips or back the bookies?


Some of us may occasionally be tempted to have a flutter at a betting shop. But now investors are being forced to ask whether it’s worth taking a punt on the bookies themselves.

A Government clampdown on so-called fixed-odds betting terminals – computerised versions of fruit machines and casino games – has dealt a major blow to Britain’s bookies.

To stop problem gamblers throwing away up to £3,424 a minute on these machines – known as the crack cocaine of the gambling industry – the Government has slashed the maximum stake from £100 to £2.

While the move was cheered by gambling opponents, it has left bookies forecasting big losses. The Association of British Bookmakers warns it will put more than 4,000 betting shops and 21,000 jobs at risk.

William Hill says it could force 900 of its shops to make a loss – or 38 per cent of its total sites, and could hit annual profits by £70 million to £100 million.

Paddy Power Betfair believes the move will eat up to 44 per cent of its gaming revenue – or around £46 million.

Online operator GVC says it will take a £120 million hit but believes it can reposition its business within two years of the rules taking effect, which is expected to be 2020.

To offset lost tax revenues, the Government is planning to slap bigger duties on online casino games, dealing a second blow to bookmakers.

So is it time to give up your shares in Britain’s bookies?

Investec analyst Alistair Ross believes the news has already been priced into bookies’ shares.

Laith Khalaf, of broker Hargreaves Lansdown, said: ‘The question is, why would you sell now? You might have sold when the whole fixed-odds clamp down came up, but now the worst news is over.’

Amid the doom and gloom of the British gambling market, UK bookmakers have been given hope by the US Supreme Court, which has ruled that sports betting should be made legal in the States. At present, punters are only allowed to bet on sports in Nevada.

Many of the British high street bookmakers already have a presence in the US. GVC, for example, owns Stadium Technology Group, a business-to-business firm providing gambling software in Nevada.

William Hill has also had a foot there since 2012, owning three small sports book operators.

This week, Paddy Power Betfair bought US fantasy sports site FanDuel for £119m.

However, the ruling is still expected to create a mad dash among British bookies to secure a chunk of what could potentially be the world’s most lucrative betting market.

Will this be enough to offset the pain caused by the clampdown on fixed-odds betting terminals? Experts are divided.

For a start, nobody can be sure how big the US market will be or whether British firms will dominate it.

Khalaf said: ‘The black market over there is pretty big, so that is a good indication that there is a demand for sports betting, but at the moment it’s hard to quantify that demand.’

Also, each state will now have to make its own sports betting laws, meaning operating in the US could be a minefield for British firms.

Mark Swain, of the Smith & Williamson Enterprise Fund, worries that other areas of the world where British bookmakers operate are also clamping down on gambling.

He said: ‘Regulatory headwinds aren’t just evident in the UK. For example, Germany has an unsettled regulatory climate.’

Investec, on the other hand, is positive about the prospects for UK firms. It has GVC, Paddy Power, Playtech and William Hill all on ‘buy’ ratings and expects them to conquer around 30 per cent of the total US market – but investors will have to wait up to four years to reap these rewards.


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