U.K. GOVERNMENT UNLIKELY TO FOLLOW POLITICAL GROUP RECOMMENDATIONS ON F.O.B.Ts (Update)
Do MPs in the All Party Parliamentary Group really understand the commercial implications?
The recommendations earlier this week on Fixed Odds Betting Terminals by the "unofficial" All Party Parliament Group of MPs led by Labourite Carolyn Harris are unlikely to be followed, especially in regard to lowering maximum staking limits to GBP 2, London analysts at Numis Securities opined late Friday.
Numis believes the UK government will ignore the calls for a massive reduction in the maximum stake for the machines, which are widely used in retail betting shops. The broker believes the government will take a more measured approach when its own second review of FOBTs is published.
The All Party Parliamentary Group has recommended that the maximum bet on the machines should be reduced from GBP 100 to just GBP 2, and that the UK government should consider slowing the speed of spins on the machines to reduce the amount wagered in a session.
Numis calculates that if government decides to reduce the maximum staking level to GBP 40 on FOBTs, the profitability of betting shops could fall by 33 percent, with Ladbrokes the most exposed with 72 percent of group EBIT generated from UK shops, compared to William Hill's 58 percent.
The broker points out that cutting machine profitability by just 20 percent would knock 26 percent from Ladbroke’s earnings and 17 percent from William Hill.
The Numis warning of the dire consequences of uninformed political thinking echo those earlier this week from Berenberg analyst Roberta Ciaccia, who said that the GBP 2 stake limit had been suggested before but was not practical.
Commenting that the average wager per FOBT session was in the region of GBP 10 to GBP 15, she said that reducing staking limits below that benchmark has the potential to put High Street betting shops out of business with the consequent risk of massive losses in tax receipts for government and tens of thousands of jobs.