U.K. gaming company William Hill Ltd. on May 17 flagged potential store closures as the British government said it would slash the maximum stake wagered on fixed-odds betting terminals to protect vulnerable people.
William Hill, one of the U.K.'s leading bookmakers, said in a statement that the reduction in the maximum stake on fixed-odds betting terminals to £2 from £100 could result in a decline of 35% to 45% in annual total gaming net revenue.
In the first four months of its current fiscal year, which began Dec. 27, 2017, London-based William Hill said about 70% of its total gaming machine net revenue was generated by stakes in excess of the proposed £2 threshold.
Based on its preliminary estimates, William Hill forecast that about 900 of its shops could become loss-making. "A proportion of these would be at risk of being closed within a relatively short time of the proposed staking change being implemented and, for the remainder of the estate, we will monitor the actual impact on the estate and performance over the medium and long term," it said.
The company operates 2,340 licensed betting offices in the U.K. that provide opportunities to wager on sporting and nonsporting events, as well as gaming on machines.
"The government has handed us a tough challenge today, and it will take some time for the full impact to be understood, for our business, the wider high street and key partners like horseracing," William Hill CEO Philip Bowcock said in the statement.
In midmorning trading in London, William Hill's shares were down 2.30 pence, or 0.7%, at 315.20 pence. In contrast, shares of gaming company Paddy Power Betfair PLC traded up 205 pence, or 2.5%, at 8,455 pence, while those of online gambling operator GVC Holdings PLC traded up 10 pence, or 1.1%, at 925.50 pence.
Paddy Power said in a May 17 statement that it did not expect the proposed change to have a material impact on its U.K. retail strategy, estimating that the direct effect of the new stake limit would be a 33% to 43% decrease in total machine gaming revenue. In 2017, that would have equated to a £35 million to £46 million revenue impact, representing 2.0% to 2.6% of group revenue. In the year ended Dec. 31, 2017, it posted revenue of £1.75 billion.
Paddy Power CEO Peter Jackson said in a statement the company previously had highlighted its concerns about the reputational damage to the gaming industry over stake limits on gaming machines. "We welcome, therefore, the significant intervention by the government today, and believe this is a positive development for the long-term sustainability of the industry," he added.
GVC, with brands including Bwin and Sportingbet, said May 17 that it expected to be able to reposition its business within two years following implementation of the new stake limit, with an anticipated fully mitigated impact of about £120 million on group EBITDA secured by the end of that period. In the first full year, the impact on EBITDA is anticipated to be about £160 million, it added.
GVC said it expected the regulatory change when it acquired Ladbrokes Coral Group PLC, a £4 billion deal that completed March 28. It added that the May 17 government announcement had no impact on the minimum targeted synergies from the deal of at least £100 million per year.
"The offer for Ladbrokes Coral Group was structured to address the potential of a £2 max stake outcome, and as such the strategic rationale for the acquisition remains unchanged," GVC CEO Kenneth Alexander said in a statement.
Implementation of the new stake limit requires parliamentary approval, so the timing is unclear.