William Hill Forecasts Bigger Losses Than Expected Due To New Tax Regime
Just when you thought the worst was over for UK bookmakers the fallout from yesterday’s tax rise continues. Finance Minister George Osborne’s tax rise from 20 percent to 25 percent sent the share price of William Hill and Ladbrokes tumbling yesterday. Ladbrokes was hit hardest with a 12 percent drop and William Hill a 7 percent drop.
William Hill announced today that their expected losses due to the new tax rate are set to be higher than the estimated 16 million pounds. The largest UK bookmaker said that it will likely lose 22 million pounds a year due to the new tax regime.
This statement further impacted William Hill’s share price which fell another 3 percent to 340.9p. Ladbrokes continued to take the heavy hits as well with a further 5.8 percent drop from yesterday to 132.2p.
As we previously reported Ladbrokes will feel the impact of this tax more than William Hill as it makes up to 40 percent of their revenues are from FOBTs.
In a formal statement William Hill said,” The total impact of this increase in MGD (Machine Gaming Duty) would be 22 million pounds (based upon 2013 machines gross win) as opposed to the previously guided 16 million impact,”
The expected revenue losses for all UK bookmakers have resulted in analysts downgrading the gaming sector. Ladbrokes in particular have not built up their online business in comparison to their main rival William Hill. They are still heavily dependent on their high street shops of which fixed odds betting terminasl play a vital role.
Analyst James Ainley of Citi summed up the problematic dilemma Ladbrokes is facing. He said,” Ladbrokes is most affected given the dominance of UK retail in its business mix. We see a dividend cut as unavoidable at this point and we reiterate our Sell recommendation.”