William Hill sees bigger hit from tax rise, sector falls again
LONDON (Reuters) - Increased tax on high stakes gambling machines is likely to cost William Hill 22 million pounds ($36.6 million) a year, the leading British bookmaker said on Thursday, raising its initial estimate of the impact.
Shares in William Hill fell three percent to 340.9p by 1013 GMT, while rival Ladbrokes was down 5.8 percent to 132.2p, extending the big losses from Wednesday when the surprise tax hike on fixed odds betting terminals was announced.
"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," William Hill said in a statement.
The duty will rise to 25 percent from 20 percent, Chancellor George Osborne said in his annual budget statement, responding to the spread of fixed-odds betting terminals that critics say are highly addictive.
The announcement led to a raft of analyst downgrades for the sector on Thursday morning.
The increase is expected to cost Ladbrokes around 20 million pounds a year and hit the company harder because it makes more of its profits from its high street betting shops than William Hill which has grown its online business more quickly.
"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," analyst James Ainley of Citi said in a research note.
Gamblers can spend up to 300 pounds ($500) a minute on the machines, more than 33,000 of which have been installed in shops around the country over the past decade.
Bookmakers recently introduced warnings to try to prevent players from running up rapid losses but say there is no evidence to support claims that the machines are leading to an increase in problem gambling.
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