Bookmakers’ UK online revenue could fall sharply if affordability measures introduced, says broker

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Flutter Entertainment PLC (LON:FLTR), Entain PLC (LON:ENT), William Hill PLC (LON:WMH) other bookmakers could see online revenue in the UK fall sharply as a new government consultation looks likely to bring herald a more restrictive regime, broker Peel Hunt has said.


The launch of the consultation this month on how gambling law should change “appears to be adopting a balanced tone and is prepared to consider the economic value of the industry and consumer freedom, as well as reducing gambling-related harm”, analysts at the broker said in a note to clients on Friday.


While there is some potential upside for casino operator Rank Group PLC (LON:RNK), a corporate client of Peel Hunt, if additional gaming machines in casinos is permitted.


“However, the law seems very likely to become more restrictive and, if the UK Gambling Commission imposes ‘affordability’ checks, online revenue could fall sharply,” analyst Ivor Jones wrote.


Conclusions to the consultation are expected in summer 2021.


The government has acknowledged the employment provided by the gambling industry, as well as the GBP3bn annual tax revenue and the need to preserve consumers’ liberty to pursue their leisure activities.


Responding to a House of Lords Select Committee report from July the government’s tone is “measured, implying a more sophisticated approach to game design, for example, than the committee’s proposal to simply limit game speed”.


But the Jones had a warning for the bookmakers that the industry’s efforts to get its house in order “may have come too late to prevent a further step down in UK profits from 2021”,


He said the “benign-sounding UK Gambling Commission Consultation on Affordability has the potential to transform the revenue-generating potential of the gambling industry, by requiring players that account for a large minority – and possibly the majority – of revenue for some operators to pass confidential information to gambling companies”.


This would “certainly reduce revenue, possibly very materially”, as many consumers “would not want to share information about income and outgoings with a gambling company”.


However, the analyst pointed out that the investment appeal of the sector relates to markets other than the UK.

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