It is not hyperbole to suggest that the gaming in the UK faces its greatest period of uncertainty in living memory as traditional bookmaking companies like Ladbrokes (LAD) deal with the pressure of online gaming companies rapidly expanding in regulated markets. That comes on top of a raft of tax and regulatory changes in 2014 that could prompt a major period of consolidation in the sector around its strongest players.
- Consolidation needs to happen
- Still very cash generative
- Dividend held steady
- Regulatory and tax changes
- No global reach
No one could accuse Ladbrokes of being in a particularly strong position at the moment - the company recently had to issue a statement denying that it was about to release its fourth profit warning in the past 12 months, which also prompted chairman Peter Erskine to buy £50,000 of shares. But the bookie has an valuable brand and bricks-and-mortar market presence, which makes it an attractive bid target. In the meantime, strong cash flow should help the fat dividend, equivalent to a yield of over 5 per cent, to be maintained and underpin the share price.