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Gambling hits hurdles

After a difficult 2009 that saw the gambling industry hit by poor weather, freak sports results, and consumer cutbacks, hopes were high that the sub-sector would get back on its feet in 2010. In particular, consolidation of the fragmented online gaming business was expected to begin in earnest, while new regulated markets would offer expansion opportunities.

In the end, the year turned out to be something of a damp squib, with even the Fifa World Cup unable to inject any life into share prices, most of which slid steadily throughout the year as the promised tsunami of corporate activity turned out to be more of a trickle. So, while PartyGaming didn't take long to informally ink a tie-up with Austria's Bwin after settling with the US justice department, clearing the merger in local markets has moved at a snail's pace. The deal won't complete until March - but analysts are still optimistic that the newly achieved scale will help it compete against US giants

Sportingbet, too, reached a settlement with US lawmakers, but its own subsequent merger talks with Sweden's Unibet came to nothing. However, Sportingbet's heavy investment in technology could still tempt a bidder at some stage. But it still looks a more attractive buy than 888, which Ladbrokes admitted it was sizing up once again. 888 has yet to reach a non-prosecution agreement in the US, and has delivered poor results this year as gamers have deserted its sub-scale poker platform. But while a deal is far from done, Ladbrokes new chief executive Richard Glynn desperately needs to improve the online offering to avoid losing further ground to William Hill's successful online joint venture with Playtech.

Just as the promise of consolidation failed to live up to expectations, so, too, did regulatory progress. In Europe, regulation hasn't proved the catalyst for growth many had hoped. In France, for example, high taxes and intense local competition have forced providers out of the market, and there are worries that other newly regulating markets like Spain, Greece and Germany may adopt similarly onerous approaches.

Greece has already said it will legalise online gaming this year in an attempt to raise €1bn (£0.85bn) in revenue over the next two or three years to comply with EU bailout terms, suggesting it may impose a heavy tax burden. It seems likely, therefore, that the UK's online operators will increasingly target business-to-business deals with local partners as a lower-risk route to international expansion. And pro-gambling senators in the US made modest progress in 2010, and European players are sensibly making sure they're ready in case the lucrative market opens up once again.

NAMEPRICE (p)MARKET CP (£m)PE RATIOYIELD (%)1 YEAR PRICE CHANGELAST IC VIEW
BETFAIR GROUP8999610.0
LADBROKES12611415.83.1-12.6
PARTYGAMING20583817.10.0-25.8
RANK GROUP133520152.554.9
SPORTINGBET603038.82.5-16.4
WILLIAM HILL17111968.34.4-11.4 

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