Accepting the risks is inherent in gambling, and buying shares in Ladbrokes Coral (LCL) is little different. Potential investors may find it difficult to look past the UK government’s review of fixed-odds betting terminals, which is due in October. The Department for Culture, Media and Sport is looking at the maximum stakes and prizes for gaming machines that have been labelled the 'crack cocaine' of gambling; how many machines can be present on one premises, and how can the risks to gamblers looking for a quick fix be minimised?
Improving digital revenue
Multi-channel play
Technology optimised for new products
Lowly rated compared with rivals
Fear of tougher regulations
Falling high-street revenue
Since 56 per cent of Ladbrokes Coral’s high street revenue comes from fixed-odds betting terminals, a cap on the amount punters could spend on them would be bad news. City analysts reckon that if the maximum stake took the extreme hit and was cut to £2 a play from the current £100 maximum, this would wipe around £450m from annual revenue and £100m per year off pre-tax profits. This could send EPS down as much as 40 per cent. But Interactive Investor’s head of equity strategy, Lee Wild, points out that these scenarios don't include benefits from the inevitable cost cutting that would follow the worst outcome.