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Ladbrokes Coral shares fall as analysts raise concerns on pending government restrictions

Published: 10:15 13 Nov 2017 GMT

Ladbrokes Coral
Ladbrokes Coral saw sales in the UK high street operations fall 1% in the third quarter

Ladbrokes Coral Group PLC (LON:LCL) shares dropped as the betting company reported a decrease in UK retail sales in the third quarter and as analysts highlighted regulatory uncertainties facing the business.

In the four months to 29 October, sales in the UK high street operations fell 1%, compared to the same period a year earlier. In the year to date, retail revenues declined 4%.

READ: Ladbrokes Coral fined £2.3mln by Gambling Commission for Gala Interactive failings

Total group revenue, however, rose 3% in the four-month period as the weak performance in UK retail was offset by 12% growth in digital and 17% growth in European retail. It compared to a 2% decline in total revenue in the second quarter. 

"On first glance, these results are pretty true to the form book," said George Salmon, equity analyst at Hargreaves Lansdown.

"UK retail continues to trend downwards, while the digital business delivers strong growth. Dig a little deeper however, and one sees that growth at Coral, plus strong performances in Italy and Australia, have masked a weaker showing from Ladbrokes.com. A better performance here will be needed going forwards."

Regulatory hurdles

The UK retail operations are set to face further pressure as the government plans to place restrictions on fixed odds betting terminals (FOTBs).   

Chief executive Jim Mullen said the company was taking “full part” in the government’s 12-week consultation into FOTBs, launched at the end of October.

“We have existed with the uncertainty caused by the review since we were created and hope that the announcement of a 12-week consultation heralds a positive step to reaching a final outcome,” he said.

The government plans to cap the size of stakes gamblers can make on FOBTs, reducing them from £100 now to between £50 and £2.

Ladbrokes faces potential hit, analysts warn

Salmon said Ladbrokes has more riding on the outcome of the government’s consultation than any other major bookie as it has over 3,500 shops across the country.

“These machines, sometimes referred to as the crack cocaine of gambling, are responsible for significant in-shop revenue,” the analyst said. 

Numis left its rating at ‘hold’ and target price at 141p, saying: “With uncertainty surrounding the profitability of Ladbroke’s UK retail estate (54% of group revenue with gaming machines more than half of this) not expected to be resolved before Spring 2018, we retain our cautious stance.”

Shares edged down 1.97% to 134.20p in morning trading. 

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