All bets are off as gambling firms feel pinch
ONE of the first consequences of the coronavirus outbreak in Europe was the cancellation of major sporting events. Not ideal for sports fans trapped at home, but for bookies it’s a potentially existential problem.
Despite the rise of online casinos, sports betting still accounts for a huge slice of the sector’s revenue.
All three of the largest bookmakers listed in London are affected. Sports betting accounted for 78 per cent of revenue at PaddyPower and Betfair owner Flutter, 53 per cent at William Hill and 45 per cent at Ladbrokes Coral owner GVC.
If sports revenues dry up until the summer, it’s expected to knock over £100million off profits for each of the major players. That would be a serious challenge and is before the impact of any enforced closures of UK sports betting shops.
Given the circumstances, it’s no surprise companies are focused on keeping cash in the business.
William Hill has already suspended its dividend, and all the companies in the sector are looking to trim costs where they can. That should help reduce the industry’s reliance on borrowing to ride out the storm.
In fact, keeping debt to a minimum will be pretty important over the next few months. While all the companies have access to extra loan facilities, some of these are conditional on keeping debt as a proportion of cash profits within fairly tight limits. With profits under pressure those limits could quickly start to look uncomfortably close.
If events stay cancelled for an extended period of time the current crisis could become a battle for survival for some of the weaker companies in the industry, although it’s not all doom and gloom.
The recent announcement that Irish horseracing is continuing, albeit behind closed doors, will come as a relief.
And it’s also unclear how much of the money usually staked on sporting events will shift online instead.
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