Bookmaker shares plummet again as operators warn of coronavirus impact
Bookmaker share prices plunged again on Monday as major operators warned the cancellation and postponement of sports events caused by the coronavirus outbreak could reduce their earnings for the year by more than £100 million.
Flutter issued an update on Monday morning which said their earnings this year could be reduced by £90-110 million due to the impact of the global pandemic.
The announcement preceded another heavy slump in gambling operator share prices, with Flutter down 20.78 per cent at 5,130p at 9am on Monday before recovering to 5,710p by close of trading.
William Hill shares were even harder hit, down nearly 30 per cent at one point and ending the day more than 25 per cent lower at 65.94p, while shares in Ladbrokes Coral's parent company GVC Holdings were down more than 21 per cent at 370p.
Both firms issued updates on Monday afternoon with William Hill saying their earnings could be hit to the tune of £100m-£110m, while the impact on GVC could be an even heavier £130m-£150m before mitigation.
Major sporting events have been cancelled or postponed around the world, with only limited exceptions – including British and Irish horseracing.
Cancellation of horseracing and an extended period of shop closures would lead to further losses, the bookmakers said.
Flutter said last year they generated approximately 78 per cent of revenues through bets placed on global sporting events.
Their estimated hit to profits was based on the assumption that restrictions remain in place until the end of August, including the cancellation of Euro 2020 and full suspension of Australian sports, but that racing in Britain, Ireland and Australia goes ahead and betting shops stay open.
Should horseracing be cancelled in the three regions and shops closed, Flutter estimate that would reduce earnings further by approximately £30m per month.
The group's underlying ebitda (earnings before interest, taxation, depreciation and amortisation) in 2019 was £426m.
Flutter's chief executive Peter Jackson said: "The challenge currently facing our business and the industry more widely is unprecedented in modern times.
"Our focus, first and foremost, is on protecting the welfare of our employees and our customers and we'll leave nothing to chance in this regard.
"While our near-term profitability will be impacted by the essential measures being taken globally, the board will remain focused on protecting shareholder value and managing the business through these turbulent times."
GVC said approximately 45 per cent of their group net gaming revenue (NGR) was generated from sporting events, with 43 per cent of online NGR generated from sports.
Under their modelling GVC said earnings for the year would be reduced by £130m-£150m before mitigation. Ebitda had been expected to be around £776m this year.
However, should betting shops in the UK close, there would be an incremental loss of ebitda of approximately £45m-£50m per month, including employment costs of approximately £20m per month.
GVC said they had accessible cash of £260m.
Chief executive Kenny Alexander said: "While we do not underestimate the challenge presented by Covid-19, GVC is in a robust position to manage the impact on our operations.
"We're a diverse global business, with an experienced and expert management team, which operates across multiple products and markets. Our priority is to protect our employees while maintaining our offer to our customers at this difficult time."
William Hill said they would be suspending their dividend until further notice as a result of the crisis.
They told the market that 53 per cent of their 2019 revenue was generated through their sports book business.
Their modelling had included the possibility of a month of betting shop closures but each additional month of closure would reduce ebitda by a further £25m-£30m.
William Hill also said they have an undrawn "revolving credit facility" of £425m.
Chief executive Ulrik Bengtsson said these were "unprecedented times" but added that William Hill have "huge experience and understanding of our customers".
He added: "People want to place sports bets and they will continue to do so where possible. In recent days we've seen betting on horses, greyhounds, international football and our well-established virtual sports.
"We're taking action to maintain our operational capability, to secure and enhance our liquidity and to ensure we're in a strong position to resume full operations when the sporting calendar returns to normal.
"We've been quick to initiate our business continuity plans, which have been in place for some weeks, with our colleagues' and customers' welfare highest on the agenda. Large parts of the business continue to operate on a 'business as usual' basis."
Comment: Bookmakers facing unprecedented challenges
Bookmakers were putting on a brave face as they detailed the financial impact of coronavirus on their businesses on Monday but in these unprecedented circumstances they face huge challenges along with the rest of the leisure sector.
Share prices have plunged again with, for example, William Hill shares now worth less than a third of where they stood on February 21.
Horseracing - and greyhound racing - might be able to mitigate the loss of earnings bookmakers are facing from the suspension of events such as the Premier League, Champions League and Masters golf but the question is for how long?
Arena Racing Company chief executive Martin Cruddace said on Sunday there was an opportunity for the racing industry to work with bookmakers for the benefit of both sectors, with racing carrying on behind closed doors while other sports were stopped completely.
However, the government's recommendation on Monday evening that social contact should be avoided along with non-essential travel may mean the window of opportunity is slammed shut soon.
The effect of further restrictions will hit retail bookmakers even harder should betting shops be closed.
However, those operators with gaming arms will need to tread carefully to avoid being accused of trying to profit from events given the scrutiny the online sector is facing.
The reputation of the gambling industry, which has become increasingly damaged in recent years, may be another factor in how bookmakers come out of this crisis.
With many businesses asking for government support, where will bookmakers come in the pecking order for assistance - if at all?
Whatever happens over the coming weeks and months, the gambling industry is unlikely to be the same again.
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