UK-listed gambling operator Gala Coral Group lost over £25m in its final quarterly results before its merger with rival Ladbrokes, largely due to increased taxes and one-off items.
In the 12 weeks ending July 2, Gala Coral revenue improved 10% to £264m and earnings rose 13% to £57.7m but the company lost £25.6m due to exceptional items.
These one-off costs included impairment charges from closed retail shops, early repayment of debt and £12.6m associated with the Ladbrokes merger. But the company was also laid low by a killer combo of recent tax hikes and regulatory restrictions.
Gala Coral said that absent these regulatory requirements, including “teething problems” implementing new online player protection rules, revenue would have risen 28%. For the fiscal year to date, incremental tax costs totaled £22.1m while new fixed-odds betting terminal staking restrictions shaved a further £7.2m off YTD earnings.
Online revenue was up across the board, led by Coral.co.uk, which rose 26% to £42.3m. Sports posted the biggest gain, up 37% to £19.4m thanks to a bookie-friendly Euro 2016 win margin, but gaming won the revenue race, rising 19% to £22.9m. Mobile channels accounted for 80% of Coral’s sports stakes and 73% of gaming.
Gala online revenue improved 7% to £22.9m. Gala Bingo gained 7% to £20.1m, while Gala Casino rose 8% to £2.8m. Mobile represented 60% of Gala online stakes.
The Italian-facing Eurobet online business gained 25% to £11.1m, evenly split between sports and gaming, with sports up 27% and gaming rising 22%.
At the retail level, Coral OTC betting stakes fell 6% to £380m, due in part to a 2% reduction in the number of betting shops, while net win was flat at £70.7m. Machine gaming revenue gained 10% to £93m and the company said only 8% of machine win was derived from bettors wagering stakes over £50.
The omni-channel Coral Connect product had another strong quarter, notching 74k new signups. Connect customers accounted for 48% of Coral’s online revenue.
“BRUTAL” TAXES TAKING THEIR TOLL
Gala Coral CEO Carl Leaver said the company had signed up 230k first-time depositors in the quarter, despite a conscious decision not to engage in any pricey TV advertising during the Euro 2016 tourney, similar to the approach the company took during the 2014 FIFA World Cup. Although this time around, the money simply may not have been there.
The company paid £10.8m in UK online point-of-consumption tax during the quarter, and Leaver estimates a total £45m hit from the POCT when the fiscal year is through. Combined with the increased Machine Games Duty and the £50 soft-cap on machine stakes and Leaver says the total hit to Gala Coral’s bottom line will be £75m this year.
Leaver told eGaming Review that the company expects a further £10m hit from the UK government’s recent decision to tax ‘free bet’ offers. Leaver said the government needed to recognize that the industry had been subject to some “pretty brutal” new costs in the past couple years and “a period of stability” was sorely needed if the industry was to find its footing.
As for the Lads-Coral merger, Leaver says the companies remain on track to complete the process this autumn. As for those 350-400 betting shops that need to be sold to satisfy competition concerns, Leaver says the actual number will likely be on the low end of that range and will be evenly split between the two companies.
