Tax increase hits bookmaker shares

Shares in Ladbrokes fell by almost 12 percent to 139.8p yesterday, while market leader William Hill was down 7 percent at 350.1p, as the market responded to Chancellor George Osborne’s latest tax raid on the betting industry.

The Treasury increased the rate of Machine Games Duty (MGD) on games with a stake higher than £5 from 20% to 25%, with absolutely no indication to the industry itself that such a change was coming.

William Hill said the tax increase would have cost it £16mhad it been in force last year and analysts forecast a cost of about £20mpounds for Ladbrokes when the tax takes effect next year. The Treasury has estimated additional tax income of between £75m-£90m per annum. Ladbrokes has been hit particualrly hard as it is more reliant on the machines than William Hill, which has a burgeoning online business.

Investec analyst James Hollins said: “The news is a surprise and a clear negative for both stocks. Forecasts will have to change and this is a massive blow, particularly to Ladbrokes, placing significant pressure on group returns, the turnaround of mobile and the dividend that the group had stated was secure for 2014.”

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