Bookmaker Ladbrokes (LAD) is suffering a double whammy of further regulatory interference by the government and a cut in its target price, sending its shares down 2.7% to 110p this morning.

LAD - Comparison Line Chart (Rebased to first)

Chancellor George Osborne used yesterday’s Budget to introduce a horse racing 'betting right' just one week after consulting on the issue. It will replace the 53 year old horse race betting levy and will apply to all bookies, wherever they are located, who take bets from British customers. Bookmakers already pay 10.75% of horseracing profits to the racing industry.

Osborne said: ‘A horseracing betting right would provide British racing with the right to authorise all betting activity in return for the appropriate financial contribution from betting operators towards the administration, integrity and future development of the sport.’

Ladbrokes has suffered the most from the tax and regulation imposed on high street bookmakers, in particular the increase in Machines Games Duty announced in the 2014 Budget.

The rate, which rose from 20% to 25%, hit Ladbrokes the hardest as it gets the highest proportion of profits from high street shops versus online betting compared with its peers William Hill (WMH) and Paddy Power (PAP). Ladbrokes’ profit before tax almost halved to £37.7 million in 2014 due to ‘regulatory headwinds’ and a disappointing Boxing Day.

Jefferies has lowered its target price from 150p to 120p due to Ladbroke’s delay in moving its business to online bookmaking over traditional shop-based activities. 'Largely driven by in-play betting on football, particularly through the mobile channel, online gambling continues to grow rapidly. We think it will be very difficult for the laggards (Ladbrokes in particular) to catch up with the leaders (Paddy Power, William Hill and unquoted Bet365),’ says analyst Ian Rennardson. Ladbrokes expects to close 60 UK shops this year.

Issue Date: 19 Mar 2015