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British bookmakers the likes of William Hill, Paddy Power and Ladbrokes have a better chance of weathering a recession. That's the conclusion made by the Irish Examiner this week.
And Ireland's biggest bookmaker, Paddy Power has the best shot of coming out on top.
Davy Stockbrokers said Paddy has a higher quality estates, more diversified business models and a lower average slip value which should provide a greater level of defensiveness in difficult economic times. William Hill and Ladbrokes should also fare well in the economic storm.
Despite this, retail like-for-like turnover will still decline at least 3% across the industry in 2009, according to the Examiner.
Davy said Paddy Power can still grow its earnings by 1.3%. This compares to a decline of 23.9% for Ladbrokes and a fall of 14% for William Hill, where it said an improvement in online business will negate some of the deterioration in retail.
During the 1991 British recession, William Hill's turnover fell 7%-8% and earnings dipped 20%.
"Should we see a repeat of the 1991 experience, there is downside risk to our own earnings estimates for all three listed bookmakers. In such a scenario, William Hill's ability to maintain dividend could be tested," Davy said.
These bookmakers are looking beyond Britain, including online throughout Europe.
But Ireland continues to be a success for these firms. William Hill has 48 shops in Ireland, making it the seventh-largest operator. Ladbrokes is the biggest with 206 shops as well as 74 shops in Northern Ireland. In market share terms, Ladbrokes is believed to be number two behind Paddy Power and possibly even the number three behind Boylesports.
"There has been a feeling in the Irish market that Ladbrokes has been over-paying for shops in recent years, leading us to wonder whether the strategy has been growth at any cost.
"The recent deterioration in the economic environment, coupled with the initiation of a price war by Paddy Power, means that we would not be surprised if Ladbrokes now pauses for breath in terms of further retail expansion," Davy said.
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Jagajeet Chiba, Gambling911.com
