Rank suffer after casino tax rise
After the shock announcement that Gordon Brown will abolish the 2.5 per cent starting rate and raise the 12.5 per cent gaming duty to 15 per cent, Rank Group’s shares have tumbled by 7 per cent after announcing the new tax levels would cost the company £8 million a year.
A higher band of 50 per cent will also be introduced for casinos that make more than £10 million a year, which is likely to include the new super-casino. That level is likely to dampen the interest of previously interested bidders for the licence.
The tax changes will hit Rank particularly hard as they have begun to focus on the gambling industry after selling their other leisure based businesses, such as the Hard Rock Café and Odeon Cinemas over the last ten years. They own the Grosvenor Casino chain, the Mecca Bingo brand as will as other online gaming services.
Rank are also planning for the inevitable negative effect the new smoking ban, introduced in England and Wales this summer, will have on it’s bingo profits after reporting a 15 per cent loss in sales in its Scotland clubs after the ban was brought in up there. As a result, they have announced they will close 9 of its bingo halls.
Many in the industry are stunned by the new duty, with Rank saying the changes were "imposed without prior indication or consultation with the industry". Analysts have described the new tax levels as a “kick in the teeth” for the industry.
The likelihood of Rank remaining a target for a takeover has now been erased, with Ladbrokes reportedly to have shown an interest.
“The changes to casino duty have wiped out all Rank's forecast casino growth and reduced its attractiveness as a buyout target,” said one analyst.
However, it may not be all bad for Rank. The new gaming duty is likely to diminish the entrance of new competition into the industry and will also put smaller casino operators at a disadvantage compared to Rank’s established position.
Editor, Jackpot.co.uk - 2007-03-23 11:07:33