The Tote, the state-owned bookmaker soon to be privatised, has seen the amount it won from punters rise by over 5%, mainly thanks to controversial touch-screen roulette machines in the group’s 540 betting shops.
In a surprise move, the bookmaker omitted to say how much gross profit it made from the GBP 500 jackpot machines, as it has done in the last two years‘ annual reports to parliament.
A spokesman said: „With the current climate we are in it is something we don’t have to do, and we have decided not to do it.“
The report for the year to March 31, which was presented to parliament yesterday, did however make clear gross profit had increased 3.1% to GBP 164m „reflecting growth in the [shop] estate from the change in mix towards gaming machines“.
A senior Tote source added that the proportion of gross win (the amount won from punters) generated by horse racing had decreased in part because of the popularity of machines. He declined to say whether horse racing bets had been pushed into decline by machines.
The government’s ownership of thousands of touch-screen roulette terminals is particularly sensitive as ministers insist they are „on probation“ and recently ordered the Gambling Commission to conduct a review of such high-stakes slot machines.
Last year a survey for the commission found one-in-nine people playing on betting shop roulette machines was a problem gambler.
In 2006 these machines made up about a third of Tote betting shop gross profits. Although the bookmaker is best known for its pool betting service, in financial terms the operation is dominated by income from the 540 betting shops.
Those considering bidding for the business, if it is put up for open auction, claim they will be unable to put a value on the Tote before the regulatory status of the machines is clarified.
Using figures from the annual report and comparative buyout multiples, the Tote would be valued at between GBP 300m and GBP 375m. The top-line operating profit (Ebitda) is about GBP 37.5m. Rival Coral was acquired three years ago by Gala for 10 times projected Ebitda and earlier this year Ladbrokes bought Northern Irish bookmaker Eastwood for a similar multiple. However, some experts suggest a more normal European buyout multiple in the current economic climate is eight times Ebitda.
Goldman Sachs recently submitted a report to ministers on privatisation options. A previous plan to sell the bookmaker to a horse racing trust, for the benefit of the sport, was challenged in Europe by William Hill and others. They successfully argued attempts by government to sell off the business at a discount to its „fair value“ amounted to state aid. The racing trust could not afford to pay a full price, which, at the time, was found by PricewaterhouseCoopers to be GBP 400m.