Gala Coral to hedge its bets before downturn

Gala Coral is streamlining its operations ahead of the likely impact of the economic downturn on casino, bingo and betting revenues, and has told staff that up to 200 jobs may be affected.

Its five divisions will be pared back to three, with bingo and casino merging and Coral betting shops being bracketed with its Eurobet equivalents in Italy.

Dominic Harrison, who replaced Neil Goulden as chief executive in September, said that while trading was satisfactory, “this is about planning for a downturn. Like everybody else, we are seeing pressure on the disposable pound.”

The group, owned by a private equity triumvirate of Candover, Cinven and Permira, operates 1,600 Coral shops, 350 Eurobet shops in Italy, 156 bingo clubs and 28 casinos.

Gala has attracted the attention of Apollo Management, the US private equity group that owns Harrah’s, the casino operator, and which has been buying up Gala debt. Harrah’s owns London Clubs International, the UK casino operator.

Casino and bingo operators have suffered a painful past 12 months, hit by the impact of the smoking ban, the loss through regulation of gaming machines and a rise in casino duty. It closed 12 bingo clubs and three casinos in the financial year to September.

Mr Harrison, previously Gala’s chief operating officer, said he wanted to “knit this group together better” and make moves “to ensure that we are fit for purpose whatever comes down the track”. He said there was no defined figure for cost savings, saying consultation with its 20,000 staff would begin on Monday.

“This is about a restructure and simultaneously a reduction in our cost base,” he said.

Mr Harrison added that the reorganisation would put the group in good shape to benefit from a recovery.

Gala’s owners in April ploughed GBP 125m (USD 186m) into paying off a tranche of senior debt to relax banking covenants, amid fears of default. Earnings before interest, tax, depreciation and amortisation for 2008 were forecast at GBP 380m, compared with GBP 402m last year, and will be announced next month.