Toby Green: Ladbrokes on a loser as heatwave puts its gaming machines in the shade

Outlook Campaigners against gaming machines – the so-called "crack cocaine" of gambling – could be forgiven for having a wry smile on their faces yesterday. Fixed-odds betting terminals have no shortage of critics, given they allow players to lose (and, yes, occasionally win) big amounts of money at high speeds.

Whichever side you come down on the issue, there is no doubt that for the bookies they have been a real money spinner, providing a steady – and predictable – source of income.

This growth, however, is slowing, and yesterday the performance of the machines were the focus of a disappointing set of results from Ladbrokes.

The country's largest betting company announced pre-tax profits for the first six months of 2013 had been cut in half, falling to £55.1m.

Ladbrokes has certainly enjoyed the boom times, with revenues from the machines jumping 40 per cent in the last three years.

Those days, however, look over. The industry has already this year reported signs of a slowdown from the machines, but yesterday's results showed things are deteriorating faster than thought.

Ladbrokes warned investors that the "market rate of growth [had been] slower than expected", and at the same time admitted it was no longer expecting like-for-like growth from the machines for the year.

Yes, the results were skewed by the heatwave. Whenever a company attempts to blame the weather for disappointing results, a healthy dose of scepticism is required. However, pinning a 9.2 per cent slump in takings from the machines for July on the sun keeping people out of the bookies does make sense.

Yet, as Ladbrokes itself admits, there is a wider problem than just a month of scorching temperatures.

Investors were clearly worried – shares dropped by nearly 4 per cent yesterday to 199.6p, leaving chief executive Richard Glynn more to do to get the £12m bonus he is in line for when they move above 297p.

Despite this, there is little in the detail of the results to bring cheer to campaigners hoping the machines may be on the way out.

The problem is competition for gamblers' money is higher than ever, as shown by Ladbrokes spending £3.8m more on free bets than it did over the same period a year ago. To splash out that amount of cash for so little obvious reward highlights quite how many options there now are on the high street.

Part of Ladbrokes's plan to deal with this is by launching a new set of machines. Due to start appearing in shops during the last three months of this year, before fully rolling out at the start of 2014, it will mean more games and – Ladbrokes will hope – a better financial performance.

Still, there is also the prospect that the Government could make things tougher. Profits across the industry have already been hit by the introduction of a new tax in February – the "machine games duty". This replaced the previous regime with a standard rate of 20 per cent on any machine where the maximum cost is above 10p and the maximum prize is above £8.

Yet compared to other countries in Europe it does not look that strenuous. In Spain, Greece and Germany the taxation of machines is at least 10 per cent higher – in Italy, it is more than double. There are some in the Square Mile who feel an increase in the duty cannot be ruled out.

More immediately, the Department for Culture, Media & Sport is due to publish the conclusion from its consultation on gaming machines – which ended in April – in a matter of weeks.

Campaigners are calling for prizes to be lowered. David Lammy MP, one vocal opponent of the machines, is among those demanding the maximum stake be lowered from £100 to £2.

The industry is united in its belief that the majority of customers use the machines responsibly. According to Ladbrokes, the average amount spent on a session is between £10 and £15, whereas the average stake on a bet over the counter is £8.40, so the different is not that huge.

However, the Salvation Army claims players are able to lose as much as £18,000 in an hour and highlights estimates that put the amount lost by problem gamblers on the machines at £300m a year.

Whatever your viewpoint, there is certainly no sign of the bookies moving away from the machines. The law currently allows for a maximum of four in one venue – Ladbrokes yesterday announced the average number in each of its shops was 3.92, up from 3.86 a year earlier. No one will be surprised if that goes right to the limit.

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