Arena Leisure warns of hurdles ahead as betting levy falls

The racecourse operator Arena Leisure last night warned of a tough year ahead as it faces up to a cutback in funding generated by the tax on bookmakers.

The group runs a quarter of the country's horseracing fixtures, operating racetracks at Doncaster, Windsor, Southwell, Wolverhampton, Folkestone, Worcester and Lingfield Park.

Its chairman David Thorpe said the yield from levy on bookmakers was set to fall this year, piling pressure on the horseracing industry against the backdrop of sluggish growth in the wider economy.

"The yield from the levy is estimated to fall to £64.8m in 2010-11 as a result of the movement of internet and betting 'offshore', the impact of overseas better operators and betting exchanges," he said. Last year, the yield stood at more than £75m.

Faced with the decline, Arena said the Levy Board, the statutory body charged with collecting the tax, had taken "the unusual step" of making certain fixtures available with either partial or no funding for prize money.

"Arena has secured 48 partially funded fixtures and 36 fixtures with no funding for prize money which, whilst each of these will still be profitable and are important in maintaining our fixture list, will be consequently less profitable than fully funded fixtures," it warned, adding that it was anticipating a "challenging" year ahead, and that it did not expect to see any material growth in 2011.

The warning came as Arena revealed lower revenues of £64m for 2010, down from £65.2m in the preceding year. Adjusted pre-tax profits were higher, climbing by more than 10 per cent to £5.4m last year, while the earnings per share fell to 1.02p from 1.16p in 2009.

"Whilst we estimate that 2011 is likely to be another challenging year, current trading is in line with expectations... Arena remains extremely well positioned for growth into 2012 and beyond," Mark Elliott, the company's chief executive, said.

Despite the warning on the year ahead, analysts remained positive. Altium's Greg Feehely, for instance, advised investors to look at the media rights contract which commences at the beginning of next year. "[It] should add around £10m per annum to Arena's bottom line for its duration [of five years]," he said, repeating his positive view on the racecourse operator.

Betting on Gibraltar

In a sign of the offshoring trend highlighted by Arena, Betfair, the world's largest betting exchange, said it was shifting part of its business to Gibraltar to reduce its tax bill. Following in the footsteps of Ladbrokes and William Hill, Betfair said the move to run its exchange under a Gibraltar licence would boost next year's earnings before interest, tax, depreciation and amortisation by around £10m. Liberum analysts queried how the Government would respond now that most online gamblers have gone offshore.