Ladbrokes is forecast to post a dramatic fall in pre-tax profit, from £112m to £44m, according to analysts at Deutsche Bank.
The dismal numbers are being linked to the first full-year application of the point-of-consumption tax, which charges 15 per cent on online gambling profits, and crackdowns on in-store fixed odds betting terminals (FOBTs).
Greater regulation on FOBTs will now see them taxed at 25 per cent and limited to four per branch, and further tightening is also expected. City estimates indicate Ladbrokes paid an extra £40m last year as a result of the new taxes.
Ladbrokes has also been hit by impairments in its retail property portfolio and efforts to plough £20m into company development. The gambling giant’s profit drop will also be driven by associated costs from its merger with Gala Coral.
The two companies are awaiting approval from the Competition and Markets Authority for the £2.3bn deal, which is expected to go through in mid-2016.
Gavin Kelleher, analyst at Goodbody, said: “This deal was blocked in 1998. However, market dynamics, competitive forces and product mix have since changed significantly.
“The focus is likely to be on local level competition and our detailed analysis shows the divestment of less than 400 shops could appease concerns.”
Once the merger is finalised, the new company will overtake William Hill as the UK’s largest bookmaker.
William Hill could also see its profits plunge this week by around 22 per cent after spending an extra £87m in tax in 2015.
The point-of-consumption tax was introduced in late-2014 to deter gambling corporations from moving their operations to low-tax, offshore areas. The Treasury estimates it will bring in an extra £300m per year to its coffers.