Ladbrokes Coral saw its income from high street outlets drop in the first half, as analysts warned of dangers from tougher gambling regulations.
Retail revenue was down six per cent on last year, as gamblers turned to having a flutter online rather than on the high street.
Like-for-like over the counter stakes were down seven per cent on the year, while revenue from bets placed through machines was down one per cent.
But net revenue through digital streams was up 17 per cent, helping the total group revenue to creep up one per cent on last year.
Group profit for the first half is expected to be four to seven per cent higher than 2016, coming in around £153.3m to £158.3m.
Shares in the group were up by more than five per cent at the time of writing.
Why it's interesting
The tie-up between Ladbrokes and Gala Coral is expected to be finalised this week. The group said it had found further cost savings in the merger process and so upped its guidance on synergies from £100m to £150m, with £45m saved by the end of this year.
But City observers said the big challenge on the horizon for the group was possible red tape coming up. Ivor Jones, an analyst at Peel Hunt, said the trading news was something of a "sideshow" to regulatory uncertainty.
George Salmon, equity analyst at Hargreaves Lansdown, said: "While the extra synergies from the Ladbrokes-Coral merger unveiled in this update are welcome, one gets the feeling the £50m per annum bump could well pale into insignificance once the government has had its say on the future of controversial fixed odds gambling machines."
But the market welcomed the results with a 5.71 per cent increase in the share price, which was trading at 125.8p today.
What the company said
Chief executive Jim Mullen said management was focusing on reducing costs to improve margins, including not showing some racecourse content in stores.
"Whilst these have had a negative impact on stakes, they have been profit positive and helped mitigate some of the impact of underlying run rates," he said.
"Furthermore, we are pleased to have resumed showing pictures from all UK racecourses following the agreement of a profit-share deal with The Racing Partnership reported last week."