Spreading out

AT THIS time of year some punters will place a fiver on a white Christmas, others might have a few quid on the Cheeky Girls to be top of the charts on Christmas Day.

Last week, Duke Street Capital placed a bet that some analysts think could be as risky as an outsider in the Grand National.

Duke Street, the company behind bingo halls group Gala as well as Leisure Link, put up pounds 52.7 million to finance a management buyout of Sporting Index, the sports betting company founded in 1992.

The man on who their bet - they no doubt would prefer to term it an investment - depends is 38-year-old Richard Glynn, a Leeds Grammar School and Oxfordeducated lawyer whose previous job was running Megalomedia for Maurice Saatchi and who is now chief executive of Sporting Index.

Glynn, who joined Sporting Index in February 2001 after a period as a consultant, sees sports spread betting as a gloriously untapped market that needs to branch out from its perceived elitism. Although the leader in the field, Sporting Index still only has between 27,000 and 28,000 registered clients as opposed to the hundreds of thousands who bet on the horses with Ladbrokes.

One reason, says Glynn, is that spread betting is seen as too complicated to understand with outmoded and confusing terminology. "Back in the old days, people went to lawyers who said. 'volenti non fit injuria' and people said 'you must be right, guv, bit clever for me that law'. In spread betting, we use City terms like buy and sell and trade which City people instinctively understand but a much wider set of people do not," he says.

"But in reality it is Bruce Forsyth's Play Your Cards Right - it is higher or lower and it is as simple as that, and that is the language we want to get across.

Our goal over the next three years is to get everyone spread betting and not just people who understand Latin."

Spread betting started in 1974 when Stuart Wheeler, the multimillion-pound Tory Party donor, founded IG Index so that British residents, forbidden by exchange control regulations, could speculate on the price of gold going up or down - higher or lower as Bruce Forsyth might put it. Within a couple of years, Wheeler extended the business to include commodities and by the early 1980s you could bet on the FTSE and the Dow and stock index futures.

Into this market on 1 April, 1992, stepped Compton Hellyer, a racehorse owner, former merchant banker and stockbroker who has an infectious zest for life and is nobody's fool. Applying the same City techniques to sport, going higher or lower on the number of goals in a football match for example, Hellyer created a unique sports betting market into which IG quickly followed, as did City Index and now Cantor Fitzgerald and Spreadex.

Traditional bookmakers such as Ladbroke and William Hill attempted the same, but without experienced traders, and quickly got their fingers burnt. Glynn, a currently suffering Leeds United fan who shares Hellyer's boyish enthusiasm, sees this as just the development stage of a new business, the foundations and not the full structure.

He says: "Now we are poised to go into the real growth phase of the business.

"The beauty of Sporting Index is that we don't see ourselves as pure gambling. We see ourselves as a leisure-based entertainment.

Sport is about passion and because spread betting interacts with events, because if your team is losing in the 88th minute you can still have a bet on what is going to happen in the next two minutes, it heightens people's enjoyment of their passions.

"We have a very simple philosophy - the three fives: pounds 5 on a burger, pounds 5 on a programme and pounds 5 on a spread bet. We want to see it as a default part of having fun."

Which may be so, but sports spread betting is still perceived as a high-risk form of gambling that can go horribly wrong. Sporting Index's worst single bet was in the cricket World Cup of 1999 when the company predicted the total number of wides in the tournament would be between 250-270. The final tally was 966 and the company lost pounds 350,000. There is no need to weep, though - it won pounds 500,000 on an England-Tonga rugby match the same year.

The big winners and losers in both cases will have been drawn from the City, and Glynn acknowledges that 55% of his company's clients are based in London and the South-East. What Sporting wants to do is create easy-to-understand bets, allowing the big-hitters to live dangerously but also bring in the smaller punters from the regions whose risks are limited, and expand the business from its current distribution channel of the internet and the telephone to PDAs, Palm Pilots and interactive television as well as casinos, leisure ventures and even betting offices.

IT IS A grand plan and one that will appeal to gamblingmad punters. Not all are convinced, especially by the price Duke Street has put up to fund that vision. Ian Wilkie, partner in charge of hospitality, leisure and gaming at accountants Ernst & Young, says: "It does appear to be full price, a stretched price. What Sporting Index is saying is that it can expand the market away from the South- East and give it greater appeal across the country.

"Perhaps it can but at the same time its core betters are traders in the City whose bonuses are under pressure and many of whom face redundancy.

"Because the price is calculated against current income remaining steady and on developing a whole new client base, it is a bet on a promise."

It is a promise on which Glynn, who acknowledges that it will be tough, aims to deliver.

He says: "We are climbing Everest and we are at base camp, not at the bottom. We are past the muddy lower climbs where people are harvesting corn, we are looking at a bit of snow now. It is a long way to the top but not succeeding terrifies me."

Copyright 2002
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