Disappointing HY1 results from Ladbrokes

Ladbrokes reported on its Q2/2015 and HY1 results Tuesday, delivering a less than sparkling performance.

The company said a 35.9 percent decrease in group operating profit was largely driven by lower year-on-year margins notably in its digital sportsbook together with the impact of increased machine gaming duty to 25 percent, the new Point of Consumption tax and withdrawal from certain overseas digital grey markets.

Other key performance indicators for the 6 month period ending June 30, 2015 were:

–    Decrease in group revenue of 0.1 percent to GBP 588.8 million (H1/2014: GBP 589.3 million).

–    An increase in total corporate costs to GBP 12.2 million (H1/2014: GBP 11.1 million).

–    Net finance expense of GBP 14.2 million (H1/2014: GBP 12.8 million) mainly due to a higher blended interest rate.

–    A 49.7 percent decrease in profit before tax to GBP 27.5 million (H1/2014: GBP 54.7 million).

–    Total exceptional items before tax of GBP 78.9 million (H1/2014: GBP 27.0 million) which includes closure of shops in UK and Ireland.

But it’s not all doom and gloom, performance in Ladbrokes’ mobile Sportsbook, Digital Gaming and Australia along with machines performance in UK Retail were better than expected, offsetting losses to a small degree.

Looking at Ladbrokes’ digital segment, net revenue grew 6.9 percent to GBP 112.2 million (H1/2014: GBP 105 million) but the company reported an operating loss of GBP 11.5 million (HY1/2014: profit of GBP 3 million) before exceptional items which it attributes to the introduction of the POC tax and “substantially lower gross win margins in Ladbrokes.com.

Despite mobile sportsbook staking increasing 64.9 percent and sportsbook staking by 20.1 percent, net revenues declined by 26.3 percent due to weak margins.

By the end of H1/2015, mobile sportsbetting represented over 64 percent of customer staking while desktop declined by 19 percent reflecting the rapid migration to mobile products.

Jim Mullen, Chief Executive, commented:

“Our first half results reflect the challenge facing Ladbrokes. While we have some encouraging customer trends, we need to reset the business and invest. The results clearly show why we need to change and why we need to do so quickly.

“In July, we set out an organic plan to create a better business in 2017 with clear targets. While doing this removes the short-term thinking that had come to dominate our actions, we recognise it does create short-term impacts on our profitability.

“However, our focus has to be about looking forward, investing and utilising our strengths to grow. There are signs in H1 that the customer is there to be convinced by the Ladbrokes offer – good Gaming performance, strong Mobile Sportsbook KPIs and growth in Australia. We have a solid base to build on.

“So going forward expect to see the Ladbrokes brand more prominent across the media, a retail driven multi-channel offer rolling out to more customers, an evolving and improved Digital offer and further progress in Australia.

“The proposed merger with the Coral Group represents an exciting opportunity for the business but, with completion some way away, the focus for me and my team must be on the here and now of delivering on our organic plan, building a better Ladbrokes and driving performance towards our 2017 targets.”

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