Ladbrokes back in the black

The UK online and land gambling group Ladbrokes has published its unaudited interim results for the half-year ended 30 June 2016, reporting a performance ahead of expectations despite a tough and competitive environment.

Highlights include:

* Group operating profit up 61 percent at GBP 52.3 million – ahead of management’s expectations;

* Strong free cash flow generation, with net debt reduced to GBP 227.2 million (2015 H1: GBP 414.3 million);

* Exceptional items – mainly Coral merger related of GBP 14.5 million;

* Headline earnings per share at 3.4p up 41.7 percent;

* Conditional clearance given by the authorities for the merger with Coral to go ahead;

* Overall revenues up 13.1 percent at GBP 661.8 million and net revenue up 45.5 percent;

* Profit after tax up 57.2 percent at GBP 34.9 million

Group chief executive Jim Mullen reported:

“These strong numbers show customers are responding positively to the new strategy at a time when the sporting gods have generally been on our side and we’ve enjoyed some helpful bookmaker friendly results.

“This combination has helped boost profits in the first half of the year. History would strongly dictate that such a run of results in our favour would see customer staking suffer, but encouragingly these numbers firmly buck that trend and combine strong staking and a good margin.

“However, 130 years of experience in sports betting has shown us that we will endure a run of customer friendly results and margins will normalise. Despite this assumption on results and our intention to continue investing in marketing, we have slightly increased our full year expectations.

“Encouragingly we have delivered a good performance across all the key customer metrics outlined in last year’s strategic plan and that gives us confidence that we are well placed to deliver against our stated 2017 targets. We have grown recreational customers, increased our football business, attracted more multi-channel customers and grown strongly in Australia.

“However, we are taking nothing for granted. We will continue to compete hard on pricing, product and customer services and maintain a relentless focus on meeting and exceeding customer expectations. With the merger on the horizon we recognise there is a lot of hard work still to come, but this is an exciting time for Ladbrokes and we approach the opportunities ahead with a strong sense of confidence.”

The company report focuses especially on Ladbrokes’ digital channel, a source of historic concern that appears to be coming right.

Total digital net revenue increased by 40.9 percent to GBP 158.1 million (H1 2015: GBP 112.2 million).

Management commented that the company has increased its digital marketing spend and improved its offering, with the focus on customer preferences.

During the first half the Sportsbook operation delivered its tenth consecutive quarter of year-on-year growth, with staking up 19.5 percent and active player numbers up 38.4 percent, driven by mobile growth, bet in play and football.

The share of staking from mobile is now 77.8 percent and football growth is 50.6 percent, whilst bet-in-play growth is 43.6 percent.

The company expanded coverage of other sports with positive results, especially in basketball.

Digital gaming enjoyed its seventh consecutive quarter of year-on-year net revenue growth in H1-2016 of 26.8 percent with positive trends across all key products. Responsible gaming obligations remain an imperative with the company.

Australia delivered another strong set of numbers for Ladbrokes following more intense marketing activity, with year-on-year revenue on a local currency basis up by 41.5 percent, driven by a 70.6 percent increase in active customers and staking growth of 53.7 percent. Despite regulatory uncertainty around issues such as in-play betting, Australia remains a very attractive market.

Ladbrokes is also in the midst of a GBP 2.3 billion merger with Gala Coral, but the two comapnies have been told by the UK Competition and Markets Authority that they will have to shed 350 to 400 high street stores as a condition of the deal.

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