Ladbrokes battles on

Investors in the UK online and land gambling group Ladbrokes are unlikely to be pleased with the company’s H1-2014 numbers released Tuesday, which show that despite a change in software provider the company’s digital profits plunged 72 percent to just GBP 3 million.

Digital provides just 4.4 percent of Ladbroke’s operating profits, compared with rival William Hill’s 52 percent, which made GBP 92 million over the same period (see previous reports).

But it’s a vital growth channel, which chief executive officer Richard Glynn acknowledges, saying that there is a shift in behaviour to betting on smartphones and tablets.

“It’s a change in pattern. The 18-to-34 year old male comes into the shops for the social experience and uses mobile to play,” he told The Guardian newspaper.

Betting on mobile more than doubled in the first half, with Glynn opining: “Mobile is the battleground now… there is no doubt about it. We only launched our mobile product six months ago, it is now bigger than desktop in digital.”

“We said a few years ago that Ladbrokes needed to dramatically increase its presence in the digital and mobile world,” Glynn added.

“I think I’ve been very upfront about the fact that it’s taken us a while to do that. The road has been bumpy at times. The product didn’t match the brand.”

On a group basis, however, no amount of management spin can hide the impact of adverse numbers for Ladbrokes like a 49.7 percent decline in group profit before tax to GBP 27.7 million, or a profit after tax dip of 49.8 percent to GBP 23.7 million.

And the group has a net debt burden of GBP 425.9 million (H1-2013 GBP 375.5 million).

Still ahead lie the challenges and increased costs of the UK’s new p.o.c. regulatory and tax regimes, adding to costs to company associated with higher taxes on FOBTs in the Retail vertical, where Ladbrokes took a GBP 14 million charge as it shuttered 29 betting shops in the first half. By the end of July 2014 it had closed a total of 46 shops and is on track to meet its target of closing 50 this year.

The interim management statement highlights achievements that include:

* Mobile Sportsbook growth: staking +105 percent; active players up 74 percent y-o-y;

* Playtech migration completed;

* Successful roll out of c.9,000 Clarity machine cabinets ahead of World Cup

* SSBT estate grown to 1,750 supporting UK Retail focus on football

* International diversification progressing with Australia’s Betstar acquisition;

* Good World Cup performance with stakes up 20 percent;

* Group stakes GBP115.3 million up 22.4 percent; gross win margin 24.3 percent;

* Digital net revenue up 25.9 percent; sign ups increased 48 percent; active player climbed 28 percent;

* Mobile staking growth up over 1100 percent; 63 percent from sportsbook wagering;

* UK Retail wagering up 7.9 percent; gross win margin 27.4 percent;

* Spain Retail JV wagering up 160 percent; Belgium Retail staking up 157 percent;

Financial performance:

* Group net revenue up 1.6 percent;

* Group operating profit down 33.7 percent at GBP 56.8 million;

* Underlying earnings per share down 38.6 percent to 4.3p, but half-year dividend maintained;

* High rollers contribution to operating profit up at GBP 10.7 million (H1-2013: GBP 3.4 million).

Chief executive Richard Glynn reported:

“In the first half of 2014 we successfully delivered all of the planned operational improvements in time for the World Cup. Our offer performed well, delivering a great betting experience for our customers and a good result for the business in a highly competitive market.

“We have made substantial progress and while there is more to do there is also much to play for. We now have the products, the platforms, the people and the brand in place to deliver. Ladbrokes today is a far stronger company and well positioned for growth.”

Glynn lists the advantages the company has to pursue growth, claiming that the company is digitally competitive in terms of both sports and gaming, and is maintaining a close watch on costs in a disciplined marketing approach.

On the UK Retail scene, he claims more machine-driven growth from the Clarity and SSBT hardware, and costs savings, whilst the company is intent on building on its World Cup football success.

Internationally, Glynn says that the acquisition of Betstar in Australia will deliver growth, whilst Ladbrokes will work to enhance its leading position in the Spanish and Belgian markets.

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