Ladbrokes releases latest quarterly results

Ladbrokes has released its interim management statement for the 3 months ended 31 March 2013, reporting that the land and online gambling group continues to progress its ‘reinvigoration strategy.’

Management report that the quarter has seen further improvements in pricing trading and liability management; continued evolution of its retail offer; the delivery of a new digital sportsbook; and strong cash generation.

The company notes that softer trading than anticipated in Q1 has exacerbated the weaker performance expected by Management in the quarter due to taxation and cost negatives in UK Retail and the expected H2 weighting of growth in digital revenues.

Management now expects group operating profit for the year to be at the bottom of the existing market range, in light of which the Q1 IMS has been released today, reporting:

* Group net revenue from continuing operations, excluding High Rollers, up 3.3 percent

* Group net revenue down 0.9 percent

* Group operating profit of GBP 37.4 million, down GBP 13 million, largely reflecting a GBP 9 million increase in like-for-like costs and machine taxation in UK Retail as previously flagged and some GBP 6 million less revenue from horse racing at Cheltenham.

Ladbrokes CEO Richard Glynn said the group plans to transform Ladbrokes had continued and progress has been made.

However, he pointed out that the trading environment and economic conditions since the start of the year have remained challenging, which when combined with a number of specific one off factors in the latter part of the period, have driven a softer first quarter than expected.

“We have a number of initiatives in the business already underway to redress some of the areas highlighted by the first quarter’s trading. With our new sportsbook fully launched, we have a strong online offer and expect it to play a big part in growing the business, following an initial period of transition,” Glynn said.

“Our partnership with Playtech aims to address our underperformance in gaming and accelerate our performance in mobile. We will also take the opportunity to drive efficiencies across all parts of the business.”

On the retail front, machine gross win was ahead by 3.2 percent for the quarter, with gross win per shop per week of GBP 3,569 up 0.3 percent. Growth during the period was lower than expected, with the impact of tougher comparatives and a more competitive market.

However, gross win per shop in the last four weeks has been up around 3 percent with total gross win up some 8 percent. An additional 137 machines were added during the period, although  gross win per terminal week of GBP 916 was down compared to GBP 923 in Q1 2012.

Over the Counter betting operations were impacted by the bad weather and poor Cheltenham racing results, all of which brought OTC win down by 2.6 percent. Sports betting, especially on football, provided some relief, delivering a higher gross win margin overall, 18.9 percent for the period (Q1 2012: 17.2 percent).

Grand National racing in Q2 gave the company a boost, generating around GBP 11 million gross win (GBP 15 million for the group), which was up some GBP 4 million.

During the period Ladbrokes opened 29 new shops and acquired 7. The group anticipates that by the end of 2013 it will have added 100 new shops.

Ladbrokes online and mobile, or Digital, operations delivered net revenues down 0.7 percent, with sportsbook growth of 13.2 percent offset by an 11.4 percent decline in gaming largely driven by lower revenues from high value customers in the online and mobile casino side.

Sportsbook growth was driven by a stronger margin, particularly during the first six weeks of the period when margin was up 10.8 percent. Sportsbook margin for the quarter improved at 9.6 percent (Q1 2012: 7.4 percent).

Glynn said that during 2013 the company will continue to evolve its new website, enhance its Mobile presence through a re-launch on the Mobenga platform and release a dedicated ‘Vegas’ gaming tab on Ladbrokes.com.

“We expect to begin to realise the full growth potential in our Digital business in 2014 when all of the benefits of our partnership with Playtech can be implemented, and while we have focussed resources to ensure a swift implementation, the risks of disruption from transition are inevitable, as a result of which we expect to see Digital profits decline in the current year,” Glynn warned.

Ladbrokes net indebtedness was reduced by a further GBP 45.8 million from GBP 386.9 million at 31 December 2012 to GBP 341.1 million at 31 March 2013.

The company cites its new Digital arrangements through Playtech as important for the future, noting that Ladbrokes is extending its software licensing arrangements with Playtech as well as signing a new agreement for the provision of marketing services, effective 1 May 2013 .

Ladbrokes has also acquired 100 percent of the issued share capital of Global Betting Exchange Alderney Limited, which operates the Betdaq exchange business, for an initial consideration of Euro 30 million (GBP 25.5 million: 50 percent in cash and 50 percent in Ladbrokes shares), and a 10 percent share in the Guernsey firm TBH, for which it paid Euro 4 million with a call option to acquire the remaining shares after four years.

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