Ladbrokes trading update reports merged group on track for 2017

The merged Ladbrokes Coral group issued a trading update Thursday covering the period January to end June 2017 and highlighting the following achievements:

* The group is on track with expectations for the full year;
* Merger synergies upgraded to GBP 150 million by 2019 – more than double original predictions;
* Strong Digital performance with net revenue 17 percent ahead of estimates;
* UK retail revenues fall 6 percent y-o-y.

CEO Jim Mullen reported a strong H1-2017 performance with Digital doing particularly well and achieving net revenue growth of 17 percent y-o-y against a backdrop of a significant period of platform integration and a competitive trading environment.

“On integration, we have successfully migrated our UK Digital brands to a single platform and completed the consolidation of our head office team,” Mullen said. The further synergies identified re-emphasise the merits of the merger and the potential of the enlarged group, with the additional savings delivered in 2017 offsetting the impact of current UK Retail run rates. We therefore remain in line with our expectations for the full year.”

Turning to the retail environment, Mullen said:

“In UK Retail, a key management focus has been on addressing some areas of ongoing inflationary pressure on the cost base and on improving gross win margins. Examples include the planned and considered commercial decisions taken on horse racing media costs and horse racing gross win margin. Whilst these have had a negative impact on stakes, they have been profit positive and helped mitigate some of the impact of underlying run rates. Furthermore, we are pleased to have resumed showing pictures from all UK racecourses following the agreement of a profit-share deal with The Racing Partnership reported last week.

“Sports net revenue was 25 percent ahead (cc +18 percent) with sports stakes 23 percent ahead (cc +18 percent). After adjusting for the Euros in 2016, sports net revenue was 34 percent ahead (cc +27 percent) with sports stakes 27 percent ahead (cc +21 percent). Sports gross win margin of 9 percent was 0.4pp ahead of last year. Gaming net revenue was 11 percent ahead of last year (cc +10 percent) and 15 percent ahead (cc +14 percent) in the sportsbook-led brands.”

Mullen reported that UK Retail net revenue was 6 percent behind last year, whilst European Retail net revenue was 1 percent behind last year (cc -10 percent). Poor football results in Italy meant that while amounts staked were 17 percent ahead of last year (cc +5 percent), OTC gross win margin was only 14.8 percent, 3.6pp behind last year.

Total Group net revenue was 1 percent ahead of H1-2016, with total group operating profit expected to be within the range GBP 153.3 million to GBP 158.3 million – 4 percent to 7 percent ahead of last year.

The update shows that estimated synergy savings have been upgraded from GBP 100 million to GBP 150 million over a three-year period, driven primarily by further cost savings identified through procurement, IT and the harmonising of horse racing gross win margins across the UK Retail brands.

The annualised phasing of the delivery of the GBP150 million synergies saving is expected to be circa GBP 45 million in 2017, GBP 130 million in 2018 and GBP 150 million in 2019.

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