News Column

Ladbrokes' online bet is a profits loser

August 13, 2014

OLIVER SMITH



BOOKMAKER Ladbrokes yesterday posted a 49.7 per cent slump in profit during the first half of the year to 30 June after disruption hurt its online profits due to the switch to a new software developer.


Britain's second-biggest bookie after William Hill has struggled to establish its online presence and an alliance with software developer Playtech has taken longer than expected to deliver improvements.


Overall revenues were helped by the World Cup, which chief executive Richard Glynn said delivered "a great betting experience for our customers and a good result for the business".


Ladbrokes reported profits of 27.7m, down from 55.1m during the same period in 2013, while revenues rose 2.6 per cent to 577.8m.


"In the first half of 2014, we successfully delivered all the planned operational improvements in time for the World Cup," said Glynn.


In March 2013, Ladbrokes partnered with Playtech to move over to a new online gaming platform. However, this process took longer than expected after Ladbrokes had to see out the contract with its existing supplier, Microgaming. Glynn had said that it was crucial that Ladbrokes ready its digital offering in time for the World Cup.


"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," he added. The World Cup boosted Lad-brokes' digital revenues by 25.9 per cent - mobile stakes rose 1,100 per cent - with retail betting up 7.9 per cent.


Ladbrokes shares rose as much as 4.3 per cent in morning trading, but later pared gains to close down 0.46 per cent at 129.90p yesterday.


WHAT DID YOU MAKE OF LADBROKES' PERFORMANCE DURING THE FIRST HALF OF 2014? By Oliver Smith ANALYST VIEWS NICK BATRAM PATRICK COFFEY DAVID JENNINGS BARCLAYS PEEL HUNT DAVY While the Digital performance is likely to excite the bulls, we believe these results throw up many questions which are central to the debate. Marketing as a percentage of revenue was 31 per cent in the first half. A key debate is how this marketing spend progresses and how much reinvestment is needed to compete.


With a regulatory storm (point of consumption tax, betting terminals duty) and a general election on the horizon, the risk of further disappointment is high. We expect some recovery short-term on relief that the firm has delivered an in-line set of numbers. However, the risk of further disappointment remains significant.


Our primary concerns remain the real possibility that consensus forecasts are materially too high in both 2014 and 2015, and the likelihood that there will have to be a material cut to the dividend in 2015 as a result. We also think that the market is under-estimating the potential impact of machine legislation for 2015.


LADBROKES TROUBLED WEBSITE TIMELINE ? In December 2010, Ladbrokes made a 240m bid for online gaming group 888 in order to get a headstart over online rivals Sportingbet and the soon-to-be-merged PartyGaming and bwin.


n. ? By August 2012, Ladbrokes had sacked its head of online strategy Richard Ames, following repeated delays to the launch of its revamped website and mobile service, which had seen more than 50m of investment in the previous two years. ? In January 2013, Ladbrokes bought betting exchange website Betdaq for 30m (23.9m) to try to bolster its online presence.


? In March 2013, Ladbrokes announced a partnership with gambling software firm Playtech to move its website over to a new platform and add a host of new casino games as well as improved online marketing and customer retention features.


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Source: City A.M. (UK)


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