Ladbrokes Profits Dive 50% In H1 2014

Ladbrokes Profits Dive 50% In H1 2014British bookmaker Ladbrokes have announced its latest half-year results ending 30th June, and a slight 4% increase in revenues to £589 million was offset by a massive 49.7% drop in pre-tax profits to £27.7 million. In spite of the dramatic figure, however, the company’s performance was anticipated by industry analysts who had adjusted their expectations after Ladbrokes released a series of profit warnings in 2013. Commenting on the company’s latest H1 results, Ladbrokes chief executive, Richard Glynn, said:
“They’re entirely in line with what we expected. We always said [H1] was about delivery and [H2] was about growth. The operational results were encouraging; there is a lot more to play for.”
In recent times, Ladbrokes has been restructuring its business and this year alone it has shut 46 of its 2,400 retail shops as it focuses on expanding its online product. Meanwhile, progress in this direction has been slow and in H1 2014 Ladbrokes’s online earnings dived by 72% to a mere £3 million, representing roughly 4% of the company’s operating profits. Needless to say, it has a long way to advance before it can more directly compete with rival bookmaker William Hill, which generated £92 million in online earnings over the same six-month period, accounting for 52% of the its overall profits.
There was some cause for optimism, however, with Ladbrokes noting a 20% increase in its 2014 FIFA World Cup bets compared to the last World Cup in 2010, with mobile bets up by an impressive 1,100%. The company also noted that twice as many wagers were now being placed using mobile devices, with Richard Glynn highlighting a growing trend amongst 18 to 34 year-old males of placing bets via their tablets and smartphones, as opposed to their desktops.
Looking ahead to H2, Ladbrokes says it is looking forward to experiencing growth as the firm’s online business starts gaining traction. The urgency for an improvement in its financial results takes on a new dimension when one considers the UK will introduce a brand new 15% online betting tax at the end of the year, a move likely to shake-up the industry as a whole.
Although recommending a ‘hold’ position for now, Numis Securities seems to also concur with Ladbrokes’ optimism, with the broker stating:
“We forecast a material turnaround in group profitability in the second half (EBIT of £80m versus £57m in the first half), largely dependent on online. Trading over the next few weeks should help clarify how credible that forecast is.”

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