Exceptional costs sees Coral report £25 million losses ahead of Ladbrokes merger

Carleaver
Carl Leaver

Publishing what will likely be its last financial update as a private company, Gala Coral (Coral) has reported top-line metric growth hindered by significant exceptional costs as the company approaches its £2.2 billion merger with Ladbrokes Plc.

Updating the market on its Q3 2016 performance (12-week period ending 2 July), Coral would declare net revenues of £264 million up 10% on corresponding 2015 £241 million.

Driven by a period of high player activity on its online assets and further aided by improved football betting margins, Coral would report a group Q3 EBITDA of £58 million up 13% on 2015 performance.

Despite its top-line metric gains, Coral would report significant ‘exceptional costs’ of £26 million attached to restructuring its Ladbrokes merger, which kept corporate profits in the red as the bookmaker posted period losses of £25.6 million.

Issuing a year-to-date overview, Coral governance would report EBITDA of £182 million (up 15%) generated from group net revenues of £868 million (up 12%).

Entering the final phase of its merger with Ladbrokes, Coral governance detailed that the company had progressed strongly in its digital performance a key growth area for its new enterprise, outlining growth across all its online divisions (Coral.co.uk, Gala websites and Eurobet.it).

Carl Leaver, Gala Coral Group CEO, commented on corporate performance

“EBITDA for the quarter was 13% ahead of last year, driven by continued strong growth in Coral.co.uk and Eurobet.it, a good machines performance in Coral Retail and a positive Euro 2016 football championship. Year-to-date, EBITDA was up 15%, or 32% ahead on an underlying basis (adjusting for incremental regulatory costs).

“Online customer acquisition volumes during the Euro 2016 football championships were encouraging. As in the 2014 World Cup, Coral did not advertise on TV, instead focussing marketing investment on channels where we see a positive return. Our predictive models indicate that the value of customers acquired during the Euros is around double the levels achieved in the 2014 World Cup. Combined with very competitive costs of acquisition, this will drive impressive returns on our marketing investment.”

“Whilst we were pleased with our ongoing online net revenue growth of 19%, it is worth noting, as highlighted at our H1 results, this growth rate was held back by new regulatory requirements, including teething problems around the introduction of new player protection measures. We estimate that net revenue would have grown by 28% absent these factors. OTC staking in Coral Retail was also impacted by these new requirements.”

This July, the UK CMA released its final report into the proposed merger between the Coral and Ladbrokes, approving the merger subject to the sale of between 350 and 400 shops.

Independent bookmakers BoyleSports and Betfred have expressed interest in purchasing these shops, and the disposal process is well under way. At present, Ladbrokes and Coral stakeholders expect to complete the merger by Autumn 2016.

 

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