Tough 2015 opening for Ladbrokes as operator is hit by adverse sports results

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Jim Mullen – Ladbrokes

Entering its first performance quarter under the leadership of new CEO Jim Mullen, Ladbrokes reported that its group performance for the period (ending 31 March) had been impacted by “customer friendly results and externally imposed headwinds” – UK POC tax and increased betting machine duty.  

As a result of these factors the operator posted an EBIT decrease of 22.3% to £14.3 million (Q1-2013: £18.3 million). Ladbrokes governance noted that company EBIT would have been above Q1 2014 performance had it not been affected by 2015 tax adjustments.

Ladbrokes management stated that the company had been hit by adverse football results seen in weeks 3, 8 and 12 and an unfavourable set of results at the Cheltenham Festival which would impact both digital and retail performance.

During the period Ladbrokes digital arm witnessed strong KPI growth with sportsbook wagering up 28%, driven by an 18.5% increase in player activity on the vertical. However the adverse sporting results which saw million pound pay-outs had seen the sportsbook’s win margin halved to 4% (2014) as its sportsbook reported a net revenue decline of 31%.

The operator has continued its ongoing turnaround of its igaming services, which saw player activity up 31% and net revenue improvements of 13%.

On the  retail betting front, Ladbrokes would be impacted on by a poor Cheltenham Festival performance, as gross win margin dropped to 15% below its target range of 16.5-17%.However the operator was able to stabilise the adverse Cheltenham results with a strong  gaming machine performance which reflected a Gross win per terminal of £1,033 (+16%)

Ladbrokes governance highlighted that its retail costs were in-line with company expectations, as Ladbrokes closed 15 stores during the period, reducing their retail portfolio to 2194 shops (FY 2014: 2209). Ladbrokes further added this week that it would review its loss making Irish retail division

Ladbrokes governance would further note that during the period it withdrew from unregulated digital markets to comply with guidelines set forth by the UK gambling commission.

Jim Mullen, Chief Executive, commented on Q1 2015 performance:

“In Q1 many of our customer metrics are encouraging but results have favoured customers and profits are materially down. These results demonstrate the challenges we continue to face. We need to change the way we run the business, build scale, primarily in Digital and respond faster to the customer and changes in the market place.

“I will complete my review of the wider business quickly and I will present some of the principal changes that I intend to make, in June, earlier than planned. Shareholders should expect me to focus on how we will build an effective competitive position, develop scale and resilience over the medium-term. I believe strongly in Ladbrokes. “

“We have laid solid operational foundations but there is still a lot to be done. The decision to seek examinership in Ireland demonstrates the seriousness of our intent and the speed with which we will execute.”

Ladbrokes Q1 2015 Overview

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