23rd Oct 2014 11:53
LONDON (Alliance News) - Deutsche Bank says Ladbrokes' earnings were ahead of its expectations, as revenue climbed 13% and earnings before interest and taxes increased by 94% to GBP33 million, providing a positive catalyst for the share price and underpinning full-year earnings guidance.
Deutsche had forecast a 9% revenue increase and EBIT of GBP29.5 million and says progress in digital revenue is encouraging as the business begins to compete more effectively. Total Digital revenue increased 23%, ahead of the 17% forecast from Deutsche, on stronger sports net revenue. The bank also highlights the 1.4% increase in Gaming net revenue, the first increase in over six quarters while marketing costs remained in-line with guidance.
It expects the bookmaker to be well-positioned for strong growth in Australia ahead of the Spring Carnival in the fourth quarter, though UK Retail net revenue, up 6%, was below Deutsche's 7% forecast.
Deutsche has a Buy recommendation on the stock and a target price of 165 pence.
Richard Carter at Numis is less impressed, pointing to the likelihood that changes in gambling duties will weigh on profits.
"Like its gambling sector peers, it is vulnerable to regulation and duty changes, of which there are an unprecedented number on the horizon," Carter says. Numis has a Reduce rating on the stock and a 100 pence a share price target.
Carter says the results remain consistent with forecasts despite being complicated by a sharp recovery in margins from very low levels, the closing stages of the World Cup and early rebuilding of Ladbrokes' online business. He adds that there may be justification for a slight upgrade in full-year operating income of GBP123 million though attention should remain on 2015, forecast to drop to GBP103 million, as regulatory challenges and duties increase.
Ladbrokes shares are down 5.8% at 121.50 pence, the second-worst performing stock on the FTSE 250.
By Ian Edmondson; Copyright 2014 Alliance News Limited. All Rights Reserved.
Related Shares:
LAD.L