30th Apr 2014 09:38
LONDON (Alliance News) - Betting firm Ladbrokes PLC reported Wednesday a drop in operating profit in the first quarter of the year, hurt by an ailing online businesses and by football results at the beginning of the year went heavily against bookmakers.
The FTSE 250 group said its operating profit before tax, net finance expense and exceptional items, fell by GBP6.5 million, or 2.3%, to GBP18.4 million in the three months to end of March, hit by football results, where an unusually high number of favourites won their football matches, meaning bookmakers had to pay out large amounts.
FTSE 100 competitor William Hill PLC recently said it had similarly suffered at the hands of punters.
Analysts were looking for a first quarter operating profit of around GBP19.3 million from Ladbrokes.
The company reiterated that the dividend payment this year will be at least 8.9 pence, and again said that it expects to see improvements in digital revenue growth only in the second half of the year.
UK net revenue in its retail stores declined 2.3% in the first quarter, although its said over-the-counter amounts staked were up 8.5%, driven by a strong performance in football.
On the online side of the business, the group said that digital net revenue was up 1.1% in the first quarter from the fourth quarter, which it said was supported by a strong mobile operational performance.
Ladbrokes' online business is lagging behind some of its rivals, at a time when betting firms such as William Hill have powered ahead. In response, Ladbrokes has been pumping money into its online operation as it tries to upgrade its offer, while partnering with Playtech PLC to provide the technology platform.
"Throughout the first quarter we competed aggressively but sensibly, continuing our policy of focusing on acquiring customers on an economically sustainable basis," the company said in a statement.
Ladbrokes kept its guidance range of spending 25% to 30% of net gaming revenue on digital marketing spend, although some analysts are not convinced this will be enough.
"We forecast 29% as we see Ladbrokes needing to invest to compete this year," Barclays analysts said in a research note early Wednesday, adding: " We continue to prefer William Hill over Ladbrokes."
Ladbrokes said it has now completed the integration of its digital products onto the Playtech Information Management Solution (IMS) platform, meaning there is now a single wallet across all betting and gaming products. It said mobile actives were up 32% in the quarter, and mobile amounts staked were up 95%.
"In digital, with the move to IMS and single-wallet capability, we now have in place all of the operational infrastructure from which to drive growth in the second half and beyond," said Chief Executive Richard Glynn in a statement.
The UK bookmaker's business is still trailing behind its bigger rival William Hill, which last week reported continued strong growth in its online business and mobile.
William Hill reported a 7% increase in group net revenue for the quarter, but a 14% drop in its operating profit, due to the negative football results.
William Hill said its online business represented 32% of group revenue in the first quarter, while its retail business represented 57%, and the rest made up of its Australia and US businesses.
Last week, William Hill also announced its plans to close 109 loss-making betting shops before the end of the year, in a bid to maintain profits, in response to the UK government's decision to increase the tax rate on high-speed, high-stake gambling machines next year to 25%, up from 20%.
Unlike William Hill, Ladbrokes kept is shop closure guidance unchanged at around 50 loss-making shop closures this year, although it said it will "inevitably review further shop closures for 2015"
"Where possible we will seek to mitigate the profit and employment impact through cost savings and staff redeployment," it said in a statement.
Ladbrokes shares were down 3.5% at 138.40 pence per share Wednesday morning.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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