UK bookmaker Ladbrokes has sought to reassure its shareholders this week that all is going according to plan despite a sharp fall in profits that could not be salvaged by a “good” World Cup.
While pre-tax profit plunged 49.7% in the first half of the year ending 30th June, the company’s Chief Executive, Richard Glynn, said it that this was in line with expectations and that a period of operational improvements meant that “financial performance would inevitably lag behind.”
Total profits from Ladbrokes’ online arm fell over 70 percent, from £10.8 million to £3 million, while poker reported a 31 percent fall in revenue. Online poker now accounts for just 2 per cent of digital revenues, the company said.
We also want to see an uptick in the performance of [traditional] machine revenues. Without that, the chief executive is toast
However, Glynn said the company is now “well positioned for growth,” and that Ladbrokes has made “substantial progress.”
“We now have the products, the platforms, the people and the brand in place to deliver,” he added.
Customer Friendly Results
Citing factors contributing to the downswing, he mentioned “customer-friendly results” from football in January and horse racing in June, as well as the transition of Ladbrokes’ online gaming arm to a new Playtech platform, a process that caused more disruption than expected, but should now yield positive results.
The company has also completed the replacement of 9,000 of its gaming machines with more sophisticated models, while closing 46 of its “under-performing” shops in the first half of the year, adding that further closures were “inevitable.”
Glynn recently came under fire from an unnamed “top ten shareholder” who, speaking to The Sunday Times, said the chief-exec needed to show a turnaround in profits or he would be “toast.”
“There needs to be some pretty clear performance indicators that prove the new digital platform worked well through the World Cup and subsequently, that they’re winning customers back and that it’s heading in the right direction,” said the shareholder. “We also want to see an uptick in the performance of [traditional] machine revenues. Without that, the chief executive is toast. With that, he’s got more time, but he’s still under pressure.”
Stock Market Retains Faith
The under-fire chief insisted that investors are behind him, however, and that his job is secure: “Shareholders understand how much work needed to be done in the business,” he said. “They understand that we’re one year into a five-year arrangement with Playtech and they understand we’ve hit our milestones.”
Ladbrokes is the largest retail betting company in the world, but still lags well behind competitors William Hill and Paddy Power in its online operations. Ladbrokes was pleased with its performance during the World Cup, with revenue up by 20 per cent on the 2010 World Cup, but the increase at William Hill was 80 per cent.
However, the company believes that the recent strengthening of its online operations will allow it to catch up, particularly in the mobile betting sector as the new Premier League Season kicks off.
The stock market seems to be retaining its faith in Ladbrokes, with shares rising 3 percent in early trading following the publication of its results.
“The results are unquestionably poor,” said Peel Hunt analyst Nick Batram, “but they are in line with forecasts. It’s also a positive narrative from Ladbrokes in that it has focused on all the things it is implementing to put it right.”