Ladbrokes falls as quarterly results disappoint

LONDON (ShareCast) - First (Other OTC: FSTC - news) -quarter results from Ladbrokes (LSE: LAD.L - news) disappointed as the bookmaker revealed operating profits were down materially due to customer friendly sporting results and new UK tax rules. Group net revenue trotted 3.3% higher, with retail net revenue up 4% and digital net revenue jumping 9.5% thanks entirely to last Australian acquisition last year, excluding which it declined 6.8%.

Earnings before interest and tax (EBIT) was down 22.3% to £14.3m in the three months to 31 March as the UK's new point of consumption tax and increased machine games duty hit hard.

Furthermore, the FTSE 250 group beat a withdrawal from certain unregulated digital markets as part of new UK gambling guidelines.

On an underlying basis, ignoring these "externally imposed headwinds", EBIT would have been up 21.2% year-on-year.

The digital business saw a 29% increase in sports betting amounts, 19% in the number of active online users and a 63% increase in customers betting via mobile but gross win was tripped up by poor sports results, with underlying net revenue down 6.8%, dragged lower by a 250 basis point fall in the gross win margin.

New (KOSDAQ: 160550.KQ - news) chief executive Jim Mullen, who on Tuesday announced a restructuring of the lossmaking Irish business, said many of the business's customer metrics were encouraging but results have favoured customers and profits were therefore materially lower.

"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." He will now speed up his strategic review and aims to present the principal changes 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." Analyst Jamie Constable at N+1Singer said Mullen "has a big job" trying to turn around the years of underperformance and and speculated that the company would be "a potential loser from the UK General Election" if Labour win as they are likely to attack bookmakers' lucrative fixed odds betting terminal income.

Panmure Gordon's Karl Burns said he was unlikely to change his near-consensus forecasts for the full year as a consequence of these results.