Online problems prompt second Ladbrokes profit warning

By Keith Weir

LONDON, Sept 26 (Reuters) - British bookmaker Ladbrokes warned on profits for the second time this year, hit by weakness in its online business that increases pressure on management to prove it can deliver promised improvements next year.

Ladbrokes (LSE: LAD.L - news) has lagged behind market leader William Hill (Other OTC: WIMHY - news) in producing attractive products for the growing number of gamblers who bet on sports events through their computer, tablet or smartphone.

Seeking to make up ground, Ladbrokes this year formed an alliance with software developer Playtech, itself a former joint venture partner with William Hill.

However, it is taking longer than expected for the alliance to pay off. Ladbrokes has struggled to run two sets of products and manage tensions between workers fearful of losing their jobs and a new development team based in Israel (Other OTC: IRLCF - news) .

"We are disappointed that the digital results are not coming through yet," Chief Executive Richard Glynn said on Thursday. "We are behind where we wanted to be at this time."

Shares in Britain's second-largest bookmaker were down 6 percent at 1024 GMT after its warning that profits from the digital business could be less than half of what analysts had been expecting.

CEO Glynn has had a troubled tenure since taking charge of Ladbrokes in 2010, with this year's profit warnings following a downgrade blamed on digital problems last year.

VOTE OF CONFIDENCE

Chairman Peter Erskine said the company would support Glynn and his strategy for the time being, having invested 50 million pounds ($80.3 million) to improve the company's online products.

"We remain fully confident in this management team to deliver them," Erskine said of the digital plans, telling Reuters that the onus is on Glynn and his team to deliver on an upturn promised by the middle of next year.

By then, Ladbrokes aims to have upgraded its online operations, with hopes pinned on a new mobile product.

Seeking to reassure investors, Ladbrokes said it would maintain its dividend at the current level for 2013 and at least match that again in 2014.

In a trading update brought forward from October, Ladbrokes said that its digital business would have operating profit of between 10 and 14 million pounds this year, compared with a market forecast of 27.5 million pounds.

Group operating profit fell almost 20 percent to 85.7 million pounds in the first six months, the company said in August. It had warned in April that profit for the year would fall after a poor performance from horse racing and online gaming in the first quarter.