Ladbrokes full-year digital revenues up 13%

Ladbrokes this morning posted a 13% increase in full-year digital net revenues but a combination of increased marketing spend and the UK’s Point of Consumption (PoC) tax saw the operator record an operating loss of ?23.8m.

Total digital net revenues for the 12 months ended 31 December 2015 were ?242.8m compared to the ?215.1m in 2014, while the operating loss was in stark contrast to the ?14m profit returned the previous year.

The operator attributed much of deficit to an ?18m PoC tax bill, an increase in marketing spend during the second half of the year, “substantial losses” to high value customers in Q1 and the withdrawal from a number of grey markets.

Net revenues from its non-Australia business amounted to ?185.5m, up 3.9% on 2014, with sportsbook down 4.5% to ?81m and margin reduced from 7.8% to 6.1%.

However, there were signs of underlying growth with sportsbook stakes up 29% and actives up 10%. Mobile accounted for 71% of total sportsbook stakes after a 69% increase in mobile turnover.

The decline in sportsbook net revenues coupled with a 13% increase in gaming meant gaming was the largest net revenue contributor across the year at ?91.2m. Exchange net revenues were relatively flat at ?13.3m.

Full-year digital numbers were boosted by a strong Q4 where a hike in marketing spend to more than 30% of net revenues saw revenues rise 28%, sportsbook staking increase 44%, mobile staking up 69% and actives jump 26%.

Ladbrokes’ Australia-facing business posted full-year net revenue growth of 54% to ?53.2m – although that figure rises to 71% on a constant currency basis.

While operating profit remained flat at ?2.5m, primarily due a 76% increase in marketing and a weakened Australian dollar, the business saw growth in a number of areas with staking up 63%, active customers up 65% and gross win margin up from 9% to 9.8%.

Ladbrokes chief executive Jim Mullen, who took charge in April 2015, said the results were evidence that his organic turnaround plan, which he unveiled in June, was beginning to bear fruit.

“While it is pleasing to report that after two quarters we have made a good start, we are only at the beginning of the journey,” Mullen said.

“Therefore, 2016 will see the same focus on winning more recreational customers, excellent operational delivery and a performance driven approach as the basis for delivering on our clear 2017 financial targets,” he added.

The firm also said its planned merger with Gala Coral remained “on track” and was “actively engaged” with the UK Competition and Markets Authority (CMA).

The combination is currently under a phase two investigation by the CMA with the body expected to report its preliminary findings in late April and make its final decision by 24 June.

Ladbrokes Group net revenues, which includes its retail business, were up 3.2% to ?1.2bn but operating profit fell by 36% to ?80.6m.

Ladbrokes’ share price was up 7% to 131.10p after early morning trading.