Ladbrokes H1s hit by weak sportsbook margin

Ladbrokes this morning confirmed a 26% year-on-year fall in H1 sportsbook revenues outside of its autonomous Australian business after reporting a sharp drop in sports betting margin.

According to the operator’s interim results for the six months to 30 June, which followed last month’s issued guidance, sportsbook margin across its core Ladbrokes.com product fell by 2.7 percentage points to 5.2% and resulted in a £12.3m drop in sportsbook revenues to £34.5m – its lowest total since H1 2011.

However, some of the underlying sportsbook numbers gave reason for optimism with sportsbook stakes up 20% and mobile contributing 65% of the total, while revenues from its exchange product grew 3% to £6.8m.

The decline in sportsbook was the main contributor to a 6.7% dip in total dot.com revenues with its Playtech-powered gaming product picking up some of the slack with a 16% increase to £43.3m.

When including its internationally regulated businesses, total digital revenues stood at £112.2m, up 6.9%, primarily due to continued growth from its Australian division which saw revenues increase by 87% to £25.4m.

The weak sportsbook margin, coupled with a £12.6m UK Point of Consumption tax hit, saw Ladbrokes post an operating loss of £11m, a steep fall against the £6.2m operating profit recorded in H1 2014.

Ladbrokes said the fall in sportsbook margin and turnover reflected “customer friendly sporting results”. Last week competitor William Hill recorded an 11% increase in sportsbook revenues at a slightly improved margin of 7.3%.

Ladbrokes chief executive Jim Mullen said today’s results “reflect the challenge facing Ladbrokes” and highlighted the need for immediate change which would include increased brand visibility.

“While we have some encouraging customer trends, we need to reset the business and invest,” Mullen said. “The results clearly show why we need to change and why we need to do so quickly.

“There are signs in H1 that the customer is there to be convinced by the Ladbrokes offer – good gaming performance, strong mobile sportsbook KPIs and growth in Australia. We have a solid base to build on.

“So going forward expect to see the Ladbrokes brand more prominent across the media, a retail driven multi-channel offer rolling out to more customers, an evolving and improved Digital offer and further progress in Australia,” he added.

In Ladbrokes ‘other regulated operations’ of Belgium, Spain and the recently discontinued Denmark, net revenues increased by 214% to 2.2m, primarily due to growth in Belgium with Denmark having only contributed £0.1m of the total.

The operator’s Spanish-facing joint venture Sportium recorded a £0.7m loss, an improvement on the £1.2m deficit recorded the previous year.

Ladbrokes’ Group revenues, which includes it vast retail estate, were up by 1.3% to £585.4m however operating profit was down by 31.5% to £38.9m, both in line with earlier guidance.

Last month the firm announced it had agreed terms on a merger with UK rival Gala Coral which, if given the go ahead by the Competition and Markets Authority, would create a gaming giant with annual online revenues of approximately £400m.

Ladbrokes share price remained relatively flat at 110.1p after early morning trading.