Improved betting margins help Ladbrokes in Q3 as casino woes continue

23rd October 2014 8:14 am GMT

UK bookmaker Ladbrokes has reported a 13 per cent increase in group net revenue for the third quarter of 2014, following strong growth from the company’s online sports betting offering which benefited from a significantly higher gross win margin and a successful World Cup.

Ladbrokes said that operational delivery and improved sporting results helped to drive its strong performance in Q3, with group operating profit nearly doubling, up 94 per cent to £33.0m.

“Ladbrokes is on track. The major operational improvements completed in H1 are now delivering growth,” said Ladbrokes CEO Richard Glynn. “Our performance in the World Cup and throughout Q3 demonstrate that we are competing successfully and winning customers.”

Q3 2014 Net Revenue

  % Change
Digital 46%
- Sportbook 58%
- Gaming 1%
UK Retail 6%
- OTC 6%
- Machine Gaming 5%

The operator recorded year-on-year growth across all of its operations, with the biggest growth generated by its improved digital offering which saw net revenue climb 46 per cent (including Australia). UK Retail net revenue rose 6 per cent, while its retail business in Belgium and Spain also performed well with net revenue up 21 per cent and 83 per cent respectively.

Ladbrokes said it was a strong World Cup for the company, generating total stakes of £33.9m, an increase of 44 per cent over the 2010 event with a gross win margin of 28.0 per cent.

Excluding the World Cup, group net revenue would have risen 10 per cent, with digital net revenue up by 17 per cent and UK Retail by 4 per cent.


Ladbrokes believes that it is now seeing the financial benefits of the digital operational transformation implemented over the past 18 months.

Sportsbook amounts staked rose 22 per cent, driven by another strong performance in mobile where stakes soared 113 per cent and actives increased by 80 per cent. The strong World Cup and better football results compared to last year helped gross win margin to 8.9 per cent, versus 6.7 per cent a year ago. Sports betting net revenue was up 58 per cent.

The operator’s online gaming offering recorded its first year-on-year increase in six quarters, with net revenue climbing 1 per cent on the back of a 31 per cent improvement in games revenue. Casino revenue fell by 3 per cent however.

In Australia, net revenue soared by 172 per cent, with stakes up 43 per cent and active up 124 per cent. Ladbrokes said that the business is well positioned for the important Spring Carnival in Q4. Excluding Australia, digital net revenue would have risen by 23 per cent compared to Q3 of last year.

Ladbrokes said that its digital progress was “encouraging”, while there still remains significant further opportunity to optimise cross-selling and refine marketing strategies to deliver on the long-term potential of its brand.

UK Retail

Ladbrokes’ UK retail business saw net revenue increase by 6 per cent in Q3, with better football results delivering improved UK OTC (over-the-counter) margins of 17.0 per cent, versus 14.9 per cent a year ago. OTC net revenue grew by 6 per cent, although stakes were impacted by higher football margins and the continued decline in staking on horseracing.

Machine gross win rose 5 per cent, reflecting the benefit of the new Clarity cabinet deployed across the UK in H1 and also from the weak weather-impacted comparable last year. Machine gross win per shop per week was up 7 per cent and on per terminal per week basis was £923.

Ladbrokes said that overall, it delivered growth ahead of expectations whilst maintaining enhanced social responsibility measures across the UK estate.

During the quarter, Ladbrokes completed its planned closure of 49 shops, with a further 40 shops identified for closure before the end of the year, bringing the total closures for 2014 to around 90. At the end of Q3 Ladbrokes had 2,231 shops in the UK. It warned that further shop closures in 2015 remain inevitable.

European Retail and Telephone

In Belgium, Ladbrokes continues to enhance the estate with self-service betting terminal (SSBTs) and virtual products, while the company’s joint venture in Spain continued its development in Catalunya and now has over 1,124 outlets across Spain.

Telephone net revenue was up £2.9m as a result of the World Cup, with High Rollers net revenue climbing 41 per cent and generating an operating profit of £4.0m in Q3 and £14.7m for the year to date.

“We entered the final part of 2014 with a competitive and attractive offer,” continued Glynn. “We have achieved much operationally in 2014, with further opportunities to drive revenue in 2015 and beyond.

“Q4 has started in line with our plans and, with usual sporting results, we will deliver full year results in line with our expectations.”

Analyst Ivor Jones of Numis Securities said that the Q3 results were difficult to interpret as they include a sharp recovery in margins from abnormally low to slightly high, the closing stages of the World Cup and the early stages of the rebuilding of the online business.

“The results are, however, consistent with our forecasts and would even justify a modest upgrade,” said Jones, although he expects the company to suffer an “inevitable” profit decline next year as increased and new duties weigh on profits.

“It seems unfair that, as Ladbrokes shows signs of turning the corner in relation to the online business, it should be in danger of walking into a number of hazards not of its own making,” he continued. “But, like its gambling sector peers, it is vulnerable to regulation and duty changes, of which there are an unprecedented number on the horizon.”

Simon French of Cenkos Securities said that while the headline profit is higher than expected, underlying trends in retail amounts staked and casino online revenue are “disappointing” and the performance compares unfavourably to William Hill.

Shares in Ladbrokes plc (Co. Data) (LSE:LAD) fell 1.86 per cent to 126.40 pence per share in London this morning following the announcement.

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