Ladbrokes shares tumble 8% as profits also fall

SHARES in Ladbrokes tumbled 8 per cent after the bookmaking giant put out a mini-profits alert, blaming weather-hit race meetings and a poor Cheltenham festival where many favourites won.

The firm said that lower revenues from higher-spending punters also impacted its performance in the three months to 31 March, when profits fell £13 million to £37.4m compared with the same period in 2012.

In an unscheduled trading update, Ladbrokes said it suffered a £6m slump in revenues due to a good week for punters at the Cheltenham festival last month. There were also flat profits at its online gaming operations.

As a result, Britain’s second biggest bookmaker said it expected operating profits for this year to be at the bottom end of current market expectations, suggesting a figure of about £188m.

That compares with £206m in 2012. Shares in Ladbrokes closed down 16.6p at 190.3p.

Richard Glynn, Ladbrokes’ chief executive, said: “The trading environment and economic conditions since the start of the year have remained challenging, which, when combined with a number of specific one-off factors in the latter part of the period, have driven a softer first quarter than expected.”

More positively, the group saw a £15m boost from the Grand National ten days ago when 66-1 outsider Auroras Encore romped home.

Some other sporting results, mainly football, also went in the company’s favour, helping its overall gross win percentage lift to just under 19 per cent. That compared with 17.2 per cent a year earlier.

Ladbrokes said the trading outlook remained tough. Gaming machine revenues have been a moneyspinner for the bookmaking sector, but the group said it expected growth to slow as the market becomes more competitive.

Bookmakers have also been hit by a new 20 per cent machine gaming duty this year. With about 8,500 machines in the UK estate, Ladbrokes’ gross win per machine for the quarter was £916 a week, down from £923 a year earlier.

Analysts said the company had its work cut out to keep up with bigger rival William Hill, which is due to publish its first-quarter trading statement on Friday.

“With retail trading flat at best and limited momentum online, Ladbrokes appears much more at the risk of sporting results than its closest peer William Hill,” Shore Capital said in a research note.

Ladbrokes’ shares have performed strongly in recent months on signs that it was getting its online strategy right after profits in its digital division halved in the first six months of 2012.

Last month it agreed a partnership with Playtech, the software company that is exiting a successful online joint venture with market leader William Hill.

Another analyst said: “The stock has had a decent run so this has pulled expectations up a bit short. A lot will depend on how quickly it can get online back on track.”