UK bookmaker Ladbrokes reported a sizable drop in H1 profit on poor sporting results, higher taxes and continued underperformance by its lagging digital division.
Excluding exceptional items and its high-rollers business, Lads’ revenue nudged up 1.3% to £585.4m in the six months ending June 30, but operating profit fell 31.5% to £38.9m and profit after tax fell 44% to £22.2m. On a statutory basis, Lad’s reported a £41.4m after-tax loss vs. a £23.7m profit in the same period last year.
Lads CEO Jim Mullen, who accelerated a company-wide review in April following the firm’s disappointing Q1 numbers, said the H1 results “clearly show why we need to change and why we need to do so quickly.”
Overall online revenue fell 6.7% to £84.6m and the division reported an £11m loss in H1, compared with a £6.2m profit in H1 2014. Lads says the UK’s new 15% online point-of-consumption tax (POCT) cost the company £12.6m in H1.
Online sportsbook revenue fell 26.3% to £34.5m as sports margins fell 2.7 points to 5.7%. Sportsbook stakes rose 20%, with mobile up 65% while desktop declined 19%. Mobile now accounts for just under two-thirds of all sports stakes. Lads’ Playtech-powered online gaming segment reported revenue up 16% to £43.3m while exchange betting revenue from Betdaq and Ladbrokes Exchange was up 3% to £6.8m.
In Australia, the Ladbrokes, Bookmaker and Betstar brands reported revenue up nearly 87% to £25.4m. Active customers were up nearly 82% and staking rose 55%, while margins improved 1.5 points to 9.6%, resulting in an operating profit of £2.7m for the down under division.
On the European continent, Lads’ regulated online operations in Belgium, Denmark and Spain saw revenue triple to £2.2m but this segment reported a £3.2m loss in the half. Lads closed its loss-making Danish operation in July.
Telephone betting continued to decline, with stakes down 36% to £56m and revenue down 53% to £2.7m, resulting in a net loss of £500k. Lads’ high-roller business reported a £2.8m profit, significantly less than the £10.7m in the same period last year.
On the UK retail front, revenue rose 1.2% to £405.7m while profit fell 1.2% to £56.9m. Over the counter betting and revenue were down 5.2% and 6.5% respectively, while machine gaming stakes and revenue rose 0.3% and 8.4%. Lads paid an extra £11.2m in Machine Games Duty in H1 after the government bumped the rate from 20% to 25% on March 1.
On the continent, Belgian retail revenue was up 20% to £26.4m while the Sportium joint venture in Spain reported an operating loss of £800k. In Ireland, revenue fell 9.2% to £33.6m while profit was flat at £2.5m. The recent restructuring of the Irish retail biz has left the firm with around 144 shops, down 52 from the end of 2014.
Lads is currently negotiating a merger with rival Gala Coral Group and Mullen expects the industry to undergo further consolidation. With the UK government now demanding a bigger cut of revenues, Mullen said operators “need to be far more efficient” and believes the UK betting business will be “a different landscape in five years’ time.”
Speaking to eGaming Review, Mullen said the digital division was on the right track although he cautioned that online profits might not come for another two years. Comparing Lads’ poor sporting results with the more favorable numbers posted last week by rival William Hill, Mullen said Lads needed to expand its recreational customer base.
Just 11% of Lads’ retail customers are currently betting with the company online. In a bid to convince more of this rabble to take the online plunge, Lads has boosted its promotional efforts to 30% of net gaming revenue. Only time will tell if this will be enough to right Lads’ floundering online ship.
