BUSINESS

Ladbrokes profit plunges on higher taxes, increased marketing costs

TAGs: Ladbrokes

ladbrokes-profit-plungesUK bookmaker Ladbrokes saw its Q3 profit plunge despite increased wagering activity and a strong performance by its Australian operation.

According to an interim statement issued on Thursday, Ladbrokes group earnings fell 56.7% to £14.3m in the three months ending Sept. 30. Overall revenue dipped 0.7%, although Q3 2014 benefited from the second half of the FIFA World Cup, without which the company claims revenue would have risen 2%.

The company credited the earnings decline to the impact of new taxes, poor sports betting margins and increased marketing expenditure. Marketing costs rose to over 30% of revenue during the quarter, but the company says the promotional push is paying off via serious gains in active customers and betting turnover.

Ladbrokes’ digital operations (Ladbrokes.com and the online betting exchanges) reported revenue up 5.7%. Online sportsbook stakes rose more than one-third but poor margins resulted in a 0.5% drop in online sports revenue. In contrast, online gaming revenue was up 11.5%, the fourth consecutive quarter of online gaming growth, thanks to a 29.4% rise in active gaming customers.

Poor sports margins also wreaked havoc at the retail level, where overall revenue fell 1% despite a 1.6% rise in OTC betting stakes. Revenue from the shops’ fixed odd betting terminals was up 4.6%.

In Australia, revenue jumped 26.3% despite margins falling 1.2 points from Q3 2014. Online sports betting stakes jumped 61.4% as the ranks of active customers surged 88.8% year-on-year. The quarter saw Lads offer partial cash out offers across all its markets as well as its new Cash In feature, which allows Lads customers to top up their accounts at over 1,000 Aussie newsagents.

LADBROKES TURNS RETAIL STAFF INTO ONLINE AFFILIATES
Ladbrokes CEO Jim Mullen (pictured) said the results reflected the first fruits of the company’s plan to “aggressively invest and grow our recreational and multi-channel customer base.” In August, Mullen revealed that just 11% of Lads’ retail customers had bet with Ladbrokes.com and Mullen now says Lads’ retail staff have been enlisted as affiliates to entice retail bettors to take their action online.

Mullen said it costs Lads around £100 to acquire an online customer through a traditional affiliate but Mullen believes this same customer can be acquired for between £10 and £20 via retail staff action. Retail employees had undergone two to three months of training as part of an “internal incentive scheme” to reward staffers who convince retail punters to make the transition online.

Mullen said the program had so far resulted in over 20k new online accounts and the customers acquired via this method were proving to be 1.5x more valuable than customers achieved through traditional online marketing channels.

Mullen also provided an update on Lads’ proposed merger with rival Gala Coral Group. Mullen said the companies were still awaiting approval from the UK’s Competition and Markets Authority (CMA) and while Mullen was personally confident of getting a favorable nod, “I wouldn’t dare try to predict what the CMA will say.” Lads recently secured financing to assure the deal’s completion and shareholders will vote on the proposed merger next month.

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