Ladbrokes First Half Digital Results Sag

UK based wagering giant Ladbrokes revealed its first half 2012 financial results due to a poor performance by the firm's digital operations.

The negative results from the digital sector of Ladbrokes included:

• May delivered the lowest digital sportsbook margin in three years

• Continuing decline in online poker

• Digital profit at £15 million was significantly down on last year's £29.7 million - a greater than expected decline despite net revenues being up at £88.3 million (H1-2011: £85.7 million).

• £16.8 million increase in digital operating costs, with the expectation that these will continue to cost the company dearly in H2. There was a £3 million over-run on website and mobile development.

Key financial indicators for the company as a whole were:

• Group net revenue grew by 8.4% to £529 million

• Group operating profit of £106.9 million, up 11%

• Profit before tax up 48.9% to £106.9 million

• Underlying earnings per share up 25.3% to 9.4p

• 23.8% increase in cash generated by operations

• Net debt reduced by a further £56.9 million to £397 million

• 10.3% increase in interim dividend to 4.30 pence

Operational highlights for the period were:

• UK Retail operating profit of £91.3 million, up 21.1%

• 2.4% growth in over the counter net revenue with continued resilience in amounts staked, up 0.7%

• Machines net revenue up 20.1% with gross win per terminal week of £947 for H1 and £970 in Q2

• Odds On launched on machines ahead of schedule, already in use by over 100,000 customers

• Over 94% operating profit growth in European Retail driven by revenue growth in Ireland and Belgium

• Digital net revenue growth of 3%, driven by sportsbook growth of 10.7%

• Over 110,000 new sportsbook customers and over 65,000 new casino customers year on year

• Continued growth in Bet in Play with stakes now 58% of total Digital sportsbook amounts staked

• Over 25% of sportsbook net revenue and 37% of total sportsbook actives on mobile

Commenting on his company's performance, Ladbrokes CEO Richard Glynn said:

“At a Group level Ladbrokes has performed strongly. We have grown revenue by 8.4% and operating profit by 11.0%, with strong cash generation continuing and a further strengthening of our balance sheet."

"Strong growth in operating profit in UK Retail and an improved performance in our European Retail and Telephone businesses was pleasing and more than outweighed a decline in Digital profits, which was greater than expected due largely to a weak sportsbook margin in Q2 and exacerbated by delays in technology."

"Looking forward we expect to see further growth in UK Retail and plan to accelerate our programme of shop openings."

"We remain committed to our Digital strategy of building a more competitive offer through a combination of ongoing investments to enhance our marketing, product and technology."

"The delivery of several key technology developments is our focus in H2. During Q4 we will deliver our new sportsbook, and begin the subsequent migration of all active customers. Our new mobile platform, which is reliant on the same technology, will then follow."

"The active data warehouse, now in use to underpin our new trading fieldbook, will be deployed further in Q4, providing enhanced customer analytics to our marketing teams. This then facilitates the subsequent development of our Customer Relationship Management capabilities. During H2 we will also extend the use of recent enhancements in our trading systems to cover further core sporting products."

"We remain confident that a combination of these developments, together with continued improvements to CRM throughout 2013, will allow us to grow our Digital business significantly."

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