Two steps forward, one step back for Ladbrokes CEO
Can green shoots of recovery keep the pressure off the chief executive in advance of the bookmaker's widely expected poor H1 results?
Ladbrokes reports its H1 results tomorrow and the pressure on chief executive Richard Glynn is set to grow further with yet another disappointing set of KPIs expected to be revealed.
Analysts are widely predicting group EBITDA to fall around 35% year-on-year to a general consensus of circa £55m for the six months ended 30 June, with poor sporting results and a tough regulatory backdrop to blame.
In an analyst note, Deutsche Bank’s Richard Carter forecasts digital EBIT to fall 74% year-on-year due to the upheaval caused by a migration continually beset by issues and delays, but points to the progress made by Ladbrokes in this field as reason to be cautiously optimistic for the future.
The first half of the year was a period where the first green shoots of recovery have been seen online with its digital division finally completing its protracted migration to Playtech’s back-end and major relaunch of its mobile and online products.
“Focus will be on digital operational progress and whether digital revenue is increasing sequentially and active players and sign-ups are continuing to trend upwards,” Carter said. “If management can convince that digital is making progress ahead of the big push in mid Q3, then we think the shares offer upside.”
A raft of improvements were made to Ladbrokes mobile sportsbook in the build-up to the World Cup and ahead of the final David Williams, head of internal PR at Ladbrokes, labelled its performance as “very encouraging”.
“[The products] worked well and we’ve been rewarded with some really encouraging numbers in our key metrics,” Williams said at the time. “This is no time to rest on laurels, however. We’re excited and braced for a huge weekend and thereafter many of our H2 plans will build on the momentum we’ve built up this past month or so.”
This also reflects Richard Glynn’s sentiments during the firm’s last results disclosure in April when he said that the firm was encouraged by the progress made in digital but said there was still an “awful lot more to do”.
Ladbrokes’ product suite now appears to be in good shape. Its Mobenga mobile sportsbook has reported strong performance since its launch at the end of last year while its online platform has had a number of significant upgrades, not least in its payments platform.
With the migration to Playtech’s IMS back end now complete, the expectation will be on Ladbrokes’ cross-selling and marketing capabilities to ratchet up in time for the new domestic football season.
Glynn has previously lamented the firm’s problems in migrating from Microgaming to Playtech, however, analysts share Glynn’s optimism that digital should now begin to deliver on its promise.
Carter expects this progress to be borne out in time for the firm’s Q3 2014 trading update in terms of new sign-ups and active players, while Morgan Stanley’s Vaughan Lewis forecasts H2 revenue growth from Ladbrokes’ digital arm of around 35%.
Failure to deliver to these expectations could have significant conseqences, both for Ladbrokes and for Glynn himself. Failure to turnaround the online division has been cited as a risk by analysts across the board and reports in yesterday’s Sunday Times suggest Digital MD Jim Mullen could be in line to replace Glynn should he be removed.
However, talk of new leadership at this present moment could be premature. Tomorrow’s results may offer little comfort, yet Ladbrokes and Glynn have always insisted H1 would be focused on getting its digital product up to scratch before delivering improved numbers in the second six months.
Whether or not Glynn can deliver remains to be seen, but there is every expectation he will be given one final opportunity to do so.