Analysis: 2014 must be better for Ladbrokes

When Ladbrokes announced it had reached an agreement with egaming software supplier Playtech to overhaul its digital business in March, the industry concluded it was onto a winner.

Having been released from its previous agreement with William Hill just two weeks before, Playtech was perfectly poised to reinvigorate an online offering that had clearly been faltering. Ladbrokes’ attempts to develop its own platforms had ground to a halt, and Playtech’s success with Hills lent considerable weight to its market-leading reputation.

Ladbrokes CEO Richard Glynn was suitably enthused by the deal, citing it to be the “next phase of our reinvigoration”. However the integration has not gone to plan, and both the operator and Glynn now face a tough start to 2014.

This last year has seen three profit warnings and more than 200 jobs come under threat of redundancy as the operator continues to reinvent itself for the digital era. But faith in Ladbrokes rebirth has been dented.

Richard Glynn’s admission that Ladbrokes had underestimated the migration’s disruption to its existing business provided an insight into the relationship between operator and supplier, as did his view that more was expected from Ladbrokes’ Israel-based staff.

Glynn’s position was unsurprisingly questioned, yet an internal rallying call issued to staff in early October sought to galvanise the company in a push to not just meet the revised expectations, but stabilise it prior to delivering growth in 2014.

And with the year ending, the first green shoots of recovery are now beginning to sprout. The operator is now ahead of schedule in its adoption of the Mobenga mobile sportsbook, an integral product considering mobile’s importance as a growth-driving platform.

Ladbrokes will complete the migration of its poker service to Playtech’s iPoker network this month and has now clarified that its players are to feature on the network’s highest tier, which can only help boost a vertical that was down 25% in the six months to 30 June this year.

The Ladbrokes Exchange also launched in recent weeks, with the long term goal of providing an exchange product to take on Betfair. Attempting to scrape some of Betfair’s 92% market share will be a considerable challenge, but a “major” piece of innovation is reserved for early next year.

But Karl Burns, an analyst at Panmure Gordon, says that while the most recent product launches are something of a rally from the operator, it’s one that has been expected. “It’s simply what’s required to be competitive with the likes of William Hill,” Burns adds.

Moves into other regulated markets such as Spain, Australia and a future move into Belgium will also help ““ particularly with the UK’s Point of Consumption tax looming ““ however again these are ones other operators have already pulled, and the markets remain hugely competitive. “I don’t know whether they’re just trying to reinvent the wheel here,” Burns says.

What remains integral to any Ladbrokes resurgence is the final and most important phases of the Playtech migration, currently hamstrung by the operator’s existing partnership with Microgaming. Playtech’s IMS will enable tools such as a single wallet, customer acquisition and cross-promoting into more profitable verticals, however these are all tools considered standard by Ladbrokes’ rivals.

Ladbrokes is now playing catch-up, with Burns expecting a number of special offers and bonuses designed specifically to entice customers back. The offers are likely to impact on the operator’s top line, but such a hit will be crucial in Ladbrokes’ attempts to increase its player yield. It can’t afford to make any more mistakes in what will be a defining year for the firm. Not everyone is hopeful it can turn things around, however. “It might just be too little, too late,” Burns concludes.