Ladbrokes reports Q1 revenue rise

Ladbrokes has reported a rise in group net revenue in its interim management statement for the three months ending 31 March, with online net revenue rising 5.9% over the period.

The operator did not break out individual figures for each sector, but announced that net revenue was up 8.9% compared to 2011, and group operating profit grew 3.9% year-on-year £50.4m. This was attributed to growth in UK and European retail, and warned that online profit would drop as a result of increased investment in the sector.

After seeing a 3.5% decline in net online gaming revenues in its full-year results for 2011, the company has shown signs of recovery with revenues up 5.9% for the quarter. Strong growth in mobile in 2011 has continued, with 20% of amounts staked now coming from the channel, rising from 15% in Q4 2011, and 23% of revenues. The company are set to launch a proprietary mobile platform in the second quarter of the year.

This helped sportsbook revenues grow 22.4% for the period, with in-play betting now accounting for 57% of amounts staked, excluding greyhound and horse racing. Games also performed well, with revenues up 19% on the back of increased content and growth in activities.

Following Richard Glynn’s (pictured) announcement that Ladbrokes will seek to renegotiate all of its supplier contracts in February last year, the company extended its relationship with sportsbook provider OpenBet, signing what is thought to be a multi-million pound contract in March.

Glynn, who was awarded a bonus of almost £500,000 in March, commented that increased spend on marketing had been key to the rise in online revenues, with the company becoming the first operator to use the TagMan tag management system to measure and optimise online marketing campaigns: “We have invested considerably more in digital marketing and customer acquisition remains strong. We are starting to see this drive growth in the top line, particularly in the key focus area of UK sportsbook which was up 22%.

“Our football Bet In Play offer is now leading the market with up to 800 matches per week. We are continuing to deliver on our trading and digital milestones with further developments expected in the coming months. As stated in February, we are confident of delivering Digital profit growth during the second half of the year as the benefits from our investments converge. At this early stage of the year we are in line with the Board’s expectations for the Group in 2012,” Glynn explained.

Despite strong growth in sportsbook and games, Ladbrokes saw decline across all other product verticals, with poker experiencing a 26.8% year-on-year decline in net revenues. Falls in casino and bingo revenues were less steep, falling 4.8% and 2.6% respectively.

Retail, on the other hand, continued to grow impressively, with machine net revenue up 21.7%, helping the division to increase revenues by 9% for the period.

Simon French of Panmure Gordon reiterated his firm’s Buy recommendation, saying that improved online operators could double the division’s profitability: “We think Q2 has started well with an excellent Grand National result and unpredictable football results. Strong turnaround in machines performance has laid the foundations for ongoing resilience in retail operations.

“The company has much greater potential for OTC gross win margin improvement relative to William Hill. Online gaming turnaround potential could double the profitability of this division in the medium term,” French said.

However, James Hollins of Investec and Nick Batram of Peel Hunt both issued a Hold recommendation, with Hollins describing the results as “marginally disappointing,” describing poker and casino as “a flop”: “Poker remains a material weak spot for Ladbrokes and we expect incremental improvements to be made, albeit with limited impact ahead of a required fundamental change in the medium-term,” he explained.

Batram downgraded his recommendation from Buy to Hold, saying: “This was a solid update and there are encouraging signs that the digital strategy is coming together. However, the real test will be H2 when marketing spend reduces.” However, he stated that Peel Hunt “remains positive for the outlook on the business in 2012.”