Ladbrokes warns of further online decline
Profit for first half of 2012 expected to be half that of H1 2011 - poor sportsbook margin and delayed launch of new sportsbook and mobile platforms blamed for poor performance.
Pressure is mounting on Ladbrokes CEO Richard Glynn to stop relying on retail growth and dramatically improve the operator’s online performance after it announced online profits for the first six months of 2012 would fall to half the amount posted in H1 2011.
In a statement to the London Stock Exchange this morning Ladbrokes revealed that “digital” profits would be down “further than anticipated,” blaming poor sportsbook margin in the second quarter of 2012 and delays in the delivery of technology projects leading to lower revenues for the period. A Ladbrokes spokesman called the numbers “disappointing” but that an analyst presentation this afternoon lead by Glynn and senior management would “impress” the stock watchers attending.
“There is a lot being landed and we think analysts will be impressed, particularly with new products, new trading tools and technology and the resetting of our digital marketing fundamentals “ there is a lot of high level CRM work involved,” he said.
“This is merely a delay and the shortfall will be made up around retail performance. The management are very focused on getting results, and we are in line for overall profit and well placed to deliver in 2013 and beyond,” he added.
Lads first warned that investments in technology, marketing expenses and entry into newly-regulated markets such as Spain where it paid “in the low millions” in back taxes and Denmark, would impact online profits when it announced its results for the three months ending 31 March 2012. However, poor sportsbook margin and a delay in launching new technology including a new front end website, and sportsbook and mobile platforms as well as an in-house marketing system, has further damaged its bottom line with profits for the first half of this year now expected to be as little as £16m compared to 2011’s £31m.
A Ladbrokes spokesman told eGaming Review its new website is in beta and that it was now “assessing feedback” from its customers. The company has spent around £50m on new technology including outsourcing ecommerce services to Hybris and search and business intelligence to Endeca Technologies that was acquired by Oracle for US$1bn last October.
Its new in-house developed sportsbook and trading and mobile platforms have also not been delivered on time and remain “several months” from being delivered,” according to the spokesman. The mobile platform is also said to be in “live beta”, however until then he said that it would continue to launch new products on its existing platform designed by Mfuse. “We are due to deliver new apps, new mobile web functionality and new tablet casino games by Probability have launched,” he added.
eGR understands that the biggest impact has come from sportsbook margin that has seen a dramatic slump in performance compared to revenues for the vertical being up 22.4% year-on-year in the first quarter of the year. A spokesman said that despite a costly advertising and marketing push during the ongoing Euro 2012 football championships results “had not been as expected” and that there “hadn’t been the usual fervour around England” as there has been in previous years. “The results at other events have also been disappointing. We planned to make more money and didn’t,” he added.
As a result the company’s share price had fallen by more than 10% at the time of writing, down 16p to 157.8p.
Nick Batram, analyst at Peel Hunt, said there was “always a risk” of a delay in the digital turnaround and poor sports results had “simply given greater exposure to the issues”. He added, however that despite credibility taking “a knock”, a “better digital business would emerge”.
When he joined the operator in April 2010, Glynn was given the target of doubling the company’s share price within five years, a task he named “Project Galvanise”, however just two years and two months into his tenure, the current share price has, despite year-to-date growth of almost 30%, fallen below the price when Glynn was appointed which stood at 159.6p.
Despite this decline Glynn was awarded a bonus of almost £500,000 with £327,000 in cash and a further £164,000 in deferred shares in March. The rest of the company’s directors, however, did not receive similar awards because the company failed to meet targets for total shareholder return and earnings per share under the terms of Lads’ performance share plan. When asked whether Glynn would return his bonus following today’s announcement a spokesman called the suggestion “ridiculous”.
Ladbrokes’ online decline contrasts the strength of its nearest rival, William Hill, in sports betting. In its full-year results for 2011 Hills revealed online net revenues had grown 28% year-on-year, with operating profit up 17% to £106.8m. On the other hand, Hills saw slow growth in retail, with net revenues up just 1% for 2011, compared to a 2.1% rise for Lads.
In the first six months of 2012, however, William Hill has also made significant progress towards launching an online offering in the United States, receiving a Nevada gaming licence last week, and today announced that it has finalised the acquisitions of American Wagering, Inc, Brandywine Bookmaking LLC and the racing and sportsbook assets of Sierra Developments.
Ladbrokes, on the other hand, invested US$3m in Las Vegas-based software supplier Stadium Technology Group, and is yet to apply for a Nevada licence.