Looks like Labrokes' winning streak is over, after profits tumbled 44 per cent over regulatory changes and a lower gross win margin.
Pre-tax profits at Ladbrokes fell 44 per cent to £24.7m in the six months to June, from £44m in the first half of 2014.
Earnings per share were dropped 44.2 per cent to 2.4p per share, from 4.3p per share in the first half of 2014.
Revenues grew 1.3 per cent to £585.4m from £577.8m in 2014
The bookmaker’s gross win margin – a measure of the proportion of bets won – fell to 16 per cent, from 16.4 per cent in the same period last year.
Why it’s interesting
Tough times for bookies have led to increased consolidation in the market: hence Labrokes' proposed £2.3bn tie-up with rival Gala Coral, announced last month.Under the deal, which the company will overtake William Hill to become the biggest bookmaker in the UK, with a net revenue of £2.1bn and operating profit of £392m.
The pair hope the merger will allow for faster online growth and create potential financial benefits of £65m a year.
Completion is conditional on approval by the Competition and Markets Authority, but firms said they were confident a merger is deliverable. Since Ladbrokes announced it was in talks with Gala Coral, its shares have fallen more than nine per cent- and more than 15 per cent in the last year.
The deal came as Ladbrokes chief exec Jim Mullen said the company was embarking on an “urgent, overdue and essential” three-year investment programme to boost revenues in its shops and grow its online business.
The company isn't the only bookies to be hit by by increased tax and regulation, though: last week William Hill reported a 35 per cent fall in half year profits, which it blamed on the increase in duties.
Ladbrokes has now parted ways with former chief exec Richard Glynn, after he failed to coax its online arm into thriving. Jim Mullen will become chief executive of Ladbrokes Coral when the merger is complete.
What Ladbrokes said
Jim Mullen, chief executive, said:
Our first half results reflect the challenge facing Ladbrokes. While we have some encouraging customer trends, we need to reset the business and invest. The results clearly show why we need to change and why we need to do so quickly.
In July, we set out an organic plan to create a better business in 2017 with clear targets. While doing this removes the short-term thinking that had come to dominate our actions, we recognise it does create short-term impacts on our profitability.
However, our focus has to be about looking forward, investing and utilising our strengths to grow. There are signs in the first half that the customer is there to be convinced by the Ladbrokes offer - good Gaming performance, strong Mobile Sportsbook KPIs and growth in Australia. We have a solid base to build on.
Ladbrokes' online business has failed to thrive, but that's not its only challenge: it's also been hit by industry changes surrounding the impact of increased machine gaming duty and the new Point of Consumption tax.