Ladbrokes Coral share price fell despite posting full-year figures in line with expectations

Oliver Gill
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Ladbrokes Coral posted in line full-year figures but is waiting with bated breath over a pivotal government plans to adjust fixed odds gaming machines.

Shares in the firm fell 1.4 per cent in early trading.

The figures

Group revenue in 2016 grew by 11 per cent to £2.4bn, with earnings swelling by 14 per cent to £381m.

Operating profit increased by 22 per cent from £217m to £264m.

Digital operating profit leapt 125 per cent with European retail operating profit up 219 per cent.

Underlying earnings per share were 6.6p with a full year dividend of 3p per share going back to investors.

The firm had £1.1bn of debt, 2.86x its annual earnings.

Read more: Ladbrokes Coral loses court battle over £71m tax avoidance case

Why it's interesting

The operating profit growth was in line with the group's year-end trading statement and towards the upper end of market expectations – consensus expectations were between £257m and £267m.

It has been the easiest of times for bookies of late, with the sector facing as many hurdles as 400m Olympic champion Sally Gunnell.

2016 saw a number of results go against them, hardly the best conditions for Ladbrokes' merger with Coral, which completed in November.

Read more: Shares in major betting companies fall as MPs criticise gambling machines

Earlier this year, the government signified its intention to impose a mandatory horseracing levy of 10 per cent on the industry from April 2017, a move Ladbrokes Coral said it found "hard to justify".

Nicholas Hyett an equity analyst at Hargreaves Lansdown said: "2016 was a good year for Ladbrokes Coral, with both businesses performing well."

Triennial review

The department of culture, media and sport is undertaking its triennial review into the gambling industry. This is process where government can mandate stakes and prizes on gaming machines can be modified, leading to some analysts saying it is the largest shake-up of the sector since the 205 Gambling Act.

"We face some short term uncertainty with the triennial review," was Ladbrokes Coral's boss Jim Mullen summary of the situation.

Read more: Going is good for Ladbrokes as shares jump on trading news

Hyett said is "concerning" and added:

As the UK’s largest high street bookmaker the group has the greatest exposure to gaming machines, which accounted for 56 per cent of UK Retail and 36 per cent of group revenues this year.

Reforms that undermine profitability, such as significantly reducing the amounts that can be staked at any one time, would have serious consequences for the group.

The issue is highly political and recent regulatory reforms elsewhere in the gambling industry have been more severe than the group had expected.”

What the company said

Chief executive Mullen added:

"This is a very successful start for the Ladbrokes Coral Group. Both Ladbrokes and Coral entered the merger in November with good momentum, and together delivered a strong full year financial performance.

"We are focussed on delivering on the full potential of the merger through the strengths of the Ladbrokes Coral brands, enhanced scale, operational efficiencies and leveraging the best of both businesses.

"Our plan is simple. We are focussed on building on the leading multi-channel experience developed by both brands, utilising a rigorous approach to data driven marketing and ensuring that our product delivers a leading customer experience.

We will look to leverage our existing experience in international markets to drive further growth and use our significantly increased scale in technology to develop new products and deploy across the enlarged group.

"We will deliver this with a firm commitment to responsible gambling and health and safety."

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