Ladbrokes Q1 hit by pre-tax profit drop, CEO review brought forward

22 April 2015

Ladbrokes quarterly pre-tax profits were down more than half on the previous quarter and new chief executive Jim Mullen has said he will bring forward his strategic review of the company to June as he seeks to address key issues affecting the UK's second largest bookmaker. 

The group's first quarter update this morning showed that group earnings before interest and tax (EBIT) amounted to £14.3m (€19.9m/US$21.5m), down from £18.4 million in the same period last year but less than half the £35.6m recorded in the fourth quarter of 2014. 

The bookmaker also noted that its withdrawal from unregulated digital markets – in line with the guidelines of the UK Gambling Commission – also contributed to a drop in group EBIT.

Chief executive Jim Mullen said the bookmaker must “change the way” it operates if it is to overcome these losses and succeed in moving forward.

"In Q1 many of our customer metrics are encouraging but results have favoured customers and profits are materially down; these results demonstrate the challenges we continue to face,” Mullen said.

“We need to change the way we run the business, build scale, primarily in digital and respond faster to the customer and changes in the market place.

“I will complete my review of the wider business quickly and I will present some of the principal changes that I intend to make, in June, earlier than planned.”

Ladbrokes said the heavy drop in EBIT was a result of punter-friendly sporting results, the introduction of the UK point of consumption tax regime and an increased duty of machine games to a new rate of 25%.

Group net revenue during the first quarter was up 3.3% on the previous year, thanks to growth across both its UK and Australian businesses.

UK net revenue was up 4.3% year-on-year, the firm’s Australian business saw net revenue rocket by 132% year-on-year during the quarter, while digital net revenue excluding Australia was also up 9.5%.

Meanwhile, Ladbrokes has announced it has been granted approval to seek the appointment of an interim examiner to address its underperforming Irish business.

As reported by iGaming Business, the bookmaker last month was said to be considering a review of its Irish arm after the division posted a loss in 2014.

In the wake of these losses, the Irish Independent newspaper reported that Ladbrokes had launched a strategic examination under the name of ‘Project Athru’ to consider various options to turn around its Irish arm.

Despite having not confirmed the launch of this examination, the bookmaker has revealed that it has received approval from the High Court in Dublin to appoint an interim examiner to establish the best way forward for its Irish division.

Ladbrokes Ireland said it has entered examinership with the objective of “restructuring the business to create a sustainable competitive business, which is currently held back due to real estate legacy issues”.

The bookmaker noted that the process will not impact its operations in Ireland or its digital and telephone businesses.

“The action taken today by the directors of the Irish companies is to safeguard the Irish business which in its current state is not sustainable and cannot be supported by the Ladbrokes board without radical change, having lost its competitive edge,” Mullen said.

“In entering the process, our aim is to build a sustainable and competitive business based in Ireland, run from Ireland, investing in Ireland and supporting the Irish economy and sporting industry while delivering for shareholders.”

Elsewhere, the bookmaker’s Ladbrokes Australia business looks set to become one of the first betting operators to launch an application on the new Apple Watch.

With Apple due to begin shipping the new wearable device this week, Ladbrokes said it has received approval to launch a betting app for customers in Australia.

The new app will enable users of the Apple Watch to place bets on various sports events whilst on the move.

Related article: Ladbrokes may review Irish business after profit fall