Ladbrokes shows resilience to recession

Ladbrokes, which has 2,100 betting shops in Britain, said operating profit, excluding bets by high stakes gamblers, increased by 0.9 % to us$ 346.8 million in the year to December 31. That was just ahead of the market consensus of us$ 341 million, based on a survey of 19 analysts by the company. Shares in Ladbrokes were up 6.5 %.

"We think these results will be well received and with the current trading still not demonstrating any signs of a slowdown we would expect the shares to react positively this morning," said Numis analyst Richard Carter.

Carter, who kept an ’add’ recommendation, upgraded his 2009 pretax profit forecast by 16 % to us$ 257 million, and his 2010 forecast by 1 % to us$ 226 million.

Bookmakers are widely regarded as being less vulnerable than other retailers to the recession given the habitual nature of gamblers and because it is a "low ticket" industry, with an average bet of less than us$ 14.2.

"All of our businesses are showing remarkable resilience. People still like going to have a few pounds on a bet," CEO Chris Bell told reporters on a conference call.

The industry has also benefited from diversifying into new revenue streams such as gambling machines and online.

"The business is much stronger in depth now. In the last recession (in early 1990s), we didn’t have machines, we didn’t have different products and we had no web business," said Bell. Gross win - total bets minus payouts - increased by 11.1 % during the year to us$ 1.62 billion, excluding bets by high stakes gamblers.

However, Ladbrokes said trade in the first six weeks of the current year had been affected by bad weather which led to several horseracing meetings being cancelled and between 200-300 shops being closed as snow stopped staff getting to work.

Bell said there had been twice as many race cancellations than in the previous year over the six week period and the rate of abandonments was three times was than the average for that time of the year. Gross win since the year end, excluding high rollers, was 1 % up on the previous year.

High rollers who place five figure sums on individual bets contributed us$ 113million to operating profit during the year. Since the year end, they have contributed us$ 34 million to operating profit. The company’s biggest rival, William Hill, is due to report full year results on February 27.