Ladbrokes profits slide but machine gambling bolsters trading

Ladbrokes made a bottom-line profit of us$ 117.3 million in the half year to June, lower than the us$ 171.7 million achieved a year ago when the World Cup boosted trading. Net revenue including high rollers - customers who place large wagers - fell to us$ 789.4 million from us$ 817.3 million. The half-year dividend was hiked 1.3 % to 3.9p. Shares in Ladbrokes are 4p higher at 151.5p in trading today.

The amount staked by over-the-counter customers in the UK fell 2.3 per cent to us$ 2 billion but this was more than offset by a 8.5 per cent jump in machine gambling to us$ 8 billion in the half year.

The sum left by losing punters overall in the UK was down by 4.4 % to us$ 330.4 million after a disastrous Cheltenham festival for the industry was countered by the Ascot, Epsom and Grand National meetings.

Ladbrokes, which runs 2,100 betting shops across the UK, said the World Cup impact amounted to us$ 19.6 million. It expects a strong second half from its gaming machines with the focus now on refining their appeal to the markets where they are installed.

Betting in Ireland was hit by a number of Irish winners at Cheltenham and Ascot, while telephone betting losses rose to us$ 5.3 million as the high stake customers did well on the Champions League final.

CEO Richard Glynn said: 'In the face of challenging economic conditions it is pleasing to see good levels of underlying growth in both the UK retail and digital businesses.' He said revitalising the Ladbrokes name remains the core focus of the group. A relaunch of the brand is to start next week, which will include a nationwide TV campaign.

While economic conditions are tough, Mr Glynn said the aim is for Ladbrokes to be the 'chocolate bar' for its gambling customers, with its duty to deliver excellence and excitement.

There was no news on the recent approach to online group Sportingbet, though Mr Glynn said the ending of discussions with its previous target 888 Holdings was its own decision and based on shareholder value considerations.

Ladbrokes' first half results make for mixed reading,' said Geetanjali Sharma of investment bank Espirito Santo. 'The profit and loss numbers are not up to mark, in our view. However, underlying trading trends in retail look encouraging with no drop off in the over the counter segment and improvements in the machine estate, which we were looking for.

'The digital growth is still not visible and we will be looking for further flavour on the timeline for organic growth initiatives and investment alongside the mergers and acquisitions strategy for this segment.'

Broker Dolmen Securities said: 'Ladbrokes' first half 2011 results were expected to be anaemic and they were, with the company reporting numbers slightly behind market expectations this morning. The stock has been range bound between us$ 2.3 and us$ 2.45 since April (one UK tax assumption-driven dip notwithstanding) and these results should do little to change that.'

James Hollins of broker Evolution reiterated a buy recommendation and a 175p price target. 'We think Ladbrokes represents a resilient underlying business that has a strong control of its cost base and is well placed to deliver on its turnaround strategy,' he said.