oth companies are very UK-focused, and international operations (both online and retail) will initially account for only around 11% of total revenue.
Ladbrokes CEO Jim Mullen will serve as CEO of the merged Ladbrokes Coral. Current Gala Coral CEO Carl Leaver will serve as executive deputy chairman for a 12-month period. Leaver’s primary responsibility in the coming months will be to realize synergies from the merger. Leaver expects these will total around £65m, most of that coming in the second year following the merger, which the companies expect to conclude mid-2016.
The two firms plan to pool digital innovation teams in order to strengthen their product pipeline. However, the firms intend to maintain two trading teams, sharing a common algorithmic platform and risk management but allowing for independent pricing of events and offers.
Leaver believes keeping the firms’ marketing efforts independent will realize a greater return on spending. More importantly, at least in the short run, this duality – along with the expected sale of a couple hundred of the firms’ combined 4k betting shops – will also help assuage competition concerns.
HORNBY, PLAYTECH PAYDAYS
Gala Coral COO Andy Hornby, whose controversial tenure as CEO of failed UK bankers HBOS is the subject of a long delayed report by UK financial regulators, will continue as COO of Ladbrokes Coral, but he won’t get a seat on the board. Hornby stands to earn a handsome bonus from the merger but he could face the boot if the regulators’ report determines that he acted negligently prior to the bank’s collapse.
Also saying ‘cha-ching’ this morning is gambling software firm Playtech, which supplies technology to both Gala Coral and Ladbrokes. As a result of the merger, Playtech has struck a deal by which it will receive £75m — £35m in cash and £40m in new Ladbrokes shares – as an accelerated determination of fees owed from a previously agreed marketing services agreement.
Playtech is also taking up to 22.9% of Lads’ new 9.99% equity placing at 125p per share, giving Playtech an estimated 2.3% stake in Ladbrokes Coral.
The day’s news helped push Playtech shares to a 52-week high and a market cap of over £3b, a new record. Smart money is on Playtech using at least some of its new walking around money to acquire yet more assets owned by company founder and Daily Mail-christened ‘jailbird pornographer’ Teddy Sagi.
LADBROKES H1 TRADING UPDATE CELEBRATES AUSTRALIA
Lads used Friday’s hubbub to sneak out an underwhelming H1 trading update, which saw revenue essentially flat at £588.8m in the six months ending June 30. New taxes and poor sporting results pushed operating profit down 38% to £41.7m and Lads reduced its previous FY 2015 forecasts by £20m.
Part of that downgrade is due to Lads’ plan to boost H2 marketing to 30% of revenue. Lads says it expects to settle that rate at around 25% through the end of 2017. The idea is to beef up business, although Mullen cautioned that Lads wouldn’t get caught up in a “race to the bottom.” Keep in mind that this plan was devised independent of the merger announcement, which remains unofficial until the competition watchdog gives its okay.
Lads says its data show only 11% of its retail customers have placed an online bet with Lads. Again, these are forecasts devised pre-merger, but Lads hopes to grow its digital division from its current 18.6% of overall revenue to 30% by the end of 2017.
Mullen described Lads’ current desktop product as a loser and thus it will upgrade to Playtech’s Mobenga platform before the start of the upcoming English Premier League season.
Online revenue rose 7% to £112.3m but the digital division reported a net loss of £11.5m compared to a £3m in the same period last year. (Thanks for nothing, online point-of-consumption tax!) Lads’ H1 retail revenue rose 1% to £410.5m, with machine gaming revenue up 8% and OTC betting revenue down 7%.
Lads’ Australian division remains its standout performer, with H1 revenue up 87%. Mullen called the Aussie division the “jewel” in Lads’ crown and the aim is to more than double 2014’s down under revenue of £34.6m by 2017. Mullen said Lads is currently the third largest corporate bookie plying its trade in Australia.