Ladbrokes reported a sharp decline in overall profit for the first half of this year, with figures recording a staggering 49.7% drop to £27.7m. The gaming company cited costs incurred as a result of restructuring, however it is widely believed to be Ladbrokesí online industry, which is straggling behind its competitors, that is costing the betting giants dear.
Pioneers of the high street betting shop era, Ladbrokes launched a chain of betting shops in following the Betting & Gaming Act of 1961, and has since established itself as one of the most recognizable names in the bookmaking industry.
However, recent figures appear to be a wake-up call that the competitive nature of the online gambling sector is threatening the long term prospects of the high street giant, and unless Ladbrokesí restructuring methods have somewhat astonishing capital enhancing effects, then the high street gambling giants must focus on enriching their e-gaming sector.
Online intake plunged by 72%, following on from a torrid 2013, when Ladbrokes chief executive, Richard Glynn, conceded that Ladbrokesí ëdigital earnings had been disappointingí. Standing at a figure between £10m and £14m, profits from e-gaming were adjudged to be underwhelming in 2013. However, given Ladbrokesí online intake for the first half of this year stands at £3m, the situation is looking bleak, especially considering the companyís failure to meaningfully cash in on the boom in betting that accompanies the World Cup & a summer of sport.
Digital earnings comprise 4.4% of Ladbrokesí profits. The stagnation of Ladbrokesí online productivity is put into perspective when contrasted with William Hillís corresponding figure of 52%.
ëChange in Patterní
Richard Glynn appeared coy on the subject of whether betting is becoming more widespread within society labelling it ìa pastime enjoyed by millions of peopleî which isnít ìbecoming more or less prevalentî.
Glynn suggested the medium by which people bet has changed, rather than the number of people, highlighting the increased usage of betting on smartphones and other mobile devices.
He said: “It’s a change in pattern. The 18- to 34-year-old male comes into the shops for the social experience and uses mobile to play.”
Figures showed that the number of people betting on mobile devices increased by over twofold in the first half, further reason for Ladbrokes to increase its online repute. However, Glynn seemed confident that the coming months would show the fruits of Ladbrokesí labour.
Glynn said: ìMobile is the battleground now ñ there is no doubt about it. We only launched [our mobile product] six months ago. It is now bigger than desktop in digital. It is growing at a very good rate.”
Ladbrokes has validated its slump in profits by pointing to restructuring measures it undertook to combat potential pitfalls in the market. It supplanted 9, 000 gaming machines with superior models, and shut 46 of its targeted 50 underperforming shops for the year. This came at a hefty cost of £14m to Ladbrokes, however it was considered a worthy price to pay in the long term, given the increased stringency of legislation against controversial betting machines.
Last year, Ladbrokes entered into business with Playtech, a market-leading supplier of online betting software, following Playtechís successful overhaul of William Hillís online interface. However, the new software has taken a year to implement, and the result is that Ladbrokes has fallen a further year behind its online competitors.
Richard Glynn remained nonplussed about the fluctuating profits, stressing that the second half of the year was to yield economic growth, in line with Ladbrokesí pre-2014 projections.
Glynn said: ìThey’re entirely in line with what we expected. We always said [the first half] was about delivery and [the second half] was about growth. The operational results were encouraging; there is a lot more to play for.”
He says the company is on track to meet market forecasts for full-year operating profits of £130m-£132m.
However, investors do not share Glynnís apparently unwavering confidence in his company, with Ladbrokesí online strategy a particular dent in investor confidence.
Ivor Jones, analyst at Numis, suggested investors were still on the fence: ììThe recent share price performance suggests scepticism among investors about the online strategy as well as concern over the somewhat hostile regulatory environment. Given the uncertainties and the track-record we donít expect the share price to perform until there is evidence of success at the bottom line,î he said.
It is clear Ladbrokes must augment its online offerings if it is to sway a massively competitive market from betting rivals, although Glynn has suggested the foundations are in place for long term success, Ladbrokesí shareholders remain sceptical.