Ladbrokes Shares Drop on Dissapointing 2009 Results

Published: 10:28 18/02/2010

The full year figures issued by Ladbrokes showed the full effect of the recession on the business and the poor football margin achieved particuarly during the 3rd quarter when there was a run of Premiership fixtures with very few draws. Earnings before interest, tax, depreciation and ammortisation from continuing operations dropped from £384M to £289M in 2009 a fall of 24.7%. Certain segments of the business are performing particuarly poorly with telephone betting and irish retail suffering from the problems of customers switching to the Internet and the severe impact of the recession in the Republic of Ireland. In 2008 Ladbrokes beneffited from an exceptional year in it's High Roller division and this was not expected to be repeated. UK Retail is still Ladbrokes real profit driver and here operating profits fell from £188M to £134M after a 7.2% decline in traditional over the counter (OTC) turnover. This was compounded by a 1% drop in gross margin to 15.9% driven by poor football margins which were 5.9% down on the previous year. One of the real issues for Ladbrokes in UK retail was the failure to cut costs and over the year costs were reduced by only 1%, mainly due to the huge cost of the loyalty scheme named "Odds On" as part of which Ladbrokes gave away to retail customers £11.8M of free bets compared with only £2M the previous year! The e-gaming division also suffered a fall in profitability of 16% down to £46M with average player yield falling to £210 and gross margins falling to 5.9%. Ladbrokes figures compare poorly with the trading statement from William Hill on the 20th January in which Hills said that they had seen good trading in the last quarter of 2009 and it expected net revenue for the full year to have increased by approx 4% and for EBITDA to be around £250M for the year. Ladbrokes shares which have enjoyed a great run recently rising from £1.20 in mid November last year to £1.56 yesterday have now retreated over 3% this morning to £1.51.

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