Ladbrokes thanks 'sporting gods' for huge profit swing

Ladbrokes chief executive Jim Mullen has thanked the "sporting gods" and cited a run of "bookmaker-friendly results" after the firm posted a huge swing back into profit.

The bookmarker reported a pre-tax profit of £25.2m for the first six months of 2016, well up from a loss of £51.4m for the same period last year. Revenues were close to £667m, a rise of around 12 per cent.

While strategy changes, such as ramping up marketing and increasing "multi-channel" betting options, were deemed a success, notes the Daily Telegraph, bosses admitted a significant increase in margins due to favourable results has been the primary factor.

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"These strong numbers show customers are responding positively to the new strategy at a time when the sporting gods have generally been on our side and we've enjoyed some helpful bookmaker-friendly results," said Mullen.

"However, 130 years of experience in sports betting has shown us that we will endure a run of customer-friendly results and margins will normalise."

Bookmakers tend to do well when outsiders with only a few backers win as irrespective of the odds, there is only a fractional payout.

Nevertheless, there are outliers where the odds are so steep on a rank outsider that they attract enough money to inflict damage – Ladbrokes says it lost £3m on Leicester City's shock Premier League victory last season, the most on any single title winner.

Even then, the hit came at the end of a season during which most of the bigger teams, which are typically heavily backed each game, consistently underperformed.

Press officer Alex Donohue said it was "a falsehood if any bookie says they have lost money overall on Leicester", noting that while £3m is a record net payout, "we did well out of Leicester upsetting the odds to get there".

"No complaints at all," Donohue added, according to The Guardian.

Ladbrokes' results also contained an update on its £2.3bn merger with Coral, which it expects to complete in the autumn. Bosses said talks are progressing well with prospective buyers on up to 400 shops that competition watchdogs have demanded be sold.

Ladbrokes and Coral cleared for £2.3bn merger

20 May

Shares at the bookmakers Ladbrokes are surging today with the provisional regulatory report into its proposed £2.3bn merger with Gala Coral being seen to have cleared a path for the deal.

The Competition and Markets Authority's draft report, published after an extended 11-month review, has concluded the combined entity would need to shed up to one in ten of its approximately 4,000 outlets to mitigate the effect on competition, the Daily Telegraph notes.

According to the report, between 350 and 400 betting shops owned by the pair are within 400 metres of each other, "which tends to be the boundary within which most competitive interaction between bookmakers takes place".

Ladbrokes and Coral argue that the surge in online betting in recent years, led by insurgents such as Paddy Power and Betfair, has taken market share from physical betting shops. They say this should be taken into account when considering the impact of the deal.

The CMA concludes, however, that although "online betting has grown substantially in recent years, the evidence we've seen confirms that a large number of customers still choose to bet in shops". It adds: "For these customers, competition comes from the choice of shops in their local area and it's they who could lose out."

Despite apparently losing the argument, the verdict is being widely seen as a victory. When the deal was announced last year, the investment bank Nomura predicted the watchdog would demand the retail betting market share commanded by the merged company be no more than 30 per cent.

This would have meant the closure of 1,300 shops. The Irish Times wrote ahead of the CMA's provisional report earlier this week that the watchdog was likely to demand the closure of between "400 and 1,000" shops, putting the final decision at the lower end of expectations.

In response to the announcement today, investors have traded up Ladbrokes shares by 6.6 per cent to 127.4p.

Ladbrokes merger with Gala Coral to face scrutiny

25 June 2015

A merger between Ladbrokes and Gala Coral, which would create by far the UK's largest high-street bookmaker, could face regulatory scrutiny and a demand to offload more than 1,000 shops, analysts have warned.

Investment bank Nomura predicts the Competition and Markets Authority may demand the retail betting market share commanded by the combined entity be no more than 30 per cent, the Daily Telegraph reports. The two groups currently account for around 45 per cent of the market and a little more than 4,000 of the total 8,700 betting shops across the country, meaning it could be forced to close 1,300 sites.

The Guardian's Nils Pratley argues that these regulatory hurdles could scupper the deal, as the pressure to sell such a large number of properties within a relatively short timetable could "create a serious financial obstacle".

The Telegraph says a bias to underperforming sites would mean many being closed rather than sold and that the numbers, if accurate, "call into question the logic of the deal". Sources at Ladbrokes, which had an agreed deal to buy Coral reversed in 1998 on competition concerns, say the market has shifted dramatically due to the influence of online betting.

Indeed, the Lex column in the Financial Times dismisses concern over shop sales and cites figures suggesting that high-street betting is growing at a rate of just 1 per cent a year, while online gambling surges ahead. The two companies control just 9 per cent of this rapidly growing digital market and could "double down on the web", it says, which in addition to cost savings through synergies would make concessions elsewhere worthwhile.

According to The Times, a proposed deal would be valued at between £3bn and £4bn. Shares in Ladbrokes rose by nearly 15 per cent yesterday to close at 140p.

Ladbrokes and Coral merger could create largest bookmaker

23 June

Bookmakers Ladbrokes has confirmed it is in talks with rival Gala Coral regarding a merger that would create the UK's largest high-street bookmaker.

The Racing Post, which first broke news of the talks on Monday, says the talks were confirmed in a written statement, but said no details over the value of any deal were disclosed. The two firms, second and third in the UK market, own a little more than 4,000 betting shops across the UK between them, meaning the merged group would leapfrog William Hill's 2,400 outlets.

The groups are roughly equal in size, according to figures quoted by the Financial Times, which show Gala Coral made before-tax earnings of £135m for the six months to May on £685m of income. Ladbrokes, by comparison, made pre-tax profit of £202m last year on £1.15bn revenue.

Gala Coral is owned by private equity groups including US giants Apollo Global Management and Cerberus Capital Management, which took over the company in a debt-for-equity restructuring in 2010. That deal resulted in previous backers Cinven, Candover and Permira, who were behind the merger of Gala and Coral in 2005, losing their collective £1.2bn investment.

Ladbrokes had made a £363m approach for Coral in 1998, but the deal was blocked by the Labour government over competition concerns. The Racing Post says that a major shift in market dynamics in favour of online betting, a market dominated by William Hill, Paddy Power and bet365, should alleviate such worries this time around.

Gala Coral had been on the block for some time and the FT says it was tipped to float later this year, which could have given it a valuation of around £2bn. Ladbrokes share price was up around 17 per cent for the day by lunchtime, adding around £180m to its overnight market cap of £1.13bn.