Ladbrokes Profits Plunge; William Hill Issues Profit Warning
Two of the world’s largest gambling companies released trading updates to the London Stock Exchange this week and neither made good reading for investors. Ladbrokes revealed an almost 57% drop in profits, while William Hill issued a profit warning after seeing its third quarter profit fall by 39%.
Ladbrokes’ earnings before interest and taxes in the three months to the end of September 2015 plummeted some 56.7 % to £14.3 million when compared to the same period in 2014. Its management team pointed the finger of blame at increased duty on its gaming machines, the new online Point of Consumption Tax, the absence of the football World Cup and unfavourable Ladbrokes horse racing results with CEO Jim Mullen describing the St Leger meeting as the worst in a decade.
It wasn’t all doom and gloom for investors, in fact quite the opposite rang true as Ladbrokes’ share price increased as much as 7.4% following the news that the increase in marketing spend was having a positive effect on bets staked and new active customers.
The company says it acquired more than 20,000 new active online customers through its vast shop estate, a strategy that Mullen has invested heavily in. Investors in the company seem happy that the company is in the process of being turned around, hence the increase in share price.
Ladbrokes is still awaiting confirmation from the Competition and Markets Authority that its merger with Gala Coral can be completed. If the deal does go through, the merged company would be Britain’s biggest bookmaker and should see shares in Ladbrokes continue to rise.
William Hill Issues a Profits Warning
William Hill, the current largest bookmaker in the UK, also blamed unfavourable horse racing results as a major reason for the 39% drop in third quarter profits while group net revenue fell by 9%.
“Whilst good operating cost discipline has partially offset the weaker than expected results and non-core market impact, the board now expects full-year operating profit to be around the bottom of the analyst consensus range,” said William Hill’s chief executive, James Henderson.
Earlier this year, William Hill lost a staggering £14 million in a single week when a number of Premier League matches were won by the favourites and many bettors placed accumulator bets with these teams in them. The company failed to make that money back before the football season ended.
Shares in William Hill fell by 6% adding to the 20% drop since May 2015. Investors in the company seem nervous at the prospect of William Hill losing its status as Britain’s biggest bookmaker with the potential mergers of Ladbrokes and Gala Coral, and PaddyPower’s deal with online giant Betfair Sportsbook.
Lead image courtesy of the Telegraph
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