As High Street bookmaker chains continue to struggle against rising gambling taxes and gaming machine duty, Ladbrokes has confirmed that the gap between itself and sector leader William Hill has widened further during the first half of the calendar year. However, this was largely due to a write down in the value of the chain’s shops, which wiped £51.8 million from the 2,169 strong portfolio currently owned by the firm.
The write down formed a major part of the £78.9 million worth of exceptional items recorded by Ladbrokes during the first half, much of which was caused by the closure of a net 40 UK stores and the cost of placing the Irish division of the business under court protection. Altogether, these costs dragged pre-tax losses to a worrying £51.4 million – a distinctly different situation to this time last year, when the firm posted a £27.7 million pre-tax profit.
New chief executive Jim Mullen took the decision to reassess the value of the shops as a means of determining the current position of the struggling chain. He believes that the latest report will help to pinpoint areas in which Ladbrokes needs to improve in the future.
He says; “Our first-half results reflect the challenge facing Ladbrokes. While we have some encouraging customer trends, we need to reset the business and invest. The results clearly show why we need to change and why we need to do so quickly.”
The write down of property values was particularly devastating as, during the first half, revenues remained relatively flat at £588.8 million. Furthermore, adjusted operating profits suffered due to the introduction of the 15 per cent point of consumption tax on online gambling in December and the 5 per cent increase on gaming machine duty in March, dropping by 31.5 per cent to just £38.9 million.
Fortunately, though, there does seem to be a light at the end of the tunnel for the bookmaker, as industry experts believe the chain’s proposed £2.3 billion merger with Coral may well gain the approval of competition regulators. This would create the UK’s biggest gambling company in terms of outlet dispersal and number, along with providing each chain with some much-needed financial support.
In the near future, however, Mr Mullen will continue to focus upon his new strategy aimed to attract new consumers to Ladbrokes outlets. This strategy will particularly emphasise the chain’s sports betting offering – an area in which it has fallen significantly behind William Hill.
Mr Mullen continues; “In July, we set out an organic plan to create a better business in 2017 with clear targets. While doing this removes the short-term thinking that had come to dominate our actions, we recognise it does create short-term impacts on our profitability.”
“The proposed merger with the Coral Group represents an exciting opportunity for the business but, with completion some way away, the focus for me and my team must be on the here and now of delivering on our organic plan, building a better Ladbrokes and driving performance towards our 2017 targets.”
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