Ladbrokes off to flying start in 2012

Bookie Ladbrokes delivered operating profit, excluding the volatile impact of high rollers, just about in the top half of the range of market forecasts in 2011, on the back of continued strong performance from gaming machines in its shops.

Total operating profit excluding high rollers eased 4.3% to £193.5m from £202.3m in 2010; the consensus range was £181.7m to £201.2m.

Revenue excluding high rollers edged up 0.4% to £980.3m in 2011 from £976.6m the year before, a million quid below the market consensus forecast.

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Profit before tax slipped 8.5% to £134.6m from £147.1m the year before, but with net finance expense excluded the decline was only 6.1% to £167.9m from £178.8m. The market consensus forecast for profit before tax was £151.9m.

Diluted earnings per share tumbled to 12.9p, or 14.9p excluding non-trading items, from 38.4p (45.3p before non-trading items) in 2010; the market consensus forecast was for earnings per share of 14.23p.

Net debt at the end of the year had fallen to £453.9m from £492.0m at the end of 2010.

The final dividend has been increased by 4.0% to 3.90p from 3.75p the year before, giving a full year dividend of 7.80p, up from 7.60p in 2010. The market had been expecting a far more modest hike to 7.64p.

The UK retail operation held its own during 2010 despite the weak economy, with operating profit up 2.1% to £152.3m, while profit per shop was up 6.9% year-on-year.

The value of bets placed over the counter in the UK rose marginally but the increasing importance of gaming machines to High Street bookmakers was underlined by the fact Ladbrokes pocketed £360.9m profits from these, up 19.2% on the year before, with gross win per terminal week of £860 for the year and £930 in the fourth quarter.

The performance of the Digital division is likely to disappoint the market. Net revenue declined by 3.5% as the poker offering waned and and the sports-book in the fourth quarter took a few knocks, but Ladbrokes claims this masked an underlying improvement in customer acquisition and conversion, especially from customers using mobile communications devices, where net revenue rose 174% to £15.6m.

Digital's operating profit retreated 12.3% to £55.0m from £62.7m the year before and was £2m below the forecast from Peel Hunt, which the broker said was towards the bottom end of the market consensus.

However, the company has a new sports-book web site in beta testing and this is scheduled to be released in the coming weeks.

"In Digital, we are pleased to have seen acceleration in the growth of customer numbers. Sports-book and casino sign ups and actives have increased strongly in H2 [second half] following the start of increased marketing investment in August," Richard Glynn, Chief Executive of Ladbrokes said.

"Mobile is delivering impressive growth with further product expansion and innovation to come throughout the year," Glynn revealed.

Trading in 2012 has seen an uplift on 2011. In the period from January 1st to February 7th, group net revenue (excluding high rollers) was up 14.7% year-on-year.

UK Retail net revenue was up 13.0% year-on-year with strong growth in both over the counter (OTC) and machines. OTC amounts staked were down 2.1%, though this was driven by a high number of horse racing cancellations in the first week of February. OTC amounts staked for January were up 1.0%.

In Digital, net revenue was up 13.1% with continued double digit growth in sign ups and actives in both sports-book and casino.

"We expect revenues to grow throughout the year as we build upon the positive growth in customer acquisition achieved to date. We have a number of important milestones in the next few months and are confident of delivering growth in profit during the second half of the year as the benefits from our investments combine," Glynn said.

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