Profits surge at Ladbrokes, but Digital needs a revamp

Shares in Ladbrokes, the online and High Street betting shop, rose on Thursday morning after the group saw profits jump by a half in the first half despite weakness in its Digital business.

Group net revenue grew 8.4% from £487.8m to £529m in the six months to June 30th, up 14% including High Rollers. However, net revenue growth in July (excluding High Rollers) slowed to 6.3%.

Meanwhile, pre-tax profit surged by 48.9% from £71.8m to £106.9m, helped by strong growth in UK Retail. The group said that the division is benefiting from ongoing efficiency initiatives and further expansion of the estate. Operating profit per shop for the trailing 12 months jumped 12.5% (up 35.9% over the past two years) to £77,300.

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Digital profits in the first half were lower year-on-year as expected "with the impact on costs necessarily preceding any anticipated benefit to revenues." Investments in newly regulated territories (like Spain and Denmark) and the withdrawal from others (particularly Greece) also had an effect on profits.

Chief Executive Richard Glynn said: "Strong growth in operating profit in UK Retail and an improved performance in our European Retail and Telephone businesses was pleasing and more than outweighed a decline in Digital profits, which was greater than expected due largely to a weak sportsbook margin in Q2 and exacerbated by delays in technology."

The company is continuing to attempt to revamp its struggling Digital division, focusing on: the overhaul/upgrade of IT systems and trading platforms; development/expansion of sports betting and gaming products; new ecommerce capabilities; and enhanced digital marketing.

Glynn said that the company is mindful of the "challenging economic backdrop" but is comfortable that its performance is in line with expectations for the full year.

"Whilst the economic climate in the UK remains a concern, the board is encouraged by the continued strength of the UK Retail estate and remains confident in the Digital strategy," he said.

Net debt reduced by £56.9m to £397m during the period, while there was a 23.8% increase in cash generated by operations. There was a 10.3% increase in interim dividend to 4.3p per share.

Shares were up 2.13% at 158p by 08:52.

BC