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Ladbrokes (LSE:LAD) stock had plunged nearly 11% to 154.90 pence by the noon hour today, following a preview of first-half results which are to be released on 20 August 2012.
Strong Start
Ladbrokes came out of the fiscal year gates running strong. During the first three months increases of 8.9 % in net revenue, 9.0% in UK retail revenue, and 3.9% in operating profit, year-on-year. The company was indicating double digit growth in digital customer registrations, and appeared to be expecting that kind of growth to continue in its interim management statement issued on 19 April 2012. That statement also announced the forthcoming launch of the new company website.
Foreboding Forecast
The crux of shareholder concern today is centered on the underperformance of Ladbrokes’ digital business. Although Ladbrokes has been heavily promoting the digital side of its business, poor performance in the second quarter is expected to trump good first quarter results. Although today’s announcement referred back to previous CEO comments that the company is expecting a decline in Digital profits year on year, shareholders may have been surprised to learn that the anticipate decline is going to be greater than expected as a result of “a poor sportsbook margin” and delivery delays related to technology upgrades that adversely affected revenue growth. It is expecting digital profits to be about 50% less than in the first quarter.
Corporate Confidence
It is likely that the press release this morning was intended to soften the blow, by getting the news out early, before the first-half report is due. The company took care to express confidence in the full year results, with the second-half outperforming the first well enough to deliver year end results that meet expectations. The company remains confident that a stronger digital business will emerge in the days ahead.
Executive Expectations
Matt Shariff, Head of Investor Relations, said that “We expect to meet market expectations for H1 and remain confident that ongoing development of the Digital business will enable us to grow Digital profits in 2013 and beyond.”
Company Spotlight
Ladbrokes is the UK’s largest betting and gaming business operating more than 2,700 betting shops across the UK, Ireland, Belgium, and Spain, as well as betting facilities for the FA Premiership grounds and nine racecourses, including Ascot. It is the largest retail bookmaker in the world. The company also has online, mobile, and telephone betting services.
