UPDATE 2-Ladbrokes warns on profits after poor racing run

Mon Apr 15, 2013 5:03am EDT

* Ladbrokes sees operating profit at bottom of range

* Online gaming, horse racing disappoint

* Shares down 8 percent after unscheduled update

By Keith Weir

LONDON, April 15 (Reuters) - Ladbrokes, Britain's second largest bookmaker, warned investors it expected annual operating profit to fall this year after a poor performance from horse racing and online gaming in the first quarter.

Ladbrokes shares fell eight percent after the unscheduled trading statement, which dashed expectations that the company was turning itself around after problems with its online operations last year.

Ladbrokes has fallen behind market leader William Hill , which has built up a head of steam in the growing online gambling sector and expanded overseas. It also faces competition from a number of new entrants in a crowded sector ripe for consolidation.

Private equity firm CVC said on Monday it was considering a takeover of online betting exchange Betfair, one of Ladbrokes' rivals for online gamblers' cash.

Ladbrokes still operates more than 2,000 betting shops in Britain and Chief Executive Richard Glynn said that conditions on the British high street were very difficult as the economy stagnates.

"The trading environment and economic conditions since the start of the year have remained challenging, which when combined with a number of specific one-off factors in the latter part of the period, have driven a softer first quarter than expected," Glynn said in a statement.

The company had expected first quarter profits to be lower than last year because of increased costs and the imposition of a new 20 percent machine games duty in its high street shops. However, revenue from machines and online gaming still proved disappointing.

Paying out on a number of favourites at Cheltenham and a number of race cancellations elsewhere this spring have further dented returns.

ONLINE DEALS

Ladbrokes said operating profit fell to 37.4 million pounds ($57.5 million) in the three months to March, down 13 million pounds.

It forecast an annual operating profit at the bottom of market forecasts which would mean a figure of around 188 million pounds. That compares with 206 million pounds in 2012.

Analysts said Ladbrokes had work to do to match William Hill, which is due to publish its first-quarter trading statement on Friday.

"With retail trading flat at best and limited momentum online, Ladbrokes appears much more at the risk of sporting results than its closest peer William Hill," Shore Capital said in a research note.

Ladbroke shares have performed strongly in recent months on signs that it was getting its online strategy right after profits in its digital division halved in the first six months of 2012.

It last month agreed a partnership with Playtech, the software company that is exiting a successful online joint venture with market leader William Hill.

It also agreed a 30 million euro ($39.3 million) deal to buy Betdaq, a smaller rival to Betfair.

Ladbrokes expects online revenues to suffer some impact from changes linked to the Playtech partnership before the full benefits are felt in 2014.

"There is going to be an integration hurdle over the next 6-9 months," said Glynn, adding that the company was now in a "stronger place" thanks to recent deals.

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