Ladbrokes profits hit by Cheltenham
LONDON (Reuters) - Bookmaker Ladbrokes (LAD.L) said on Friday gross profit fell by 34 percent in the four months to the end of April after a run of punter-friendly results in March, particularly at the Cheltenham Festival.
Shares in the group, which have outperformed the wider leisure sector Q.FTASX5750 by 10 percent since the start of 2009, were down 7 percent to 208.25 pence at 11:05 a.m.
Ladbrokes, which has 2,100 betting shops in Britain, said March proved to be highly profitable for many of its customers. Favourite Kauto Star's victory in the Cheltenham Gold Cup was one of a number of results falling in favour of gamblers.
The company said gross win -- total bets minus payouts -- over the four month period was flat, but had increased by 5 percent since March benefiting from rank outsider Mon Mome's victory in the Grand National.
Ladbrokes said the rate of decline in gross profit in the first four months was not representative of its expectations for the year and had already given way to more normal trends in May.
Chief Executive Chris Bell reiterated the company's confidence for the full year.
"While it is difficult to predict future staking levels in the current economic climate, the general resilience of our business and strong cost control gives us confidence in the outturn for the full year," he said.
The consensus forecast for full year underlying pretax profit stands at 167 million pounds, according to a Reuters Estimates poll of 15 analysts.
In the UK, total gross win declined by 4 percent. Over-the-counter gross win fell by 7 percent or by 11 percent taking into account free bets offered to customers. The gross win margin fell to 17.5 percent from 17.7 during the period.
Investec Securities analyst Matthew Gerard said Ladbrokes' update compared unfavourably with more bullish recent statements from William Hill (WMH.L) and Paddy Power (PAP.I) and downgraded the stock to 'sell' from 'hold'.
"There is no hiding from the fact that this is a disappointing update," he said.
William Hill reported a 2 percent increase in retail gross win in the 17 weeks to April 28. Paddy Power's retail sportsbook amounts staked grew by 1 percent in the 19 weeks to May 12.
Ladbrokes said the performance of its 61 outlets in Spain is ahead of its expectations but the successful development of the business remains contingent on other regions following Madrid's lead in regulating and licensing sports betting.
On Thursday, rival William Hill (WMH.L) said it had decided to withdraw from a joint venture with Codere (CDRE.MC) in Spain, after regulatory barriers made expansion too problematic.
In Ladbrokes' online business, net revenue fell by 2 percent during the period with growth in games offset by weakness in the sports betting margin, due to Cheltenham, and in poker.
Ladbrokes said it is now unlikely that it will achieve the growth necessary to reach its previously stated profit target for the division of 80 to 90 million pounds in 2010.
The group is facing increased competition in the online business from William Hill, which has recently linked up with software provider Playtech (PTEC.L) to improve its offering.
($1=.6611 Pound)
(Editing by Jon Loades-Carter)
