Ladbrokes chief calls for change after drop in pre-tax profits

Ladbrokes chief calls for change after drop in pre-tax profits

Wednesday, April 22, 2015 Totally Gaming

Jim Mullen, chief executive officer of Ladbrokes, has called for the bookmaker to change the way in conducts business if it is to improve on its performance during the three months through to March 31.

The bookmaker saw group earnings before interest and tax (EBIT) amount to £14.3m (€19.9m/$25.1m) in the first quarter, down from £18.4m in the same period last year and heavy drop on the £35.6m posted in the final quarter of 2014.

Ladbrokes cited the impact of the UK’s new point of consumption tax and an increase in machine games duty to 25 per cent as the main reasons behind this decline. The bookmaker also noted that its withdrawal from unregulated digital markets – in line with the guidelines of the UK Gambling Commission – also hit group EBIT in the quarter.

Despite the losses, Ladbrokes was able to record a year-on-year increase in revenue during the opening quarter of the year. Group net revenue was up 3.3 per cent on the corresponding period last year, thanks to growth across the bookmaker’s UK and Australian businesses.

Net revenue in the UK was up 4.3 per cent in the first quarter while Australian net revenue rocketed by 132 per cent on a year-on-year basis.

Digital net revenue as also up by 9.5 per cent, but the bookmaker did see its European business suffer slightly with net revenue from the region down 1 per cent in comparison with the first quarter of 2014.

However, Mullen was keen to focus on the pre-tax losses in the quarter and warned that if the bookmaker does not change the way it conducts business, then it is likely to encounter further issues.

“In Q1 many of our customer metrics are encouraging but results have favoured customers and profits are materially down; these results demonstrate the challenges we continue to face,” Mullen said.

“We need to change the way we run the business, build scale, primarily in digital and respond faster to the customer and changes in the market place. I will complete my review of the wider business quickly and I will present some of the principal changes that I intend to make, in June, earlier than planned.”

Meanwhile, Ladbrokes has revealed plans to undertake an examinership of its Irish business after the division suffered losses in 2014.

A report in the Irish Independent newspaper last month said the bookmaker had identified its Irish business as one of the causes of losses in 2014 and had launched a strategic examination of its Irish arm in an effort to review the best options to turn business around following losses.

Following the initial report, Ladbrokes has now confirmed it has been granted approval from the High Court in Dublin to appoint an interim examiner to find the best way forward for its Irish business.

In a statement, the bookmaker said the examinership process has been rolled out in the hope of “restructuring the business to create a sustainable competitive business, which is currently held back due to real estate legacy issues”. However, Ladbrokes did not that the process will not impact its Irish operations nor its digital and telephone businesses.

“The action taken today by the directors of the Irish companies is to safeguard the Irish business which in its current state is not sustainable and cannot be supported by the Ladbrokes board without radical change, having lost its competitive edge,” Mullen said.

“In entering the process, our aim is to build a sustainable and competitive business based in Ireland, run from Ireland, investing in Ireland and supporting the Irish economy and sporting industry while delivering for shareholders.”

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