Ladbrokes, the owner of more than 2,300 UK and Irish betting shops, reported a drop in profit after paying out more on winning wagers and said its online unit may not grow quickly enough to meet its 2010 profitability goal.
Earnings before interest and tax fell 34 per cent in the four months through April as March’s Cheltenham horseracing festival proved particularly costly, the company said today.
Free bet promotions and “unfavourable cost phasing” in the Internet unit also hurt profit.
Weaker economic conditions and “softening yields” make it unlikely the online unit will reach its 2010 profitability target of £80 million to £90 million, the company said.
The bookmaker is emphasizing Internet gaming in response to slowing growth at its betting shops, the main profit generator.
“There is nothing hiding from the fact this is a disappointing update,” analyst Matthew Gerard at Investec Securities in London said in a note, as he cut his rating on the stock to “sell” from “hold”.
Weaker growth from gambling machines, Irish betting shops and Internet wagering “is more of a fundamental concern,” Gerard wrote.
Ladbrokes fell as much as 18.25 pence to 206.5 pence in London and traded at 208.5 pence at 9.30am local time.
The bookmaker said the profit decline in the first four months of 2009 isn’t representative of company expectations for the year, with “more normal trends” being seen in May.
“It has been a bit of a rollercoaster ride for us,” chief executive Chris Bell told journalists on a conference call, adding that costs linked to gaining new Internet gambling customers will fall during the rest of the year.
Results at the end of February, excluding so-called high rollers, were in line with the company’s forecast, even with a high number of horse race cancellations, Ladbrokes said.
Bloomberg