Bookmakers Ladbrokes? share price rocked by profit warning

As many of their rivals are counting the cost of recent wins for favourites during Gold Cup day at the prestigious Cheltenham Festival, UK bookmaker chain Ladbrokes has announced that they expect to see its operating profit fall during the previous quarter. Following the surprisingly bleak news, shares in the company dropped by 8% overnight.

While Ladbrokes were not alone in struggling during Cheltenham, where many bookmakers lost millions in the aftermath of a string of victories for the pre-race favourites during the final day, poor performance on their part has seen their finances take a big hit. Ladbrokes seem to have had many other problems shared by others in the betting industry too.

Coining it in?

Another problem which the gaming industry has had to face up to is the 20% Machine Games Duty (MGD), which was introduced as part of the 2012 Budget. With slot machines a significant source of income for the likes of Ladbrokes, a 20% duty was always likely to impact on profit margins. Overall, the beginning of 2013 has been one to forget for them.

In a statement explaining why Ladbrokes had seen its fortunes falter recently, chief executive Richard Glynn said: “The trading environment and economic conditions since the start of the year have remained challenging.”

The start of the year is usually seen as a difficult time for many bookmakers. With the exception of the Cheltenham Festival, PDC World Darts Championship (which the bookmaker sponsors) and the start of the Formula One season, the first three months are usually bereft of major sporting events, which means less opportunities for them to make money.

Brighter times ahead

Despite the bad news and hit that its share price suffered, Ladbrokes could see its fortunes improve later on in 2013. A much-needed website revamp, coupled with a surprise 66/1 winner in the Grand National at Aintree earlier this month are likely to provide them with an increase in its online customer base, while other shock sporting wins won’t have harmed them too much.

Tournament favourite Tiger Woods’ failure to live up to his tag at the Masters Golf event in the US will be welcomed, as 16/1 shot Adam Scott picked up the big prize. Meanwhile, the race to avoid relegation from the Premier League, the upcoming UEFA Champions League final and Wimbledon could see Ladbrokes’ takings over the busy spring/summer period improve considerably.

Looking to promote your product/service to SME businesses in your region? Find out how Bdaily can help →