Ladbrokes Issues Profit Warning After Poor First Quarter

LONDON -- Ladbrokes  (LSE: LAD  )  this morning warned that a "softer" three months than the comparable first quarter in 2012 meant that group operating profit fell 13 million pounds to 37.4 million pounds, blaming "a number of specific one-off factors in the latter part of the period" amid challenging trading conditions.

Although the bookmakers knew that the quarter would see less profit due to known taxation, cost headwinds in U.K. retail rising about 9 million pounds and the expected second-half weighting of growth in digital revenues, other factors contributed to a worse figure than expected. 

These include a 6 million pound reduction in year-on-year profit from Cheltenham, 7 million pound lower revenues from high rollers (Q1 2013: 7.2 million pounds against 14.2 million pounds in Q1 2012), and an abnormally large number of racing cancellations due to poor weather in the U.K.

The news comes despite its announcement that the Grand National saw a spike in year-on-year profits for Ladbrokes, which generated a gross win of 11 million pounds (15 million pounds for the group), up by around 4 million pounds from last year.

Ladbrokes recognizes that it is in the middle of implementing its reinvigoration strategy, with a strong push on digital that has seen the delivery of a new digital sportsbook alongside further improvements in pricing trading and liability management and strong cash generation in the quarter. However, following the deal with Playtech coupled with the one-off factors outlined above, the company now expects group operating profit for the year to be at the bottom of the existing market range.

Its share price plummeted over 8.5% in early trade this morning to 189.20 pence, some way off its 2013 high of 243 pence achieved in March but which has since seen a steady decline.

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