Baptism of fire
Ladbrokes' 2010 results may look promising on the surface, but Quentin Toulemonde examines the challenges which its newly-appointed managers could face in the future.
Last Thursday,Ladbrokes presented its results for the year ended 31 December 2010 and, on paper, things seemed promising.
Everything looked good, and indeed eGaming Review quickly echoed this positive news. However, behind those bright results, the unchanged analyst ‘Hold’ recommendations got me thinking.
On a positive note, Ladbrokes’ situation is comfortably better than it was two years ago. The new management team has restructured and refocused its attentions to online and managed to revitalise a bookmaker that was seemingly otherwise doomed.
Ladbrokes has strongly developed its in-play offering with a 27% rise in the number of events it covers, and targeted new customers with new mobile apps “ its mobile channel revenue grew by 78.4%. This year will see the company continue in the same vein according to its CEO, but with one important keyword added: ecommerce. Although the potential value added by this platform is still by no means clear, and needs to be proven, Ladbrokes has clearly demonstrated its intentions to dive deeper into the digital era with improved customer analytics and customer-facing site as well as increased investment in a new trading platform and mobile offering better pricing and increasing its reach to a new smartphone generation.
This increased online focus, however, doesn’t mean it will not look to grow its existing, and highly successful, retail empire. Firstly, it still accounts for more than 80% of Ladbrokes’ overall revenue. Secondly, and according to its management team, it allows the bookmaker to recruit players at low cost: 26% of new online customers joined at zero cost by typing ladbrokes.com into their browsers, while 30% used search engines. This is a seriously competitive advantage in a very challenging market. But beyond this optimistic picture, doubts surround Ladbrokes’ profitability. Besides, its poker revenues (along with everyone else’s) fell by 20% last year.
A Revenue & Customs settlement, agreed in April 2010, allowed Ladbrokes to recoup a £261.9m. Take that away, however, and the company is underperforming its 2009 results. This may explain why Nick Batram, analyst at Peel Hunt, did not jump for joy when the results were announced last Thursday.
In 2011, Ladbrokes will have the opportunity to prove that its “digital” strategy is not merely paved with good intentions. Moreover, it can’t count on another rebate, and there is no World Cup in 2011. For its newly-appointed managers, this year will be a baptism of fire.