A recent announcement from the London-based online gaming company Ladbrokes revealed that it is continuing to struggle during the global recession. The numbers in the statement reflect the company’s performance over the past three months and indicate that overall revenue for Ladbrokes was down 15% from the same period in 2008. Rather than sit back and ride out the recession, the company is taking action and outlined several changes designed to cut costs and increase profits over the rest of the year.
The company’s current Chief Executive, Chris Bell, explained the rationale behind the changes in the official statement to shareholders: “Against a weak economic environment and a recent period of lower gross win margins, we have already announced decisive cost actions which, together with further savings recently identified, will leave Ladbrokes well positioned when the upturn comes. Whilst we have decided not to pay a final dividend in 2009, we intend to re-instate dividend payments at the interim results next year.”
While Bell remained optimistic about the company’s performance in 2010, the numbers for the third quarter of 2009 were lackluster, as operating profit dropped a staggering 58% from £52.8 million in 2008 to just £22.4 million for the same period this year. Ladbrokes saw its biggest drop in revenue in its telephone betting business, which is down a whopping 73% from 2008. Ladbrokes also took a small loss in High Roller betting from July through September, dropping £2.8 million to bring total profit from these wagers in 2009 to £55.8 million.
In addition to seeing drops in sports betting in the Irish and U.K. markets, Ladbrokes also experienced a 13% drop in overall revenue for its various e-gaming ventures. The online sports book saw the greatest decline in revenue, falling 31%, while the company’s online poker venture also saw a substantial drop of 21%. Ladbrokes posted small gains for its online casino and bingo departments, but they were not enough to compensate for the losses in other e-gaming fields. The report did state that, despite the declining revenue for e-gaming, the ventures are still showing year to year growth from 2008 to 2009.
Several major steps are being taken to curb spending for the company, including a salary freeze for the Board of Directors that will be effective until January of 2011. The company has also set out to raise equity capital and intends to reduce capital expenditure in 2010 to less than £50 million. Ladbrokes will also be cutting costs and staffing in both e-gaming and telephone betting, with an overhaul of what it termed “call handling resourcing.”
The Board of Directors also recommended forgoing the final dividend payment of 2009, but resuming a progressive dividend payment schedule in 2010. Ladbrokes is a publicly traded company on the London Stock Exchange, where it can be found under the symbol “LAD.” Since its October 8th announcement that it would be flooding the market with new shares to help raise equity capital, trading prices have fallen from $171.30 to its current price of $135.60.
