Ladbrokes faces £3m bill if Leicester win Premier League, but results please

Discussion in 'Market News' started by Lily, Apr 21, 2016.

  1. Lily

    Lily Forum Member

    Aug 29, 2015
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    Bookmaker says revenues rose despite worst ever Cheltenham festival

    Leicester City are the preferred choice of most neutrals to win the Premier League. But not the bookmakers.

    Announcing better than expected first quarter results despite a poor Cheltenham racing festival, Ladbrokes said a Leicester win would cost it £3m despite a significant number of punters cashing out their bets already.

    At Cheltenham we were reminded of the intense competition with offers and pricing at levels which, in our view, abandoned bookmaking principles. We competed hard but refused to pursue unsustainable strategies and our stance remains that we will compete where we know we can get the right returns from the right customers.

    Recent wins under Roy Hodgson have seen liabilities increase around the England team but France remain favourites followed closely by Germany and Spain.

    This is an encouraging statement. Ladbrokes’ group revenues in the first quarter were up 10.6% versus our first half expectation of +7.9%. The group should benefit from Euro 2016 in the second quarter and this implies that the revenue beat for the first half as a whole should be greater again. Against a backdrop of negative commentary relating to Cheltenham, we suspect that this statement will very much ease investor concerns. Our current EBIT forecast for Ladbrokes sits 5% above consensus (£99.5m versus £94.8m) and we see scope to increase our numbers by a couple of percent at least at this point. Clearly market revisions should be greater again.

    Having talked cautiously in recent weeks, Sky’s nine month results beat consensus by 2% at EBIT, in-line on revs. Group EBIT growth of +12% year on year is outstripping revenue growth of +5%. But this should be viewed in the context of weakening customer adds in the UK / Germany, and Champions League costs dropping out of comps in the UK / Italy. On an adjusted basis, UK EBIT now growing in-line with revenues. Overall, no surprises but no clear positive catalyst either, in our view.

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